Connecticut Business Litigation Blog : Connecticut Business Lawyer & Attorney : N. Kane Bennett : Raymond & Bennett Law Firm : Hartford, Middletown, Glastonbury

Recently,the Attorney General's office announced another criminal conviction against a home improvement contractor responsible for many failed home improvement contracts. The report also indicated that the homeowner consumers were going to get some financial relief from the Home Improvement Guaranty Fund (HIGF).  The HIGF offers up to $15,000 in relief to consumers who meet certain conditions including:

• failed contract with a register contractor
• contract was for residential dwelling
• you must first obtain a court judgment against the contractor
• you must take reasonable steps to enforce the judgment without success

Any consumer who meets this criteria can file an application that is posted online.  This applies to home improvements, not new construction.  Consumers of new home construction in Connecticut can apply to the New Home Guaranty Fund (NHGF) for  up to $30,000 in relief.  The same basic criteria apply here, but the fund involves new home construction contracts.

 Many times, when a contractor goes bankrupt or has no assets, the HIGF and NHGF are the only source of recovery for consumers that were victim of defective or negligent construction for new construction and home improvements.  When a consumer decides to bring a lawsuit against a contractor, the first questions asked should be whether the contractor has assets to pay any judgment.  If not, the funds may be the only realistic option for recovery

Of course, the goal is for homeowners to find their way to the many reputable contractors in Connecticut to avoid this type of problem.  Reputable contractors will urge consumers to look up a contractor's history of complaints with the Department of Consumer Protection before signing a contract.  Consumers should also ask for references and follow up on them before signing any contract.  A reputable contractor will have no problem providing several references and examples of work product. 

It is also critical that a consumer check to see if a contractor is properly registered before signing the contract.  Although failing to properly register may be criminal, the lack of registration could prevent a consumer from recovering even the limited amounts under the guaranty funds.

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A whole series of new laws went into effect starting October 1, 2009.  For a full list of the laws you can find a link on Dan Schwartz's Employment Law Blog.  For a humorous "quick and dirty" summary you can go to Ryan McKeen's Connecticut Law Blog. If you want to know the new taxes and higher fees, read these articles by Susan Haigh of the Day and Christopher Keating of the Courant.

If you just want to know the laws affecting business, the Connecticut Office of Legislative Research puts together a nice summary.  From that summary, I offer a few highlights of the laws that went into effect October 1, 2009. 

BUSINESS CORPORATE ACT CHANGES-- PA09-55

There are several changes to the Connecticut Business Corporation Act.  To most significant change is on Dissolution and is summarized in section 23.  Here are the highlights:

• eliminates requirement that court dissolve corporation in certain situations involving deadlock in management and elections
• permits, instead of requires, court to dissolve corporation in certain situations involving deadlock and irreparable injury is threatened because of the deadlock

Safeguarding Personal Information-- PA 09-71

This is an act concerning state chartered banks and requires safeguarding of personal information, which is information that can be associated with an individual through an identifier like a Social Security number.  The act gives the Department of Banking authority to enforce the law against state chartered banks.  Any bank that adopts the security and privacy provisions that comply with the federal Gramm-Leach-Bliley Act is in compliance with the state act.

Penalty for Doing Business Without Authority -- PA09-83

This act increases the penalty on foreign businesses that conduct business without registering.  I covered this act on an earlier blog post here.

Consumer Privacy and Identify Theft -- PA 09-239

Several changes were made to social security numbers and the personal identifier information.  There were also changes to the laws concerning identity theft. 

Most significant to businesses are the provisions that penalize employers for failing to:

• obtain and retain job applications securely
• take reasonable steps to destroy applications when disposing of them
• allows the Department of Consumer Protection and Attorney General to enforce its provisions
• a civil penalty between $500 and $500,000 may be imposed for failure to comply. The fines will be deposited into a newly established Privacy Protection Guaranty and Enforcement Account

I intend to a more detailed blog post on this topic in the future.  Businesses should also be aware of the Act Concerning Social Security Numbers, which I wrote about in an earlier technology tip post here.

Customer Access to Restrooms - PA09-129

This act mandates that retail establishments give access to restrooms to individuals with certain medical conditions, even if the restroom is not open to the public.  The act applies to customers with proof of certain medical conditions, such as inflammatory bowel disease.  The act does not require any changes in construction for the non-public bathrooms.

 Employment--PA09101

This act makes changes to the ban on employer discrimination for gender in compensation to employees.  Allows the court to award back pay, compensatory, and punitive damages for claims that fall under the act.  Dan Schwartz details the provisions of this act here.

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Secretary of State, Susan Bysiewicz, has fined an affiliate of Deloitte Touche Tohmatsu approximately $22,000 in the past year for failing to register to do business in Connecticut.  The fines were reported on by Lynn Doan of The Hartford Courant and also picked up  by Alexander Soule in the Fairfield County Business Journal.  Deloitte's unit is one of the larger employers in Fairfield County, but as an out-of-state company it apparently failed to register to do business in Connecticut for more than 10 years.  The fine to Deloitte's unit was the biggest this year.

The State's authority to issue the fines arise from Connecticut General Statutes section 33-921concerning foreign corporations. Attorney General Blumenthal issued a press announcement that the State collected more than 1.2 million in fines during fiscal year 2009 pursuant to this statute.  The statute provides for penalties if a foreign corporation fails to register to do business in Connecticut.  The statute provides that the foreign corporation must pay:

(1) all fees and taxes which would have been imposed . . .had it . . . received such certificate of authority to transact business . . . and (2) all interest and penalties . . .. A foreign corporation is further liable to this state, for each month or part thereof during which it transacted business without a certificate of authority, in an amount equal to one hundred sixty-five dollars . . . Such fees and penalties may be levied by the Secretary of the State.

Although the fines might seem significant enough to act as a deterrent, and are set to increase this October, the statute also prohibits a foreign company from "maintain[ing] a proceeding in any court" in the state until it obtains a certificate of authority.  This means that a foreign company cannot successfully maintain a lawsuit if it fails to obtain a certificate of authority.  

The lack of a certificate will give a foreign corporation's opponent a special defense to a lawsuit.  However, there is some authority that suggests the company may cure the defect.  Additionally, the defense is waivable if not raised in a timely manner.   

As a practical matter, the requirement to register is helpful to business litigants.  When a foreign company registers, an agent in state is appointed to accept service of legal papers for a lawsuit.   The requirement to register also places the same burdens on out-of-state businesses as in-state businesses.

The fines further serves as a reminder to both plaintiffs and defendants in business litigation in Connecticut.  If you are a foreign corporation, you must register to do business in Connecticut before bringing a lawsuit.  If you are a defendant in business litigation, you must check to see if your opponent has obtained a certificate and raise it as a special defense or risk waiving it.

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