600 LLC v. Sportech Venues, Inc. (2016)

MEMORANDUM OF DECISION (Motion to Strike # 120, Short Calendar, January 25, 2016)

The defendants seeks to strike counts three and four of the plaintiff's amended complaint on the ground that the two counts are insufficient as a matter of law, in that (1) the plaintiff fails to state a factual basis for the claim alleging that the defendant violated an implied covenant of good faith and fair dealing and (2) the Connecticut Unfair Trade Practices Act (CUTPA) claim fails as a matter of law.

FACTS

On October 16, 2015, the plaintiff, 600 Main, LLC (600 Main), filed a five-count amended complaint against the defendant, Sportech Venues, Inc. (Sportech), which is the operative complaint in this matter.  In the complaint, the plaintiff alleges the following facts.  The defendant is a Connecticut corporation that owns and operates off-track betting systems.  The plaintiff and the defendant entered into a written lease dated December 17, 2010 (the lease), under which the defendant agreed to lease a parcel of real property (the property) located in Willimantic, Connecticut, to the plaintiff for an initial seven-year term.¹  On or about December 1, 2014, the defendant failed and/or refused to pay the monthly rents due under the lease.  The plaintiff served the defendant with a notice to quit on January 22, 2015, which required the defendant to vacate the property on or before January 28, 2015.  The defendant refused to vacate the property, requiring the plaintiff to file a summary process action for eviction.  The defendant vacated the property on March 10, 2015.

Count three of the plaintiff's complaint alleges breach of the covenant of good faith and fair dealing, in that, the defendant intentionally and in bad faith failed to pay the plaintiff the rent agreed upon to force the plaintiff into financial distress.  Moreover, the defendant intentionally and in bad faith failed to pay the plaintiff the agreed upon rent in order to gain leverage so the defendant could negotiate a lower monthly rental payment for the property.  The plaintiff also alleges that the defendant colluded with a potential buyer of the property to secure a lower rental agreement for the property from the potential buyer.

Count four of the complaint alleges violation of CUTPA, in that, Sportech knowingly and intentionally issued an inaccurate and fraudulent federal tax form to the plaintiff and engaged in conduct that forced 600 Main into financial distress.  The plaintiff alleges that such conduct amounts to CUTPA violations.

On October 26, 2015, the defendant filed a motion to strike counts three and four of the amended complaint.  The defendant submitted a memorandum of law in support of this motion.  The plaintiff filed an objection to the motion to strike on November 4, 2015.  This matter was heard at short calendar on January 25, 2016.

“A motion to strike shall be used whenever any party wishes to contest ․ the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or any one or more counts thereof, to state a claim upon which relief can be granted ․” Practice Book § 10–39(a).  “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).  “A motion to strike admits all facts well pleaded;  it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings.”  (Emphasis in original;  internal quotation marks omitted.)  Id., 588.

“[A] motion to strike challenges the legal sufficiency of a pleading and, consequently, requires no factual findings by the trial court ․ [The court] construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency ․ Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․” Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, 309 Conn. 342, 350, 71 A.3d 480 (2013).  “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.)  Santorso v. Bristol Hospital, 308 Conn. 338, 349, 63 A.3d 940 (2013).

I. Count Three—The Covenant of Good Faith and Fair Dealing

In count three, the plaintiff alleges breach of the covenant of good faith and fair dealing.  The defendant moves to strike the third count on the ground that it fails to state a legally sufficient cause of action for breach of the covenant of good faith and fair dealing because it fails to allege facts that the defendant's actions were undertaken with sinister motive.  The plaintiff counters that the complaint has sufficiently alleged facts to support an action for bad faith.

“Every contract carries an implied covenant of good faith and fair dealing requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement.”  (Internal quotation marks omitted.)  Alexandru v. Strong, 81 Conn.App. 68, 80, 837 A.2d 875, cert. denied, 268 Conn. 906, 845 A.2d 406 (2004).  “To constitute a breach of that covenant, 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.”  Id. “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 ․ [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.)  Blumberg Associates Worldwide, Inc. v. Brown & Brown of Connecticut, Inc., 132 Conn.App. 85, 100, 30 A.3d 38 (2011), aff'd, 311 Conn. 123, 84 A.3d 840 (2014).

“[T]here is a split of authority among 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.  In alleging a breach of the covenant of good faith and fair dealing, courts have stressed that such a claim must be alleged in terms of wanton and malicious injury [and] evil motive ․ The second line of cases generally holds parties to a less stringent standard requiring that a plaintiff need only allege sufficient facts or allegations from which a reasonable inference of sinister motive can be made ․ Even where courts have used an inference analysis, however, they have looked to allegations that the conduct at issue was engaged in purposefully.”  Steven Auto, LLC v. National Casualty Company, Superior Court, judicial district of Waterbury, Docket No. CV 14–6023906–S (February 11, 2016, Roraback, J.).²

In the present case, paragraph 21 of the complaint alleges:  “Sportech intentionally and in bad faith failed to pay 600 Main the rent agreed upon forcing 600 Main to pursue potential buyers for the property at a financially damaging discount and then Sportech secretly colluded with a potential buyer to secure a lower rental agreement for the property from said buyer.”  (Emphasis added.)  In addition, paragraph 20 alleges:  “Sportech intentionally and in bad faith failed to pay 600 Main the rent agreed upon in order to gain leverage by forcing 600 Main into financial distress so Sportech could negotiate a lower monthly rental payment for the property.”  (Emphasis added.)

The relevant definition of “collude” is “to connive with another.”  Merriam–Webster's Third New International Dictionary (1981).  “Connive,” in turn, is defined as “to cooperate secretly;  have a secret understanding;  conspire.”  Id. That said, the plaintiff has essentially alleged that the defendant purposefully withheld rent in order to push the plaintiff into financial distress in an effort to force the plaintiff to seek other options than the agreed upon lease.³  The plaintiff has alleged that the defendant did so in an effort to renegotiate the monthly rent and/or in an effort to conspire with a third party to obtain a lower monthly rent if the plaintiff was forced to sell the property.  As such, in motion to strike, all well pleaded facts are admitted.  See Faulkner v. United Technologies Corp., supra, 240 Conn. 588.  Therefore, viewing the allegations in the complaint in the light most favorable to sustaining their legal sufficiency, the plaintiff has sufficiently alleged that the defendant's actions constituted bad faith.⁴  The motion to strike count three is denied.

II. Count Four—Connecticut Unfair Trade Practices Act

In count four, the plaintiff alleges that the defendant engaged in deceptive and unfair business conduct, entitling 600 Main to recover damages, attorneys fees, and costs pursuant to General Statutes § 42–110b(a).  The plaintiff alleges that the defendant:  “(a) intentionally threatened a representative of 600 Main with physical harm if said representative attempted to inspect the property;  (b) knowingly and fraudulently misrepresented information on its [federal tax form] 1099;  (c) knowingly and intentionally colluded with a potential buyer of the property to obtain a lower monthly rental agreement;  and (d) knowingly and intentionally engaged in unfair, unethical and unscrupulous conduct in an attempt to lower its monthly rent payments.”  The defendant moves to strike the fourth count on the ground that it fails to state a claim, in that, CUTPA does not apply in the present matter because the defendant's alleged conduct was incidental to the defendant's primary trade or business.  The plaintiff counters that they have alleged more than a mere breach of contract claim, bringing the count into the realm of CUTPA.

Section 42–110b(a) reads:  “No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”  However, “[a] CUTPA violation may not be alleged for activities that are incidental to an entity's primary trade or commerce ․” Dinardo Seaside Tower, Ltd. v. Sikorsky Aircraft Corp., 153 Conn.App. 10, 21, 100 A.3d 413, cert. denied, 314 Conn. 947 (2014).  “In making a determination as to whether a defendant is subject to CUTPA and has committed a violation thereof, it must first be determined whether the defendant's actions were carried out in the defendant's trade or commerce ․ The conduct at issue must occur in the defendant's primary trade or business;  it must not be merely incidental to the defendant's trade or business.”  Id., 22.

In the present case, the defendant's alleged breach is incidental to its primary trade or commerce.  The defendant, as alleged by the complaint, is a Connecticut corporation that owns and operates off-track betting systems and is licensed pursuant to General Statutes § 12–574.  The complaint fails to allege that the defendant's primary trade or commerce includes renting or leasing properties.  It is clear, from the face of the complaint, that the defendant's primary trade or commerce is as a licensed operator of Connecticut's off-track betting system and that any alleged lease violation is incidental to that trade or commerce.  See id. (defendant's primary trade or business was the manufacture and servicing of aviation equipment and leasing of property incidental to that trade or business);  Lavigne v. Killingly, Superior Court, judicial district of Windham, Docket No. CV 14–6007875–S (December 24, 2015, Calmar, J.) (commercial lease entered into by Town was incidental to its primary trade or commerce).  For such reason, the plaintiff's CUTPA claim is legally insufficient.  The motion to strike count four is granted.

CONCLUSION

For the aforementioned reasons, the motion to strike is denied as to count three, but is granted as to count four.

THE COURT

CALMAR, J.

FOOTNOTES

FN1. Paragraph six of the complaint alleges, “[t]he rent agreed to under the Written Lease for the Property was for Year 1—gross rent of $86,400.00 annually, paid monthly in advance in the amount of $7,200.00 by Sportech.  Year 2—gross rent of $88,992.00 annually, paid monthly in advance in the amount of $7,416.00 by Sportech.  Year 3—gross rent of $91,661.76 annually, paid monthly in advance in the amount of $7,638.48 by Sportech.  Year 4—gross rent of $94,411.61 annually, paid monthly in advance in the amount of $7,867.63 by Sportech.  Year 5—gross rent of $97,243.96 annually, paid monthly in advance in the amount of $8,103.66 by Sportech.  Year 6—gross rent of $100,161.28 annually, paid monthly in advance in the amount of $8,346.77 by Sportech.  Year 7—gross rent of $103,166.12 annually, paid monthly in advance in the amount of $8,597.18 by Sportech.”  The complaint also alleges that, “[s]tarting the first day of October 2013, 600 Main and Sportech agreed that for the next twenty (20) future monthly payments pursuant to the Written Lease, 600 Main would give Sportech a deduction of $1,500.00 per month.”.  FN1. Paragraph six of the complaint alleges, “[t]he rent agreed to under the Written Lease for the Property was for Year 1—gross rent of $86,400.00 annually, paid monthly in advance in the amount of $7,200.00 by Sportech.  Year 2—gross rent of $88,992.00 annually, paid monthly in advance in the amount of $7,416.00 by Sportech.  Year 3—gross rent of $91,661.76 annually, paid monthly in advance in the amount of $7,638.48 by Sportech.  Year 4—gross rent of $94,411.61 annually, paid monthly in advance in the amount of $7,867.63 by Sportech.  Year 5—gross rent of $97,243.96 annually, paid monthly in advance in the amount of $8,103.66 by Sportech.  Year 6—gross rent of $100,161.28 annually, paid monthly in advance in the amount of $8,346.77 by Sportech.  Year 7—gross rent of $103,166.12 annually, paid monthly in advance in the amount of $8,597.18 by Sportech.”  The complaint also alleges that, “[s]tarting the first day of October 2013, 600 Main and Sportech agreed that for the next twenty (20) future monthly payments pursuant to the Written Lease, 600 Main would give Sportech a deduction of $1,500.00 per month.”

FN2. While this court acknowledges the Superior Court split, it is unnecessary for the court to distinguish its position amongst the split at this time.  Count three of the complaint in the present matter is legally sufficient under either standard set forth by the Superior Courts..  FN2. While this court acknowledges the Superior Court split, it is unnecessary for the court to distinguish its position amongst the split at this time.  Count three of the complaint in the present matter is legally sufficient under either standard set forth by the Superior Courts.

FN3. The relevant definition of “intentionally” is as follows:  “in an intentional manner;  with intention;  purposely.”  (Emphasis added.)  Merriam–Webster's Third New International Dictionary (1981)..  FN3. The relevant definition of “intentionally” is as follows:  “in an intentional manner;  with intention;  purposely.”  (Emphasis added.)  Merriam–Webster's Third New International Dictionary (1981).

FN4. Moreover, “[The court] construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency ․ Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․” Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, supra, 309 Conn. 350..  FN4. Moreover, “[The court] construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency ․ Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․” Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, supra, 309 Conn. 350.

Calmar, Harry E., J.