Appellate Court Notes: Week of July 4, 2016
Welcome to our Supreme and Appellate Court summaries webpage. On this page, I provide abbreviated summaries of decisions from the Connecticut Appellate Courts which highlight important issues and developments in Connecticut law, and provide practical practice pointers to litigants. I have been summarizing these court decisions internally for our firm for more than 10 years, and providing relevant highlights to my municipal and insurance practice clients for almost as long. It was suggested that a wider audience might appreciate brief summaries of recent rulings that condense often long and confusing decisions down to their basic elements. These summaries are limited to the civil litigation decisions. I may from time to time add commentary, and may even criticize a decision’s reasoning. Such commentary is solely my own personal opinion. Pullman & Comley’s Appellate Practice Group of which I am a member includes experienced appellate advocates in almost every area of the law. Should you have a need to consult about a potential appeal, please email me at firstname.lastname@example.org. I hope the reader finds these summaries helpful. – Edward P. McCreery
Posted July 8, 2016
Supreme Court Advance Release Opinions
- SC19453 - Modzelewski's Towing & Recovery, Inc. v. Commissioner of Motor Vehicles
When a truck pulling a trailer with a boat got into an automobile accident, the state police called a tow truck operator who had to remove the trailer and boat on a flatbed to its storage yard. They later had to lift the boat off the trailer so it could be weighed to see if it exceeded the weight limits. The wrecking company charged over $14,000. The trailer’s insurer paid, and then demanded back $12,000, the difference between the charge by the towing company and what the state Department of Motor Vehicles thought was proper under the state regulations. The tow truck operator claimed that the federal regulations preempted the state regulations. But the hearing officer in the administrative appeal rejected that argument. On appeal, the Superior Court held that the Commissioner of Motor Vehicles only had the authority to regulate the charge for the actual towing, not the pre-towing or post-towing services, which were preempted by federal law. Therefore, it ruled the Plaintiff was not required to refund the money.
The Commissioner of Motor Vehicles then appealed to the Supreme Court, claiming that state regulation of pre-towing and post-towing services was not preempted by the feds. The federal regulation prohibits states from enacting any law related to price, route or service of any motor carrier with respect to transportation of property. An exception to the federal rule is that the states may regulate transportation by tow trucks when the transportation is performed without the consent of the owner.
The Supreme Court concluded that the pre-towing services did, indeed, fall under the exception of non-consensual transportation by a tow truck. Regulation by a state was therefore not preempted. The purpose of the Federal Act was to free up the interstate motor carrier industry like airlines, which had been deregulated. Tow truck services, such as occurred here, have little or no effect on the goal of preserving free market in interstate commerce. Therefore, the Commissioner was within its powers to prohibit the tow company from charging more than posted rates. (The Court declined to review the issue whether post-towing storage services were preempted by federal regulation).
- SC19390 - Martinez v. Empire Fire & Marine Ins. Co.
- SC19390 Dissent - Martinez v. Empire Fire & Marine Ins. Co.
The defendant insurer had issued a federally required MCS-90 Endorsement providing coverage for accidents that occur during interstate transportation. Here, the truck in question got into an accident with the plaintiff while it was performing an intrastate trip entirely within Connecticut. It was driving from the yard to pick up repair parts for other trucks in the company’s fleet. The issue was whether the insurer had to pay the judgment against the truck operator. Arguing “trip-specific” interpretation of coverage, the insurer moved for summary judgment, claiming that it was only obligated to cover vehicles while on a purely interstate trip.
The plaintiff argued that the endorsement covered any accident. But even if it is limited to interstate trips, here the vehicle was on the way to pick up parts to be installed in trucks that would later go on an interstate trips.
The Trial Court granted summary judgment to the insurer. The Appellate Court affirmed, and the Supreme Court upheld the Appellate Court. An MCS-90 Endorsement applies only to liability the insured may incur for accidents involving vehicles traveling in interstate commerce, not on an intrastate trip. MCS-90 Endorsements have been extensively considered and interpreted by the Federal Courts and the Second Circuit which, itself, has embraced the “trip-specific” interpretation of such endorsements. That is also the interpretation followed by the majority of the courts.
In addition to the Federally-mandated insurance coverage for interstate trips, the states are free to regulate intrastate trips. In fact, Connecticut has regulations that apply to motor carriers engaged in intrastate travel that should have triggered additional in-state insurance requirements on the part of the truck operator in this case.
Finally, one cannot consider this an interstate trip simply because the truck was traveling in-state to pick up repair parts that would be installed in trucks that would later cross state lines. Any later movement of repair parts after their installation would be a separate trip than the one at issue where the accident occurred.
Justice Everleigh dissented. He would have rejected the trip-specific approach. He would find that the plain language of the endorsement reveals that it covers any accident involving the truck. While acknowledging that it is a well-settled principle that decisions of the Second Circuit are particularly persuasive when resolving Federal law, Justice Everleigh said he disagreed with the Second Circuit on this issue.
Appellate Court Advance Release Opinions:
- AC37105 - System Pros, Inc. v. Kasica
Plaintiff and defendant agreed to form a corporation, each owning fifty percent of the shares of stock, for the purpose of providing computer consulting services to insurance companies. Each owner deposited fees paid for their individual consultant work into their own bank accounts. Fees for work done by independent contractors or employees were deposited into the corporate account and then profits were split 50/50. After a business dispute arose, the defendant locked the plaintiff out of the corporation, and thereafter brought a dissolution action. The plaintiff brought his own lawsuit seeking an accounting and tortious interference with business relationship, breach of fiduciary duty, violations of standards of a corporate director and corporate officer and CUTPA.
The Trial Court found in favor of the plaintiff on all counts and awarded $400,000 in lost wages, $85,000 for half of the value of the corporation, $20,000 for penalties paid to the IRS for early liquidation of his retirement account, and $100,000 for obligations the plaintiff had to his ex-wife. On top of that, the Trial Court awarded $140,000 owed by the corporation to the plaintiff; and granted punitive damages of attorneys’ fees of $146,000 and pre-judgment interest at ten percent for money wrongfully withheld, for a grand total of over $1.3 million.
The defendant took what turned out to be a very successful appeal to the Appellate Court which knocked out most of the damages awarded. First, that Court said the Trial Court used the wrong date to value the corporation. The value of the corporation should have been determined as of the date of the wrongful conduct of the defendant. Instead, the Trial Court picked a later date when the corporation was worth much more. Therefore, those damages awarded by the Trial Court were cut in half.
Next, the Appellate Court set aside the $400,000 in lost wages because they had not been established with reasonable certainty. Here, the plaintiff never had received salary from the corporation. The only compensation he received was fifty percent of the profits of the corporation, and the consulting fees for the work he did himself. Although the plaintiff had prepared a spreadsheet of the number of consulting opportunities that came by the corporation that were not conveyed to him, the evidence he would have, in fact secured such employment had the information been conveyed to him amounted to pure conjecture and subjective opinion, which cannot form the basis for an award of damages.
Plaintiff made his own assumptions that he would not only have gotten the jobs, but also would have been paid $85.00 per hour. Witnesses testified that actually landing a job even if the opportunity passed a company’s desk was quite a herculean task. There were thousands of companies engaged in the same business competing for the work. Finally, the plaintiff did not establish that he was qualified to fulfill all of the roles needed for the job opportunities and many of the jobs were located outside of Connecticut, where the plaintiff did not want to relocate. The Court noted that there exists a huge difference between an opportunity to apply for a contract and actually obtaining the contract for the job. The $400,000 was tossed.
The Court did uphold the $20,000 damage award for the penalties the plaintiff incurred when he claimed that once he was locked out of the company, he had to drain money out of his 401(k) and IRA account in order to survive and pay bills.
However, the defendant won the next round. The Appellate Court threw out the award of $103,000 for obligations the plaintiff owed his ex-wife. The Trial Court referred to it as alimony he could not pay because the company wasn’t paying him. The Appellate Court said in a nice way, "Oh poppycock." First off, the Court questioned how on Earth could the business partner be on the hook for his alimony obligations? Further, plaintiff never claimed he wanted the unpaid alimony to be paid by his business partner. He only pled that he wanted to be reimbursed his attorney fees fending off his wife’s motions in divorce court because he was not paying her alimony. The Court concluded that even if in a million years the plaintiff could show any causal connection and proper damage attribution of matrimonial attorney fees to his business dispute, he had failed to do so here.
Next, the Court threw out the award of CUTPA damages. The Supreme Court has previously held that purely intra-corporate conflicts do not constitute CUTPA violations. The Appellate Court noted that there is an exception to that rule when the defendant’s actions go well beyond the governance of the corporation and place them in direct competition with the interests of the company. That includes usurping customers, employees or assets of the business in favor of themselves or another company.
The record revealed no evidence that the defendant had improperly utilized or transferred corporate assets for his own benefit or to that of another business. At best, the defendant paid himself additional salary and expense reimbursement to the tune of $140,000. But that merely reconfirms that the improprieties were intra-corporate in nature. CUTPA did not apply.
Next, the Court threw out the award of $326,000 in pre-judgment interest. C.G.S. § 37-3(a) authorizing the award of pre-judgment interest, only applies to claims involving the detention of money after it becomes due and payable. Plaintiff’s claims for one-half of the value of the company and compensation for tax penalties does not involve the detention of monies that are due and payable. The damages awarded represent monies due only once the corporation was ordered dissolved, and the valuation was resolved. Therefore, pre-judgment interest should not have been awarded. Similarly, the $20,000 tax penalties was not money that was withheld by the defendant that was owed to the plaintiff. It was inappropriate to award any pre-judgment interest in this case.
Finally, the Court did uphold the award of attorneys’ fees to the plaintiff as a result of the finding of common law liability for intentional torts. The Trial Court found the defendant liable on all eight counts of the complaint. Those findings were not challenged, including that the defendant interfered with the plaintiff’s business relationships, breached his fiduciary duties, breached his duties as a corporate director and corporate officer. The intentional violation of these obligations justified an award of punitive damages.
All in all, a big win for the defendant through the appellate process.
The facts and holdings of any case may be redacted, paraphrased or condensed for ease of reading. No summary can be an exact rendering of any decision, however, so interested readers are referred to the full decisions. The docket number of each case is a hyperlink to the Connecticut Judicial Department online slip opinion. © 2016 Pullman & Comley, LLC. All Rights Reserved.Back to Top