Weber v. U.S. Sterling Securities, Inc.

• Decision Date: 19 June 2007
• Docket Number: No. 17623.,17623.
• Citation: 924 A.2d 816,282 Conn. 722
• Parties: Aharon WEBER v. U.S. STERLING SECURITIES, INC., et al.
• Court: Connecticut Supreme Court

924 A.2d 816

282 Conn. 722

Aharon WEBER v. U.S. STERLING SECURITIES, INC., et al.

No. 17623.

Supreme Court of Connecticut.

Argued October 1, 2006.

Decided June 19, 2007.

Earle Giovanniello, New Haven, with whom, on the brief, was Todd Bank, Kew Gardens, NY, for the appellant (plaintiff).

Allen A. Currier, Danbury, for the appellees (defendants).

BORDEN, NORCOTT, PALMER, VERTEFEUILLE and ZARELLA, Js.

VERTEFEUILLE, J.

In this appeal, we are asked to decide whether liability attaches under the federal Telephone Consumer Protection Act (act), 47 U.S.C. § 227, to individual members of a limited liability company who sent unsolicited facsimile (fax) advertisements within New York state. The plaintiff, Aharon Weber, appeals from the summary judgment rendered by the trial court in favor of the defendants Michelle Master Orr and Shawn Orr. The plaintiff contends that the trial court improperly concluded that the Orrs' membership in a Delaware limited liability company precludes their personal liability. Additionally, the plaintiff claims that the trial court improperly rendered summary judgment based on its conclusion that New York Civil Law and Rules § 901(b) bars the plaintiff's class action claim and that New York General Business Law § 396-aa bars the plaintiff's individual action. We reverse in part and affirm in part the judgment of the trial court.

The following facts and procedural history guide our resolution of this appeal. The plaintiff initially filed a complaint in the Superior Court in the judicial district of Fairfield against U.S. Sterling Securities, Inc. (U.S. Sterling), a resident of Brooklyn, New York, doing business as U.S. Sterling Capital Corporation, and Michelle Master Orr and Shawn Orr, both doing business for Retail Relief, LLC (Retail Relief), alleging that they had sent a one page unsolicited fax advertisement to the plaintiff in violation of the act. The action subsequently was transferred to the Complex Litigation Docket in Stamford. The plaintiff alleged in his complaint that Shawn Orr and U.S. Sterling sent a one page fax from Hauppauge, New York, to the plaintiff's residence in Brooklyn. The fax advertised the services of Retail Relief, a consulting firm that offers to help retail businesses negotiate gross margin agreements with vendors, that is, advises businesses on the correct price at which to sell their products in order to make a certain profit. Michelle Master Orr is identified in the advertisement as the firm's managing director; she and her husband, Shawn Orr, both reside in New Canaan, Connecticut.¹

The plaintiff brought the present action both in his individual capacity and as a class action on behalf of all persons and entities who had received similar unsolicited fax advertisements.² In his complaint, the plaintiff alleged that the defendants sent the same unsolicited fax to 5000 class members. Pursuant to 47 U.S.C. § 227(b)(3)(A), the plaintiff sought injunctive relief and alleged that according to 47 U.S.C. § 227(b)(3)(B) and (C), violation of the act entitled him and the other class members to statutory damages in the amount of $500 for each unsolicited fax received and treble damages for wilful or knowing violations of the act.

Thereafter, the defendants moved for summary judgment, alleging that: (1) they could not be found personally liable because they were acting on behalf of a Delaware limited liability company; (2) New York law applies to the facts of the case and New York Civil Practice Law and Rules § 901(b) operates to bar the plaintiff from maintaining a class action lawsuit under the act; (3) even if § 901(b) does not preclude the present action, New York General Business Law § 396-aa bars the plaintiff's claim as it is pleaded in the complaint. The trial court granted the defendants' motion, finding that no genuine issue of material fact existed as to any of the plaintiff's allegations and that the defendants are entitled to summary judgment as a matter of law.³ This appeal followed.⁴

A brief description of the act provides context for the plaintiff's allegations. First enacted in 1991 in response to consumer complaints regarding the growing number of unsolicited telemarketing calls and fax advertisements, the act was intended to "protect the privacy interests of residential telephone subscribers by placing restrictions on unsolicited, automated telephone calls to the home and to facilitate interstate commerce by restricting certain uses of [fax] machines and automatic dialers." S.Rep. No. 102-178, 102nd Cong., 1st Sess. (1991), reprinted in 1991 U.S.Code Cong. & Admin.News 1968; see Telephone Consumer Protection Act of 1991, Pub.L. No. 102-243, § 2, 105 Stat. 2394. The act makes it unlawful "for any person within the United States . . . to use any telephone [fax] machine, computer, or other device to send an unsolicited advertisement to a telephone [fax] machine . . . ." 47 U.S.C. § 227(b)(1)(C) (2000). An "unsolicited advertisement" is one that is "transmitted to any person without that person's prior express invitation or permission." 47 U.S.C. § 227(a)(4) (2000). The act creates a private right of action pursuant to 47 U.S.C. § 227(b)(3) (2000): "A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State . . . (A) an action based on a violation of this subsection . . . to enjoin such violation, (B) an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater, or (C) both such actions . . . ." Claims under the act sound in tort regardless of whether they are construed as property or invasion of privacy tort claims. See J2 Global Communications v. Vision Lab Telecommunications, United States District Court, Docket No. CV056348, *6 (C.D.Cal. May 9, 2006) (determining that ban against unsolicited faxes in act addresses both property and privacy torts); US Fax Law Center, Inc. v. iHire, Inc., 362 F.Supp.2d 1248, 1252 (D.Colo.2005) (determining that claims under act sound in tort). If a court finds that a defendant has "willfully or knowingly" violated the act, the court may award treble damages in the amount of $1500 per fax. 47 U.S.C. § 227(b)(3)(C).

Before addressing the merits of the plaintiff's appeal, we set forth the applicable standard of review of a trial court's ruling on a motion for summary judgment. "Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party . . . . The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law. . . . The test is whether the party moving for summary judgment would be entitled to a directed verdict on the same facts . . . . Our review of the trial court's decision to grant the defendant's motion for summary judgment is plenary." (Citations omitted; internal quotation marks omitted.) Leisure Resort Technology, Inc. v. Trading Cove Associates, 277 Conn. 21, 30-31, 889 A.2d 785 (2006).

I

The plaintiff first claims that the trial court improperly concluded that the defendants cannot be held personally liable for sending unsolicited faxes on behalf of Retail Relief, a Delaware limited liability company. Specifically, the plaintiff claims that the trial court improperly concluded that § 18-303(a) of title 6 of the Delaware Code Annotated exempts members of a limited liability company from personal tort liability. We agree.

As a preliminary matter, we review some general principles governing limited liability companies. "[Limited liability companies] are hybrid entities that combine desirable characteristics of corporations, limited partnerships, and general partnerships. [They] are entitled to partnership status for federal income tax purposes under certain circumstances, which permits [limited liability company] members to avoid double taxation, i.e., taxation of the entity as well as taxation of the members' incomes . . . . Moreover . . . members, unlike partners in general partnerships, may have limited liability, such that . . . members who are involved in managing the [limited liability company] may avoid becoming personally liable for its debts and obligations." (Citation omitted.) Great Lakes Chemical Corp. v. Monsanto Co., 96 F. Sup.2d 376, 383 (D.Del.2000). The limited liability company thus shields owners and managers from personal liability for the debts and liabilities incurred by the limited liability company. "All the [limited liability company] statutes explicitly provide that neither the members nor managers of [a limited liability company] are liable for debts, obligations, or other liabilities of the [limited liability company]. Indeed, the ability to combine limited liability with partnership features is one of the most important advantages of the [limited liability company]." 2 L. Ribstein & R. Keatinge, Limited Liability Companies (2005) § 12:1 p. 12-1. Much like the liability protection offered to shareholders in a corporation, members of a limited liability company have been traditionally exempt from liability based on their membership in a limited liability company while they remain personally liable for their individual conduct. Generally, "[l]imited liability means only that a member or manager is not liable for debts and liabilities of the business solely by virtue of being such a member or manager. It does not protect the members or managers from direct individual liability for their own wrongs, such as torts and professional malpractice." Id., at § 12:4,...