PCUW LLC v. Michael Constanti et al. (2014)

MEMORANDUM OF DECISION RE MOTION TO STRIKE, # 157

The counterclaim defendants, PCUW, LLC, (“LLC”), and Michael Ricci (“counterclaim defendants”) seek to strike count three of the counterclaim plaintiffs' (“counterclaim plaintiffs”) first revised complaint dated October 30, 2013, as well as subparagraphs (2) and (3) of the prayer for relief in their entirety, and that portion of subparagraph (4) of the prayer for relief that seeks attorneys fees.   They contend that the counterclaim plaintiffs have failed to sufficiently allege facts to support a claim for statutory theft, and have failed to allege facts under the complaint that would establish a claim upon which the relief sought can be granted.

FACTUAL AND PROCEDURAL BACKGROUND

This case arises out of a failed business partnership.   On October 30, 2013, the counterclaim plaintiffs filed a revised counterclaim in three counts:  count one alleges breach of contract;  count two alleges breach of fiduciary duty;  and count three alleges civil larceny pursuant to General Statutes § 52–564.

Count three alleges that the counterclaim defendant, Ricci, and the counterclaim plaintiffs, Michael and Christos Constanti, formed an LLC, and entered into an operating agreement which provided that the “․ business and affairs of the [LLC] shall be conducted pursuant to the consent and authorization of members holding at least majority interest ․” (Count three, ¶ 3.)   It further alleged that Ricci was responsible for operating, controlling and managing the LLC's bank account, but in doing so, “failed to obtain the consent of the majority of the LLC members.”  (Count three, ¶ 5–6.)   The counterclaim plaintiffs then allege that:

7.  Michael Ricci failed to keep an up to date true and accurate accounting for all of the money deposited and disbursed through the LLC bank account of the LLC.

8.  Michael Ricci made decisions regarding the management and control of the LLC bank account without the knowledge, consent and authorization of the majority members of the LLC in violation of the operating agreement.

9. Michael Ricci's actions ․ constitute larceny as defined by C.G.S. § 52–564.  (Count three, ¶¶ 7–9.)

The counterclaim defendants seek to strike count three, and the prayer for relief seeking treble damages, as well as the prayers for relief seeking punitive damages and attorneys fees.

DISCUSSION

“Whenever any party wishes to contest (1) the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof to state a claim upon which relief can be granted ․ that party may do so by filing a motion to strike the contested pleading or part thereof.”  Practice Book § 10–39(a).  “The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any [complaint] ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Peter–Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 270, 709 A.2d 558 (1998).  “In ruling on a motion to strike, the court is limited to the facts alleged in the complaint.”  (Internal quotation marks omitted.)   Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).   The court must “construe the complaint in the manner most favorable to sustaining its legal sufficiency.”  (Internal quotation marks omitted.)   Eskin v. Castiglia, 253 Conn. 516, 523, 753 A.2d 927 (2000).  “A motion to strike admits all facts well pleaded;  it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings.”  (Emphasis in original;  internal quotation marks omitted.)  Faulkner v. United Technologies Corp., supra, 240 Conn. 588.   In deciding a motion to strike, “the role of the trial court [is] to examine the [complaint], construed in favor of the plaintiffs, to determine whether the [pleading party has] stated a legally sufficient cause of action.”  (Internal quotation marks omitted.)  Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997).  “[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied.”  (Internal quotation marks omitted.)  Batte–Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007).

Count three—statutory theft

“The elements of civil theft are also largely the same as the elements to prove the tort of conversion, but theft requires a plaintiff to prove the additional element of intent over and above what he or she must demonstrate to prove conversion.”  (Internal quotation marks omitted.)  Sullivan v. Delisa, 101 Conn.App. 605, 620, 923 A.2d 760, cert. denied, 283 Conn. 908 (2007).   “Statutory theft under [General Statutes] § 52–564 ¹ is synonymous with larceny [as provided in] General Statutes 53a–119 ․ Pursuant to § 53a–119, [a] person commits larceny, when, with the intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains or [withholds] such property from [the] owner.”  (Citations omitted;  internal quotation marks omitted.)  Hi–Ho Tower, Inc. v. Com–Tronics, Inc., 255 Conn. 20, 44, 761 A.2d 1268 (2000).  “[S]tatutory theft requires a plaintiff to prove the additional element of intent over and above what he or she must demonstrate to prove conversion.”  Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 771, 905 A.2d 623 (2006).

The counterclaim plaintiffs' statutory theft claim does not sufficiently plead that the defendant, Ricci, intended to deprive them of their property.²  The counterclaim plaintiffs claim that Ricci committed statutory theft because he failed to keep an accurate accounting and made decisions regarding the management and control of the LLC's accounts without a majority consent or authorization under the operating agreement.   These allegations do not amount to an intent of Ricci to deprive the counterclaim plaintiffs of their property, but rather provide that the basis of the suit is a contract, whereby an action in tort is inappropriate.   There are no specific allegations which indicate that Ricci intentionally engaged in some unauthorized act which deprived the plaintiffs of their property permanently or for an indefinite period of time.   Deming v. Nationwide Mutual Ins. Co., supra, 279 Conn. 773.   Merely alleging that Ricci failed to obtain consent of the majority of the LLC members, or failed to keep an up to date accounting of the money deposited and disbursed, or made decisions without the consent of the majority of the LLC members does not rise to an allegation that the defendant specifically intended to steal such funds.   The court agrees with the counterclaim defendants that the allegations in count three are nothing more than the breach of contract allegations incorporated from count one.   The counterclaim plaintiff's claim asserting statutory theft are unsupported by the facts alleged, and, therefore, are legally insufficient.   Because count three is stricken, the prayer for relief seeking treble damages pursuant to a statutory theft claim is also stricken.

Prayer for Relief—Punitive Damages

In the counterclaim plaintiffs' prayer for relief, they seek punitive damages.³  The counterclaim defendants seek to strike the claim for punitive damages because neither of the remaining two counts alleges sufficient facts to support an inference that Ricci acted with a reckless indifference to the rights of others.   Because the court has stricken count three, the counterclaim plaintiffs' claim relief for punitive damages can only be evaluated in light of the allegations of count one, which alleges breach of contract, and count two, which alleges a breach of fiduciary duty.

In order to secure common-law punitive damages, a plaintiff must plead and prove facts that “reveal a reckless indifference to the rights of others or an intentional and wanton violation of those rights ․ Recklessness is ․ more than negligence, more than gross negligence ․ [T]here must be something more than a failure to exercise a reasonable degree of watchfulness to avoid danger to others or to take reasonable precautions to avoid injury to them ․ Wanton misconduct is reckless misconduct ․ It is such conduct as indicates a reckless disregard of the just rights or safety of others or of the consequences of the action ․” (Internal quotation marks and citation omitted.)  Franc v. Bethel Holding Co., 73 Conn.App. 114, 137–38, 807 A.2d 519, (2002), cert. granted on other grounds, 262 Conn. 923, 812 A.2d 864 (2002).

The law with regard to punitive damages in breach of contract cases is well-settled.  “Punitive damages are not ordinarily recoverable for breach of contract ․ This is so because punitive or exemplary damages are assessed by way of punishment, and the motivating basis does not usually arise as a result of the ordinary private contract relationship.”  (Citations omitted;  internal quotation marks omitted.)  Barry v. Posi–Seal International, Inc., 40 Conn.App. 577, 584, 672 A.2d 514, cert. denied, 237 Conn. 917, 676 A.2d 1373 (1996).  “Breach of contract founded on tortious conduct may allow the award of punitive damages.   Such tortious conduct must be alleged in terms of wanton and malicious injury, evil motive and violence, for punitive damages may be awarded only for outrageous conduct, that is, for acts done with a bad motive or with a reckless indifference to the interests of others.”  (Internal quotation marks omitted.)  L.F. Pace & Sons v. Travelers Indemnity Co., 9 Conn.App. 30, 48, 514 A.2d 766, cert. denied, 201 Conn. 811, 516 A.2d 886 (1986).

The remaining two counts do not contain any allegations that Ricci acted with reckless indifference or was reckless in any way in breaching his alleged fiduciary duty owed to the counterclaim plaintiffs.   Therefore, the counterclaim defendants' motion to strike the prayer for relief seeking punitive damages must be granted.

Prayer for relief—attorneys fees

Subparagraph (4) of the prayer for relief sets forth a claim for “attorneys fees,” but again does not set forth the basis of said relief, or to which count(s) it applies.   The counterclaim defendants argue the prayer for relief for attorneys fees should be stricken because no statute has been alleged as the basis for an award of attorneys fees in this case, and no allegations warrant the imposition of common-law attorneys fees.⁴  The counterclaim plaintiff argues that the revised counterclaim contains claims of action, specifically breach of fiduciary duty and statutory theft, which allow for an award of common-law punitive damages and that attorneys fees are a component of punitive damages.   Furthermore, they contend that the complaint sets forth allegations, specifically in count one, ¶ 20, which would allow for an award of attorneys fees based upon the operating agreement.

“In the United States, the general rule of law known as the American Rule is that a prevailing litigant ordinarily is not entitled to collect a reasonable attorneys fee from the opposing party as part of his or her damages or costs ․ There are certain exceptions to this rule ․ In the main, exceptions are based upon statutory or contract provisions authorizing the recovery of attorneys fees by a prevailing litigant ․ Attorneys fees may also be awarded as a component of punitive damages.”  (Citation omitted;  internal quotation marks omitted.)  Narcisco v. Brown, 63 Conn.App. 578, 580, 777 A.2d 728 (2001);  Ralph v. Vogeler, 45 Conn.App. 56, 65, 695 A.2d 1066, cert. denied, 241 Conn. 920, 696 A.2d 342 (1997).

As described above, the revised counterclaim does not contain sufficient allegations which would warrant an award of punitive damages, nor does it contain any statutory provisions which would allow for an award of attorneys fees or punitive damages.   Subparagraph (5) of the prayers for relief sets forth the only basis for an award of attorneys fees, that is, based upon the provisions set forth in the operating agreement as alleged.

CONCLUSION

The counterclaim defendants' motion to strike count three is granted, as well as the prayers for relief, subparagraph (2)—treble damages, subparagraph (3)—punitive damages, and that part of subparagraph (4)—attorneys fees.

Swienton, J.

FOOTNOTES

FN1. General Statutes § 52–564 provides “[a]ny person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages.”.  FN1. General Statutes § 52–564 provides “[a]ny person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages.”

FN2. The court will not address the issue of whether any property would have been the property of the LLC rather than its individual members..  FN2. The court will not address the issue of whether any property would have been the property of the LLC rather than its individual members.

FN3. The counterclaim plaintiffs do not specify under which specific count(s) of their counterclaim allegedly support this claim for enhanced damages..  FN3. The counterclaim plaintiffs do not specify under which specific count(s) of their counterclaim allegedly support this claim for enhanced damages.

FN4. They contend that any basis for an award of attorneys fees would be contractual, and that claim is included in subparagraph (5) of the prayer for relief.  “Indemnify from and against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards and costs and expenses (including but not limited to reasonable attorneys fees) arising directly or indirectly, in whole or in part of any breach of the Operating agreement by Michael Ricci.”  (Prayers for relief, subparagraph 5.).  FN4. They contend that any basis for an award of attorneys fees would be contractual, and that claim is included in subparagraph (5) of the prayer for relief.  “Indemnify from and against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards and costs and expenses (including but not limited to reasonable attorneys fees) arising directly or indirectly, in whole or in part of any breach of the Operating agreement by Michael Ricci.”  (Prayers for relief, subparagraph 5.)

Swienton, Cynthia K., J.