Business Litigation: 2011 in Review
| Pages | 148 |
| Publication year | 2021 |
86 CBJ 148. BUSINESS LITIGATION: 2011 IN REVIEW
Volume 86, No. 2, Pg. 148
June 2012
For Connecticut business litigators, several themes can be discerned from 2011's leading caselaw: sobering reminders about how tenuous victory at trial can be; considerable focus on the law of finality of judgments, including res judicata and collateral estoppel; and a notable volume of complex, first-impression cases that stayed with the Appellate Court rather than being transferred to the Supreme Court. This article will discuss these cases, as well as other noteworthy 2011 court opinions in the realm of business law.
We lead with the Connecticut Supreme Court's decision in Lighthouse Landings, Inc. v. Connecticut Light and Power Company.(fn1) The case illuminates (pun intended) a critical point of trial and appellate procedure: a prevailing party's duty in some cases to perfect at trial possible alternative grounds for the judgment to be affirmed on appeal. Failure to do so may cost the party dearly if the judgment is reversed.
The sublimely torturous factual background and procedural history are as follows. Lighthouse had leased a parcel of land from CL and P in Stamford for the anticipated operation of a high-speed ferry service between Stamford and New York City.(fn2) Article six of the lease required Lighthouse to work diligently to obtain all necessary permits, and provided that if all such permits had not been secured within 180 days of the start of the lease, Lighthouse had the option of terminating the lease or extending the contingency period for another sixty days.(fn3) If the necessary permits were still not secured by the close of the extension term, then either party could terminate the lease.(fn4) Lighthouse ultimately failed to obtain its permits by the end of the extension term and CL and P terminated the lease.(fn5)
In its ensuing suit for damages, Lighthouse crafted an elaborate argument. Lighthouse claimed that after the first 180 days of the lease, it had not only the enumerated options of extending the lease for another sixty days or terminating it, but also a third, implicit option of doing nothing, and retaining its tenancy.(fn6) Under this theory, if Lighthouse had exercised the "do-nothing" option, CL and P apparently would have been stuck with Lighthouse indefinitely. Therefore, Lighthouse argued, CL and P needed to, and did, induce Lighthouse to formally exercise the sixty-day option, anticipating that Lighthouse would still not have all its permits by the end of that period, at which time CL and P would obtain the right to terminate the lease.(fn7)
More particularly, Lighthouse claimed that CL and P had made false assurances that it would not terminate the lease, which Lighthouse relied upon in exercising the sixty-day option, making CL and P's subsequent termination improper.(fn8 )Those false assurances allegedly continued after Lighthouse exercised the option, and during the option period itself, inducing Lighthouse to make a non-refundable $236,500 deposit toward the purchase of a high-speed ferry.(fn9 )Lighthouse alleged breach of contract, promissory estoppel, breach of the duty of good faith and fair dealing, intentional and negligent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act (CUTPA).(fn10)
CL and P, in turn, filed a separate action, seeking a declaratory judgment that it had acted properly in terminating the lease.(fn11) Lighthouse responded with special defenses and counterclaims based on the same allegations it had raised in its damages case.(fn12)
Following a courtside trial in the declaratory judgment action, the court entered judgment for Lighthouse, finding that the lease had been terminated properly under its terms, but should nevertheless be reinstated under the doctrine of equitable nonforfeiture.(fn13) Lighthouse then sought a prejudgment remedy (PJR) in its separate action for damages, which the court granted.(fn14) CL and P appealed from both the final judgment in the declaratory judgment action and the PJR order in the damages action.(fn15)
The first round of appeals was resolved in a 2006 Supreme Court decision, Connecticut Light and Power Co. v. Lighthouse Landings, Inc. ("Lighthouse Landings I").(fn16) In Lighthouse Landings I, the Court rejected the premise that: (i) Lighthouse had had a "do-nothing" option at the end of the first option period and (ii) CL and P had duped them out of "doing nothing" and thereby wrongfully obtained an otherwise-unavailable right of termination sixty days later.(fn17) To the contrary, the Court ruled that:
at the end of 180 days Lighthouse was required either to terminate the lease or to extend it. There was no third option of doing nothing. We thus conclude that the trial court improperly reinstated the lease under the doctrine of equitable nonforfeiture... [I]t cannot be said that the power company wrongfully induced Lighthouse to extend the lease, and, therefore, equitable principles do not apply.(fn18)
The Court thus reversed the judgments entered in both cases, and further instructed the lower court to render judgment for CL and P in the declaratory judgment action.(fn19) The remand order in the damages case included an instruction to deny Lighthouse's PJR application,(fn20) with a footnote instructing the trial court, on remand, "to consider, in light of this decision, Lighthouse's claim for damages arising from the power company's alleged breach of lease, unfair trade practices, intentional misrepresentation, negligent misrepresentation and breach of duty of good faith and fair dealing."(fn21)
Following remand, CL and P sought summary judgment, claiming that Lighthouse's damages claims were barred by the doctrine of collateral estoppel.(fn22) The trial court agreed with CL and P as to the claims for breach of lease, breach of the duty of good faith and fair dealing, and promissory estoppel, and granted the motion as to those claims.(fn23) However, the court denied summary judgment with respect to the remaining claims for intentional and negligent misrepresentation and violation of CUTPA.(fn24) CL and P appealed from the denial of summary judgment as to those claims.(fn25) Following oral argument, the Supreme Court ordered the parties to file supplemental briefs on the issue of whether or not Lighthouse's remaining claims were barred by the trial court's judgment in the declaratory judgment action, under the doctrine of res judicata.(fn26)
The Supreme Court's subsequent opinion, released more than 25 months after oral argument,(fn27) starkly illustrates the difference between collateral estoppel, which bars relitiga-tion of an issue that was "actually decided,"(fn28) and res judica-ta, which further bars a party from relitigating a matter "which it already has had an opportunity to litigate."(fn29) As for collateral estoppel, the court agreed with Lighthouse that its opinion in Lighthouse Landings I did not bar Lighthouse's misrepresentation and CUTPA claims.(fn30) The Court found that its earlier decision had focused entirely on whether or not CL and P had wrongfully induced Lighthouse to exercise the lease option.(fn31) CL and P's subsequent, further assurances during the sixty-day option period-the ones that allegedly prompted Lighthouse to place a deposit on the ferry boat, giving rise to its misrepresentation and CUTPA claims-had not factored into that opinion.(fn32) Thus, because the court had not actually ruled upon the propriety of the post-exercise conduct that gave rise to Lighthouse's tort claims, those claims were not barred by collateral estoppel.(fn33)
The court next considered the res judicata effect of the trial court's decision in favor of Lighthouse in the declaratory judgment action, in which Lighthouse had raised all of its damages claims as a counterclaim. The court noted that the doctrine bars a successful plaintiff (or counterclaim plaintiff) from bringing a new action on the "original claim," which in turn refers to "all or any part of the transaction, or series of connected transactions, out of which the action arose."(fn34)
In the Lighthouse case, "all of the allegations and theories in both actions were intended to support the single underlying claim that the power company wrongfully had terminated the lease."(fn35) That issue had been fully litigated and decided by the trial court.(fn36) Allowing Lighthouse to proceed with its misrepresentation and CUTPA claims would force the trial court to retry the threshold issue of improper termination, the very outcome that res judicata seeks to prevent.(fn37) Accordingly, the court reversed the decision below and ordered judgment for CL and P.(fn38) It was thus Lighthouse's short-lived win in the Superior Court-a pyrrhic victory if ever there was one-that barred it from moving forward after the remand.
How might Lighthouse have avoided this outcome? Upon prevailing in the trial court, Lighthouse:
could have obtained the ruling that it now seeks by requesting an articulation from the trial court in the declaratory judgment action as to its other special defenses [which had been incorporated by reference into the counterclaim] and by presenting those defenses to this court in Lighthouse Landings [I] as alternative grounds for affirmance... In particular, Lighthouse could have sought a ruling on its fourth special defense, in which it alleged waiver and estoppel on the ground that the power company had assured Lighthouse in July, 2000, as to the continued validity of the lease.(fn39)
The lesson of Lighthouse Landings I and II is that a plaintiff that pursues multiple theories, and obtains judgment on one that is novel or questionable, cannot rest on its laurels. At the risk of being whistled for...
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