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.