Wentworth, DeAngelis & Kaufman, Inc. v. Stephen Nims et al. (2014)

MEMORANDUM OF DECISION RE MOTION TO STRIKE

The plaintiff, Wentworth, DeAngelis & Kaufman, Inc. (Wentworth), originally brought this action in nine counts against its former employee, Stephen Nims, his subsequent colleague, Michael Nelson, and Associated Insurance Services, Inc. (Associated), a company Nims owned after he left the plaintiff's employ in 2010.   On September 4, 2013, the plaintiff revised its complaint to clarify which claims related to which defendants.   The revised complaint contained twenty-one counts.   On September 26, 2013, the defendants moved to strike all nine counts of the original complaint.   Although the defendants' failure to address the operative version of the complaint made their arguments somewhat more difficult to follow, the parties did address the few substantive differences in the original and revised complaints in their briefs and at oral argument, heard on October 21, 2013.   The court will accordingly address each claim in turn.

I

LEGAL STANDARD

“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.)  Fidelity Bank v. Krenisky, 72 Conn.App. 700, 720, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002).  “For the purpose of ruling upon a motion to strike, the facts alleged in a complaint, though not the legal conclusions it may contain, are deemed to be admitted.”   (Internal quotation marks omitted.)  Bridgeport Harbour Place I, LLC v. Ganim, 111 Conn.App. 197, 203, 958 A.2d 210 (2008), aff'd, 303 Conn. 205, 32 A.3d 296 (2011).  “[P]leadings must be construed broadly and realistically, rather than narrowly and technically.”  (Internal quotation marks omitted.)   Asylum Hill Problem Solving Revitalization Ass'n v. King, 277 Conn 238, 246, 890 A.2d 522 (2006).   However, “[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged.”  (Internal quotation marks omitted.)  Bridgeport Harbour Place I, LLC v. Ganim, 303 Conn. 205, 213, 32 A.3d 296 (2011).

II

MISAPPROPRIATION OF TRADE SECRETS

In the first count, directed to defendant Nims, the plaintiff alleges the following relevant facts.   The plaintiff is an independent insurance agency.   In 2007, Nims began employment with the plaintiff, where his responsibilities included providing services for many of the plaintiff's customer accounts.   In 2008, the plaintiff was approached with a business opportunity by Edward Scannel, who owned a 60 percent interest in Kelly Associates, Inc., a company that maintained accounts in the specialty market of armored vehicle insurance.   The plaintiff agreed to help Scannel manage those accounts and charged Nims with servicing them.   Nims' responsibilities required him to travel throughout North America to meet with the clients.   The plaintiff purchased the armored vehicle insurance accounts from Scannel in 2009.  (Paragraphs 1–7.)

In 2010, Nims became the owner and president of Associated and ceased working on the plaintiff's premises but maintained a working relationship with the plaintiff.   Nims continued to help service the plaintiff's armored vehicle accounts and received commissions for that work.   In late 2012, Nims informed the plaintiff that J.R. Davis, the holder of a 40 percent interest in Kelly Associates, Inc., had expressed desire not to continue to do business with the plaintiff.   In a “purported attempt to maintain the Davis armored vehicle account,” Nims convinced the plaintiff to move that account from Wentworth's name to that of Associated.  (Paragraphs 8–11.)

On May 27, 2013, the plaintiff learned that the defendants intended to steal the plaintiff's clients as their own, for the benefit of the defendants and to the exclusion of the plaintiff.   On May 30, 2013, the plaintiff informed its Lloyd's of London broker for the armored vehicle accounts that Nims was no longer associated with the plaintiff's business or any of its accounts.   The plaintiff then learned that a number of its armored vehicle clients had recently requested that their “broker of record” be changed from the plaintiff to Associated.  (Paragraphs 12–13.)

On June 6, 2013, the plaintiff was approached by Nelson, acting as a representative of the defendants, with an offer to purchase the plaintiff's armored vehicle accounts and certain other insurance business for $275,000.   The plaintiff agreed to this offer and was awaiting paperwork and payment to be tendered on June 10, 2013.   The defendants never intended to purchase the plaintiff's business, but intentionally misrepresented their willingness to purchase the business to delay the plaintiff's efforts to protect its rights while continuing to steal the plaintiff's business and simultaneously becoming licensed in several states where the plaintiff's clients do business.   (Paragraphs 14–15.)

The plaintiff expended considerable time, energy, and capital in acquiring the skills, knowledge, and client lists associated with its share of the armored vehicle insurance market, all of which derive economic value from not being generally known and not being readily ascertainable by other persons or businesses.   Said skills, knowledge, and client lists are trade secrets as defined by General Statutes § 35–51(d).  (Paragraph 16.)

The defendants have used and continue to use the alleged trade secrets to induce a number of the plaintiff's clients to change their “broker of record” from the plaintiff to Associated.  (Paragraph 17.)   The defendants have used the plaintiff's trade secrets without the plaintiff's express or implied consent, while knowing that the trade secrets were acquired under circumstances giving rise to a duty to maintain their secrecy and limit their use.   This use is a misappropriation as defined by General Statutes § 35–51(d).  Such actions are in violation of the Uniform Trade Secrets Act, General Statutes § 35–50 et seq.  (Paragraph 19.)   Nims' misappropriation of the plaintiff's trade secrets was willful and malicious in that he intended to misappropriate the trade secrets and was aware that the plaintiff would sustain damages thereby.  (Paragraph 20.)   As a result of Nims' actions, the plaintiff sustained and continues to sustain significant and permanent loss of business and commissions.  (Paragraph 21.)

The tenth count, directed to defendant Nelson, incorporates paragraphs one through nineteen from the first count and further alleges that Nelson's misappropriation of the plaintiff's trade secrets was wilful and malicious and that the plaintiff has sustained and continues to sustain significant and permanent loss of business and commissions.   The fourteenth count, directed to defendant Associated, similarly incorporates paragraphs one through nineteen from the first count and similarly alleges that Associated's misappropriation, through its principals, agents, servants, and/or employees, was wilful and malicious and that the plaintiff has sustained and continues to sustain significant and permanent loss of business and commissions.

The defendants move to strike the first, tenth, and fourteenth counts on the ground that the plaintiff has failed to allege that the information claimed to be trade secrets were the subject of reasonable efforts to maintain their secrecy, as required by the definition by the Uniform Trade Secrets Act. The court agrees.

General Statutes § 35–51(d) defines “trade secret” as “information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list that (1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”   The complaint describes the specialized nature of the armored vehicle insurance accounts and expressly alleges that the knowledge, skills and customer lists associated with these accounts “derive independent economic value from not being generally known to, and not being readily ascertainable by other persons or businesses.”   These allegations are sufficient to satisfy § 35–51(d)(1).   Nevertheless, nothing in the complaint alleges that the plaintiff made efforts that were reasonable under the circumstances to maintain the secrecy of this information.

“The question of whether, in a specific case, a party has made reasonable efforts to maintain the secrecy of a purported trade secret is by nature a highly fact-specific inquiry.   What may be adequate under the peculiar facts of one case might be considered inadequate under the facts of another.   According to § 35–51(d)(2), the efforts need only be ‘reasonable under the circumstances ․ ‘ “ (Citation omitted;  emphasis in original;  internal quotation marks omitted) Elm City Cheese Company, Inc. v. Federico, 251 Conn. 59, 80, 752 A.2d 1037 (1999).   Reasonable efforts may include such techniques as:  requiring employees to sign confidentiality agreements or otherwise advising them of the confidential nature of the information;  posting of warning or cautionary signs;  placing legends on documents;  and keeping secret documents under lock.  Id., 79.   The plaintiff has not alleged any measures taken to maintain the secrecy of the alleged trade secrets.   Nor does the plaintiff's memorandum in opposition identify any measures taken to preserve the secrecy of the information.   Because reasonable efforts to preserve the secrecy of the alleged trade secrets are an essential element of a trade secret claim, the defendants' motion to strike the first, tenth, and fourteenth counts is granted.

III

TORTIOUS INTERFERENCE WITH BUSINESS EXPECTANCY

In the second count, directed to Nims, the plaintiff incorporates paragraphs one through fifteen of the first count and additionally alleges that a business relationship existed between the plaintiff and each of its clients by way of the plaintiff's procuring and servicing the clients' specialty insurance products.   Nims, by assisting the plaintiff in procuring and servicing its clients' policies, was aware of these business relationships, and Nelson and Associated, through their knowledge of this relationship, were also aware of the plaintiff's business relationships.  (Paragraphs 16–17.)   The defendants intentionally interfered with the plaintiff's business relationships by “fraudulently inducing, through the unauthorized use of Wentworth's protected trade secrets, policies, policy information and other written materials, a number of armored vehicle clients to change their ‘broker of record’ from Wentworth to Associated.”  (Paragraph 18.)   As a result of Nims' actions, the plaintiff has sustained and will continue to sustain significant and permanent loss of business and commissions.  (Paragraph 19.)

The eleventh count (as to Nelson) and the fifteenth count (as to Associated) incorporates paragraphs one through eighteen of the second count and adds an allegation that as a result of Nelson's and Associated's actions, respectively, the plaintiff has sustained and will continue to sustain significant and permanent loss of business and commissions.

The defendants argue that the second count includes no allegation that Nims used improper means to tortiously interfere, as defined by General Statutes § 35–51(a).   The defendants further claim that if the first count is inadequately pleaded, then the second count is also deficient because the interference claimed in that count is also the “unauthorized use of Wentworth's trade secrets.”   The plaintiff maintains that the second count is sufficiently pleaded and, even if the first count has failed to allege a misappropriation of trade secrets, the interference alleged against Nims in the second count also involved the unauthorized use of the plaintiff's “policies, policy information, and other written materials.”

“It is well established that the elements of a claim for tortious interference with business expectancies are:  (1) a business relationship between the plaintiff and another party, (2) the defendant's intentional interference with the business relationship while knowing of the relationship, and (3) as a result of the interference, the plaintiff suffers actual loss.”  Hi–Ho Tower, Inc. v. Com–Tronics, Inc., 255 Conn. 20, 27, 761 A.2d 1268 (2000).  “The plaintiff need not prove that the defendant caused the breach of an actual contract;  proof of interference with even an unenforceable promise is enough ․ A cause of action for tortious interference with a business expectancy requires proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation ․ or that the defendant acted maliciously ․ It is also true, however, that not every act that disturbs a contract or business expectancy is actionable. A defendant is guilty of tortious interference if he has engaged in improper conduct ․ [T]he plaintiff [is required] to plead and prove at least some improper motive or improper means” (Citations omitted, internal quotation marks omitted.)  Biro v. Hirsch, 62 Conn.App. 11, 21, 771 A.2d 129, cert. denied, 256 Conn. 908, 772 A.2d 601 (2001).

“In the context of a tortious interference claim, the term malice is meant not in the sense of ill will, but intentional interference without justification ․ In other words, the [plaintiff] bears the burden of alleging and proving lack of justification on the part of the [defendant] ․ Our Supreme Court has recognized that the legal theory of tortious interference with a business expectancy encompasses a broad range of behavior.”  (Internal quotation marks omitted.)  American Diamond Exchange, Inc. v. Alpert, 101 Conn.App. 83, 90–91, 920 A.2d 357, cert. denied, 284 Conn. 901, 931 A.2d 261 (2007).  “Stated simply, to substantiate a claim of tortious interference with a business expectancy, there must be evidence that the interference resulted from the defendant's commission of a tort.”  (Internal quotation marks omitted.)  Biro v. Hirsch, supra, 62 Conn.App. 21.

This court has determined that the plaintiff failed to sufficiently allege that Nims misappropriated trade secrets because there is no allegation that the plaintiff took reasonable efforts to maintain the secrecy of the “skills, knowledge, and client lists” the plaintiff claims were trade secrets.   The plaintiff nevertheless contends that the second count sufficiently alleges tortious interference because it alleges that Nims interfered with the plaintiff's business relationships through the “unauthorized use of its policies, policy information, and other written materials,” and not just its “trade secrets.”

“Generally speaking, in the absence of a restrictive covenant, a former employee may compete with his or her former employer upon termination of employment ․ Even after the employment has ceased, however, the employee remains subject to a duty not to use trade secrets, or other confidential information, which he has acquired in the course of his employment, for his own benefit or that of a competitor to the detriment of his former employer.”   (Citation omitted;  emphasis added;  internal quotation marks omitted.)  Elm City Cheese Co. v. Federico, supra, 251 Conn. 69.

In the present case, the second count includes the allegation that Nims, a former employee of the plaintiff, appropriated customers through the “unauthorized use” of the plaintiff's information.   The allegation that Nims's use of “policies, policy information, and other written materials” was “unauthorized” implies that the information was confidential.   The plaintiff alleges that Nims used that information to the benefit of a competitor and to the detriment of his former employer, the plaintiff.   Therefore, the second count includes the allegation that Nims used improper means to interfere with the plaintiff's client contracts.   This is sufficient to survive a motion to strike.   See, e.g., Precision Computer Services, Inc. v. Zones, Inc., Superior Court, judicial district of Fairfield, Docket No. CV–12–6031688–S (April 11, 2013, Sommer, J.) (allegations that defendant used improper or tortious means to pursue business with the plaintiff's clients by inducing former employees to use privileged information to acquire plaintiff's customers sufficiently described tortious activity);  Direct Mail Jobs, LLC v. Hughes, Superior Court, judicial district of New Britain, Docket No. CV–08–05009794–S (July 29, 2011, Pittman, J.) (defendant employee and employer's use of confidential information obtained by employee from former employer constituted tortious interference), Kronholm & Keeler v. Arthur A. Watson & Co., Superior Court, judicial district of New Britain, Docket No. CV–96–0559227–S (July 14, 1997, Hennessey, J.) (“[b]ecause count one of the revised amended complaint alleges that the defendant sought to appropriate information that he knew was confidential and proprietary, the plaintiff has alleged sufficient facts to support its claim that the defendant acted maliciously”).   The defendants' motion to strike the second count is therefore denied.

The plaintiff alleges tortious interference against Nelson and Associated in the eleventh and fifteenth counts respectively.   The defendants have put forward identical grounds to strike those counts as they did for the tortious interference against Nims in the second count.   In ruling on a motion to strike the trial court is limited to considering the grounds specified in the motion.”  Meredith v. Police Commission, 182 Conn. 138, 140, 438 A.2d 27 (1980).   Accordingly, the motion to strike the eleventh and fifteenth counts is also denied.

IV

CUTPA

The third count incorporates paragraphs one through eighteen of the second count and alleges additionally that Nims' actions constitute unfair or deceptive acts or practices in the conduct of a trade or business in violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110b.   The plaintiff alleges that as a result of Nims' actions, the plaintiff has sustained and continues to sustain an ascertainable loss, including significant and permanent loss of business and commissions.   The twelfth and sixteenth counts make identical allegations against Nelson and Associated, respectively.

The defendants move to strike the CUTPA counts on several grounds.   The defendants claim “no facts plead and no attempt is made to distinguish an independent intervening cause has occurred here.   That is a completely free third party has elected not to do business with Wentworth.”   The defendants further claim that the plaintiff “does not identify the elements under the Cigarette Rule on which the court can find this an unfair trade practice.”   The defendants additionally argue that the “complaint fails to identify a prohibited act” because the complaint has failed to adequately plead that the information allegedly used by Nims was a ‘trade secret.’ “

General Statutes § 42–110b(a) 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.”  “In determining whether a practice violates CUTPA, we are guided by the criteria set out in the Federal Trade Commission's so-called cigarette rule:  (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—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 businesspersons] ․ All 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.”  (Citation omitted;  internal quotation marks omitted.)  Blackwell v. Mahmood, 120 Conn.App. 690, 703–04, 992 A.2d 1219 (2010).

“[T]he essential difference between a tort claim for interference with business expectancies and a claim under CUTPA is the standard by which the alleged acts are measured While liability in tort is imposed only if the defendant maliciously or deliberately interfered with a competitor's business expectancies, CUTPA liability is premised on a finding that the defendant engaged in unfair competition and unfair or deceptive trade practices.”   Sportsmen's Boating Corp. v. Hensley, 192 Conn. 747, 755, 474 A .2d 780 (1984), superseded by statute on other grounds as stated in Fischera v. Mine Hill Corp., 207 Conn. 204, 207 n.2, 541 A.2d 472 (1988).  “[I]mproper conduct that does not rise to the level of tortious interference may, nonetheless, constitute a CUTPA violation.”  PAR Painting, Inc. v. Greenhorne & O'Mara, Inc., 61 Conn.App. 317, 328, 763 A.2d 1078, cert. denied, 255 Conn. 951, 770 A.2d 31 (2001).  “Conduct that might be actionable under CUTPA may not rise to a level sufficient to invoke tort liability.   The reverse of that proposition, however, is seldom true ․ [I]t is difficult to conceive of a situation where tortious interference would be found but a CUTPA violation would not.”   Sportsmen's Boating Corp. v. Hensley, supra, 756–57.

In the present case, the plaintiff has sufficiently alleged that Nims tortiously interfered with the plaintiff's business expectancy.   The third count incorporates those allegations and alleges that Nims also violated CUTPA through those actions.   Because there are sufficient allegations against Nims to give rise to a tortious interference claim, the complaint likewise includes sufficient allegations to give rise to a CUTPA violation by Nims.

The defendants have also moved to strike the twelfth and sixteenth counts, which allege CUTPA violations against Nelson and Associated.   The defendant argues that the allegations in those counts are deficient because the complaint only alleges that Nims committed wrongful actions.   According to the defendants, there are no allegations made against Nelson or Associated that would support a CUTPA claim.   The plaintiff maintains that Nelson and Associated are referred to individually and as “the defendants” throughout the complaint.

“[A] violation of CUTPA may be established by showing a deceptive practice or a practice amounting to a violation of public policy.”  (Internal quotation marks omitted.)  Smithfield Associates, LLC v. Tolland Bank, 86 Conn.App. 14, 28, 860 A.2d 738 (2004), cert. denied, 273 Conn. 907, 867 A.2d 839 (2005).  “An act or practice is deceptive if there is a representation, omission or other practice likely to mislead, the act or practice is reasonably interpreted by the other party, and it is likely to affect the other party's decisions or conduct.”  Id. A misrepresentation, as a deceptive act, may thus be the basis for a cause of action under CUTPA.   See, e.g., Friedlander Limited Partnership v. Cohen, Superior Court, judicial district of Fairfield, Docket No. CV–04–0412547–S (April 15, 2005, Skolnick, J.) (if plaintiff alleges that a defendant made a misrepresentation during the course of business, with or without the intent to deceive, and that misrepresentation led plaintiff to lose money or property, he has alleged a cause of action under CUTPA).

An intentional misrepresentation is an adequate ground upon which to base a CUTPA claim.   See Connecticut National Bank v. Voog, 233 Conn. 352, 366–68, 659 A.2d 172 (1995).   Additionally, neither knowledge of falsity nor intent to deceive, mislead or defraud need be proven to establish a violation of CUTPA.   See Prishwalko v. Bob Thomas Ford, Inc., 33 Conn.App. 575, 583, 636 A.2d 1383 (1994).   Because CUTPA does not require an intent to deceive, even “[a]n allegation of innocent misrepresentation can amount to a CUTPA violation.”   Hendriks Associates v. Old Lyme Marina, Superior Court, judicial district of New London, Docket No. CV–546496 (November 22, 2000, Martin, J.).

The complaint includes the allegation that both Nelson and Nims were principals, agents, servants and/or employees of Associated.   In paragraph fourteen of the first count, which is incorporated into both the twelfth and sixteenth counts, the plaintiff specifically alleges that “Wentworth was approached by Nelson, as a representative of the defendants, with an offer to purchase Wentworth's armored vehicle and other insurance business,” and that “Wentworth agreed to the defendants' offer to purchase this business and was awaiting paperwork and payment” (Emphasis added.)   The third count also incorporates paragraph fifteen of the first count, which includes the allegations:  “[t]he defendants never intended to purchase Wentworth's business.   To the contrary, the defendants intentionally misrepresented their willingness to purchase Wentworth's business to further delay Wentworth's efforts to protect its rights while continuing to steal Wentworth's business and simultaneously becoming licensed in several states where Wentworth's clients are located.”  (Emphasis added.)   The twelfth count, therefore, includes allegations against Nelson, individually and as Associated's agent.   Both the twelfth and the sixteenth counts allege intentional misrepresentations on the part of Nelson and Associated.   A misrepresentation claim, as pleaded here, sufficiently alleges a cause of action under CUTPA.   See Precision Mechanical, Inc. v. Empyrean Hospitality, Superior Court, judicial district of Ansonia–Milford, Docket No. CV–07–5002281–S (September 26, 2007, Esposito, J.) (allegation that defendant made false and misleading representations and omissions regarding its intentions to contract with plaintiff sufficient to survive motion to strike).   Consequently, the defendants' motion to strike the twelfth and sixteenth counts is denied.

V

CONVERSION AND STATUTORY THEFT

In the fourth and seventeenth counts, the plaintiff incorporates paragraphs one through eighteen of the first count and alleges, additionally, that Nims (in the fourth count) and Associated (in the seventeenth count) used the plaintiff's protected trade secrets, policies, policy information and other written materials.   The plaintiff further alleges that the use was unauthorized and that the plaintiff was unaware of it at the time and that Nims and Associated exercised the right of ownership over the plaintiff's trade secrets, policies, policy information, and other written materials to the exclusion of the plaintiff's rights, and that the plaintiff sustained significant losses as a result.

In the fifth and eighteenth counts, the plaintiff incorporates the allegations of conversion made in paragraphs one through twenty-one of the fourth and eighteenth counts, respectively, and additionally alleges:  Nims (in the fifth count) and Associated (in the eighteenth count) intended to deprive the plaintiff of its property;  the plaintiff sustained a significant and permanent loss of business and resulting commissions as a result;  the plaintiff is entitled to treble damages for statutory theft under General Statutes § 52–564.

The defendants assert the following grounds for striking the conversion counts (1) Nims had the information at issue before the plaintiff acquired the accounts from Scannel, and therefore the plaintiff did not have an ownership interest when Nims acquired the information;  (2) Scannel, who owned only a sixty percent interest in Kelly Associates, lacked the authority to sell corporate assets, and therefore the plaintiff never actually “owned” anything;  (3) the proximate cause of the plaintiff's loss, as alleged in paragraph twenty-three, was that various policyholders decided to take their business elsewhere and that the plaintiff failed to obtain from Nims a covenant not to compete before turning over the information to him;  (4) there is no allegation that the plaintiff does not continue to possess all the information originally acquired from Scannel;  and (5) the allegations contradict themselves because the complaint alleges both that the plaintiff turned the list over to Nims and that Nims' use of the property was unauthorized and that the plaintiff was unaware of it.   With respect to the statutory theft claims, the defendants rely largely on their arguments pertaining to the conversion claims and add that the plaintiff has failed to allege the intent necessary to sustain a theft claim.

The defendants' argument with respect to Scannel's authority to sell the accounts improperly asks the court to consider facts outside the complaint.   This court cannot do so.  “It is well established that a motion to strike must be considered within the confines of the pleadings and not external documents ․ We are limited ․ to a consideration of the facts alleged in the complaint.”  (Internal quotation marks omitted.)  Zirinsky v. Zirinsky, 87 Conn.App. 257, 268 n.9, 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005);  see also Rowe v. Godou, 209 Conn. 273, 278, 550 A.2d 1073 (1988) (in ruling on a motion to strike, court cannot resort to information outside of the complaint).

The defendants' argument with respect to lack of proximate cause, though not clearly articulated, appears to concern the difference between the documents allegedly converted and the damages claimed to have resulted from the conversion.   That is, the plaintiff's damages claim does not relate to the inherent value of the tangible property allegedly converted—the various written documents alleged to have been converted—but to the loss of the business relationships through the misuse of the information obtained through the documents.

The plaintiff argues that even if the defendants rightfully obtained the plaintiff's property, they committed conversion when they began to use that property in a manner adverse to the plaintiff's property rights.   The plaintiff does not address the defendants' claims regarding proximate cause or the distinction between the alleged conversion of particular documents and the damages claimed for the loss of business relationships.

Our Supreme Court has “defined conversion as an unauthorized assumption and exercise of the right of ownership over goods belonging to another, to the exclusion of the owner's rights ․ It 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.”  (Internal quotation marks omitted.)  Macomber v. Travelers Property & Casualty Co., 261 Conn. 620, 649, 804 A.2d 180 (2002).   Similarly, “statutory theft under [General Statutes] § 52–564 is synonymous with larceny [as provided in] General Statutes § 53a–119 ․ Pursuant to § 53a–119, [a] person commits larceny when, with 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.”   Suarez–Negree v. Trotta, 47 Conn.App. 517, 520–21, 705 A.2d 515 (1998).

“In Connecticut, intangible property interests have not traditionally been subject to the tort of conversion, except for those intangible property rights evidenced in a document.   See, e.g., Aetna Life & Casualty Co. v. Union Trust Co., 230 Conn. 779, 790 n.6, 46 A.2d 799 (1994) (conversion of trust account);  Devitt v. Manulik, 176 Conn. 657, 662–63, 410 A.2d 465 (1979) (conversion applicable to account passbook).”  Hi–Ho Tower, Inc. v. Com–Tronics, Inc., 255 Conn. 20, 44, 761 A.2d 1268 (2000).   In Hi–Ho Tower, the court found it unnecessary to reach the plaintiff's claim that the torts of conversion and statutory theft should be extended to include intangible property rights.   It noted, however, that comment (f) to § 242 of the Restatement (Second) of Torts provides that “in a proper case liability for intentional interference with some ․ kind of intangible rights may ․ be found.”  (Internal quotation marks omitted.)  Id.

Section 242 of the Restatement (Second) of Torts addresses tort liability for the conversion of a document in which intangible rights are merged.   The rule applies to such things as promissory notes, bonds, bills of exchange, share certificates, and warehouse receipts.   Subsection (2) of § 242 recognizes potential liability for one who “effectively prevents the exercise of intangible rights of the kind customarily merged in a document.”   Comment (f) to § 242 provides:  “Thus far the liability stated in Subsection (2) has not been extended beyond the kind of intangible rights which are customarily represented by and merged in a document.   It is at present the prevailing view that there can be no conversion of ․ such intangible rights as the goodwill of a business or the names of customers.   The process of extension has not, however, necessarily terminated, and nothing that is said in this Section is intended to indicate that in a proper case liability for intentional interference with some other kind of intangible rights may not be found.”

It is clear from the allegations of the plaintiff's complaint that the subject of the alleged conversion and theft is the intangible business interest that was reflected in the documents allegedly converted to the defendants' use.   That is, the essence of the conversion and statutory theft counts is that the defendants intentionally misused the information in the documents to steal the plaintiff's clients.

No Connecticut case cited by either party, or found by the court, has extended the causes of action for conversion or statutory theft to such intangible property interests.  “The process of expansion [of the tort of conversion] has stopped with the kind of intangible rights which are customarily merged in, or identified with some document.   There is perhaps no very valid and essential reason why there might not be conversion of an ordinary debt, the good will of a business, or ‘any species of personal property which is the subject of private ownership.’․   But it would seem preferable to fashion other remedies, such as unfair competition, to protect people from having intangible values used and appropriated in unfair ways.”   W. Prosser & W. Keeton, Torts (5th Ed.1984), § 15.

As comment (f) to § 242 suggests, a customer list is different from something like a stock certificate or a bill of sale or a bank passbook, each of which has independent legal significance and merges with the property rights it represents.   As best as can be determined from a broad and realistic reading of the complaint, the interests represented by the documents allegedly converted in this case were business expectancies.   The court concludes that Connecticut has not yet expanded the torts of conversion and statutory theft to include such intangible interests, but has instead provided remedies for such alleged wrongs in the tort of intentional interference with business expectancies and through CUTPA.   Accordingly, the motion to strike the fourth, fifth, seventeenth, and eighteenth counts is granted.

V

NEGLIGENT MISREPRESENTATION

In the sixth count, the plaintiff has alleged negligent misrepresentation against Nims, and in the nineteenth count, it has alleged negligent misrepresentation against Associated, based on representations made by Associated's “principals, agents, servants and/or employees.”   The defendants move to strike the sixth count on the ground that the complaint does not allege that Nims made a statement of fact to the plaintiff, but rather that Nims stated an intention to do an act in the future.   The plaintiff contends that it is not required to plead allegations concerning the defendant's past or present intent in order to assert a legally sufficient claim sounding in negligent misrepresentation.

Connecticut courts have “long recognized liability for misrepresentation ․ The governing principles [of negligent misrepresentation] are set forth in similar terms in § 552 of the Restatement (Second) of Torts (1977):  One who, in the course of his business, profession or employment ․ supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.”  (Internal quotation marks omitted.)  Kramer v. Petisi, 285 Conn. 674, 681, 940 A.2d 800 (2008).  “Traditionally, an action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a misrepresentation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result.”  Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 626, 910 A.2d 209 (2006).

“For purposes of a cause of action for negligent misrepresentation ․ [i]t is sufficient to allege that the representations contained false information.”   (Internal quotation marks omitted ) D'Ulisse–Cupo v. Board of Directors of Notre Dame High School, 202 Conn 206, 218, 520 A.2d 217 (1987).  “[E]ven an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth.”   (Internal quotation marks omitted.)  Kramer v. Petisi, supra, 285 Conn. 681.  “Therefore, the requisite state of mind in pleading negligent misrepresentation is that the defendant knew or should have known that the misrepresentations were false.”   Kelly v. Noble Environmental Power, LLC, Superior Court, judicial district of Middlesex, Docket No CV–08–5005444–S (September 2, 2009, Jones, J.).

“The requirement that a representation be made as a statement of fact focuses on whether, under the circumstances surrounding the statement, the representation was intended as one of fact as distinguished from one of opinion ․ It is sometimes difficult to determine whether a given statement is one of opinion or one of fact, inasmuch as the subject matter, the form of the statement, the surrounding circumstances, and the respective knowledge of the parties all have a bearing upon the question ․ [E]ach case must in a large measure be adjudged upon its own facts” (Internal quotation marks omitted.)   Anastasia v. Beautiful You Hair Designs, Inc., 61 Conn.App. 471, 478, 767 A.2d 118 (2001).

The sixth count includes the specific allegation that Nims made representations “that he would use the plaintiff's protected trade secrets, policies, policy information and other written materials for the benefit of Wentworth.”   It is further alleged that “Nims failed to use reasonable care in making these representations, and the representations made by Nims proved to be false, as Nims indeed used Wentworth's protected trade secrets, policies, policy information and other written materials to fraudulently divert Wentworth's clients.”

The defendant argues that the sixth count is deficient because it fails to allege that Nims did not actually intend not to keep his promise when he made it.   Although the question is a close one, the court is mindful that, in reviewing a motion to strike, “pleadings 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).

The sixth count incorporates paragraph twelve of the first count, which states that ‘[o]n or about May 27, 2013, it came to Wentworth's attention that the defendants intended to steal Wentworth's clients as their own.”  “A representation about a promise to do something in the future, when linked with a present intention not to do it, is a false representation.”  (Internal quotation marks omitted.)  Duplissie v. Devino, 96 Conn.App. 673, 681, 902 A.2d 30, cert. denied, 280 Conn. 916, 908 A.2d 536 (2006).   A broad and realistic reading of the sixth count reveals that the plaintiff alleged Nims knew or should have known his representation to the plaintiff was false because he actually intended to steal the plaintiff's clients as his own.

The defendants argue that the court's holding regarding the issues raised in the sixth count “will apply with equal force to the defendant Associated (Nineteenth Count).”   The court agrees.   The sixth and the nineteenth counts sufficiently allege negligent misrepresentation by Nims and, through Nims as Associated's principal or agent, Associated.   Accordingly, the motion to strike these counts is denied.

VI

FRAUDULENT MISREPRESENTATION

The seventh and twentieth counts assert claims of fraudulent misrepresentation against Nims and Associated, respectively The defendants argue that the court must strike these counts because they set forth no “statement of fact” by Nims. The defendants specifically claim that there is no allegation of a representation coupled with a current intention not to honor it.   The plaintiff contends that that the complaint sufficiently alleges fraudulent misrepresentation because the seventh count incorporates the sixth count and additionally alleges that Nims' representations were known to be untrue by Nims and were made to induce the plaintiff to act.   Similarly, the twentieth count incorporates the nineteenth counts and alleges that Associated's representations were untrue when made and were made to induce the plaintiff to act.

“The essential elements of an action in common law fraud, as we have repeatedly held, are that:  (1) a false representation was made as a statement of fact;  (2) it was untrue and known to be untrue by the party making it;  (3) it was made to induce the other party to act upon it, and (4) the other party did so act upon that false representation to his injury ․ Under a fraud claim of this type, the party to whom the false representation was made claims to have relied on that representation and to have suffered harm as a result of the reliance ․ In contrast to a negligent representation, [a] fraudulent representation ․ is one that is knowingly untrue, or made without belief in its truth, or recklessly made and for the purpose of inducing action upon it ․ This is so because fraudulent misrepresentation is an intentional tort.”  (Citations omitted;  internal quotation marks omitted.)  Sturm v. Harb Development, LLC, 298 Conn. 124, 142, 2 A.3d 859 (2010).

The seventh count includes the allegation that the plaintiff entrusted Nims with “trade secrets, policies, policy information and other written materials” as a result of the defendant's representations “that he would use such information for the benefit of Wentworth.”   This court has determined that the sixth count, which the seventh count incorporates, sufficiently pleads that Nims made a representation to the plaintiff for the purposes of a negligent misrepresentation claim.   Additionally, the seventh count includes the allegation that “Nims' representations were known by Nims to be untrue, and were made to induce Wentworth to act upon the representation.”   The seventh count, therefore, goes beyond the sixth count to include a specific allegation that Nims knew that he would break his promise to use the entrusted information for the plaintiff's benefit.   Therefore, the plaintiff has alleged the first three elements of intentional misrepresentation in the seventh count:  (1) that the defendant made a false representation;  (2) that was known to be untrue when it was made;  and (3) was intended to induce the plaintiff to act on it.

Finally, the seventh count incorporates the sixth count's allegation:  “Wentworth justifiably relied on Nims' representations by entrusting him with Wentworth's protected trade secrets, policies, policy information and other written materials.”   The plaintiff has alleged that it suffered a permanent loss of business due to Nims' fraudulent misrepresentation.   The plaintiff, therefore, has sufficiently alleged the final element of fraudulent misrepresentation:  that it acted upon the defendant's false representation and was injured as a result.   The twentieth count contains identical allegations with respect to Associated.   Both sufficiently allege a claim of fraudulent misrepresentation.   Accordingly, the motion to strike the seventh and twentieth counts is denied.

VII

BREACH OF FIDUCIARY DUTY

The eighth count alleges that Nims had a fiduciary duty to the plaintiff, which Nims breached.   The plaintiff specifically claims that “Nims had a high degree of control over Wentworth's trade secrets, policies, policy information and other written materials used by Nims, and Wentworth placed its trust and confidences in him.”   The defendants move to strike the eighth count on the ground that the complaint contains no allegation that Nims was in a fiduciary relationship with the plaintiff.   The defendants further argue that the eighth count is insufficient because there is no allegation that the plaintiff took steps to protect the alleged trade secrets from dissemination.   The plaintiff argues, in response, that Nims was both a former employee and subsequently an agent of the plaintiff, was entrusted with the plaintiff's confidential information, and was acting on behalf of and for the benefit of the plaintiff.

“It is axiomatic that a party cannot breach a fiduciary duty to another party unless a fiduciary relationship exists between them.  [A] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other.   (Emphasis omitted;  internal quotation marks omitted.)  Biller Associates v. Peterken, 269 Conn. 716, 723, 849 A.2d 847 (2004).  “Connecticut courts have specifically refused to define a fiduciary relationship in precise detail and in such a manner as to exclude new situations ․ Instead, a fiduciary relationship exists where there is a justifiable trust confided on one side and a resulting superiority and influence on the other.”  (Citation omitted;  internal quotation marks omitted.)  Southbridge Associates, LLC v. Garofalo, 53 Conn.App 11, 18, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999).  “The law will imply [fiduciary responsibilities] only where one party to a relationship is unable to fully protect its interests [or where one party has a high degree of control over the property or subject matter of another] and the unprotected party has placed its trust and confidence in the other.”  (Internal quotation marks omitted.)  Hi–Ho Tower, Inc. v. Com–Tronics, Inc., supra, 255 Conn. 41.   Courts have recognized a fiduciary relationship, however, in circumstances where one party was “under a specific duty to act for the benefit of another.”  Id., 38.

“ ‘Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.’   I Restatement (Second), Agency § 1, p. 7 (1958).”  (Emphasis omitted.)  Macomber v. Travelers Property & Casualty Corp., supra, 261 Conn. 639 n.12. “An agent is a fiduciary with respect to matters within the scope of his agency.”  Taylor v. Hamden Hall School, Inc., 149 Conn. 545, 552, 182 A.2d 615 (1962).   In this case, the plaintiff has alleged that it purchased the armored vehicle accounts from Scannel in 2009 and that Nims serviced the accounts first as the plaintiff's employee and then, after his departure from the plaintiff's business, through a “working relationship” in which he “continued to help service [the plaintiff's] armored vehicle accounts, and continued to receive the corresponding commissions” (First count, paragraphs 6–9, incorporated by reference into the eighth count.)   Construing these allegations broadly and realistically, as the court is required to do when ruling on a motion to strike, the court concludes that they are sufficient to allege the existence of an agency relationship, which is, by definition, a fiduciary relationship for actions within the scope of the agency.   Accordingly, the motion to strike the eighth count is denied.

VIII

CIVIL CONSPIRACY

In the ninth, thirteenth, and twenty-first counts, the plaintiff alleges a civil conspiracy on the part of Nims, Nelson, and Associated.   The claim incorporates the allegations in the second count and adds:  Nims and Nelson worked together to solicit the plaintiff's clients through unlawful means;  Nelson acted in furtherance of the unlawful scheme by representing that the defendants would purchase the armored vehicle accounts for $275,000;  the offer was made only to delay any attempt by the plaintiff to protect its rights.   The defendants argue that the civil conspiracy counts fail because the trade secret claim fails, and that the absence of a covenant not to compete “compels the conclusion that competition as to those customers was proper, appropriate and lawful.”

“The [elements] of a civil action for conspiracy are:  (1) a combination between two or more persons, (2) to do a criminal or an unlawful act or a lawful act by criminal or unlawful means, (3) an act done by one or more of the conspirators pursuant to the scheme and in furtherance of the object, (4) which act results in damage to the plaintiff ․ There is, however, no independent claim of civil conspiracy.   Rather, [t]he action is for damages caused by acts committed pursuant to a formed conspiracy rather than by the conspiracy itself ․ Thus, to state a cause of action, a claim of civil conspiracy must be joined with an allegation of a substantive tort.  [T]he essence of a civil conspiracy ․ [is] two or more persons acting together to achieve a shared goal that results in injury to another.”  (Citations omitted;  internal quotation marks omitted.)  Macomber v. Travelers Property & Casualty Corp, supra, 277 Conn. 635–36.

“Thus, the purpose of a civil conspiracy claim is to impose civil liability for damages on those who agree to join in a tortfeasor's conduct and, thereby, become liable for the ensuing damage, simply by virtue of their agreement to engage in the wrongdoing.   Implicit in this purpose, and in the principle that there must be an underlying tort for the viability of a civil conspiracy claim, is the notion that the coconspirator be liable for the damages flowing from the underlying tortious conduct to which the coconspirator agreed.”  Id.

In this case, the court has denied the motion to strike the claims sounding in tortious interference with business expectancy.   The plaintiff has adequately alleged that Nims, Nelson, and Associated acted together to injure the plaintiff's interests to commit that substantive tort.   Accordingly, the motion to strike the ninth, thirteenth, and twenty-first counts is denied.

IX

CONCLUSION

For the reasons stated above, the motion to strike is granted as to the first, fourth, fifth, tenth, fourteenth, seventeenth, and eighteenth counts.   The motion to strike is denied as to all other counts.

BY THE COURT,

Sheila A. Huddleston, Judge

Huddleston, Sheila A., J.