PMI Shares, Inc. v. SIMA International, Inc.
| Decision Date | 03 April 2017 |
| Docket Number | LLICV166013981S |
| Court | Connecticut Superior Court |
| Parties | PMI Shares, Inc. v. SIMA International, Inc. |
UNPUBLISHED OPINION
The defendant, SIMA International, Inc. (SIMA or the defendant) moved to strike counts three through eight of the amended complaint, as well as, the plaintiff's claims for declaratory judgment and for a temporary and permanent injunction (#105) on September 12, 2016. The defendant filed a memorandum in support of this motion (#110) on September 13, 2016 and a reply brief (#113) on October 26, 2016. The plaintiff, PMI Shares, Inc. (PMI or the plaintiff), filed a memorandum in opposition to the motion to strike (#111) on October 12, 2016. The court heard argument on the motion to strike on December 19, 2016. For the reasons set forth below the court grants the motion to strike in part and denies it in part.
To begin its analysis, the court will first review the familiar legal standards employed in considering a motion to strike. The court will then review the allegations of the counts and claims for relief that the defendant moves the court to strike. Finally, the court will consider the legal sufficiency of each such count and claim for relief seriatim.
A motion to strike is used " to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). In determining whether or not a pleading's allegations are sufficient, " all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 260, 765 A.2d 505 (2001). However, a " motion to strike . . . does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis omitted; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997). Additionally, the court must " construe the complaint in the manner most favorable to sustaining its legal sufficiency . . . [and] [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 117-18, 889 A.2d 810 (2006).
The plaintiff has alleged that the following relevant facts are common to counts three through seven.[1]
The parties are both corporations organized under the laws of Connecticut. The defendant originally called itself People Management International, Inc., but changed its name to SIMA on or about July 28, 2008.[2] On May 24, 2005, the parties entered into a contract entitled, " Assignment of Intellectual Property Rights and Agreement Regarding Royalty Payments" (contract).
The contract contained the following provisions. The plaintiff agreed to transfer certain intellectual property to the defendant in exchange for royalty payments in the amount of four percent of annual " Gross Sales, " adjusted annually for inflation based upon the federal Consumer Price Index.[3] Under the contract, " Gross Sales" were defined as " gross revenue from the sales or provisions of products and services of whatever type and nature, by Assignee or any of its licensees, affiliates associates, members, directors, agents or other related entities or persons, made using the Intellectual Property ." The Royalty Payments were to be paid quarterly, within thirty days of the end of each fiscal quarter, beginning with the fiscal quarter of June 30, 2005. If the defendant were to default by failing to pay " any Royalty Payment on the due date, all of the Intellectual Property shall revert back to [plaintiff], and [defendant] shall execute an Assignment of Intellectual Property Rights, " in a form acceptable to the plaintiff, within ten days of receiving written notice from PMI of its exercise of the right of reversion. The defendant's board of directors was required to approve the reversion of the plaintiff's intellectual property under these circumstances.
The contract contained additional provisions, including the following. The defendant agreed to use its best efforts to increase Gross Sales each year. The defendant also acknowledged that its failure to make Royalty Payments when due would result in irreparable harm to the plaintiff and would entitle the plaintiff to all equitable relief, including injunctive relief, as well as reasonable attorneys fees and costs necessary to enforce the contract.
Since the execution of the contract, the defendant has been involved in the business of entering into licensing agreements with entities interested in using the intellectual property in question for various business purposes in exchange for royalty payments paid by such licensees to the defendant. The amount of the defendant's Gross Sales, as that term is defined under the contract, and therefore, the amount of the plaintiff's Royalty Payments, which are based upon Gross Sales, is based upon the revenue generated by royalty payments made by the defendant's licensees to the defendant.
Counts three through seven incorporate all of the foregoing allegations.
In addition to the common allegations set forth above in section II. B., which are incorporated by reference into counts one through seven, counts three through eight respectively allege the following specific allegations.
Count three claims a breach of fiduciary duty. Count three includes the following pertinent allegations.
The " nature of the contractual relationship between the Plaintiff and the Defendant" resulted in " a fiduciary relationship" between the plaintiff and the defendant. Under the contract, the defendant was obligated to (1) make Royalty Payments to the plaintiff based on defined Gross Sales and in accordance with contractual provisions (2) ensure that its licensees, affiliates, associates, members, directors, agents or others were " accurately reporting Gross Sales, " (3) collect royalties based on accurate Gross Sales from its licensees and (4) act in good faith and make reasonable efforts to collect all such royalty payments owed to the defendant. The defendant violated these obligations in the following ways. The defendant failed to ensure accurate reporting of Gross Sales by its licensees and to accept and/or collect correct royalties from its licensees based on accurate Gross Sales. The defendant failed to report accurately its Gross Sales.
The defendant knew or should have known that these actions would harm the plaintiff as beneficial owner of the intellectual property at issue, and/or as intended beneficiary of the contract and the defendant's licensing agreements.
The defendant's actions have decreased Gross Sales, as that term is defined in the contract, resulting in lower Royalty Payments to the plaintiff. This amounts to a failure of the defendant to pay the plaintiff all of the Royalty Payments the plaintiff is owed under the contract. The defendant has, therefore, (1) knowingly, willfully and without justification or excuse, breached its fiduciary obligations to the plaintiff, and (2) maliciously and intentionally, or with conscious indifference, harmed the plaintiff. The plaintiff has suffered " financial injury" as a direct and proximate result of the defendant's breach of its fiduciary obligations to the plaintiff.
Count four claims a tortious interference with contractual relations. Count four posits the following salient allegations.
The defendant owed the plaintiff the following obligations under the contract: (1) to insure that the defendant's licensees or other related, listed entities accurately reported Gross Sales, (2) to collect royalties from these listed entities based on correct Gross Sales figures, (3) to act in good faith and make reasonable efforts to collect or accept royalty payments from the defendant's licensees so as to increase Gross Sales, and (4) to make Royalty Payments to the plaintiff based on actual Gross Sales.
The defendant failed to perform these aforementioned duties. The defendant's failure to do so has resulted in the plaintiff receiving lower Royalty Payments than it should. The plaintiff is, therefore, receiving a smaller amount of Royalty Payments than what is owed under the contract. The defendant has, additionally, failed to accurately report its Gross Sales to the plaintiff as required under the contract. The defendant knew or should have known that these failures would directly harm the plaintiff as beneficial owner of the intellectual property assigned under the contract and/or as the intended beneficiary of the contract and the defendant's licensing agreements. The defendant undertook these actions maliciously and with intent to damage the plaintiff or with conscious indifference to the consequences of these actions.
As a result of the foregoing, the defendant has interfered with the plaintiff's rights under the contract.
Count five sounds in negligence. Count five alleges the following relevant facts.
The defendant owed the plaintiff duties under the contract including the duty to make sure the defendant's licensees and other listed entities were accurately reporting Gross Sales, to collect royalties from such entities based on correct sales figures and agreements between the defendant...
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