Manere v. Collins
| Decision Date | 29 September 2020 |
| Docket Number | AC 42182 |
| Citation | 200 Conn.App. 356,241 A.3d 133 |
| Court | Connecticut Court of Appeals |
| Parties | Robert MANERE v. Peter COLLINS et al. |
Alan R. Spirer, Westport, for the appellant (plaintiff).
Alexander H. Schwartz, Southport, with whom was Roy S. Ward, for the appellees (defendants).
The plaintiff, Robert Manere, appeals from the judgment of the trial court, rendered after a bench trial, in favor of the defendants, Peter Collins and BAHR, LLC (BAHR). On appeal, the plaintiff claims that the court improperly (1) concluded that BAHR's counterclaim stated a claim upon which relief could be granted, (2) applied a six year statute of limitations to BAHR's counterclaim, and (3) rejected his application to dissolve BAHR on the ground of oppression pursuant to General Statutes § 34-267 (a) (5), Connecticut's limited liability company dissolution statute.1 We agree with the plaintiff's second and third claims and, accordingly, reverse in part the judgment of the trial court.
The following facts, as found by the trial court or otherwise undisputed, and procedural history are relevant to this appeal. In 2009, the plaintiff and Collins, both graduates of the same high school, reconnected during their thirtieth high school reunion. Between the time after graduation and the reunion, both had pursued professions in the food service and bar industry. The plaintiff had experience in the restaurant business and Collins was the owner and manager of a successful bar in New York City. Still working in the Fairfield county area, the plaintiff became aware that a popular bar and restaurant establishment, Seagrape Cafe (cafe), was potentially for sale. Both the plaintiff and Collins were familiar with the cafe and its popularity among college students.
In 2011, the plaintiff and Collins formed BAHR, a Connecticut limited liability company, for the purposes of purchasing and operating the cafe. After forming BAHR, the plaintiff and Collins executed an operating agreement drafted by an attorney who previously had represented the plaintiff in unrelated business matters. The plaintiff and Collins were the sole members of BAHR, and the operating agreement designated both as its managers. Each provided capital contributions and "priority member loans"2 to BAHR. Specifically, Collins provided a $600 capital contribution and a $149,400 priority member loan,3 and the plaintiff provided a $400 capital contribution and a $19,600 priority member loan.4 Due to the disparity in their respective loans, Collins received a 60 percent interest and the plaintiff received a 40 percent interest in BAHR. There-after, the plaintiff signed a lease on behalf of BAHR for the property on which the cafe is located and further provided a personal guarantee of BAHR's performance under the lease.
In the fall of 2011, the cafe opened under BAHR's ownership. Because Collins was living in New York City, where he operated a different establishment, the plaintiff and Collins agreed that the plaintiff would be primarily responsible for operating the cafe and acting as its on-site manager. Prior to its opening, Collins and the plaintiff agreed that, as compensation for acting as the cafe's manager, the plaintiff would be paid a weekly salary of $600. The plaintiff's responsibilities included hiring and paying staff, obtaining stock items such as food and liquor, and accounting for revenue and expenses. Shortly after the cafe opened, the plaintiff and Collins agreed to raise the plaintiff's weekly salary to $1000 per week.5 Unbeknownst to Collins, the plaintiff was also using BAHR funds to pay for personal expenses such as health insurance, car payments, and gas.
In October, 2012, Hurricane Sandy devastated the Fairfield county area and severely damaged the cafe premises. In addition to the cafe, a small house located on the same property, which was leased by BAHR and used as an office for BAHR affairs, sustained damage. Due to the severe impact on both the cafe and the community in which it was located, the cafe was closed for a period of time in an effort to rebuild the premises. Pursuant to their recovery plan, both the plaintiff and Collins agreed that neither would take any guaranteed payments from BAHR for a period of fifty-two weeks. Despite this oral agreement, the plaintiff continued to take cash from the business during the recovery period. For instance, the plaintiff continued to take a salary in cash and unilaterally increased that salary to $1500 per week in June, 2013. He also continued to use BAHR funds to pay for his health insurance, car payments, and gas. The plaintiff recorded these cash payments in a handwritten ledger. In October, 2013, after the fifty-two week period had ended, the plaintiff ceased taking his $1500 salary in cash and resumed issuing himself checks in that amount. He also continued to use BAHR funds to pay for personal expenses.
In 2015, Collins and his family moved to Connecticut and began to spend more time at the cafe. Due to his more active role in the cafe, Collins began to receive a weekly salary of $1000. The plaintiff thereafter reduced his weekly salary from $1500 to $1000. Later that same year, the plaintiff, Collins, and two associates of Collins opened a restaurant called the Georgetown Saloon. BAHR was not involved in this new venture. Instead, a separate limited liability company was formed for the purposes of owning and operating the Georgetown Saloon. Like his role at the cafe, the plaintiff was tasked with operating the Georgetown Saloon and acting as its on-site manager. Unlike the cafe, however, the Georgetown Saloon proved unsuccessful and closed in July, 2016. Although he did not blame the plaintiff for the Georgetown Saloon's failure, Collins became concerned with the plaintiff's style of management based on the manner in which the plaintiff conducted himself as its manager. As a result, Collins began to increasingly question the plaintiff about cafe affairs, including its finances and daily receipts.
Dissatisfied with the information he was receiving from the plaintiff, Collins began to ask cafe employees to text or e-mail him daily revenue numbers. When Collins asked the plaintiff to provide him with BAHR's business records—all of which had been relocated from the on-site office to the plaintiff's home after Hurricane Sandy—he received partial information which was often either incomplete or unresponsive. The piecemeal information provided by the plaintiff led Collins to perform his own inquiry into BAHR's records. With his wife, Collins obtained records of cash receipts and payments, bank records, tax returns, and other information in an attempt to reconstruct BAHR's financial history. Complicating this process was the fact that Collins initially did not have access to the payroll system and, due to the plaintiff's disorganized storage or outright destruction of BAHR's financial records, had only part of BAHR's financial records available to him. The trial court found that Collins’ reconstruction of the cafe's financial history revealed that the plaintiff had misappropriated approximately $190,000 of BAHR funds. In March, 2017, Collins unilaterally amended the operating agreement.6 In the amended operating agreement, the plaintiff was terminated as a manager of BAHR. In addition, the plaintiff was removed as the liquor permittee for the cafe. The plaintiff's son, who was employed as a bartender at the cafe, was also terminated as an employee. Collins thereafter stopped payment on nine $1000 checks issued to the plaintiff and changed the locks on the cafe to prevent the plaintiff from accessing the building.7
After taking over management of the cafe, Collins brought the building into compliance with fire safety standards. He further ensured that the cafe's staff were put on a payroll system for the purpose of placing the cafe in compliance with state and federal wage and hour laws. As a result, the cafe's revenue increased by 25 percent.
Since 2017, BAHR has not made any distributions to Collins or the plaintiff. Additionally, the plaintiff has not been provided with any information concerning BAHR's finances pursuant to the operating agreement, other than the information he received through the discovery process of the underlying litigation. Although Collins continued to receive a weekly salary of $1000 as of the time of the trial, no other payments have been made by BAHR to either Collins or the plaintiff.
In response to the measures taken by Collins, the plaintiff instituted the underlying action against Collins and BAHR, asserting a series of claims against both defendants including, inter alia, breach of contract by both defendants, breach of fiduciary duty by Collins, and oppression by Collins. The plaintiff also sought an accounting of BAHR's finances. The plaintiff further requested the dissolution of BAHR pursuant to § 34-267 (a) (5) on the ground of oppression.8 In response, BAHR filed an answer and brought a counterclaim against the plaintiff.9 The plaintiff, as the counterclaim defendant, asserted four special defenses.10 After a two day bench trial, the court, Hon. George R. Thim , judge trial referee, rendered judgment in favor of the defendants on all counts of the plaintiff's complaint. The court further rendered judgment in favor of BAHR on its counterclaim and awarded it $190,463.03 in damages. This appeal followed.
The plaintiff first challenges the propriety of the court's judgment in favor of BAHR on its counterclaim. According to the plaintiff, the counterclaim alleged a claim of misappropriation, a cause of action that is not recognized under Connecticut law. The plaintiff therefore argues that, based on its responsive pleading, BAHR did not state a claim upon which relief could be granted.11 We disagree.
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