UHY LLP v. Master–Halco, Inc. et al. (2014)

MEMORANDUM OF DECISION RE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (# 208)

In this vexatious litigation case, the defendants, Halloran & Sage, LLP (Halloran & Sage), George Royster, and Master–Halco, Inc. (Master–Halco), have filed two motions for summary judgment.   This court previously denied the motion for summary judgment (first motion) filed by Halloran & Sage and Royster in a memorandum of decision dated February 11, 2014.   UHY, LLP v. Master–Halco, Inc., Superior Court, judicial district of New Haven, Docket No. CV–10–6013402–S (February 11, 2014, Nazzaro, J.).   This memorandum of decision addresses the motion for summary judgment (present motion) filed by Master–Halco.   For the reasons set forth herein, the present motion is denied.

FACTS

In 2010, the plaintiffs, UHY, LLP (UHY), Joseph Natarelli, Robert Mercado, UHY Advisors, Inc., and UHY Advisors N.E., LLC, commenced the present action against the defendants, Master–Halco, Halloran & Sage, and Royster.   The plaintiffs' revised amended complaint alleges the following facts, as set forth in this court's memorandum of decision on the first motion:  “In 2006, Master–Halco, the largest fence retailer in North America, brought an action against UHY and two of its accountants, Natarelli, and Mercado, alleging that they had engaged in a scheme to prevent Master–Halco from recovering from one of its debtors, Atlas Fence, Inc. (Atlas), and its owner, Michael Picard, through misrepresentation, asset concealment, and fraud.   In this action, Master–Halco was represented by Royster and his employer, the law firm of Halloran & Sage.

“The defendants knew that Master–Halco's claims were without reasonable basis, but nonetheless continued to pursue them to trial in 2010.   Although Master–Halco eventually withdrew its action against UHY, Natarelli, and Mercado after trial began—because it knew it could not prove the truth of its allegations—the plaintiffs sustained substantial losses and expenses in defending against the litigation.

“The plaintiffs now bring the following claims.   In counts one and two, they allege statutory and common-law vexatious litigation, respectively, against Master–Halco.   In counts three and four, they allege statutory and common-law vexatious litigation, respectively, against Halloran & Sage and Royster.   In count five, they allege that Halloran & Sage and Royster aided and abetted Master–Halco in pursuing vexatious litigation.   And in count six, they allege that Master–Halco violated the Connecticut Unfair Trade Practices Act [ (CUTPA) ], General Statutes § 42–110a et seq.”  UHY, LLP v. Master–Halco, Inc., supra, Superior Court, Docket No. CV–10–6013402–S.

In the first motion, Halloran & Sage and Royster moved for summary judgment on counts three, four, and five of the plaintiffs' revised complaint on the ground that (1) the plaintiffs' claims are barred by the statute of limitations set forth in General Statutes § 52–577,1 and (2) there is no genuine issue of material fact as to the facts known to them when they commenced and prosecuted their claims against the plaintiffs, and that those facts satisfy the probable cause standard set forth by our Supreme Court in Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, 281 Conn. 84, 912 A.2d 1019 (2007).   In a memorandum of decision dated February 11, 2014, this court rejected those arguments and denied the first motion.  UHY, LLP v. Master–Halco, Inc., supra, Superior Court, Docket No. CV–10–6013402–S.   Specifically, the court found that (1) the plaintiffs' claims were not barred by § 52–577 because the plaintiffs alleged a continuing course of conduct in the commencement and continued prosecution of the lawsuit, and thus the statute of limitations did not begin to run until the defendants withdrew their allegedly baseless action, and (2) there remain genuine issues as to the facts known to Halloran and Sage and Royster at the time they commenced and prosecuted their action against the plaintiffs.  Id.

On November 25, 2013, Master–Halco filed the present motion, moving for summary judgment on counts one, two, and six of the plaintiffs' revised amended complaint.   In the present motion, Master–Halco argues that summary judgment is appropriate for the reasons set forth in the first motion, namely that (1) the plaintiffs' claims are barred by the statute of limitations set forth in § 52–577 and (2) the facts known to Master–Halco's attorneys were more than sufficient to satisfy the probable cause standard set forth in Falls Church Group Ltd v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. 84.   Additionally, Master–Halco argues that summary judgment should be granted on the CUTPA claim alleged in count six because it is predicated on the vexatious litigation claims in counts one and two.   In the present motion, Master–Halco did not submit a memorandum of law or any supporting materials, but rather expressly adopted and incorporated by reference the arguments set forth in the memorandum of law, exhibits, and affidavits submitted by Halloran & Sage and Royster in the first motion.   The plaintiffs filed a memorandum in objection to the present motion on December 20, 2013, and an amended memorandum in objection to the present motion on December 30, 2013.   The amended memorandum was accompanied by over 700 pages of supporting documents.   Subsequently, the plaintiffs submitted over 1500 additional pages of evidence in opposition to the present motion.²  This matter was argued at the short calendar on January 21, 2014, and February 4, 2014.

DISCUSSION

“Summary judgment is a method of resolving litigation when pleadings, affidavits, and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Internal quotation marks omitted.)  Grenier v. Commissioner of Transportation, 306 Conn. 523, 534, 51 A.3d 367 (2012).   “[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way.”  (Internal quotation marks omitted.)  Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003).   Moreover, “[i]n seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact ․ The courts hold the movant to a strict standard.   To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact.”  (Internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 10–11, 938 A.2d 576 (2008).  “In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact ․ but rather to determine whether any such issues exist.”  (Internal quotation marks omitted.)  RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 233, 32 A.3d 307 (2011).

I

Master–Halco first argues that the plaintiffs' claims are time barred by the statute of limitations set forth in § 52–577.   As Master–Halco expressly acknowledges, this argument is identical to the argument advanced by Halloran & Sage and Royster in the first motion. (11/25/13, Defs.' Mot. Summ. J., p. 1 [“For the reasons set forth in the Motion for Summary Judgment filed by ․ Halloran & Sage and ․ Royster, and the Memorandum of Law filed therewith, the plaintiffs' claims are barred by the statute of limitations set forth in ․ § 52–577.”] )   Therefore, the present motion is denied as to this ground for the reasons set forth in this court's memorandum of decision on the first motion.

In that memorandum of decision, the court acknowledged that “[i]n the context of a motion for summary judgment based on a statute of limitations special defense, a defendant typically meets its initial burden of showing the absence of a genuine issue of material fact by demonstrating that the action had commenced outside of the statutory limitation period.”  Romprey v. Safeco Ins. Co. of America, 310 Conn. 304, 321, 77 A.3d 726 (2013).  Section 52–577, the statute of repose at issue here, is “an occurrence statute, meaning that the time period within which a plaintiff must commence an action begins to run at the moment the act or omission complained of occurs ․ The three year limitation period of § 52–577, therefore, begins with the date of the act or omission complained of ․” (Emphasis omitted;  internal quotation marks omitted.)  Byrne v. Burke, 112 Conn.App. 262, 271–72, 962 A.2d 825, cert. denied, 290 Conn. 923, 966 A.2d 235 (2009).

This case, however, involves a continuing course of conduct.   The plaintiffs allege in count one that Master–Halco “commenced and continued to prosecute the Litigation against [the p]laintiffs.”  (Emphasis added.)   In count two, the plaintiffs complain of “Master–Halco's wrongful commencement and continued prosecution of the Litigation.”  (Emphasis added.)   As this court found in its memorandum of decision on the first motion with regard to the nearly identical allegations against Halloran & Sage and Royster set forth in counts three and four, “these allegations make clear that the act complained of was not intended to be limited to the singular event of the defendants commencing a baseless action against the plaintiffs, but was also intended to include the defendants' continued prosecution of that baseless action.   Thus, for purpose of determining the applicability of § 52–577, ‘the act or omission complained of was not a discrete and isolated event, but an ongoing one that continued until the defendants withdrew their action.”  UHY, LLP v. Master–Halco, Inc., supra, Superior Court, Docket No. CV–10–6013402–S;  see Karwowski v. Fardy, Superior Court, judicial district of New Britain, Docket No. CV–03–0522489–S (June 27, 2005, Burke, J.) (39 Conn. L. Rptr. 613, 615) (“[t]he act of maintaining a vexatious suit beyond three years from its commencement could be a bad act that itself, is the ‘act or omission complained of for purposes of § 52–577 ․” [internal quotation marks omitted] ).   It is undisputed that the continued prosecution of the prior lawsuit, i.e., the acts alleged in counts one and two, did not terminate until April 2010 when the underlying suit was withdrawn.   This action was commenced less than three months later in July of the same year, well within the three-year time limitation set forth in § 52–577.   Consequently, § 52–577 does not bar the plaintiffs' claims, and the present motion is therefore denied as to this ground.

II

Master–Halco also argues that a strong factual basis existed to support the claims brought in the underlying action and that the facts known to Master–Halco's attorneys were more than sufficient to satisfy the probable cause standard set forth by our Supreme Court in Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. 84.   Therefore, Master–Halco argues that it is entitled to summary judgment on the plaintiffs' claims for statutory and common-law vexatious litigation (counts one and two of the revised amended complaint).   In making this argument in the present motion, Master–Halco relies entirely on Halloran & Sage and Royster's memorandum of law, exhibits, and affidavits from the first motion.

Our Supreme Court has held that “[t]o establish [a vexatious litigation] cause of action, it is necessary to prove want of probable cause, malice and a termination of suit in the plaintiff's favor ․ Probable cause is the knowledge of facts sufficient to justify a reasonable person in the belief that there are reasonable grounds for prosecuting an action ․ In either [a common-law vexatious litigation claim or a statutory vexatious litigation claim under General Statutes § 52–568] ³ ․ [t]he existence of probable cause is an absolute protection against an action for [vexatious litigation], and what facts, and whether particular facts, constitute probable cause is always a question of law.”  (Citations omitted;  footnote added;  internal quotation marks omitted.)  Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. 94.

“For purposes of a vexatious suit action, [t]he legal idea of probable cause is a bona fide belief in the existence of the facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances in entertaining it ․ Probable cause is the knowledge of facts, actual or apparent, strong enough to justify a reasonable man in the belief that he has lawful grounds for prosecuting the defendant in the manner complained of ․ Thus, in the context of a vexatious suit action, the defendant lacks probable cause if he lacks a reasonable, good faith belief in the facts alleged and the validity of the claim asserted ․ Accordingly, the probable cause standard applied to a vexatious litigation action against a litigant is a purely objective one.”  (Citations omitted;  internal quotation marks omitted.)  Id., 94–95.   Our Supreme Court has warned that “[p]robable cause may be present even where a suit lacks merit.   Favorable termination of the suit often establishes lack of merit, yet the plaintiff in [a vexatious litigation case] must separately show lack of probable cause.”  (Emphasis omitted;  internal quotation marks omitted.)  Embalmers' Supply Co. v. Giannitti, 103 Conn.App. 20, 35, 929 A.2d 729 (2007), cert. denied, 284 Conn. 931, 934 A.2d 246 (2007).

In support of their respective positions on the present motion, the parties have cumulatively submitted thousands of pages of documentation.   This memorandum of decision does not, however, attempt to discuss every document introduced and its potential impact in a thorough, exhaustive probable cause analysis.   At this juncture, this court must only decide whether, as a matter of law, there are any genuine issues of material fact regarding the existence of probable cause.   The voluminous evidence submitted demonstrates that such issues exist.   Even assuming arguendo that Master–Halco has met its burden of demonstrating the existence of probable cause, the plaintiffs have submitted substantial evidence that, if credited by the jury, could indicate the absence of probable cause.   For example, although Master–Halco claims that it was ignorant of the dire financial conditions at Atlas, substantial deposition testimony and other documentary evidence indicates to the contrary.   More specifically, the plaintiffs submit evidence tending to show that Master–Halco's credit department had serious concerns about Atlas's financial status, that corporate officers repeatedly noticed Atlas's account delinquency and cash flow problems, and that the CEO of Master–Halco was personally involved in the situation.   Additionally, the plaintiffs' evidence raises questions as to whether Master–Halco deliberately disregarded the unfavorable determinations of their long-time forensic accountant in favor of another expert who lacked proper credentials or experience in construction accounting or fraud examination.

As this discussion demonstrates, the evidence presented in support and in opposition to the present motion, when viewed “in the light most favorable to the nonmoving party”;  (internal quotation marks omitted) Patel v. Flexo Converters U.S.A., Inc., 309 Conn. 52, 57, 68 A.3d 1162 (2013);  is more than sufficient to raise questions as to whether Master–Halco exercised some degree of “ ‘wilful blindness' that exceeds a simple failure to investigate”;  DeLaurentis v. New Haven, 220 Conn. 225, 261, 597 A.2d 807 (1991).   Because genuine issues of material fact exist as to the complete set of facts known to Master–Halco at the time they commenced and prosecuted their action against the plaintiffs, the present motion is denied as to this ground.

III

Master–Halco also argues that summary judgment should be granted on the plaintiffs' CUTPA claim because it is predicated on the vexatious litigation claims.   The court notes that other than asserting this argument in one sentence in the present motion, Master–Halco does not properly brief the argument in a memorandum of law, nor does it cite any pertinent authority as required by Practice Book § 11–10.⁴

Count six of the plaintiffs' revised amended complaint sets forth a CUTPA claim against Master–Halco predicated on Master–Halco's alleged “threat and pursuit of expensive vexatious litigation.” (1/10/11, Pls.' Revised Am. Compl.  Count 6, ¶ 45.)   Superior Court decisions have “recognized that CUTPA claims can be predicated on allegations of vexatious litigation.”   American International Specialty Lines Co. v. HMT Inspections, Superior Court, judicial district of Middlesex, Docket No. CV–09–5007419–S (April 13, 2011, Wiese, J.).   In the present motion, Master–Halco's request for summary judgment on the CUTPA claim (count six) is premised entirely on the court granting summary judgment on the vexatious litigation claims (counts one and two).   In parts I and II of this memorandum of decision, the court denied the motion for summary judgment as to the vexatious litigation claims.   Because the court denies summary judgment on the vexatious litigation claims, the motion for summary judgment on the CUTPA claim is also denied.

CONCLUSION

For the foregoing reasons, the present motion is denied.

It is So Ordered,

Nazzaro, J.

FOOTNOTES

FN1. General Statutes § 52–577 provides in relevant part:  “No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of.”.  FN1. General Statutes § 52–577 provides in relevant part:  “No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of.”

FN2. While Halloran & Sage and Royster objected to these submissions as untimely with regards to the first motion, Master–Halco has made no such objection with regards to the present motion..  FN2. While Halloran & Sage and Royster objected to these submissions as untimely with regards to the first motion, Master–Halco has made no such objection with regards to the present motion.

FN3. General Statutes § 52–568 provides:  “Any person who commences and prosecutes any civil action or complaint against another, in his own name or the name of others, or asserts a defense to any civil action or complaint commenced and prosecuted by another (1) without probable cause, shall pay such other person double damages, or (2) without probable cause, and with a malicious intent unjustly to vex and trouble such other person, shall pay him treble damages.”.  FN3. General Statutes § 52–568 provides:  “Any person who commences and prosecutes any civil action or complaint against another, in his own name or the name of others, or asserts a defense to any civil action or complaint commenced and prosecuted by another (1) without probable cause, shall pay such other person double damages, or (2) without probable cause, and with a malicious intent unjustly to vex and trouble such other person, shall pay him treble damages.”

FN4. Practice Book § 11–10 provides in relevant part:  “A memorandum of law briefly outlining the claims of law and authority pertinent thereto shall be filed and served by the movant with ․ motions for summary judgment.”  (Emphasis added.).  FN4. Practice Book § 11–10 provides in relevant part:  “A memorandum of law briefly outlining the claims of law and authority pertinent thereto shall be filed and served by the movant with ․ motions for summary judgment.”  (Emphasis added.)

Nazzaro, John J., J.