Glazer v. Dress Barn, Inc.

• Decision Date: 07 June 2005
• Docket Number: (SC 17228).
• Citation: 274 Conn. 33,873 A.2d 929
• Court: Connecticut Supreme Court
• Parties: ALAN M. GLAZER ET AL. v. DRESS BARN, INC.

274 Conn. 33

873 A.2d 929

ALAN M. GLAZER ET AL. v. DRESS BARN, INC.

(SC 17228).

Supreme Court of Connecticut.

Argued November 23, 2004.

Officially released June 7, 2005.

Norcott, Katz, Palmer, Vertefeuille and Zarella, Js.

Wesley W. Horton, with whom were Robert M. Shields, Jr., Michael S. Taylor and, on the brief, Kenneth J. Bartschi, for the appellant-appellee (defendant).

Peter N. Wang, pro hac vice, with whom were Ben A. Solnit, Robert B. Flynn and, on the brief, Dorit S. Heimer, for the appellees-appellants (plaintiffs).

Opinion

KATZ, J.

The defendant, Dress Barn, Inc., and the plaintiffs, Alan M. Glazer, GLZR Acquisition Corporation (GLZR) and BFI Liquidating Limited (BFI), respectively appeal and cross appeal from the judgment of the trial court, rendered after a jury trial, in favor of the plaintiffs on claims of breach of contract, negligent misrepresentation and violations of the Connecticut Unfair Trade Practices Act (CUTPA); General Statutes § 42-110a et seq.; awarding $30 million in compensatory damages. The defendant claims that the evidence was insufficient to support the judgment on each of these claims and that the trial court improperly: (1) charged the jury on the statute of frauds, General Statutes § 52-550, and on damages; (2) modified its decision on postjudgment interest; and (3) sanctioned the defendant for a discovery violation by striking certain testimony. The plaintiffs claim on cross appeal that the trial court improperly denied their application for prejudgment interest. We conclude that the jury charge was improper with respect to the statute of frauds and that there was insufficient evidence to support the verdict. Accordingly, we reverse the judgment of the trial court.

The jury reasonably could have found the following facts. Bedford Fair Industries (Bedford Fair), a general partnership, is a private direct mail marketer of moderately priced women's apparel through seasonal catalogs. At all relevant times, GLZR and BFI were the sole partners in Bedford Fair. Glazer was one of the founders of Bedford Fair and its president; he also was the majority shareholder of GLZR and BFI. In late 1995, Bedford Fair began to explore the possibility of selling the company to an appropriate strategic partner, while keeping Glazer and his management team to run the operation.

Dress Barn operates a chain of women's retail apparel stores, with 726 stores nationwide as of 1997. It decided to expand its operation by entering into the catalog mail order business and determined that the most cost effective option was to buy an existing mail order company that could provide customer lists, shipping facilities and expertise in that business. In late 1996, Glazer contacted David Jaffe, Dress Barn's then senior vice president, about the possibility of Dress Barn acquiring Bedford Fair.¹ Executive officers for the two companies met on December 6, 1996, and January 10, 1997, to discuss the merits of such a proposal. At these meetings, Bedford Fair provided Dress Barn with confidential financial information, including sales and profit data for the previous two years, monthly revenue projections for 1997 and annual revenue projections for 1997 through 2001. The 1996 balance sheet reflected an outstanding debt of $8.4 million owed to the Bank of New York (bank), and Bedford Fair explained that it was virtually fully drawn on its line of credit with the bank. The 1996 balance sheet also reflected Bedford Fair's monthly cash flow, which indicated that its expenses exceeded its revenues in certain months, including August. Although the data reflected operating losses for 1995 and 1996, and a projected loss for 1997,² the five year projections reflected a return to profitability in late 1997 and future growth. Dress Barn understood that these projections assumed that Bedford Fair's "credit crunch" would be relieved.

Part of the increased profit projections was based on successful testing results Bedford Fair had achieved, on a limited scale for the two previous seasons, from a deferred billing program. Under this program, Bedford Fair offered its customers the option of receiving merchandise immediately upon ordering while deferring payment for the goods for approximately two months.³ At the January 10, 1997 meeting, Bedford Fair shared the test results of the deferred billing program with Dress Barn.

Dress Barn thereafter sent Bedford Fair a proposed "Fair Term Sheet" (term sheet), dated February 7, 1997, setting forth certain key components of the proposed acquisition of Bedford Fair. The terms included, inter alia, a $20 million purchase price based on "certain debt level assumptions," Dress Barn's assumption of $5 million of Bedford Fair's bank debt, Glazer's continuation as chief executive officer, and an equal allocation of tax savings arising from the sale.

On March 28, 1997, the parties met to discuss the acquisition terms, at which time Glazer expressed general agreement with the terms set forth in the term sheet. At the March 28 meeting, Bedford Fair reported that it had exceeded its income projections for January and February, and that it anticipated exceeding its March projections as well. It also shared with Dress Barn the results from its expanded testing of the deferred billing program in its spring catalog, which had been quite successful. Bedford Fair noted that it did not think it would be able to support the deferred billing in its fall catalog because of cash flow problems in July and August. Bedford Fair explained that, although the program ultimately would increase revenues significantly, the reduced cash flow in late July and August while billing was deferred would impact its ability to pay creditors during that period. Moreover, Bedford Fair would incur higher costs from running the deferred billing program because, in anticipation of greater response rates, it would need to print and mail more catalogs and order more merchandise.

Bedford Fair inquired whether Dress Barn would be willing to provide financing so that Bedford Fair could continue and expand the deferred billing program in its fall catalog. Because the parties had set late July, 1997, as the target acquisition date, Bedford Fair explained that, if Dress Barn were to acquire Bedford Fair, the benefits of the deferred billing would accrue to Dress Barn as the deferred charges subsequently were processed. Dress Barn would derive a further benefit from an anticipated higher customer response rate, which then would allow it to have a broader mailing for the winter 1997 catalog. Glazer told Dress Barn that, if it decided not to provide the financing, Bedford Fair either would suspend the deferred billing program or would look to another source for financing so that it could continue the program. Glazer indicated that Bedford Fair was fully extended on its $8.5 million line of credit with the bank, and that the bank would not provide the additional financing, unless he provided a personal guarantee, which Glazer was unwilling to do.⁴ Glazer made it clear that Dress Barn would need to provide the financing only if the sale did not go through by the end of July as they anticipated. Bedford Fair noted that it needed a commitment soon to make timely printing commitments. Jaffe indicated that the proposal made sense and that he would get back to Bedford Fair as to whether Dress Barn would provide the financing.

On April 4, 1997, the parties met to negotiate a letter of intent for the acquisition. The parties agreed at that time that Dress Barn would determine the methodology for calculating the purchase price, but Bedford Fair would set the date on which Bedford Fair's stock value would be determined.

At the April 4 meeting, Jaffe agreed that Dress Barn would provide financing to support the deferred billing program. He indicated that Dress Barn wanted Bedford Fair's efforts expended toward running the business rather than looking for alternative sources of financing. Jaffe also noted his understanding that the financing would be necessary only if the sale did not go through. The parties then shook hands on the deal. Bedford Fair asked to have the financing agreement in writing, but Jaffe asked to defer memorializing both the financing agreement and the letter of intent until after completion of a pending secondary stock offering so that they would not have to include the transaction details in the stock prospectus. On May 23, 1997, after the stock offering had been completed, the parties signed a letter of intent setting forth certain principal terms of Dress Barn's acquisition of Bedford Fair consistent with the February term sheet and a closing date of "July 28, 1997 or as soon as practicable thereafter." An exhibit setting forth a formula for calculating the purchase price was attached to, and incorporated by reference in, the letter of intent. The parties agreed therein that the letter of intent was not a binding agreement, which would result only from the execution of future definitive agreements and approval of the transaction and agreements by Dress Barn's board of directors. The parties expressly exempted from that disclaimer certain paragraphs of the agreement, which were to be legally binding upon the parties. One of those paragraphs provided that Dress Barn "anticipates being able to conduct the necessary `due diligence' investigation and negotiating and executing definitive agreements by June 30, 1997."⁵ Another paragraph precluded Bedford Fair from soliciting or negotiating with any third parties with respect to the sale of its business or any of its assets until June 30, 1997. Dress Barn similarly agreed therein not to negotiate with third parties during that period. In letters dated May 27, 1997, David Mackey, Bedford Fair's chief operating officer, informed Bedford Fair's two principal creditors, the bank and R. R. Donnelly and Sons Company (Donnelly),⁶ that the parties had executed a letter of intent....