Edmands v. Cuno, Inc., 17321.
| Decision Date | 21 March 2006 |
| Docket Number | No. 17321.,17321. |
| Citation | 892 A.2d 938,277 Conn. 425 |
| Court | Connecticut Supreme Court |
| Parties | Robert EDMANDS et al. v. CUNO, INC. |
Kenneth A. Votre, New Haven, for the appellants (plaintiffs).
William H. Bright, Jr., with whom, on the brief, were Charles D. Ray and Allison A. Wood, Hartford, for the appellee (defendant).
SULLIVAN, C.J., and NORCOTT, KATZ, PALMER and ZARELLA, Js.
This action arises from the termination of long-standing distributorship and sales representative agreements between the defendant, CUNO, Inc., and the plaintiffs, Robert Edmands, who filed the action in his name as "doing business as Eastern Filter Sales," and Eastern Filter Sales Company (Eastern). The plaintiffs commenced the action after the defendant gave notice of its intent to terminate the agreements, and the defendant asserted counterclaims relating to the plaintiffs' alleged failure to return or pay for certain products in their possession. The plaintiffs appeal from the judgment of the trial court rendered in favor of the defendant, claiming that the court improperly determined that the plaintiffs could not prevail on their claims alleging: a violation of what is commonly known as the Connecticut Franchise Act (franchise act), , General Statutes § 42-133f; a violation of the Connecticut Unfair Trade Practices Act (CUTPA), , General Statutes § 42-110b; and a breach of the implied covenant of good faith and fair dealing. They also claim that the trial court improperly failed to set aside the verdict in favor of the defendant on its counterclaim alleging breach of contract with respect to Edmands personally and that the court improperly granted the defendant's motion requiring the plaintiffs to disclose assets to secure the judgment. We affirm the judgment of the trial court.
The record reflects the following undisputed facts and procedural history. The defendant is a Connecticut based corporation that designs, manufactures and sells filtration products that are marketed under the defendant's name (CUNO products) and are used by industrial companies for the separation, clarification and purification of fluids and gases. The relationship between the defendant and Eastern began in 1972, when Edmands' father and a business partner, John Stample, entered into agreements with the defendant under which Eastern was designated a sales representative and distributor of CUNO products in Connecticut and specified counties in Western Massachusetts. From almost the inception of the relationship until the time the defendant gave notice of its intent to terminate the agreements, CUNO products represented approximately 93 percent of Eastern's business.
In 1984, Edmands purchased his father's share of the business. That year, Edmands, as president of Eastern, Stample and the defendant executed the four operative agreements in this appeal, which in their essential terms mirrored the 1972 agreements: sales representative and distributorship agreements for the defendant's general filter products division, and sales representative and distributorship agreements for the defendant's microfiltration division. The sales representative agreements governed the plaintiffs' solicitation of orders for CUNO products from customers, for which the defendant, following shipment and billing the order to the customer, paid a commission to the plaintiffs. The distributorship agreements governed the sale of CUNO products from the defendant to the plaintiffs, which the plaintiffs in turn sold to customers from Eastern's inventory. All of the agreements designated the plaintiffs as independent contractors. The agreements were to "continue in force indefinitely, subject to cancellation by either party, at any time and for any reason, upon thirty (30) days' notice in writing to the other party."1
In 1996, Edmands purchased Stample's share of the business. Between June, 1996, and March, 2000, the defendant sent numerous communications to Edmands expressing concerns principally about the plaintiffs' inability to retain qualified salespersons, but also about disappointing sales results. Thereafter, in a letter dated September 11, 2000, Anthony C. Doina, the defendant's vice president and general manager, informed Edmands that, "[i]n accordance with the requirements of the [1984] agreements, this letter will serve as [sixty] day notice of cancellation without cause of these sales agreements," effective November 10, 2000. Although Doina noted therein that the defendant was not required under the terms of the agreements to provide a reason for the termination, he nonetheless provided the following reasons: First, the defendant had decided that it would be "a better business practice to sell [its] product directly in the market [the plaintiffs] now service"; second, the defendant had been "disappointed in [the plaintiffs'] coverage of the territory," in part because the plaintiffs had been unable "to hire and retain qualified sales people. . . ."
In January, 2001, the plaintiffs filed an ex parte application to enjoin temporarily the defendant's termination of the agreements and a verified six count complaint, seeking, inter alia, a permanent injunction and incidental and punitive damages. The plaintiffs alleged that the parties' relationship was that of franchisor-franchisee, and, accordingly, claimed that the defendant's actions: (1) violated the franchise act by terminating the agreements without proper notice and good cause; (2) violated CUTPA; (3) breached the implied covenant of good faith and fair dealing; and (4) constituted negligence. The plaintiffs also alleged that, as a result of conduct by the defendant before and after it gave notice of its intent to terminate the agreements, the defendant had violated the Connecticut Trade Secrets Act, General Statutes § 35-50et seq. (trade secrets act), and tortiously had interfered with legitimate business expectancies.
The trial court, Pittman, J., denied the application for a temporary injunction and ordered a hearing on the request for permanent injunctive relief seeking to bar the defendant from terminating the relationship. At the hearing, pursuant to the parties' stipulation, Hon. Anthony V. DeMayo, judge trial referee, limited his consideration to the request for a permanent injunction, leaving the remaining issues to be tried later. In a detailed memorandum of decision, the trial court thereafter concluded: (1) that the relationship between the parties was not that of franchisor-franchisee and thus was not covered by the franchise act; and (2) that, in any event, the defendant had demonstrated the requisite good cause for termination of a franchise agreement. Accordingly, the trial court denied the plaintiffs' request for a permanent injunction.2
In July, 2001, the plaintiff filed a claim for a jury trial on all counts. In June, 2003, the defendant filed an amended answer and asserted counterclaims alleging that the plaintiffs' failure either to return or pay for the CUNO products in their possession constituted a breach of contract, unjust enrichment and conversion. In March, 2004, shortly before the jury trial had commenced, the defendant requested a determination that the plaintiffs' counts alleging violations of the trade secrets act and the franchise act must be tried to the court, rather than to the jury.
After the close of evidence, the plaintiffs notified the trial court, Corradino, J., that they were withdrawing the negligence and trade secrets act claims, and the defendant similarly notified the court that it was withdrawing its conversion counterclaim. After these announcements, the trial court reviewed the remaining counts with the parties and discussed at length its doubts as to whether the plaintiffs could prevail on their franchise act claim. Specifically, the court discussed the various elements identified in our case law as relevant to establishing the requisite control by a franchisor and noted that, although the plaintiffs and the defendant regularly had developed a marketing plan, the evidence did not indicate that the defendant actually had exercised control over the plaintiffs' operation of the business under the requisite factors.
The following day, the trial court met with the parties and stated that: (1) the court would decide the franchise act claim; (2) it intended to render judgment for the defendant on that claim; and (3) as a result of the intended decision on the franchise act claim, the defendant was entitled to judgment on the plaintiffs' claims for a violation of CUTPA and for breach of the covenant of good faith and fair dealing.3 The court explained that it had concluded that the defendant was entitled to judgment on the franchise act claim because the plaintiffs had not met their burden of proving sufficient control by the defendant to establish the necessary management agreement under the franchise act and because the defendant also had established good cause for terminating the agreements in accordance with the franchise act. The court further explained that judgment also must be rendered for the defendant on the CUTPA and fair dealing claims because those claims were predicated on the alleged violation of the franchise act. Accordingly, the trial court rendered partial judgment for the defendant on those three counts. The jury thereafter returned a verdict in favor of the defendant on the plaintiffs' claim of tortious interference with legitimate business expectancies and on the defendant's counterclaim for breach of contract, awarding the defendant $88,716.12 in damages and $26,259.97 in interest. In light of its verdict on the breach of contract counterclaim, the jury did not address the defendant's counterclaim for unjust enrichment.
The plaintiffs thereafter filed motions for reconsideration, to set aside the verdict...
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