Zhao v. Dean
| Decision Date | 31 January 2020 |
| Docket Number | FSTCV196042813S |
| Parties | Guoliang Zhao v. Craig Dean |
| Court | Connecticut Superior Court |
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Krumeich, Edward T., J.
Defendants Craig Dean, Sam Valler, Gerald International Limited, Gerald Holdings, LLC and SBM Capital, LLP have moved to strike the Tenth, Eleventh and Twelfth counts of the complaint. For the reasons stated below, the motion is denied.
"The purpose of a motion to strike is 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). (Internal quotation marks omitted.) Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, 309 Conn 342, 350, 71 A.3d 480 (2013). "If any facts provable under the express and implied allegations in the plaintiff’s complaint support a cause of action ... the complaint is not vulnerable to a motion to strike." Bouchard v People’s Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991). On the other hand, "[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Santorso v. Bristol Hospital, 308 Conn. 338, 349 (2013).
The Tenth Count States A CUTPA Claim.
The Tenth Count alleges that defendants violated the Connecticut Unfair Trade Practices Act, C.G.S. § 42-110a et seq. ("CUTPA"), by engaging in a fraudulent scheme to induce plaintiffs to enter into transactions with Metals Trading Corporation ("MTC") that they knew would not be honored and by misappropriating and transferring assets away from MTC to entities controlled by them so MTC’s debt to plaintiffs could not be enforced by legal process.
Defendants have moved to strike the CUTPA claim as beyond the scope of that statute on the following grounds: (1) that plaintiffs lack a commercial relationship with defendants, (2) that the transactions at issue were incidental to MTC’s primary business, and (3) that this is an intracorporate conflict outside trade and commerce.
In Fink v. Golenbock, 238 Conn. 183, 212-15 (1996), the Supreme Court held the transfer of assets from one entity in which plaintiff had an interest to another entity controlled by defendants to deprive plaintiff of the benefit of the assets violated CUTPA. Id. at 212. In Fink, 238 Conn. at 212, defendant argued the dispute was an intracorporate conflict that did not impact trade or commerce and thus outside the scope of CUTPA. The Supreme Court rejected that argument: "[defendant’s] actions went well beyond governance of the corporation, and placed him in direct competition with the interests of the corporation."
The Fink Court stressed that the "trade or commerce" element of CUTPA is broadly defined:
Trade or commerce, in turn, is broadly defined as "the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state." General Statutes § 42-110a(4). The entire act is remedial in character; General Statutes § 42-110b(d) ... and must "be liberally construed in favor of those whom the legislature intended to benefit." 238 Conn. at 212-13.
Other courts have followed Fink and held that misappropriation of assets and usurpation of corporate opportunities violate CUTPA. See e.g., Spector v. Konover, 57 Conn.App. 121, 133 (2000); Ostrowski v. Avery, 243 Conn. 355, 379 (1997); Getz v. Riek, 2016 WL 6885180 *8 (Conn.Super. 2016). See also Halo Tech Holdings, Inc. v. Cooper, 2008 WL 877156 *19 (D.Conn. 2008) ().
In Metcoff v. Lebovics, 51 Conn.Supp. 68, 87-88 (2007) , aff’d 123 Conn.App. 512 (2010), Judge Stevens held that the corporate officers who were defendants in that case had not engaged in "trade or commerce" and thus were not subject to CUTPA liability for acts taken on behalf of the corporation:
The scope of CUTPA is broad, but not that broad. Certainly, there are circumstances in which the individual acts of a corporate officer or employee may form the basis of a CUTPA violation but the actions of an officer, director or employee taken on behalf of the corporation and within the context of his corporate responsibilities are ordinarily outside of CUTPA’s application. This point follows from the fact that an officer, director or employee of a corporation primarily provides services to the corporation and therefore is not engaged "in the conduct of any trade or commerce" within the meaning of CUTPA. Thus, it follows in turn that CUTPA does not apply to intracorporate affairs; Ostrowski v. Avery, supra, 243 Conn. at 379, 703 A.2d 117; or employer-employee relations. Quimby v. Kimberly Clark Corp., 28 Conn.App. 660, 670-71, 613 A.2d 838 (1992). The corporation itself may be engaging in a trade or business in commerce, but not the individual who is merely working for or on behalf of the corporation. In other words, CUTPA is typically directed to businesses and self-employed people, but not to everyone who may be employed or engaged by such individuals.
In Cohen v. Roll-A-Cover, LLC, 2009 WL 2872920 *9 (Conn.Super. 2009), Judge Stevens explained how narrow his ruling was in Metcoff:
The holding in Metcoff is narrow and must be viewed in the context of the facts presented in that case. In Metcoff, the plaintiffs argued that CUTPA applied to the defendants’ conduct because their primary business, trade or commerce involved "performing the functions of a director and/or officer" of the defendant corporation ... The plaintiffs reasoned that trade or commerce under CUTPA was implicated because the claims of the complaint concerned the defendant corporation’s "relationship with its creditors, and in particular, [the corporation’s] ability to pay [the] plaintiffs." ... The plaintiffs in Metcoff did not allege that the individual defendants personally engaged in any conduct against them directly.
The complaint here alleges personal wrongdoing by defendants so does not raise the corporate shield issue that proved dispositive in Metcoff. See Metcoff v. Lebovics, 51 Conn.Supp. at 87-88.
Defendants argue this case is similar to NatTel, LLC v. SAC Capital Advisors, 2005 WL 2253756 *2 (D.Conn. 2005), in which the District Court dismissed a CUTPA claim about fabrication of corporate documents because the "challenged conduct clearly reflects only the internal corporate operations and therefore cannot support a claim under CUTPA." The alleged transaction here did not constitute "purely intracorporate matters," as in Metcoff, but an intercorporate transfer of assets, which as the Appellate Court recognized on appeal in Metcoff, has been held to concern trade or commerce. See Metcoff v. Lebovics, 123 Conn.App: 512, 519 (2010).[1] Unlike Metcoff and NatTel, the alleged transfer of assets out of MTC’s subsidiaries to other entities, which stripped MTC of its value, would be a "distribution" of property within the scope of C.G.S. § 42-110a(4). That the parties are not competitors is not dispositive; the entities alleged to have engaged in the asset transfer are in commerce and CUTPA is not limited to competitors or consumers, but extends to other persons who suffered ascertainable loss caused by unfair or deceptive practices in trade or commerce. See generally Macomber v. Travelers Property and Cas. Corp., 261 Conn. 620, 642-44 (2002). Moreover, the transfer of MTC’s asset base under the circumstances alleged to the detriment of its shareholders and creditors, would be competitive with MTC’s interests. Compare, Spector, 57 Conn.App. at 133-34. That the relationship of the parties may not be commercial is not significant; the analysis under CUTPA focuses on a defendant’s "activities, rather than his. relationship to the plaintiff ..." Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 492 (1995).
Defendants argue that the alleged transfer of assets had nothing to do with commodities trading, the primary business of MTC’s subsidiaries, and so the CUTPA claim must fail because it cannot satisfy the exclusion where the alleged transaction is merely "incidental to an entity’s primary trade or commerce." Sovereign Bank v. Licata, 116 Conn.App. 483, 484 (2009). Here, the alleged transfer of assets related to MTC’s alleged trade or business as a holding...
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