Tes Franchising, LLC v. Feldman, No. 17867.

• Decision Date: 25 March 2008
• Docket Number: No. 17867.
• Citation: 286 Conn. 132,943 A.2d 406
• Court: Connecticut Supreme Court
• Parties: TES FRANCHISING, LLC v. Richard FELDMAN.

943 A.2d 406

286 Conn. 132

TES FRANCHISING, LLC v. Richard FELDMAN.

No. 17867.

Supreme Court of Connecticut.

Argued October 15, 2007.

Decided March 25, 2008.

Charles D. Ray, with whom were Vanessa D. Roberts, Hartford, and Mario G. Ceste, Wallingford, for the appellant (defendant).

Scott C. Kern, New Haven, with whom, on the brief, was Janine Hodgson, for the appellee (plaintiff).

ROGERS, C.J., and NORCOTT, KATZ, ZARELLA and SCHALLER, Js.

ROGERS, C.J.

This appeal addresses issues arising from a trial court's determination of probable cause in granting a prejudgment remedy. The defendant, Richard Feldman, appeals from the trial court's order granting a prejudgment remedy in favor of the plaintiff, TES Franchising, LLC, upon a finding of probable cause that the defendant had breached a settlement agreement by disclosing confidential information and making disparaging remarks about the plaintiff. On appeal, the defendant claims that the trial court, Lopez, J., improperly: (1) granted the prejudgment remedy because the trial court's memorandum of decision does not address adequately the defendant's defenses and counterclaims as required by General Statutes § 52-278d(a);¹ (2) found that the defendant had breached the settlement agreement because the evidence was insufficient to prove that he had made disparaging remarks about the plaintiff or had disclosed confidential information; and (3) awarded liquidated damages and attorney's fees in calculating the prejudgment remedy. We reverse the decision of the trial court as to the award of attorney's fees only, and affirm the judgment in all other respects.

The record reveals the following relevant facts and procedural history. The parties, who were involved in a franchisor-franchisee relationship,² executed a settlement agreement in 2005 to resolve a dispute over the plaintiff's business practices and to sever what had become a contentious business relationship. The settlement agreement prohibited the parties from making disparaging remarks about each other and specifically prohibited the defendant from divulging confidential information about the plaintiff. The settlement agreement also provided that, should the defendant breach the agreement by disclosing confidential information about the plaintiff, the defendant would pay the plaintiff $49,000 for each violation.

Thereafter, the plaintiff commenced the present action alleging that the defendant had made disparaging remarks about the plaintiff and had disclosed confidential information in violation of the settlement agreement when he contacted as many as thirty state regulatory agencies³ to complain about the plaintiff's business practices.⁴ The plaintiff alleged breach of contract and sought injunctive relief and damages stemming from the defendant's disclosures. The plaintiff also sought, and was granted, a temporary injunction against the defendant, who was ordered by the trial court to abide by the settlement agreement's prohibition against disparaging remarks and the disclosure of confidential information. The plaintiff then filed an application for a prejudgment remedy, which the trial court granted in the amount of $245,000 to secure any future judgment for lost profits and attorney's fees. The defendant thereafter moved for articulation of the trial court's order granting the prejudgment remedy, but the trial court denied his request for elaboration of the court's grounds for rejecting his defenses and counterclaims. The Appellate Court subsequently granted the defendant's motion for review, but denied the requested relief for articulation. This appeal followed.⁵

We begin with the law governing prejudgment remedies and our limited role on review. "A prejudgment remedy `means any remedy or combination of remedies that enables a person by way of attachment, foreign attachment, garnishment or replevin to deprive the defendant in a civil action of, or affect the use, possession or enjoyment by such defendant of, his property prior to final judgment....' General Statutes § 52-278a(d). A prejudgment remedy is available upon a finding by the court that `there is probable cause that a judgment in the amount of the prejudgment remedy sought, or in an amount greater than the amount of the prejudgment remedy sought, taking into account any defenses, counterclaims or set-offs, will be rendered in the matter in favor of the plaintiff....' General Statutes § 52-278d(a)(1)." Margolin v. Kleban & Samor, P.C., 275 Conn. 765, 767-68 n. 3, 882 A.2d 653 (2005). "Proof of probable cause as a condition of obtaining a prejudgment remedy is not as demanding as proof by a fair preponderance of the evidence." Ledgebrook Condominium Assn., Inc. v. Lusk Corp., 172 Conn. 577, 584, 376 A.2d 60 (1977). "The legal idea of probable cause is a bona fide belief in the existence of the facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it." Wall v. Toomey, 52 Conn. 35, 36 (1884). "Probable cause is a flexible common sense standard. It does not demand that a belief be correct or more likely true than false." New England Land Co., Ltd. v. DeMarkey, 213 Conn. 612, 620, 569 A.2d 1098 (1990). Under this standard, "the trial court's function is to determine whether there is probable cause to believe that a judgment will be rendered in favor of the plaintiff in a trial on the merits." Bank of Boston Connecticut v. Schlesinger, 220 Conn. 152, 156, 595 A.2d 872 (1991).

"As for our standard of review, we have stated: This court's role on review of the granting of a prejudgment remedy is very circumscribed. Three S. Development Co. v. Santore, [193 Conn. 174, 176, 474 A.2d 795 (1984)]. In its determination of probable cause, the trial court is vested with broad discretion which is not to be overruled in the absence of clear error. Augeri v. C.F. Wooding Co., 173 Conn. 426, 429, 378 A.2d 538 (1977) ... Since Augeri ... we have consistently enunciated our standard of review in these matters. In the absence of clear error, this court should not overrule the thoughtful decision of the trial court, which has had an opportunity to assess the legal issues which may be raised and to weigh the credibility of at least some of the witnesses. Three S. Development Co. v. Santore, supra, at [176].... [On appeal], therefore, we need only decide whether the trial court's conclusions were reasonable under the clear error standard. Solomon v. Aberman, [196 Conn. 359, 364, 493 A.2d 193 (1985)]."⁶ (Citations omitted; internal quotation marks omitted.) New England Land Co., Ltd. v. DeMarkey, supra, 213 Conn. at 620-21, 569 A.2d 1098.

I

Guided by these principles, we turn to the defendant's first claim on appeal, namely, that the trial court improperly granted the prejudgment remedy in light of the following defenses and counterclaims raised by the defendant: (1) the settlement agreement is void as against public policy because it prevents the defendant from contacting state regulators about the plaintiff's allegedly illegal business practices; (2) the defendant is entitled to quasi-judicial immunity because his statements were made to regulatory and law enforcement agencies; (3) the action against the defendant is an invalid strategic lawsuit against public participation (a type of vexatious litigation known as a SLAPP suit); see Beecher v. Mohegan Tribe of Indians of Connecticut, 282 Conn. 130, 133 and n. 4, 918 A.2d 880 (2007); aimed at retaliating against the defendant's exercise of his right to petition; (4) the settlement agreement's prescribed amount of damages in the event of a breach is not a liquidated damages provision, but, rather, an invalid penalty clause; (5) the plaintiff had breached the terms of the settlement agreement first, thereby excusing the defendant from compliance with the agreement; and (6) the plaintiff's business practices violate the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The defendant argues that the trial court did not give full consideration to these claims as required by § 52-278d(a)(1) because the court did not analyze each claim individually in its memorandum of decision.⁷ The defendant maintains that, if the trial court properly had considered all of the defenses and counterclaims raised, those claims would have defeated a finding of probable cause.⁸ We conclude that, although the trial court did not analyze the defendant's defenses and counterclaims individually in its memorandum of decision, it gave adequate consideration to these claims under § 52-278d(a).

In its memorandum of decision granting the plaintiff's request for a prejudgment remedy, the trial court set out the correct test for determining whether to grant such a remedy under § 52-278d(a). The court then emphasized that "[a] review of the defenses presented by [the defendant], as well as his counterclaims, is necessary before the court can determine if there is probable cause to issue the prejudgment remedy." The court stated that "[t]hese defenses and counterclaims were presented orally and in a memorandum of law in opposition to the motion for prejudgment remedy," and the court individually acknowledged each defense and counterclaim raised.⁹ The memorandum of decision however, expressly discussed the merits of the defendant's absolute immunity and SLAPP suit defenses only.¹⁰ In granting the prejudgment remedy order, the court then stated that, "[h]aving considered the defenses and the counterclaims presented by the defendant, the court finds that the plaintiff has established that probable cause exists to issue a prejudgment remedy...."

Section 52-278d(a) explicitly requires that a trial court's determination of probable cause in granting a prejudgment remedy include the court's "taking into account any defenses, counterclaims or set-offs...." (Emphasis added.) Therefore, it is well settled that, in...