Argument Recap:  Munn v. The Hotchkiss School, SC 19525

The Connecticut Supreme Court heard oral argument this term in Munn v. The Hotchkiss School to decide whether Connecticut public policy supports imposing a duty on a school to warn about or protect against a serious insect-borne disease when it organizes a trip abroad.

The case arises from a month-long trip to China organized by Hotchkiss, a private secondary boarding school. Eighteen students went on the trip, including 15 year-old Cara Munn.  While in China, Munn contracted a serious tick-borne disease that left her with catastrophic physical and mental disabilities, including the inability to speak. According to the CDC, Munn was the first reported case of tick-borne encephalitis (TBE) in a U.S. traveler to China.

Munn sued Hotchkiss in federal court for negligence. She claimed that Hotchkiss failed to warn her of the risks of tick-borne diseases and failed to require her to wear protective clothing or apply insect repellent.  The jury awarded the plaintiff $41.5 million in damages for her injuries.

Hotchkiss appealed to the Second Circuit on various grounds, including the foreseeability of the harm to Munn and the scope of Hotchkiss’ duty to warn and to protect students in these circumstances. The Second Circuit determined that the harm here was foreseeable.  Foreseeability is not enough to impose a legal duty, however.  Public policy must also support the imposition of a legal duty. Because this question of state law was unresolved in Connecticut, the Second Circuit certified two questions to the Connecticut Supreme Court: (1) Does Connecticut public policy support imposing a duty on a school to warn about or protect against the risk of a serious insect-borne disease when it organizes a trip abroad?  (2) If so, does an award of approximately $41.5 million in favor of the plaintiffs, $31.5 million of which are non-economic damages, warrant remittitur?

In evaluating whether public policy supports the imposition of a duty, the Connecticut Supreme Court considers four factors: (1) the normal expectations of the participants in the activity under review; (2) the public policy of encouraging participation in the activity, while weighing the safety of the participants; (3) the avoidance of increased litigation; and (4) the decisions of other jurisdictions.

Munn argues that these public policy factors require the Court to recognize that schools, as custodians of children, have a broad duty to warn and protect the students in their care. In the context of school trips, this duty extends to risks identified in governmental advisories, no matter how remote.

Hotchkiss acknowledges that schools have a general duty to protect their students, but argues that the duty does not extend to harm that is “undeniably remote.” Foreign travel involves countless risks, many of which are foreseeable but extremely remote.  In its brief, Hotchkiss gives many examples of such risks, including an earthquake in the Himalayas, a tsunami in Japan, a hotel fire in a country with lower safety standards, or a nuclear power plant disaster.  Requiring schools to identify, warn about, and protect against such “undeniably remote” risks would be extremely burdensome and would entail an unacceptable amount of risk.  As a result, schools would provide far fewer educational travel opportunities for their students, to the detriment of the students.

At oral argument, the justices seemed to be most interested in the “remoteness” issue, with both parties receiving questions about the remoteness of the risk at issue in this case, and the burden on the school to warn about and protect against that risk.

The Connecticut Supreme Court also heard argument on the second question certified to it: whether the jury’s award of $41.5 million, including $31.5 million of non-economic damages, warrants a remittitur. The basic test in Connecticut  for reviewing the amount of a jury verdict is “whether the size of the verdict so shocks the sense of justice as to compel the conclusion that the jury [was] influenced by partiality, prejudice, mistake or corruption . . .” However, the Connecticut Supreme Court has not set specific criteria for evaluating whether a jury award is excessive.

At oral argument, the Court inquired whether it would be appropriate for it to order a remittitur where it was “three steps removed” from that decision, since a jury had already awarded damages and the trial judge had already upheld the damages award. The Court also asked questions to better understand not only how the verdict shocks the conscience, but how it compels the conclusion that the jury was influenced by improper factors.

This case will be closely watched by the over 450 private schools in Connecticut, as well as the many colleges and universities, camps, and other organizations that provide educational and recreational opportunities for children and teenagers on trips and in nature. The Court’s decision will have far-reaching effects on the availability of such trips and programs, and the ability of Connecticut’s youth to participate in such trips and programs to learn important practical and life skills, develop independence, and develop a sense of responsibility.

We will continue to monitor and provide updates on this important case.

Argument Recap:  Channing Real Estate, LLC v. Gates, SC19575

The Connecticut Supreme Court recently heard argument in Channing Real Estate, LLC v. Gates, an appeal that rose out of a failed real estate development joint venture.  This case presents two issues of interest to Connecticut’s business community.  The first issue is whether the whole case needs to be retried after an appellate ruling that the parol evidence rule blocks evidence of prior and contemporaneous statements from varying the meaning of promissory notes.  The second issue is whether the payor on those notes can counterclaim under the Connecticut Unfair Trade Practices Act (“CUTPA”) when he was a member of a limited liability company that was working on a joint venture with the limited liability company that was the payee.  This post will focus on the application of CUTPA to joint ventures, which is an issue of first impression for the Supreme Court.

Since it was enacted in 1973, CUTPA has been the basis for countless lawsuits in part because it is one of the few vehicles that litigants can use to recover their attorneys’ fees and punitive damages. Conn. Gen. Stat. § 42-110g.  Indeed, the defendant in this lawsuit, Mr. Gates, was awarded his attorneys’ fees by the trial court even though he did not prove he was entitled to damages on his CUTPA claim.  The courts have interpreted CUTPA broadly, citing its remedial purpose, but they also have ruled that certain conduct cannot violate CUTPA because it is not “trade” or “commerce” as required under the statute.  One of those categories of conduct that is outside of the bounds of CUTPA is intra-corporate or intra-partnership disputes.  In its appeal, Channing Real Estate, LLC argues that this is a dispute between former joint venturers, and that therefore Mr. Gates cannot pursue his CUTPA counterclaim.  Although the appellate courts have ruled a few times on what is or is not an internal business dispute outside of the reach of CUTPA, this case presents a fresh opportunity to clarify whether CUTPA applies to disputes in business arrangements that are not corporations or partnerships.

Continue Reading Does CUTPA apply to negotiations?

Argument Recap:  Lackman v. McAnulty, SC 19668

On October 14, the Connecticut Supreme Court heard arguments in the appeal of Lackman v. McAnulty, SC 19668, a case in which two nieces sued their two aunts in a battle over real estate from their grandfather’s estate.  The underlying question was whether the “Property” should pass through the grandfather’s revocable trust – in which case the aunts shared in the Property – or whether the property should pass by specific bequest in the grandfather’s will – in which case only the nieces and their father would get the Property.

Continue Reading How is a decedent’s property dispersed: Revocable Trust or Will?

Argument Recap:  Jefferson Allen, et al. v. Commissioner of Revenue Services, SC 19567

The Supreme Court heard oral argument in the case of Jefferson Allen, et al. v. Commissioner of Revenue Services, SC 19567, on October 13, 2016.  The issues in the case concern the constitutionality of Connecticut’s taxation of the exercise of qualified stock options by former residents when the options had no readily ascertainable value when received as part of compensation for work performed in Connecticut.  As part of this question, the Court is asked to interpret certain tax regulations referencing the applicable time period for taxing income derived from or connected with sources within this state.  Finally, because the nonresidents actually filed and paid income taxes within Connecticut for income from the exercise of qualified stock options in 2002, but later tried to amend and get a refund of those taxes, the Court is asked to address the issue of whether the statute of limitations is jurisdictional and equitably tolled by the existence of an audit.

Continue Reading Can Connecticut tax income from certain stock options exercised after the recipient (employee) moves out of state?

Argument Recap:  Gold v. Rowland, SC 19585

The Supreme Court heard oral argument for a second time in the 15-year old lawsuit by a class of Connecticut state employees claiming that they were members entitled to shares of stock when their insurer, Anthem, demutualized in 2001.  At the time Anthem converted from a mutual to a stock corporation, Anthem determined that the State of Connecticut, as the group under the policies, was the member under Anthem’s Articles of Incorporation.  Therefore, the State received 1,645,773 shares of stock that it later sold for $93 million.  The employees claim that the Articles of Incorporation also deem them, as individual certificate holders under the group policy, to be members and that they should have received stock or cash.  Both Judge Sheldon and Judge Bright ruled on summary judgment that the Articles of Incorporation are ambiguous.  Judge Bright held a bench trial and issued a 90-page decision in which he ruled for Anthem that only the State was a member at the time of the demutualization.

Continue Reading The $100 Million Question: How to Interpret a Contract?

Argument Recap:  Heisinger v. Cleary, SC 19633

In Heisinger v. Cleary, SC 19633, the Supreme Court heard argument in a case alleging mismanagement of a decedent’s estate and residuary trust. The plaintiff claimed that the overvaluing of the principal asset of the estate by some $3,000,000 was a breach of the co-executor’s fiduciary duty to plaintiff, the sole beneficiary of the estate, because reliance upon an allegedly erroneous appraisal resulted in severe federal estate tax liabilities.

The co-executors, the plaintiff’s aunt and an attorney with a long-time relationship with the decedent, raised several special defenses, including the fact that they were entitled to rely on an expert appraisal in valuing the assets of the estate – the so-called third party reliance rule.  The defendants ultimately moved for summary judgment, which was denied initially as premature.  After much discovery and numerous depositions, the defendants renewed their summary judgment motions just prior to trial. The plaintiff also sought partial summary judgment.

Continue Reading Can “Blind” Negligence Constitute a Breach of a Fiduciary Duty?

 Argument Recap: Graham v. Olson Woods Associates, Inc., SC 19626

The Supreme Court heard oral argument last week in Graham v. Olson Woods Associates, Inc., SC 19626.  The question before the court is whether an insurer that is dismissed from a case after a formal hearing on an unopposed motion to dismiss may be cited back into the case at a later date. This case has implications to employers, insurers and claimants alike.  A decision permitting the insurer to be cited back (effectively holding that a motion to dismiss is never final) means that employers and insurers will be forced to incur legal fees for attorney appearances at all hearings (informal and formal) through the end of the case (whatever and whenever that is) regardless of whether there is evidence to implicate the employer/insurer.  On the other hand, a decision in the insurer’s favor would appear to elevate form over substance, where there may be no actual prejudice to the insurer in reversing the initial ruling.

The case is further complicated by its context. This particular claim arises from the “mystifying place” called the asbestos docket: the Eighth District of the Workers’ Compensation Commission.  Asbestos claims often stay on the docket for years before they ever reach a conclusion and therefore, the cost to employers/insurers is not insignificant.

Continue Reading In the Workers’ Compensation Arena, Are Dispositive Motions Ever Dispositive?

Argument Recap: Nutmeg Housing Development Corporation v. Town of Colchester, SC 19551

The Supreme Court heard oral argument on September 21, 2016 in Nutmeg Housing Development Corporation v. Town of Colchester, SC 19551, a tax appeal challenging the assessment of the value of an affordable housing project in Colchester.  Of particular interest is the dispute over whether Low Income Housing Tax Credits (LIHTCs) should affect the fair market value of the subject property for tax assessment purposes.

The Low Income Housing Tax Credit program is a federal tax incentive program designed to stimulate investment in affordable housing. Under the program, an eligible taxpayer receives credit against federal income taxes by holding an ownership interest in a qualified low-income housing project. This case presents the question of whether these tax credits can be considered in the valuation of the affordable housing property for purposes of property taxes.

Continue Reading Low Income Housing Tax Credits: Should They Affect A Municipal Property Tax Bill?

Argument Recap: Disciplinary Counsel v. Laurence Parnoff, SC 19626

 Practice Book § 2-47A requires the disbarment of any lawyer who has knowingly misappropriated a client’s funds.  Last week, the Connecticut Supreme Court heard arguments in the appeal of Disciplinary Counsel v. Laurence Parnoff, in which the Office of the Chief Disciplinary Counsel argued that both the trial court and the Appellate Court got it wrong when they concluded that Attorney Parnoff’s conduct in closing an escrow account and taking those funds for his personal use was merely negligent and not a “knowing misappropriation” of client funds.  No Connecticut appellate court has previously considered the application of Practice Book 2-47A and therefore this case will be the Supreme Court’s first opportunity to rule on what conduct constitutes a knowing misappropriation.

Parnoff Fails To Maintain Disputed Funds In An Escrow Account

Attorney Parnoff represented Darcy Yuille in a claim against her former employer.  In her retainer agreement, Yuille agreed to pay Parnoff a contingency fee of 40% of her recovery if she prevailed on her bad faith claim.  After winning more than $1 million at arbitration, Yuille contested the 40% contingency – $438,413.17 – as being in excess of the fees permitted under Conn. Gen. Stat. §52-251(c).  Yuille also demanded that another attorney, Laura Mooney, who had made an appearance in the bad faith litigation on Yuille’s behalf, be paid out of Parnoff’s share of the award.  In 2004, Yuille agreed that Parnoff could take $125,000 of the judgment and Parnoff agreed to hold the balance of the disputed fee in escrow until the resolution of the dispute.

Continue Reading Court Considers Subjective Standard to Prove “Knowing Misappropriation” of Clients Funds

Argument Recap:  Connecticut Light and Power Company v. Proctor, SC 19531

The Supreme Court heard oral argument yesterday in Connecticut Light and Power Company v. Proctor, SC 1935, a dispute concerning a poultry business, unpaid electric service and a man from New Jersey known only as “Chan.” Setting aside the interesting facts, the legal issue presented is whether the elements of an implied in fact contract were established at trial.

The facts, in a nutshell, reflect that the Defendant, Gary Proctor, was a part time employee of a poultry business known as “Pedigree Chicks” which, although operating in Connecticut, was not registered with the Secretary of State’s office.  Mr. Proctor contacted Plaintiff to arrange for electric service to the commercial location but was informed by Plaintiff that no commercial account could be created in the absence of a validly registered corporate entity.  From that point, the facts asserted by the parties diverge greatly with the Plaintiff asserting that Defendant orally undertook personal responsibility for not only future electric consumption charges but also for payment of “retroactive” charges for service previously provided to the location.  Plaintiff’s claims were bolstered by Defendant’s act of providing his home address, contact phone numbers and social security number in a conversation with one of its representatives at the time of the creation of the account.

Continue Reading A Chicken Farm and an Electric Bill – Enforcing an Implied Contract