LLC v. LLC (2014)

MEMORANDUM OF DECISION ON DEFENDANT BASIS INVESTMENT GROUP, LLC'S MOTION TO DISMISS DATED MARCH 28, 2013 (# 104.00)

The defendant's Motion to Dismiss alleges lack of personal jurisdiction.   “This Court lacks personal jurisdiction over Basis for two reasons:  (1) Connecticut's longarm statute (Conn.Gen.Stat. § 52–59b) does not authorize the assertion of jurisdiction over Basis:  and (2) the exercise of personal jurisdiction over Basis would violate constitutional principles of due process.” (# 104.00, page 1.) The court held an evidentiary hearing over two days, October 22 and 23, 2013.  Standard Tallow Corporation v. Jowdy, 190 Conn. 48, 56 (1983).

The operative complaint is the April 15, 2013 Amended Complaint coded in on October 17, 2013 (# 122.00).   It is in four counts:  tortious interference with contractual rights and financial expectations, breach of contract, unjust enrichment, and promissory estoppel.   Essentially this lawsuit seeks the collection of a $138,000 mortgage broker's commission based on a Petoskey, Michigan $18,400,000 mortgage loan to Strathmore Development Company Michigan, LLC (Strathmore).   The first count alleges that Basis Investment Group, LLC aka Basis Real Estate Capital II, LLC (Basis) tortiously interfered with the Strathmore/Avant Capital Partners, LLC (Avant) November 23, 2010 contract and as a result Avant was not paid the $138,000 mortgage broker's commission due Avant by Strathmore pursuant to that contract.   The breach of contract count involves the enforcement of a separate oral agreement between Avant and Basis that Basis would honor and protect Avant's contract with Strathmore.   Paragraph 11 of the April 15, 2013 Amended Complaint (# 122.00) contains the contract allegations for the contract between Avant and Basis.  “In or about December 2010, the defendant, BASIS INVESTMENT, by and through its employees, agents, servants, officers and/or representatives, represented, warranted and promised to the plaintiff that, if plaintiff introduced its sponsor, Strathmore Development, to the defendant, in connection with the financing of the property, that the defendant, BASIS INVESTMENT, would honor and protect the plaintiff's contract with Strathmore Development as well as the plaintiff's right and entitlement to be paid its broker's fee from the gross proceeds of the loan at time of closing, pursuant to said contract.”   The unjust enrichment count is in lieu of the breach of contract claim by Avant against Basis.   The promissory estoppel count seeks to enforce a December 2010 promise made by Basis to Avant.   All of the plaintiff's claims center on the $138,000 mortgage broker's commission.

The defendant is a Delaware limited liability company with its principal office and headquarters in New York, New York. The plaintiff is a New York limited liability company registered to do business in Connecticut with its only office located in Greenwich, Connecticut.   Strathmore Development Company Michigan, LLC is an LLC owning real property in Petoskey, Michigan and was the borrower of the $18,400,000 loan.

When a defendant files a motion to dismiss challenging the court's jurisdiction, a two part inquiry is required.   The trial court must first “decide whether the applicable state longarm statute authorizes the assertion of jurisdiction over the [defendant].   If the statutory requirements [are] met, its second obligation [is] then to decide whether the exercise of jurisdiction over the [defendant] would violate constitutional principles of due process.”   Frazer v. McGowan, 198 Conn. 243, 246, 502 A.2d 905 (1986);  see Thomason v. Chemical Bank, 234 Conn. 281, 286, 661 A.2d 595 (1995);  Lombard Bros., Inc. v. General Asset Management Co., 190 Conn. 245, 250, 460 A.2d 481 (1983).

Knipple v. Viking Communications, 236 Conn. 602, 606 (1996).

The return of service demonstrates that constructive service was used and the defendant, Basis, was not served abode or in hand in Connecticut.   The burden of proof is on the plaintiff, Avant, to prove jurisdiction over the defendant, Basis.  Cogswell v. American Transit Insurance Company, 282 Conn. 505, 515 (2007).

To exercise personal jurisdiction over a nonresident the court must undertake a two-part inquiry.  “First, the plaintiff has the burden of showing that the state's long arm statute authorizes the exercise of personal jurisdiction ․ If the defendant is subject to jurisdiction under the terms of the applicable longarm statute, then the court must also consider whether the exercise of jurisdiction satisfies due process, namely whether the defendants have certain minimum contacts with the forum state such that the maintenance of the suit in that forum does not offend traditional notions of fair play and substantial justice.”  (Citations omitted;  internal quotation marks omitted.)  Nastro v. D'Onofrio, 263 F.Sup.2d 446, 451 (D.Conn.2003).   A court debating whether to exercise jurisdiction over the person of a nonresident must use the analysis articulated in the seminal case of International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed 95 (1945).  “The constitutional due process standard requires that, in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.”  Id. “Whether a given defendant has contacts with the forum state sufficient to satisfy due process is dependent upon the facts of the particular case.   Like any standard that requires a determination of reasonableness, the minimum contacts test of International Shoe Co. is not susceptible of mechanical application;  rather the facts of each case must be weighed to determine whether the requisite affiliating circumstances are present.”  (Citations omitted;  internal quotation marks omitted.)  Cogswell v. American Transit Ins. Co., 282 Conn. 505, 525, 923 A.2d 638 (2007).  “The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State.   The application of that rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.   This ‘purposeful availment’ requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated contacts' ․ or of the ‘unilateral activity of another party or a third person.’  “ (Internal quotation marks omitted.)  Id., 530.

Carlin v. Carlin, Superior Court, judicial district of Danbury at Danbury, Docket Number DBD CV 12–6009977 (February 7, 2013, Pavia, J.).

Both parties agree that the Connecticut longarm statute at issue is Gen.Stat. § 52–59b.   On its face Gen.Stat. § 52–59b applies to “nonresident individual, foreign partnership or foreign voluntary association.”   The business entity known as an LLC, limited liability company, is not mentioned in Gen.Stat. § 52–59b.   Foreign corporations are subject to suit in Connecticut by reason of another longarm statute:  Gen.Stat. § 33–929(f).  That statute, too, is silent on LLC's. Many courts have applied corporate law and statutes to an LLC, when the statutory authority is silent.   David Caron Chrysler Motors, LLC v. Goodhall's, Inc., 122 Conn.App. 149, 160, fn. 7 (2010);  Sturm v. Harb Development, LLC, 298 Conn. 124, 131–32 (2010);  Austen v. Catterton Partners V, LP, 729 F.Sup.2d 548, 553–59 (D.Conn.2010).  “Although there is no appellate authority stating which Connecticut longarm statute should be applied to an LLC, the Connecticut federal District and Superior Courts have addressed this issue, and are in conflict.”   Unique Extrusions, Inc. v. Koehler–Bright Star, LLC., Superior Court, judicial district of New Britain at New Britain, Docket Number CV–10–6003582 (August 27, 2010, Shortall, J.T.R.) [50 Conn. L. Rptr. 530].

The parties submitted this Motion to Dismiss based on their agreement that the proper longarm statute was Gen.Stat. § 52–59b.   The court will therefore treat the applicable longarm statute as Gen.Stat. § 52–59b.  Unique Extrusions, Inc. v. Koehler–Bright Star, LLC, supra.

The plaintiff claims that this lawsuit complies with three provisions of Gen.Stat. § 52–59b.   If the plaintiff satisfies any one of the three provisions but not the other two, this court can still exercise in personam jurisdiction.  Pitruzello v. Muro, 70 Conn.App. 309, 311 (2002);  Pro Performance Corporate Services, Inc. v. Goldman, 47 Conn.Sup. 476, 483 (2002).   The three provisions are:  transacts any business within the state, Gen.Stat. § 52–59b(a)(l);  commits a tortious act outside the state causing injury to person or property within the state;  Gen.Stat. 52–59b(a)(3)(A);  and commits a tortious act outside the state causing injury to person or property within the state;  Gen.Stat. 52–59b(a)(3)(B).

(a) As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident individual, foreign partnership or foreign voluntary association, or over the executor or administrator of such nonresident individual, foreign partnership or foreign voluntary association, who in person or through an agent:  (1) Transacts any business within the state;  (3) commits a tortious act outside the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if such person or agent (A) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (B) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce;

Gen.Stat. § 52–59b.

Most of the testimony concerned whether the $138,000 claim at hand was viable and if viable, whether it amounted to transacting business within the State of Connecticut.   This court will devote its attention to the plaintiff's first claim;  that the applicable longarm statutory provision is Gen.Stat. 52–59b(a)(1) “transacts to any business within the state ․” The term “transacts any business” embraces “a single purposeful business transaction.”  Zartolas v. Nisenfeld, 184 Conn. 471, 474 (1981).  “Our Supreme Court has clarified that the phrase ‘transacts any business ’ in § 52–59b has a broader meaning than the phrases ‘transact business' in [General Statutes] § 33–396;  ‘transacting business' in [General Statutes] § 33–397;  and ‘transacts business' in the repealed [General Statutes] § 52–59a ․” (Emphasis added.)  Zartolas v. Nisenfeld, supra, 184 Conn. 476 n.4. “Because ‘ §§ 33–396 and 33–397 provide no guidance for interpreting § 52–59b,’ the cases construing those statutes and their particular language are inapposite.”   The Doyle Group v. Alaskans for Cuddy, 146 Conn.App. 341, 350 (2013).  “In determining whether [the defendant's] contacts constitute the transaction of business within the state, we do not apply a rigid formula but balance considerations of public policy, common sense, and the chronology and geography of the relevant factors ․” Gaudio v. Gaudio, 23 Conn.App. 287, 298, cert. denied, 217 Conn. 803 (1990).

The court makes the following finding of facts and legal conclusions.   The court's findings and legal conclusions contained herein are for the purpose of determining jurisdiction only and are not to be construed as findings conclusive or binding on the merits of the case in chief.  Solano v. Calegari, 108 Conn.App. 731, 741 (2008).

The parties submitted an October 21, 2013 Joint Stipulated Facts Re Hearing on Defendant's Motion to Dismiss (# 123.00).   Ex. 12.   The court accepts these facts to be true.   As to Basis and its connection to Connecticut, the Stipulation states that Basis never maintained any offices or employees in Connecticut, never owned Connecticut real estate, had no telephone number, bank account or mailing address in Connecticut, has never been registered to do business in Connecticut, does not derive any revenue in Connecticut, and has never closed a real property transaction for property located in Connecticut.   Despite these facts a nonresident who has not entered Connecticut physically may be subject to jurisdiction under Gen.Stat. § 52–59b(a)(1) if that individual has invoked the benefits and protection of Connecticut law by virtue of his or her purposeful Connecticut related activity.  Ryan v. Cerullo, 282 Conn. 109, 119–20 (2007).

Avant has only one office.   Avant was first located in New York City and since January 1, 2010 its only office has been in Greenwich, Connecticut.   After January 1, 2010 it received and generated its mail from the Greenwich office, made and received all telephone calls, received and deposited checks, and sent and received emails and faxes, all from the Greenwich office.   On November 23, 2010 Avant and Strathmore entered into a three-page agreement for Avant to provide to Strathmore debt financing for Strathmore's Petoskey, Michigan real estate project.   Ex. 1. This three-page agreement was dated November 22, 2010 but was signed on November 23, 2010.   The project was known as “Bear Creek.”   A placement fee of 0.75% of any mortgage financing closed was agreed to be paid by Strathmore to Avant at the closing.   Avant then prepared an eleven-page prospectus outlining the Strathmore project located in Petoskey, Michigan and its finances.   Ex. 8. On December 1, 2010 Avant sent to Basis this prospectus, that it called a loan submission package.   Ex. 7. Multiple emails were exchanged between Basis and Avant on December 1, 2010.   Avant thus introduced Basis to Strathmore on December 1, 2010.   Ex. 7. At that time Strathmore confirmed to Avant that Basis was an approved lending source for Strathmore and therefore was subject to the two-year exclusive brokerage provisions of the November 23, 2010 contract.   Ex. 1.

Avant and Basis had business contacts years before.   Ex. 2, Ex. 4. Adam Luysterborghs of Avant had received assurances by Dinesh Sakhrani of Basis that Basis would honor whatever exclusivity arrangements that Avant had.   The November 23, 2010 letter agreement was Avant/Strathmore's exclusivity arrangement.  “The Limited Exclusivity shall remain in full force and effect for all Capital Sources introduced to the Sponsor by AVANT for the limited purpose of the Subject Transaction for a period of two (2) years.”   Ex. 1, page 2. As between Avant and Basis the December 1, 2010 agreement to honor the Strathmore exclusivity agreement was oral and not reduced to writing.   Mr. Sakhrani told Avant that to the extent that Avant presents deals to Basis, Basis would protect Avant's mortgage broker's fees.   Avant claims that this exclusivity protection agreement and the payment of mortgage broker's fees from the closing proceeds is common in the commercial mortgage business.

Multiple telephone calls were made to and from Avant's Connecticut office by Basis in 2009 through 2011.   Many emails were exchanged.   Exhibits 2, 4, 7, 9, and 11.

Strathmore obtained the eventual mortgage financing for the Michigan project which included an adjacent Michigan project.   The mortgage closed within two years of the November 23, 2010 exclusivity agreement.   Ex. 1. Basis was the lender.  “Basis, through its affiliate Basis Real Estate Capital II, LLC, entered into a loan agreement with Strathmore Development Company Michigan, LLC, or its agents/affiliates, concerning property that included Bear Creek Apartments and the closing for said loan agreement took place on or about May 17, 2012.”   Joint Stipulation # 123.00, paragraph 17.   Avant claims that it was entitled to the $138,000 mortgage broker's fee from Strathmore pursuant to the November 23, 2010 agreement as of the May 17, 2012 mortgage closing.   Ex. 1. Avant was not paid by Strathmore.   The breach of contract count against Basis is its failure to honor its December 2010 protective agreement with Avant and in which Basis agreed to see to it that Avant was paid its $138,000 fee at the mortgage closing.

The court finds that this was a single purposeful transaction that Basis, a New York business, did with Avant, a business with its only offices in Connecticut after January 1, 2010.   The transaction had two purposes:  to introduce Basis to Strathmore leading to closing a mortgage loan and Basis protecting Avant for its mortgage broker's fees.   The plaintiff has satisfied the longarm statute, Gen.Stat. § 52–59b(a)(1).

The remaining issue is whether this transaction satisfied due process requirements.   Does Basis have certain minimum contacts with Connecticut such that the maintenance of lawsuit in Connecticut “does not offend traditional notions of fair play and substantial justice.”  International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945).  “A state court will have specific jurisdiction over a non-resident defendant whenever the defendant has purposefully directed [its] activities at residents of the forum ․ and the litigation [has] result[ed] from alleged injuries that arise out of or relate to those activities ․ “ Cogswell v. American Transit Insurance Company, supra, 282 Conn. 524 (2007).

The testimony is replete with telephone calls made to and from Avant's Greenwich office to and by Basis.   Emails were exchanged between Avant and Basis and offered in evidence.   Financial records were sent to Basis from the Avant Greenwich office as requested by Basis.   Ex. 1. The Joint Stipulation states:  “All relevant dealing and communications between Avant and Basis, concerning potential financing of the subject property (‘Bear Creek Apartments' or ‘Bear Creek’) in December of 2010 and thereafter, were by email and/or telephone between the parties at their respective office locations.” (# 123.00, paragraph 14.)   It has been held that sending wire and mail to another at a Connecticut address is sufficient to submit the out of state party to Connecticut's jurisdiction.  Knipple v. Viking Communications, supra, 236 Conn. 610;  Pro Performance Corporate Services, Inc. v. Goldman, supra, 47 Conn.Sup. 483;  MS/C Communications, Inc. v. Hamilton, Superior Court, judicial district of Fairfield at Bridgeport, Docket Number 266263 (August 8, 1990, Spear, J.) [2 Conn. L. Rptr. 247].   In addition, Adam Luysterborghs entered into an oral contract with Basis in which Basis was to protect Avant's exclusive mortgage broker's fees as to Strathmore.   This occurred in a telephone call originated from Basis in New York to Avant in Connecticut in December 2010.   This reconfirmed a previous similar protective agreement between Basis and Avant.   Ex. 2. Avant commenced operations from its sole Connecticut office in December 2009, when that oral protective agreement was in effect.   Ex. 5. The Doyle Group v. Alaskans for Cuddy, supra, 146 Conn. 349.  “Because this litigation arises from those Connecticut-based contacts and activities, it is fully consistent with due process for the defendant to be sued here.”  Unique Extrusions, Inc. v. Koehler–Bright Star, LLC, supra.

The most recent Appellate case discussing Gen.Stat. § 52–59b held that the defendant “has transacted business in [Connecticut] by virtue of his contracting [with] a Connecticut based [company and] by e-mails.   See [General Statutes] § 52–59b.”   The Doyle Group v. Alaskans for Cuddy, 146 Conn.App. 341, 345 (2013).   The plaintiff was a Connecticut based political consulting firm located in Hartford.   David Cuddy contemplated running for a United States Senate seat in Alaska.   The plaintiff sent a contract to the defendant who signed it and returned the signed contract to Connecticut along with a $10,000 personal check.   The contract was signed by both parties and lasted for three months.   The plaintiff thereafter performed consulting work for the defendant via e-mail and telephone calls to Cuddy and his agents.   The defendant terminated the contract after a few months and no further payments were made.   A month later the plaintiff sued the defendant in Connecticut and served process on the defendant through the office of the Connecticut Secretary of State.   The defendant filed a timely motion to dismiss alleging that “pursuant to General Statutes § 52–59b(a)(1) that the court lacked personal jurisdiction over him.”  Id. 344.   The court denied the motion to dismiss.   After a plaintiff's verdict in a jury trial, the defendant's appeal was rejected by the Appellate Court on October 8, 2013.

Cuddy argued quite accurately that he was not a resident of Connecticut, he signed the subject contract outside of Connecticut, he never physically has been present in Connecticut for any purpose related to the subject of this cause of action, he never has engaged in any business activity in Connecticut and he owns no property, bank accounts or business interests in Connecticut.   He also attested that he is not subject to any regulation by the State of Connecticut.  Id. 345.   Evidence at the trial demonstrated the accuracy of the above facts.   Further evidence at trial indicated that several telephone calls were either received in or originated from Connecticut and the plaintiff held itself out to be a Connecticut based consulting firm.

The first paragraph of the contract at issue in Cuddy recites that the plaintiff is a Connecticut company, and that it has no presence outside of Connecticut.   Pursuant to his affidavit, Cuddy engaged in negotiations with the plaintiff, signed the contract for services to be performed by the plaintiff in Connecticut, mailed the contract and his personal check to the plaintiff in Connecticut, and engaged in telephone calls and e-mail communication arising from the contract.  “We conclude that the allegations of the amended complaint and the parties' affidavits constitute conduct that falls within the scope of ‘[t]ransacts any business within the state’ pursuant to § 52–59b.”  Id. 348.

[A] nonresident individual who has not entered this state physically nevertheless may be subject to jurisdiction in this state under § 52–59b(a)(1) if that individual has invoked the benefits and protection of Connecticut's laws by virtue of his or her purposeful Connecticut related activity ․” (Internal quotation marks omitted.)  Ryan v. Cerullo, supra, 282 Conn. 120.  “[D]etermination of whether exercise of personal jurisdiction satisfies due process will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum [s]tate, thus invoking the benefits and protections of its laws ․ (Internal quotation marks omitted.)  Id., quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958).

The Doyle Group v. Alaskans for Cuddy, supra, 146 Conn.App. 348.

The court finds that these contacts by Basis were purposeful and directed to accomplish a recognized business purpose.  Cashman v. Cashman, 41 Conn.App. 382, 389 (1996).   They were not random, fortuitous, or attenuated contacts.   “The defendant's conduct and connection with the forum state must be such that it should reasonably anticipate being haled into court there.”  World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d. 490 (1980).   The court finds that the maintenance of this lawsuit in Connecticut does not offend traditional notions of fair play and substantial justice.

The defendant's March 28, 2013 Motion to Dismiss (# 104.00) is denied.

BY THE COURT

Hon. Kevin Tierney

Judge Trial Referee

Tierney, Kevin, J.T.R.