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.

Unjust Enrichment In Connecticut – The Catchall When You have No Contract

The Connecticut Appellate Court’s  recent decision in Schirmer v. Souza is a reminder that there are circumstances where you can still recover damages for non-payment of services even when you do not have a written contract.   In Schirmer, the Appellate Court upheld an award in favor of the plaintiffs on claims of unjust enrichment concerning renovations to a residence on the defendants’ property.

In a somewhat strange set of facts, the plaintiffs loaned their daughter and son-in-law money to renovate a home.  The plaintiffs believed that their daughter had title to the property when the son-in-law’s parents, the defendants, actually owned the property.  The son-in-law performed the renovations but went beyond the scope of the project and essentially built a new house.  The defendants then 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 had no contract with the defendants, the owners of the newly constructed house.  Plaintiffs sued and recovered after trial based on a theory of unjust enrichment. 

Unjust enrichment is an equitable remedy.  It is a broad and flexible remedy when the right circumstances are present.  To recover, a plaintiff must prove:

  • The defendants were benefited
  • The defendants unjustly did not pay the plaintiffs for the benefits
  • The failure to pay was to the detriment of plaintiff
  • The plaintiff lacks an available remedy under a written contract

 As the court noted in this case, the question becomes "did the defendant, to the detriment of someone else, obtain something of value to which the defendant was not entitled?"  The equitable remedy is based upon the principle that one should not be permitted to unjustly enrich himself at the expense of another.  Instead, there should restitution for the property received. 

In this case, the defendants claimed there was an error at trial because there was no proof of any contractual relationship between the parties.  However, the basis of recovery was not in contract, but rather quasi contract with restitution as the remedy.  Restitution amounts to restoring to a party that property or money that was wrongfully taken or received by another. The basic idea is that one party should not benefit unfairly to the detriment of another. 

When unjust enrichment applies, a plaintiff can recover in restitution without a contract.  In Connecticut lawsuits, you typically see claims for unjust enrichment in circumstances where there may be no valid contract in place but one of the following occurred:

  • Services rendered, but not paid for
  • Wrongful receipt of profits
  • Mistakes made in payment to the wrong party
  • Improvements to property

In his case, the Appellate Court found that the defendants accepted the benefit of the renovations and made a profit upon the sale of the house.  There was some difficulty in establishing the proper damages, but the Appellate Court upheld the finding of damages that amounted to the expenditures of the plaintiffs.  

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.