SBD Kitchens, LLC v. Jefferson

• Decision Date: 16 June 2015
• Docket Number: 36412,36613.,Nos. 36411,s. 36411
• Citation: SBD Kitchens, LLC v. Jefferson, 157 Conn.App. 731, 118 A.3d 550 (Conn. App. 2015)
• Court: Connecticut Court of Appeals
• Parties: SBD KITCHENS, LLC v. Brett JEFFERSON et al. Brett Jefferson et al. v. SBD Kitchens, LLC.

157 Conn.App. 731

118 A.3d 550

SBD KITCHENS, LLC

v.Brett JEFFERSON et al.

Brett Jefferson et al.

v.SBD Kitchens, LLC.

Nos. 36411

36412

36613.

Appellate Court of Connecticut.

Argued Dec. 10, 2014.

Decided June 16, 2015.

Ethan A. Brecher, with whom, on the brief, was Ana M. Montoya, for the appellants-appellees(defendants in the first case, plaintiffs in the second case).

James C. Riley, with whom, on the brief, was Thomas P. O'Connor, Greenwich, for the appellee-appellant(plaintiff in the first case, defendant in the second case).

GRUENDEL, LAVINE and BORDEN, Js.

Opinion

BORDEN, J.

These three appeals arise out of an arbitration proceeding.In the first two consolidated appeals, AC 36411 and AC 36412, the defendants, Brett Jefferson and Catherine Jefferson, appeal from the trial court's judgment confirming the arbitrator's award of punitive damages to the plaintiff, SBD Kitchens, LLC, claiming that the award was made in manifest disregard of the law.¹In the third appeal, AC 36613, the plaintiff claims that the trial court improperly denied its motion for attorney's fees incurred in the subsequent court proceedings.We affirm the judgments of the trial court.

These claims arose out of work that the plaintiff performed at the home of the defendants, and the defendants' creation and maintenance of a website criticizing the quality of that work.The defendants commenced an action against the plaintiff, claiming, inter alia, breach of contract and violations of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a et seq.(contract action).The plaintiff filed a demand for arbitration with the American Arbitration Association in accordance with the parties' written agreement and filed an application in the trial court under a separate docket number for an order compelling arbitration (arbitration action).²The plaintiff alleged breach of contract and defamation and sought compensatory and punitive damages, as well as injunctive relief.The court, Hon. TaggartAdams, judge trial referee, ordered all of the parties' various claims to be arbitrated.

Before the arbitrator,³the plaintiff alleged breach of contract on the basis of the defendants' failure to pay the final invoice for the work performed by it in the defendants' residence.The plaintiff also claimed it was defamed by an Internet website created and maintained by the defendants, and sought compensatory and punitive damages as well as injunctive relief.The defendants raised various related defenses and counterclaims.⁴The arbitrator found for the defendants on the plaintiff's breach of contract claim, and found for the plaintiff on the defendants' counterclaims.The arbitrator also found for the plaintiff on its defamation claim, and awarded the plaintiff compensatory damages in the amount of $25,000, and punitive damages, consisting of attorney's fees and costs allocable to the defamation claim, in the amount of $166,038.89, as well as certain injunctive relief regarding the website.

The plaintiff applied to the trial court to confirm the award.The defendants filed two applications: one, to confirm that part of the award denying the plaintiff's breach of contract claim; and the second, to vacate the award of punitive damages.The court, Povodator, J., granted the plaintiff's application to confirm the award, granted the defendants' first application, namely, to confirm that part of the award denying the plaintiff's breach of contract claim, and denied the defendants' second application, namely, to vacate the award of punitive damages.Thereafter, the plaintiff filed a motion for attorney's fees, which the court denied.These appeals followed.

I

In the first two appeals, AC 36411 and AC 36412, the defendants raise only one claim: the arbitrator's award of punitive damages was made in manifest disregard of the law.We disagree and, accordingly, affirm the judgment of the trial court confirming the award of punitive damages to the plaintiff.

Certain facts relevant to this appeal are undisputed.The plaintiff, owned by Sarah Blank and her husband, Charles Karas, is a small business engaged in the installation of kitchens and other residential home projects.The defendants own a home at 225 Tokeneke Road in Darien.Brett Jefferson is the founder and head of an asset management firm, Hildene Capital Management (Hildene), with approximately $1.4 billion in assets under management.The defendants used Harry Russell, an employee of Hildene, to help them create and manage the website that is at issue in the present case.

The arbitrator made the following specific factual findings and conclusions in his written award, none of which the defendants challenge.First, the arbitrator summarized the proceedings before him as follows.

“[The plaintiff] seeks the recovery of money damages for breach of contract on the part of [the defendants] in allegedly failing to pay the final invoice submitted by [the plaintiff] in the amount of $14,117.75 for services performed under separate agreements which the parties refer to familiarly as ‘the Kitchen Contract’ and ‘the Bathroom Contract’ in connection with the renovation work undertaken at the [defendants'] residence in Darien, Connecticut.In addition, [the plaintiff] seeks an award of compensatory and punitive damages as well as injunctive relief resulting from and related to the content of an Internet website created by or at the direction of [Brett Jefferson] and containing statements critical of [the plaintiff's] performance and practices during the course of the relationship between the parties.The website is alleged by [the plaintiff] to be defamatory.

“By way of Amended Answer to Demand for Arbitration and Amended Counterclaims ... the [defendants] have denied liability to [the plaintiff] either for breach of contract or for defamation.[The defendants] have raised twelve defenses to [the plaintiff's] claims and have asserted six counterclaims (which have been pleaded jointly as defenses and counterclaims).”

Second, the arbitrator made certain specific findings of fact and conclusions of law in his award.In the course of rejecting the plaintiff's breach of contract claim,⁵he addressed certain of the defendants' counterclaims, namely, that the plaintiff had “charged an unreasonable markup on its underlying costs or represented that it would charge a markup only on cabine try....”⁶The arbitrator found that these assertions of the defendants were “belied by the evidence.”Specifically, with respect to the kitchen contract, the arbitrator found that the contract price of $212,835 was “consistent with budget information provided by [the plaintiff] to [the defendants] prior to the execution of the contract....There is no evidence to suggest that the [defendants] did not know what they were to receive for that price.In addition, the testimony of Jennifer Howard, a designer who had initially been consulted by the [defendants] but who had no stake in this dispute, was instructive in terms of the pricing exercise that she and [the plaintiff] undertook for the defendants in early February of 2010 as well as on this issue of markups in general.”With respect to the bathroom contract, the arbitrator similarly found, on the basis of evidence that he detailed in his award, that “the [defendants] understood what they would be getting for [the contract price of] $276,028—the essence of a bargained-for exchange.”

Regarding the plaintiff's defamation claim, the arbitrator found as follows.“On or about November 11, 2011, the [defendants] published a website entitled ‘SBD Kitchens Contract Issues' and subtitled ‘SBD Kitchens SCAM (U) ... in which numerous statements are made concerning the contracting process with [the plaintiff] as well as [its] performance.”Although the initial motivation for the website was the defendants' frustration regarding their inability to secure cost information from the plaintiff, the “relationship between the parties fractured irreparably in early March of 2011 as a result of a conversation between [Brett] Jefferson and Karas of [the plaintiff] in which [Brett] Jefferson according to Karas, told Karas ‘that he was going to destroy you, your business, your life, your reputation.’

“Thereafter [Brett] Jefferson worked with an employee of his company, Harry Russell, who in turn worked with a website designer, Michael Walker of Walker, Tek, to create the website, culminating in an e-mail sent by [Brett] Jefferson to Blank of [the plaintiff] at the close of business on November 11, 2011, with the subject line ‘Happy Friday’ enclosing a link to the new website....The website remained active for approximately a year.It went offline in late 2012 and then was reactivated in April of 2013.”

The arbitrator concluded that the contents of the website constituted “libel per se under Connecticut law.”The arbitrator stated that “the website contains several false and/or defamatory statements.In addition to the appearance of the term ‘SCAM’ in the subtitle of the website, examples of these include:

“ ‘I feel that [the plaintiff] made misrepresentations as to their form of compensation and that much of their work was inferior.’

“ ‘Another designer (Designer 2) was very clear that she only charged a markup on the cabinets.This methodology was similar to what was conveyed to us by [the plaintiff].’

“ ‘[The plaintiff] with their deceptive pricing was motivated to have us select lesser quality items so they could achieve a greater markup.’

“The section of the website entitled ‘Inferior Workmanship and Knowledge,’ to the extent that it contains inaccurate statements of the factual circumstances concerning the beverage refrigerator, the vanity in the children's bathroom and the angled wall in Bathroom 6.”(Emphasis added.)

The arbitrator stated: “When coupled with the content and tone of internal e-mails between and among [Brett Jefferson, Russell, Walker] and others, the conclusion is inescapable that publication of the...