Parol Evidence Rule Can Sting In Court

 Parties to contracts frequently argue over contract terms and the intent behind certain provisions of a contract.  However, if the matter goes to court, these arguments can become meaningless if the contract is clear because of the parol evidence rule.  A recent appellate court case, Connecticut Bank and Trust Co. v. Munsill-Borden Mansion, LLC, serves to highlight how the rule could impact the evidence in a breach of contract case at trial in Connecticut.

In the CT Bank and Trust case, the parties were arguing over whether an individual had personally guaranteed a promissory note.  The individual's attorney wanted to ask a witness questions concerning the intent behind signing the note.  However, the trial judge sustained objections to all of the questions that strayed from the actual note. The reason cited was the parol evidence rule.

In summary, the parol evidence rule prohibits the use of extrinsic evidence (off the contract) to vary or contradict the terms of an integrated (complete) contract.  There are exceptions.  Exceptions include evidence to explain ambiguity, prove a collateral oral agreement that does not vary the contract, add a missing term that does not set forth the complete agreement, or to show mistake or fraud. 

In this case, application of the rule barred all of the questions that were not related to the note itself.  Therefore, any arguments over terms or intent were irrelevant.  Simply put, the parties were confined to the contract itself.

The take away here is to make sure any specific terms you want in a contract are reduced to writing in the contract, and not in a separate document or conversation.  For example, emails or verbal agreements that alter the terms of a clear and integrated contract may become irrelevant and unenforceable in court. 

Business Lawsuit Roundup

New Connecticut business litigation decisions and lawsuits of interest for February 2011:

Appellate Decisions:

Schirmer v. Souza

The Appellate Court upheld an award in favor of the plaintiffs on claims of unjust enrichment concerning renovations to a residence on defendants' property. In a somewhat strange set of facts, the plaintiffs loaned money to the occupants of a home thinking they had title when the defendants actually had title. The defendants sold the house after the renovations.  Plaintiffs expected  over $100,000 from the sale of home to cover the renovation costs and instead got nothing.  Plaintiffs sued an recovered   based on unjust enrichment. 

Gateway, Kelso and Co. v. West Hartford No. 1, LLC

The Appellate Court upheld denial of summary judgment holding that a court finding in a pre-judgment proceeding could not provide the basis for summary judgment.  Plaintiff moved for a prejudgment remedy and it was denied because the defendant raised a defense based on the plaintiff's failure to be licensed.  The defendant then tried to use that same ruling to obtain a judgment in the case.   The trial court denied the motion finding that the earlier ruling was not sufficient.  The Appellate Court upheld the denial of summary judgment and agreed that the ruling in the prejudgment remedy proceeding could not be the basis of the summary judgment ruling.

Tzovolos v. Wiseman

The Appellate Court adopted the trial court's findings in full in this case involving two complex commercial disputes over the ownership and security interests in restaurant equipment.  The plaintiffs alleged breach of a purchase and sale agreement and a promissory note related to the equipment. The most significant aspect of the decision is the trial court's decision to hold the individual defendants liable for the corporate defendants.

Trial Decision:

Directory Assistants, Inc. v. Albano

This case was filed in the federal district court over breach of a non-compete agreement.  The parties reached a stipulated settlement requiring the defendant to either file for bankruptcy or pay plaintiff $66,000.00 by way of a stipulated judgment.  At the time of the settlement agreement, the defendant was not sure of his ability to file for bankruptcy.  After agreeing to settle, the defendant either changed his mind or was not able to file for bankruptcy.  The defendant then tried to back out of the settlement.  The trial court ruled in plaintiff's favor following arguments on a motion to enforce the settlement agreement. The court ruled that a litigant cannot agree to a settlement and then change his mind after the fact.  The court entered judgment.

New Lawsuits:

Coach, Inc. v. Tropical Sun, LLC, et al

This is a trademark infringement action under the Lanham Act, and a copyright infringement act under the Copyright Act. The action is brought by  Coach , well known for its leather made products like handbags and wallets. Coach owns several trademarks in various classes for its goods dating back to 1963 for leather goods and wallets. Coach alleges that its trademark is famous.  Coach also alleges that many of the combinations or design elements on its products are "protected works" under the Copyright Act.  Coach alleges that the defendants are selling look a likes from a retail store in Connecticut. 

The lawsuit gives some insight as to how trademark owners can police their products.  In this case, Coach sent a private investigator into the store to purchase the fake Coach products.  The products were retailing for far less than Coach's genuine products.

Jacqueline Millan v. AIG

This is a whistleblower lawsuit.  Ms. Millan alleges she was fired from AIG Financial Products after identifying irregularities in AIG stock trading. She alleges that she was employed as a compliance associate and reported the irregularities to her supervisor and then was "shut out of the investigation and subjected to intimidation."  She alleges she was fired shorty thereafter.  The complaint seeks recovery for retaliatory discharge under Sarbanes-Oxley Act and Connecticut's whistleblower law (31-51q).  The irregularities related to AIG employee stock trades at time when AIG was considering bankruptcy.

Connecticut Business Lawsuit Roundup

As a new addition in 2011, I am going to regularly feature new business lawsuits along with the usual trial and appellate decisions of interest in Connecticut.  Here's the first installment:

Appellate Court:

Cianci v. Original Werks, LLC 

Appellate Court finds that $150,000 mechanic's lien was timely filed despite claim that it was made after statutory limit of 90 days from date "services" were performed. The decision includes a discussion of the legislative history of the mechanic's lien statute and the definition of "services" under the statute. The court determined that services includes work done in or utilized in the building to be constructed, raised, removed, or reparied or the improvement of any lot or subdivision. In this case, the court construed the mechanic's lien statute liberally and found that that contractor returning to the property at the request of the homeowner to investigate alleged deficiencies constituted lienable services.

Walpole Woodworkers, Inc.  v. Manning

Appellate Court finds that homeowner who raised the Home Improvement Act's technical requirements of start and finish date in bad faith.  The Home Improvement Act in Connecticut requires registered contractors to include the following in written agreements:

  •  signatures of owner and contractor
  • name and address of contractor
  • cancellation rights
  • start date and completion date

Failure to include these requirements can result in technical defenses to enforcement of a  home improvement contract.  However, a homeowner cannot successfully raise these defenses in bad faith.  In this case, the homeowner had no real dispute with the work but refused to pay.  The Appellate Court upheld a finding of bad faith when the homeowner tried to raise the lack of start date and completion date in the contract.

Read here for one of my old posts on Connecticut's Home Improvement Act requirements and defenses.

New Lawsuits:

Environmental Energy Services, Inc v. Cylenchar Limited, et al.  United States District Court.

Plaintiff Environmental is a Connecticut corporation and claims that Defendants (both from England) made misrepresentations which induced plaintiff to perform services. Plaintiff claims breach of a partnership agreement, unjust enrichment, fraud, and violation of Connecticut’s Unfair Trade Practices Act. Plaintiff alleges that it was in a joint venture business with Defendants to market a technology that removes mercury from exhaust gasses in coal fired utilities. Pursuant to the joint venture, Defendants were to provide a significant cash investment, provide technical assistance, and a license. Plaintiff was to market the technology. Plaintiff alleges that it spent significant sums marketing the technology and gaining a trial customer for the new technology at which time the Defendants issued a cease and desist to Plaintiffs and refused to continue with the joint venture.

 

Tellar v. Webber, et al.  State Judicial District of Hartford.

Plaintiff and Defendant were equal owners of a limited liability company (LLC) engaged in the relish making business.  Plaintiff alleges that Defendant, his co-owner, dissolved the LLC without consent and started another relish business.  Plaintiff alleges the Defendant did so without sharing profits or including Plaintiff.  Plaintiff brought suit as an individual and derivatively on behalf of the the LLC against his co-owner in the LLC and the co-owner's new business.  The Plaintiff claimed breach of contract to share profits, breach of good faith and fair dealing, breach of fiduciary duty, conversion, civil theft, unfair trade practices, and usurping a corporate opportunity.

Largest Jury Verdict In Connecticut History For Trade Secret Case

After an eight week jury trial in Waterbury Superior Court, an East Hartford based flooring solutions company,Dur-A-Flex, has been awarded 50.5 million dollars in damages for the misuse of its trade secrets by Laticrete International, a Bethany based multinational corporation.  Laticrete was a former purchaser of Dur-A-Flex's colored sand products.  The jury found that the Laticrete misappropriated Dur-A-Flex's trade secrets for the colored sand and awarded 43.7  million dollars in damages.  After the jury verdict, Judge Dennis Eveleigh awarded Dur-A-Flex more than 5 million dollars for attorney's fees in a written decision (download here).   He also conditioned Laticrete's future use of Dur-A-Flex's technology on payment of royalty fees.

The case was brought back in 2006 on the Complex Litigation Docket in Waterbury  (Access court docket here). Dur-A-Flex was represented by Lawrence Rosenthal and Fletcher Thomson from Rogin Nassau's Hartford office.  Laticrete was represented by Elizabeth Stewart from Murtha Cullina's New Haven office.  

Dur-A-Flex supplied color sand to Laticrete for use in Laticrete's grout products.  Laticrete was the only customer of Dur-A-Flex for the sand product.  Laticrete at some point stopped buying the colored sand from Dur-A-Flex and started making an identical sand product.  Dur-A-Flex claimed that Laticrete was, if fact, using Dur-A-Flex's manufacturing process to make the sand.    The jury agreed with Dur-A-Flex and found that Laticrete violated Connecticut's Uniform Trade Secrets Act. 

Attorney Rosenthal commented on the verdict and stated he was "certain that Dur-A-Flex had been significantly damaged by Laticrete's improper and unauthorized use of its technology."  He believed the verdict was the largest ever for a trade secret case in Connecticut. 

I also believe this is the largest jury verdict in Connecticut history for a trade secret case.  Additionally, Connecticut case law is fairly sparse when it comes to significant trade secret cases.  I expect that the Dur-A-Flex case will impact trade secret law in Connecticut for years to come.  In particular, not only the amount of the award, but Judge Eveleigh's written decision on awarding future royalties and attorney's fees, which included a 10% contingency success fee.   Judge Eveleigh also issued a post-judgment order permitting Dur-A-Flex to attach the assets of Laticrete. It should be noted that Judge Eveleigh will become a justice of the Connecticut Supreme Court on June 1, 2010.   As such, I expect that his decision will carry more weight on these issues.

Bysiewicz, Blumethal, and Hulk Hogan .... Oh My

Some noteworthy Connecticut lawsuits, and of course, continuing coverage of Hulk Hogan....

  • The Bysiewicz for Connecticut Attorney General saga continues.  Is she qualified or not?  Is the statute that seems to preclude her from running unconstitutional?  Will voters elect an Attorney General with essentially no significant experience representing regular clients?  Common sense says "no", but the polls suggest otherwise and she fights on.  Only time will tell as the legal community awaits the ruling of Judge Michael Sheldon.  Several bloggers and columnists have been regularly covering this issue, including the original story breaker,Ryan McKeen at A Connecticut Law Blog.   For the Republican take, check out Chris Healy on the Everyday Republican.  The Hartford Courant's coverage is here.  Christine Stuart at CT News Junkie regularly posts on the Bysiewicz case.
  • Richard Blumenthal, although running for Senate, continues to make headlines as our current Attorney General.  His office is now suing Westport National Bank and an investment manager seeking to recover $16.2 million in losses for up to 240 investors.  As of Friday, the lawsuit was served but not yet returned to Court.  Blumenthal issued a statement saying the Bank collected $2.4 million in fees...but actually did little..."   The Bank President, Richard Cummings, fired back stating that Blumenthal's comments were "inflammatory" and contained "numerous inaccuracies."
  • ctwatchdog reported on the CT Department of Consumer Protection charging Wal-Mart Stores in two locations with pricing violations.  A hearing will take place in May to determine fines against Wal-Mart for allegations of unit price violations with consumer products. 
  • Doug Malan of the CT Law Tribune, who also has his own company on professional writing, covers the unfortunate story of a father and son lawsuit involving control and break up of the Simko law firm.  Although the lawsuit relates to a law firm dispute, the legal issues are the same for any family business where sometimes the formality of reducing agreements to writing are overlooked.  According to Malan's story, the case is headed for trial in May and Connecticut Statutes on limited liability companies may govern the outcome by default because there was no written operating agreement.  Family disputes over closely held businesses are always painful, but a clearly drafted operated agreement can mitigate the dispute especially if the agreement includes provisions for succession, disability, buy-outs and arbitration.
  • A while back, I posted about Hulk Hogan's lawsuit against his attorney's for failing to advise him he had insurance coverage for an auto accident claim.  The Hulkster is back at it.  This time he is suing his insurance company for not giving him enough coverage.  You might see this kind of a lawsuit in Connecticut but typically only against an agent, not the insurance company itself.  In fact, many times lawsuits are filed in Connecticut against insurance agents for professional malpractice or breach of fiduciary duty for failing to obtain the proper coverages for clients. It seems the Hulk had 30 million in assets but only a $250,000 auto policy. 

Business Blog Round Up: YouTube, Coffee Cups, Anna Nicole and Identify Theft

 

  • Ashby Jones of Wall Street Journal blog writes an intriguing post about the Google and Viacom lawsuit concerning Viacom's claims of copyright infringement against YouTube (Google subsidiary).  The post recites how Viacom employees were uploading copyrighted copies of their own videos to YouTube to help prove that YouTube was not promptly removing videos that infringe copyrights.  At stake: immunity under the Digital Millennium Copyright Act.  Google says its protected from suit under the Act because YouTube removes content upon request of a copyright holder.  Viacom says otherwise and points to some of its own videos that were not removed.  I do not know the particulars of the lawsuit, but if Viacom hopes to prevail, you would expect that they have more to proceed on than there own employee videos.
  • PatentlyO, the nations leading patent law blog, has a humorous post indicating Starbucks may soon be subject to a false marketing claim if it keeps a patent number on its corrugated cardboard cups for much longer.  Professor Dennis Crouch looked up the patent  on the cup and its set to expire in a month.  Maybe Starbucks will settle out of court like the coffee house did with Kramer on Seinfeld for lifetime free coffee!  (if you are wondering, this happened in the Maestro episode)   
  • Brendon Tavelli of The Privacy Law Blog writes about the Federal Trade Commissions settlement against LifeLock,Inc. for misrepresentation concerning its identity theft services and protections.  35 states joined in the settlement.  According the the settlement, LifeLock was not providing the comprehensive identify theft coverage it advertised.  Any consumer considering identify theft should do a very detailed investigation of the company and its services.  I wrote a post recently about data loss and noted that many victims are offered identity theft protection as part of the settlement.  Many times, the protection is not adequate. 
  • Victoria Pynchon's Settle It Now Blog has a compelling post about her project to teach women to negotiate better in retail, relationships, employment, and the law.  I recently discovered this popular blog and now I am a regular reader.  Great insights, not only for women (although she says so a few times).
  • John Buford of the North Carolina Business Litigation Report has a post about a business valuation case involving a closely held business.  At issue in the case was determining a value of an unproven technology.  The problem was setting a fair price to avoid a windfall for either side.  Although it is a North Carolina case, the concepts of valuing intellectual property, especially unproven technology, is more of a function of the science of appraisals than state law.  Some useful concepts are discussed including the appraiser's methodology that the court accepted.
  • Mashable, a top 100 blog, discusses Twitter's birthday only 4 years ago.  Twitter hit 50 million tweets per day last month. Mashable is a great blog that has just about everything there is to do with social media and web 2.0.
  • For more on social media: Nicole Black's Sui Generis - a New York Law Blog - discusses Nicole's new book, "Social Media for Lawyers: The Next Frontier."  The book is co-authored by Carolyn Elefant, who publishes the blog MyShingle.com an excellent resource for solos and small firm lawyers.  
  •  Megan Erickson's Social Networking Blog also details the Classmates.com settlement.  I guess  I was not the only one getting those annoying emails claiming my classmates were looking for me. 
  • Cannot do a business blog round up without mentioning the ScotusBlog and its post on Anna Nicole Smith's estate losing her long disputed claim for millions from her tycoon husband J. Howard Marshall.  The Post includes the decision and a summary story.  

 

Business Blog Round Up

Here are some quick hits on business blogs:

The Wall Street Journal blog reports on two restaurants involved in a lawsuit to determine who is most harmful to your health.  Well, sort of.  The Heart Attack Grill, an Arizona eatery, filed a federal lawsuit against the owners of Heart Stoppers Sports Grill, a Florida restaurant, accusing them of stealing the idea for an unhealthy menu.  

Victoria Pynchon of the Settle It Now blog is trying to decide on a cover for her conflict resolution book entitled "A is for Asshole, the ABC's of Conflict Resolution."  If the cover is anything like the title, it should be a hit seller.

Edward McNally of the Delaware Business Litigation Blog has a helpful post that links to a new Delaware case for anyone looking for ways to calculate money damages or breach of a non-compete agreement.  Many times, these cases are resolved with injunctions or temporary restraining orders.  It is not very common to actually get to the issue of monetary damages for breach of a non-compete agreement.   This new case provides some ideas on how to calculate damages.

Megan Erickson's Social Networking Blog discusses Facebook's concerns over identifying its responsibilities for privacy of its 350 million users.

 Maxwell Kennerly's Litigation and Trial Blog digests recent Third Circuit law in two different cases involving first amendment and privacy rights for students creating fake MySpace pages.

 The Business Law Prof Blog has an interesting post about turning a simple contractual relationship into a fiduciary relationship.  Once a fiduciary relationship is established, it can have significant implications on the outcome of litigation.  A mere contractual relationship is not significant enough to form a fiduciary relationship absent other special factors.  One of my prior posts covers breach of fiduciary duty in Connecticut.

Just In Time For Christmas - - Lawsuits, Snowball Fights, and Michael Bolton

 Here's some humor for the holidays:

  • A very funny post from Faces of Lawsuit Abuse.org.  It is a 2009 poll of the most ridiculous lawsuits of the year.  My vote was for the April winner: "Tourist sues New York club after she slipped while dancing on top of the bar."  (story here). The judge carefully examined the facts and made his ruling according to simple math:  drunk + dancing + wet bar = case dismissed.

 Happy Holidays everyone!

 

Business Litigation Blog Roundup

Here are some quick hits from Blogs I read around the country on business litigation.

Dionne Searcey of the Wall Street Journal law blog reports on the intellectual property fight over the red, white, and blue "Hope" image of President Barrack Obama created by Los Angeles artist Shepard Fairey.  Fairey is claiming his rights to the work, but apparently is confused as to his source material leading to the withdrawal of his duped attorneys. 

Rush on Business breaks down his tips for negotiating Franchise Agreements. Rush highlights the need to have an attorney review your franchise agreement and not to believe any franchisor that says you do not need an attorney or that they will not hold you to certain terms of the agreement.

A win for digital technology was reported on by Mack Sperling in the North Carolina Business Litigation Report.  Mack reports on a case where a settlement agreement was challenged under the statue of frauds because it involved land and there were no written signatures.  You can read here an earlier post from me on the statute of frauds in Connecticut.  The court upheld the agreement in part based on electronic signatures in emails exchanged between counsel. 

Nancy Savitt of the Privacy Law Blog reports on an enforcement action concerning the Children's Online Privacy Protect Act (COPPA).  The Federal Trade Commission fined Iconix Brand Group, Inc $250,000 for "collecting personal information from children without complying with COPPA's parent consent..."  The personal information at issue was dates of birth.  Collecting personal identifiers such as dates of birth can be a real risk for any business.  Read here for some of my posts on how Connecticut businesses can address privacy concerns.

 Jeffrey Mehalic's West Virginia's Business Litigation Blog discusses an interesting suit involving misappropriation of trade secrets against the Pittsburgh Post-Gazette.  A corporation, Mylan, brought a lawsuit against the paper claiming misappropriation of trade secrets and conversion for articles that were allegedly not favorable to Mylan.

Edward McNally of Delaware Business Litigation Blog reports on a case upholding Delaware as a forum for a trade secret case.  This post is informative in that it discusses why Delaware is often a preferred forum for corporate litigants trying to protect trade secrets. 

Connecticut Business Litigation Roundup

Here is a round up of a few interesting business lawsuits making news in Connecticut this past week: 

Smoking Gun "Crap" Email In Case Watched by Wall Street

In Pursuit Partners, LLC v. UBS AG, et al., a 35 million dollar prejudgment remedy was awarded in favor of a Connecticut hedge fund against UBS.  Judge Blawie issued the order in Stamford Superior Court after finding the bank was in possession of material non-public information regarding downgrades to financial products that UBS continued to sell.  This case is getting a lot of attention on Wall Street and reported on by Matthew Goldstein  at seekingalpha.com and Serena NG and Carrick Mollenkamp on WSJ.com. 

The UBS case will be interesting to watch and is another example of the increasing importance of discovering smoking gun emails.  Preliminary discovery in the case turned up internal emails calling some of the financial products "crap."   Here is a docket report on the case. (download).

Fairfield Company Uncovers Fraud and Ejects Board Member

Competitive Technologies (CTT), won a contested default judgment for more than $4 million dollars after discovering a former board member took company money and invested it in a fictitious South American company that did not exist.  Read the report on the case by Michael Juliano of the Connecticut Post.  You can also download here a copy of the judgment from Judge Dorsey who found that the defendants willfully disregarded court orders.  

The fraud was uncovered in part by the work of Breen & Associates.  I have worked with Bill Breen before on several cases.  He is an exceptional fraud investigator and expert.  Looks like he successfully uncovered another financial fraud for a business client.   

Civil Rights Violations Alleged Against Litchfield In Refusing Jewish Temple

Rabbi Joseph Eisenbach has filed a lawsuit in federal court against the Town of Litchfield over the Town's refusal to permit modification of his property for religious purposes.  The complaint (download here) states that the Rabbi is seeking declaratory relief, permanent injunction, and damages for violations of civil rights and the Religious Land Use and Institutionalized Persons Act of 2000.  This case was reported on by Christine Stuart, editor of  CTNews Junkie where a reader left some disturbing comments about anti-semitic statements at the commission hearings on the matter. 

An attorney for the Town has not yet appeared in the case and no answer has been filed. Given the allegations in this Complaint, this is a case that is likely to stay in the news.