Management Strategies, Inc. v. West Haven Housing Authority (2014)

MEMORANDUM OF DECISION RE MOTION TO STRIKE (# 118)

FACTS

On June 21, 2012, the plaintiff, Management Strategies, Inc., filed a complaint against the defendant, West Haven Housing Authority.   As a result of a request to revise, the plaintiff filed a revised complaint on April 19, 2013.   In count one of the revised six-count complaint, alleging a breach of contract, the plaintiff alleges the following facts.   The plaintiff is a Connecticut corporation and the defendant is a public organization which is “charged with the operation of the Section 8 Existing Housing Assistance Program” in West Haven, Connecticut.   On March 5, 2010, the plaintiff entered into a written contract with the defendant in which the plaintiff, acting as the contractor for the project known as Facade Improvements at Morrissey Manor, agreed to make certain improvements to the property located at 15 Bayshore Drive in West Haven.   On March 24, 2010, the city of West Haven (city) issued a building permit for the project and on August 6, 2010, the city issued an electrical permit for the project.

At certain times, the plaintiff noticed that the contract documents were “defective, deficient and/or inadequate to construct” the project.   The plaintiff notified the defendant of the deficiencies and requested that the defendant adjust the contract sum and contract time accordingly.   The defendant failed, refused, or neglected to do so.   In addition, at certain times during the course of performing the work, the plaintiff encountered unforeseen and unanticipated conditions that differed materially from those shown in the contract documents and which were unknown to the plaintiff at the time the contract was executed.   The plaintiff notified the defendant of these conditions and requested that the defendant investigate them and adjust the contract sum and contract time accordingly.   The defendant failed, refused, or neglected to do so.   The plaintiff also, with the consent and direction from the defendant, provided services, labor, materials and equipment to the project in addition to those provided for in the contract documents, and the defendant made changes to the work shown on the contract documents.   The defendant refused to adjust the contract sum or contract time as a result of these changes.

The plaintiff substantially completed the project in November 2010.   The defendant inspected and approved of the plaintiff's work and, on November 19, 2010, the city approved of the work after performing a final inspection.   The defendant refused to pay the plaintiff for the outstanding contract balance, change orders, extra work and project delays.   Moreover, the defendant hired another contractor to perform work that was outside the scope of the contract, but the defendant did not terminate the plaintiff's right to proceed with work under the contract.

Count two is a claim for unjust enrichment.   Count three alleges a breach of the implied covenant of good faith and fair dealing.   Counts four and five allege negligent misrepresentation and intentional or fraudulent misrepresentation, respectively.   Count six alleges a violation of General Statutes § 42–110 et seq., the Connecticut's Unfair Trade Practices Act (CUTPA).

On July 31, 2013, the defendant filed a motion to strike counts two, three, and six of the revised complaint and a memorandum of law in support of the motion on the ground that the counts are legally insufficient.   On September 9, 2013, the plaintiff filed an objection and a memorandum in opposition.   Thereafter, the defendant filed a reply to the plaintiff's objection on November 11, 2013.   The matter was heard at short calendar on November 18, 2013.

DISCUSSION

“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.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court.”  (Internal quotation marks omitted.)   Simms v. Seaman, 308 Conn. 523, 529, 69 A.3d 880 (2013).  “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).

“[I]t is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted ․ The role of the trial court in ruling on a motion to strike is to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [plaintiff] stated a legally sufficient cause of action ․” (Citations omitted;  internal quotation marks omitted.)  Coe v. Board of Education, 301 Conn. 112, 116–17, 19 A.3d 640 (2011).  “[P]leadings are to be construed broadly and realistically, rather than narrowly and technically ․” (Internal quotation marks omitted.)  Downs v. Trias, 306 Conn. 81, 92, 49 A.3d 180 (2012).   Nevertheless, a motion to strike “does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings.”  (Emphasis omitted;  internal quotation marks omitted.)  Faulkner v. United Technologies Corp., supra, 240 Conn. 588.

The defendant argues that the court should strike counts two, three, and six because they are legally insufficient.   Specifically, the defendant argues that count two, alleging unjust enrichment, is legally insufficient because there is an allegedly enforceable express contract between the parties.   The defendant further argues that count three, alleging a breach of the implied covenant of good faith and fair dealing, is legally insufficient because it does not allege acts of bad faith or sinister motive.   Finally, the defendant argues that count six, brought pursuant to § 42–110 and alleging a violation of CUTPA, should be stricken because the defendant is a municipal housing authority and is, therefore, exempted from liability under CUTPA.   The plaintiff, in opposition, argues that count two is legally sufficient under Practice Book § 10–25 which allows a party to plead alternative theories of liability.   Moreover, the plaintiff argues that the revised complaint contains sufficient allegations to support a cause of action based on bad faith and that the defendant is not exempt from liability under CUTPA.

A

Unjust Enrichment

“Unjust enrichment applies wherever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract ․ With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard ․ [Parties] seeking recovery for unjust enrichment must prove (1) that the [defendant was] benefitted, (2) that the [defendant] unjustly did not pay the [the plaintiff] for the benefits, and (3) that the failure of payment was to [the plaintiff's] detriment.”  (Internal quotation marks omitted.)  Vertex, Inc. v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006).

Under Practice Book § 10–25, “[t]he plaintiff may claim alternative relief, based upon an alternative construction of the cause of action.”  “Parties routinely plead alternative counts alleging breach of contract and unjust enrichment, although in doing so, they are entitled only to a single measure of damages arising out of these alternative claims.”  Stein v. Horton, 99 Conn.App. 477, 485, 914 A.2d 606 (2007).  “While proof of an enforceable contract might preclude application of an unjust enrichment theory, the plaintiff may be unable to prove an enforceable contract and, at least in the early stages of the proceedings, is entitled to plead inconsistent theories.”   Thames River Capital, LLC v. Montville Realty Partnership, LLC, Superior Court, judicial district of New London, Docket No. CV–12–6015194–S (October 2, 2013, Cosgrove, J.) [56 Conn. L. Rptr. 887].   Moreover, Practice Book § 10–26 “requires these alternative pleadings to be asserted in separate counts.”  (Internal quotation marks omitted.)   Schifano v. Bank of New York Co., Superior Court, judicial district of Danbury, Docket No. CV–12–5009097–S (April 1, 2013, Doherty, J.).  “Consequently, several courts have found that a claim for unjust enrichment should be stricken if it asserts allegations referring to an express agreement between the parties.”   Alvarez v. Fleet National Bank, Superior Court, judicial district of New Haven, Docket No. CV–01–0450643–S (April 19, 2004, Skolnick, J.);   see also, Glidepath, LLC v. Lawrence Brunoli, Inc., Superior Court, judicial district of Hartford, Docket No. CV- 10–6014624–S (December 21, 2012, Peck, J.) (“[S]everal Superior Court cases have found it improper to expressly incorporate the allegations of a breach of contract into an unjust enrichment claim, reasoning that incorporating allegations of the breach of contract into a count of unjust enrichment violates the alternative pleading rule requiring separate and distinct counts” (Internal quotation marks omitted)).

The defendant argues that by incorporating paragraphs 1 through 4 of count one into count two, the word “contractor” from paragraph four of count one is incorporated into count two as a description of the plaintiff.   Moreover, the defendant argues, the use of the word “contractor” indicates an express contract between the parties based on definitions in a number of dictionaries.  “To determine the common, natural, and ordinary meaning of an undefined term, it is proper to turn to the definition found in a dictionary.”  New London County Mutual Ins. Co. v. Zachem, 145 Conn.App. 160, 166, 74 A.3d 525 (2013).   Although some dictionaries associate “contractor” with “contract,” this association is not required.   The context in which a word is used usually provides guidance as to what that particular word means.   See Tine v. Zoning Board of Appeals, 308 Conn. 300, 307, 63 A.3d 910 (2013) (“In the absence of a definition of a term in the statute itself, [w]e may presume ․ that the legislature intended [a word] to have its ordinary meaning in the English language, as gleaned from the context of its use” (Internal quotation marks omitted)).   Here, paragraph four of counts one and two state:  “At all times relevant hereto, [the plaintiff] was the contractor for the project known as Facade Improvements at Morrissey Manor (the “Project”) located at 15 Bayshore Drive, West Haven, Connecticut (the “Property”).”   Using a definition provided by American Heritage College Dictionary (2d Ed.2002), a “contractor” is “a person who agrees to furnish materials or perform services at a specified price, esp. for construction.”   This definition does not require the existence of a contract.   Although one subsection of the definition provided in Merriam–Webster's Collegiate Dictionary (10th Ed.2002) does state “one that contracts or is a party to a contract,” another part states “something (as a muscle) that contracts or shortens.”   The latter definition is clearly inapplicable in the present case.   The court is not limited to one subsection of a definition or one dictionary in rendering its decision.   Moreover, in a motion to strike, the court must construe the pleadings in a light most favorable to the non-moving party, namely, the plaintiff, and in the manner most favorable to sustaining their legal sufficiency.   See Coe v. Board of Education, supra, 301 Conn. 116–17;  see also Santorso v. Bristol Hospital, 308 Conn. 338, 349, 63 A.3d 940 (2013) (“We take facts to be those alleged in the complaint that has been stricken and we construe the complaint in the manner most favorable to sustaining its legal sufficiency” (Internal quotation marks omitted)).   Construing the complaint in the manner most favorable to sustaining its legal sufficiency, the court construes “contractor” to mean “a person who agrees to furnish materials or perform services at a specified price.”   Thus, because “contractor” does not have to indicate the existence of an express contract, the plaintiff has sufficiently pleaded unjust enrichment in count two and the motion to strike count two of the revised complaint is denied.

B

Breach of the Implied Covenant of Good Faith and Fair Dealing

“It is axiomatic that the ․ duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship ․ The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term ․ In accordance with these authorities, the existence of a contract between the parties is a necessary antecedent to any claim of breach of the duty of good faith and fair dealing.”  (Citations omitted;  emphasis omitted;  internal quotation marks omitted.)  Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 638, 804 A.2d 180 (2002).

“To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith ․ Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive ․ Bad faith means more than mere negligence;  it involves a dishonest purpose.”  (Internal quotation marks omitted.)   Rafalko v. University of New Haven, 129 Conn.App. 44, 51, 19 A.3d 215 (2011).  “[B]ad faith may be overt or may consist of inaction, and it may include evasion of the spirit of the bargain ․” (Internal quotation marks omitted.)  Keller v. Beckenstein, 117 Conn.App. 550, 564, 979 A.2d 1055, cert. denied, 294 Conn. 913, 983 A.2d 274 (2009).

“Absent allegations and evidence of a dishonest purpose or sinister motive, a claim for breach of the implied covenant of good faith and fair dealing is legally insufficient.”  Alexandru v. Strong, 81 Conn.App. 68, 81, 837 A.2d 875, cert. denied, 268 Conn. 906, 845 A.2d 406 (2004).  “There is a split of authority in the Superior Courts as to what factual allegations are sufficient to constitute the element of bad faith.   The first line of cases requires specific allegations establishing a dishonest purpose or malice ․ The second line of cases holds the plaintiff to a less stringent standard ․ [where] the plaintiffs need only allege sufficient facts or allegations from which it may reasonably be inferred that the defendant breached the implied covenant of good faith and fair dealing ․ [A] majority of trial courts have held [however] that plaintiffs must plead facts that go beyond a simple breach of contract claim and enter into a realm of tortious conduct which is motivated by a dishonest or sinister purpose.”  (Internal quotation marks omitted.)  Katz v. Hartford Financial Services Group, Inc., Superior Court, judicial district of Hartford, Docket No. CV–11–6020408–S (May 11, 2012, Domnarski, J.).   “[Even] where courts have used an inference analysis ․ they have looked to allegations that the conduct at issue was engaged in purposefully.”  (Internal quotation marks omitted.)   Urban Apparel Plus, LLC v. Sentinel Ins. Co., Ltd., Superior Court, judicial district of New Haven, Docket No. CV–13–6035293–S (October 31, 2013, Fischer, J.) [57 Conn. L. Rptr. 124].

The defendant argues that the allegations in paragraphs 42 and 43 of the revised complaint alleging that the defendant “had no intention of paying [the plaintiff]” and “knowingly and intentionally [sought] to evade its contractual obligation” are insufficient to satisfy the pleading requirements for breach of the implied covenant of good faith and fair dealing.   The plaintiff maintains that the allegations are sufficient because they “give rise to a clear inference that the defendant acted in bad faith in breaching its obligations that it owed to the plaintiff.”   In the present case, under either standard, the allegations are legally sufficient.   Under the more lenient standard, the court can infer that the defendant allegedly acted in bad faith by having a dishonest motive and an intent to deceive.   Moreover, under the more stringent standard, the allegations that the defendant had no intention in paying the plaintiff and “knowingly and intentionally [sought] to evade its contractual obligation” are sufficient allegations of bad faith and deceit.   Although the plaintiff does not use the words “deceit” or “malicious” in its allegations, the plaintiff alleges that the defendant's bad acts were intentional.   In addition, the allegation that the defendant had “no intention of paying [the plaintiff]” is clear “evidence of a dishonest purpose.”  Alexandru v. Strong, supra, 81 Conn.App. 81.   Because the allegations in count three are legally sufficient to establish a claim for breach of the implied covenant of good faith and fair dealing, the motion to strike count three of the revised complaint is denied.

C

CUTPA (General Statutes § 42–110a et seq.)

In § 42–110b(a), CUTPA provides:  “No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”  “Such a cause of action is available to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a [prohibited] method, act of practice.”   (Internal quotation marks omitted.)   Rizzo v. Rizzo's Garage, LLC, Superior Court, judicial district of Danbury, Docket No. CV–12–6009507–S (April 11, 2013, Pavia, J.);   see also General Statutes § 42–110g(a).¹

“[B]ecause CUTPA is a self-avowed ‘remedial’ measure, General Statutes § 42–110b(d), it is construed liberally in an effort to effectuate its public policy goals.”  (Internal quotation marks omitted.)  Associated Investment Co. Ltd. Partnership v. Williams Associates IV, supra, 230 Conn. 158.  “CUTPA was intended to provide a remedy that is separate and distinct from the remedies provided by contract law when the defendant's contractual breach was accompanied by aggravating circumstances.”  Ulbrich v. Groth, 310 Conn. 375, 411, 78 A.3d 76 (2013).   Moreover, a single transaction can give rise to a CUTPA claim.  Johnson Electric Co. v. Salce Contracting Associates, Inc., 72 Conn.App. 342, 351, 805 A.2d 735, cert. denied, 262 Conn. 922, 812 A.2d 864 (2002).

General Statutes § 42–110c provides exceptions to CUTPA liability.   Section 42–110c provides in subsection (a):  “Nothing in this chapter shall apply to:  (1) Transactions or actions otherwise permitted under law as administered by any regulatory board or officer acting under statutory authority of the state or of the United States ․” The Supreme Court, applying § 42–110c, has held that the acts of municipal housing authorities, acting as landlords, “are exempt from the operation of CUTPA.”  Connelly v. Housing Authority, 213 Conn. 354, 356, 567 A.2d 1212 (1990).   However, “there is no blanket immunity for municipalities from CUTPA and the factors from Connelly must be applied to find that a municipality is exempt.” ²  Frillici v. Westport, Superior Court, judicial district of Stamford–Norwalk at Stamford, Complex Litigation Docket, Docket No. X05–CV–00–0176696–S (October 12, 2001, Tierney, J.).

The defendant argues that, as a municipal housing authority, it is exempted from liability under CUTPA.   Moreover, the defendant argues that the conduct of the defendant surrounding the contractual relationship with the plaintiff is deemed by the legislature to be the work of government and not trade or commerce, and therefore does not fall under the ambit of CUTPA liability.   The plaintiff maintains that the defendant is liable under CUTPA because municipal housing authorities are not, in and of themselves, exempt from liability under CUTPA.  “Most trial courts have held that CUTPA is inapplicable to the actions of a governmental entity, as a matter of law, even if that conduct, performed by a private person, might be considered to have commercial overtones.”   (Internal quotation marks omitted.)  Loureiro Contractors, Inc. v. Danbury, supra, Superior Court, Docket No. CV–09–6002650–S.   One Superior Court looked to Massachusetts law, which has unfair trade practices laws similar to Connecticut, for guidance on these issues and found that “[w]hether a municipality is acting in a business context depends on the nature of the transaction, the character of the parties involved, and [their] activities ․ and whether the transaction [was] motivated by business ․ reasons ․ [A] party is not engaging in trade or commerce ․ when its actions are motivated by legislative mandate.”  (Internal quotation marks omitted.)   Baker v. Cheshire, Superior Court, judicial district of New Haven, Docket No. CV–07–5013602–S (April 24, 2008) (45 Conn. L. Rptr. 452).  “When determining whether a municipality's conduct takes place in the business context, Massachusetts courts have also considered whether the action taken was merely incidental to a primary function ․ and whether the municipality sought to profit from its action.”  (Citation omitted;  internal quotation marks omitted.)  Loureiro Contractors, Inc. v. Danbury, supra.

In the present case, the plaintiff alleges in the revised complaint in paragraph 2 of count one that the defendant is a “public corporation organized and existing” pursuant to General Statutes § 8–38 et seq.,³ and also alleges in paragraph 3 of count one that the defendant receives funding from the United States Department of Housing and Urban Development.   These allegations are sufficient to indicate that the defendant is a municipal authority or public agency.   Moreover, the alleged relationship between the parties appears to have “commercial overtones,” but nevertheless is government action that is “incidental to primary function.”   There is no indication that the defendant sought to profit from the relationship with the plaintiff.   Therefore, because the defendant is a municipal organization, acting pursuant to statutory authority, and did not seek to profit from the relationship with the plaintiff, the defendant is exempt from liability under CUTPA.   The motion to strike count six of the revised complaint is therefore granted.

CONCLUSION

For the foregoing reasons, the motion to strike counts two and three is denied and the motion to strike count six is granted.

Wilson, J.

FOOTNOTES

FN1. To determine whether certain acts are unfair, the Supreme Court has “adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission ․ (1)[W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers [ (competitors or other businessmen) ].”  (Internal quotation marks omitted.)  Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 591, 657 A.2d 212 (1995).  “[A]ll three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three ․ Thus a violation of CUTPA may be established by showing either an actual deceptive practice ․ or a practice amounting to a violation of public policy ․ Furthermore, a party need not prove an intent to deceive to prevail under CUTPA.”  (Internal quotation marks omitted.)  Associated Investment Co. Ltd. Partnership v. Williams Associates IV, 230 Conn. 148, 156, 645 A.2d 505 (1994)..  FN1. To determine whether certain acts are unfair, the Supreme Court has “adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission ․ (1)[W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers [ (competitors or other businessmen) ].”  (Internal quotation marks omitted.)  Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 591, 657 A.2d 212 (1995).  “[A]ll three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three ․ Thus a violation of CUTPA may be established by showing either an actual deceptive practice ․ or a practice amounting to a violation of public policy ․ Furthermore, a party need not prove an intent to deceive to prevail under CUTPA.”  (Internal quotation marks omitted.)  Associated Investment Co. Ltd. Partnership v. Williams Associates IV, 230 Conn. 148, 156, 645 A.2d 505 (1994).

FN2. “Connelly considered four factors to determine whether CUTPA was applicable, including the following:  (1) The agency is a creature of statute and is expressly authorized and regulated by both the State and Federal government;  (2) Both federal regulations and state law provide carefully balanced procedural and substantive remedies for tenants in a variety of situations;  (3) Those regulatory remedies carefully balance the rights and obligations of the agency and its tenants;  and this balance might be upset by providing a CUTPA remedy;  and (4) There has been no instance in which the Federal Trade Commission Act has been applied to a local housing authority.”   Loureiro Contractors, Inc. v. Danbury, Superior Court, judicial district of New Britain, Docket No. CV–09–6002650–S (April 29, 2010, Swienton, J.) [49 Conn. L. Rptr. 772].   The Supreme Court “[did] not make it clear that all of these factors are essential to this analysis.   In each case [in which the factors were applied], the Supreme Court found authorization and pervasive regulation of the activity at issue by state and federal statutes.”  Id..  FN2. “Connelly considered four factors to determine whether CUTPA was applicable, including the following:  (1) The agency is a creature of statute and is expressly authorized and regulated by both the State and Federal government;  (2) Both federal regulations and state law provide carefully balanced procedural and substantive remedies for tenants in a variety of situations;  (3) Those regulatory remedies carefully balance the rights and obligations of the agency and its tenants;  and this balance might be upset by providing a CUTPA remedy;  and (4) There has been no instance in which the Federal Trade Commission Act has been applied to a local housing authority.”   Loureiro Contractors, Inc. v. Danbury, Superior Court, judicial district of New Britain, Docket No. CV–09–6002650–S (April 29, 2010, Swienton, J.) [49 Conn. L. Rptr. 772].   The Supreme Court “[did] not make it clear that all of these factors are essential to this analysis.   In each case [in which the factors were applied], the Supreme Court found authorization and pervasive regulation of the activity at issue by state and federal statutes.”  Id.

FN3. Chapter 128 of the Connecticut General Statutes, § 8–38 et seq. are the provisions which govern municipal housing authorities in this state..  FN3. Chapter 128 of the Connecticut General Statutes, § 8–38 et seq. are the provisions which govern municipal housing authorities in this state.

Wilson, Robin L., J.