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Adler v. Rosenthal

Appellate Court of Connecticut

March 15, 2016

LAWRENCE H. ADLER
v.
EDWARD M. ROSENTHAL

         Argued October 19, 2015.

          Action to recover damages for, inter alia, breach of contract, and for other relief, brought to the Superior Court in the judicial district of Hartford, where the court, Hon. Jerry Wagner, judge trial referee, denied the defendant's motion to dismiss; thereafter, the defendant was defaulted for failure to plead; subsequently, the court, Vacchelli, J., denied the plaintiff's request to amend the complaint; thereafter, following a hearing in damages, the court, Vacchelli, J., rendered judgment for the plaintiff, from which the defendant appealed and the plaintiff cross appealed to this court.

          SYLLABUS

         The plaintiff sought to recover damages from the defendant for breach of the parties' preliminary agreement to form a law partnership. Prior to entering into the preliminary agreement, the defendant allegedly stated to the plaintiff that he earned $250,000 a year representing nursing homes, in addition to his contingency fee work. The preliminary agreement detailed that the parties' would be paid an annual salary and share the profits for the first year of the partnership based on the parties' ownership interest. The plaintiff made various preparations for the new partnership, including registering with the Secretary of the State and establishing a new office. Two days prior to the agreed upon start date, the defendant informed that plaintiff that he did not want to form the new partnership. Thereafter, the plaintiff filed an application for a prejudgment remedy, which the trial court denied, and subsequently the plaintiff served the defendant with a writ of summons and complaint. The defendant filed a motion to dismiss, claiming that the plaintiff had failed to comply with the statute (§ 52-278j [b]) requiring him to serve and return process within thirty days of the denial of his application for a prejudgment remedy, and that he had failed to comply with the statute (§ 52-45a) requiring the writ of summons to designate a return date. The plaintiff filed a request for leave to amend the return date, to which the defendant objected. The trial court subsequently denied the defendant's motion to dismiss on the ground that § 52-278j did not mandate dismissal of the action because the defendant was not prejudiced by the amendment of the return date. After the defendant was defaulted for failure to plead, the court held a hearing in damages and rendered judgment for the plaintiff, awarding reliance damages and damages for lost profits with respect to the first six months of the proposed partnership. On appeal, the defendant claimed that the trial court improperly denied his motion to dismiss and improperly awarded damages for lost profits. On cross appeal, the plaintiff claimed that the trial court erred by not allowing him to amend his complaint to include a claim for paralegal time expended addressing the defendant's failure to join the contemplated partnership, by failing to award damages for the time he expended addressing the issues caused by the defendant's failure to join the contemplated partnership, and by failing to award damages for the cost of hiring a new associate to replace the defendant.

          Held :

         1. The trial court did not err when it denied the defendant's motion to dismiss because, contrary to the defendant's claim that the plaintiff's failure to comply with § 52-278j (b) rendered the civil action a nullity and deprived the trial court of subject matter jurisdiction, § 52-278j (b) only required the court to consider the application for a prejudgment remedy withdrawn and to dismiss it, but did not mandate dismissal of the entire civil action for lack of subject matter jurisdiction.

         2. This court declined to review the defendant's claim that the trial court improperly denied his motion to dismiss on the ground that the plaintiff had failed to include a return date on the writ of summons and complaint, the defendant having waived the right to pursue a motion to dismiss on the basis of insufficiency of service of process or lack of personal jurisdiction under the applicable rule of practice (§ 10-32); the defendant did not file a timely objection to the plaintiff's request for leave to amend the return date and, therefore, the amended writ of summons and complaint was deemed to have been filed by consent pursuant to the applicable rule of practice (§ 10-60 [a]).

         3. The trial court's finding as to lost profits was clearly erroneous because the plaintiff failed in his burden to prove what, if any, revenue the defendant would have contributed to the new firm: the plaintiff did not present, to a degree of reasonable certainty, expert testimony or statistical evidence regarding lost profits that resulted from the defendant's failure to join the law firm despite the fact that he had an established law practice and that he continued to practice law after failing to join the plaintiff's firm; furthermore, the evidence presented was insufficient to prove that the $250,000 a year figure, upon which the trial court relied, accurately reflected what would have been the defendant's contribution, in profit, to the contemplated new law firm, as the plaintiff did not subpoena the defendant's profit and loss statements or tax documentation during the relevant time period.

         4. The plaintiff could not prevail on his claim on cross appeal that the trial court abused its discretion by denying his request to amend his complaint to include a claim for damages arising from lost billing time for his staff: the plaintiff sought to amend his complaint during trial and it was likely that an amendment would have caused significant prejudice to the defendant, who was not put on notice of the substance of the new claim at a point in time at which he could have adequately prepared to defend against it; furthermore, although the plaintiff argued that he sought to amend the complaint to the evidence presented at trial, the record reflected that the trial court disallowed such evidence.

         5. The trial court's finding that declined to award the plaintiff compensation for the time he spent addressing the defendant's failure to join the firm was not clearly erroneous, as the plaintiff provided no time sheets or other evidence justifying such an award.

         6. The trial court's decision not to award the plaintiff the cost of hiring a new associate was not clearly erroneous, as the new associate's salary was less that the salary that would have been paid to the defendant, and there was no persuasive evidence that the hiring of a new associate was done for the purpose of replacing the defendant, given that he never actually joined the firm and accordingly added nothing to the plaintiff's caseload.

         Hugh D. Hughes, for the appellant-appellee (defendant).

         William B. Wynne, with whom, on the brief was Heidi Zultowsky, for the appellee-appellant (plaintiff).

         Keller, Mullins and Schaller, Js. KELLER, J. In this opinion the other judges concurred.

          OPINION

          [163 Conn.App. 665] KELLER, J.

          In this breach of contract action stemming from an agreement to form a law partnership, the defendant, Attorney Edward M. Rosenthal, appeals from the judgment of the trial court, following a hearing in damages, rendered in favor of the plaintiff, Attorney Lawrence H. Adler, and awarding him damages in the amount of $42,447.72, plus costs.[1] On appeal, the defendant claims that the court (1) improperly denied his motion to dismiss the plaintiff's action, and (2) improperly awarded the plaintiff damages for lost profits. The [163 Conn.App. 666] plaintiff filed a cross appeal, in which he claims that the court erred by (1) not allowing him to amend his complaint to include a claim for paralegal time expended addressing the defendant's failure to join their contemplated law partnership, (2) failing to award him damages for time that he expended addressing the defendant's failure to join their contemplated law partnership, and (3) failing to award him damages for the cost he incurred by hiring an associate to replace the defendant. With respect to the defendant's appeal, we reverse the court's judgment in part, with respect to its award of lost profits, and remand the case to that court with direction to vacate that portion of its damages award. We affirm the judgment of the trial court in all other respects, including with respect to the plaintiff's cross appeal.

         The following facts, as found by the trial court, and procedural history inform our review of the present appeal. In 2008, the plaintiff left his partnership position at a law firm and began to explore the possibility of starting his own law firm. In the plaintiff's efforts to start a new firm, he met with the defendant for the first time on July 14, 2008. During this meeting, the plaintiff proposed to the defendant that they enter into a partnership to start their own law firm. The defendant indicated that he was interested, but he did not formally agree to enter into a partnership at that time. In the following weeks, the plaintiff and the defendant communicated with each other and met several times to discuss the new law firm. Additionally, the plaintiff and the defendant looked for potential office space and discussed other matters with each other related to their own practices, including expected income, draws, and expenses.

         On July 29, 2008, the plaintiff and the defendant met in Bushnell Park in Hartford and signed a one page " Prelim[in]ary Partnership Agreement" (preliminary agreement) to enter into a partnership in the business [163 Conn.App. 667] of practicing law. Pursuant to this preliminary agreement, the plaintiff and the defendant agreed to join their practices and to form a law firm called Adler Rosenthal, LLC, or some similar name. The plaintiff would hold an 80 percent interest in the firm, and the defendant would hold a 20 percent interest. Each partner would bring the files of all of his clients to the firm, and each partner would retain the files of his respective original clients. The plaintiff's work included mostly contingency cases with some hourly work, and the defendant's work included mostly contingency cases, as well as representing nursing homes, which he billed hourly. In addition to these clients, the defendant would contribute office furniture and equipment that he already owned, which the new firm would use. The defendant would assist the plaintiff with his contingency work.

         The preliminary agreement provided that the initial draws would be paid weekly, with the plaintiff to receive $250,000 annually and the defendant to receive $110,000 annually. The profits after costs, expenses, loan repayments, and initial draws would be divided in the first year based upon the plaintiff's 80 percent ownership interest and the defendant's 20 percent ownership interest. After the first year, profit sharing would be determined annually on the basis of the ratio of the originated receipts that each partner brought into the firm during the prior year, subject to some adjustments. The preliminary agreement provided that each partner would use good faith and fair dealing with the other partner and the firm, and it further provided that each partner would use his best efforts to bring in new clients and to work adequate hours.

         The preliminary agreement did not provide a start or end date, and it did not contain a termination provision. Notwithstanding the absence of these provisions, the preliminary agreement did provide as follows: " In the [163 Conn.App. 668] event [the defendant] separates from the firm for any reason, each partner will retain their own clients (assuming the clients agree) and neither partner will solicit the other's clients. [The defendant] will be permitted to take the property, furniture, computers, etc he came to the firm with. Hourly clients will be billed by and for the firm until the partner taking the file departs. Contingency fee cases will have a lien placed on the recovery with the firm to receive the portion of the fee received based on the ratio of hours the file is worked on while the matter is at the firm as compared with the hours worked on the file after departure. The lat[t]er portion to go to the departing partner. Each paralegal hour will be equal to 1/2 of each attorney hour for this computation." The preliminary agreement also contained a provision stating that each partner promised to enter into a more detailed written partnership agreement " shortly" after their partnership commenced.

         On the same day that the plaintiff and the defendant signed the preliminary agreement, they both went to the Office of the Secretary of the State and filed organizational documentation for the firm, named Adler and Rosenthal, LLC. The defendant and the plaintiff also agreed that they would begin the partnership on September 1, 2008. In preparation for the start date, the plaintiff and his wife, who also worked as the plaintiff's business manager, began to take steps to establish the new law firm. Specifically, the plaintiff and his wife, under the business name of Adler and Rosenthal, LLC, met with landlords to discuss potential office space, negotiated with payroll, telephone, and insurance companies, interviewed and negotiated with prospective staff members, put an advertisement in the yellow pages, set up e-mail accounts and a computer system, opened bank accounts, purchased office supplies, and arranged for a construction crew to construct an office space in East Hartford.

          [163 Conn.App. 669] Two days before the contemplated start date of the new firm, on August 30, 2008, the plaintiff arranged for movers to go to the defendant's office in Avon to pick up his office equipment and furniture and move it to the new firm's office in East Hartford. On this date, the plaintiff called the defendant at his office several times to see if he needed assistance with moving his equipment and furniture. The defendant at first did not answer or respond to the plaintiff's calls. When he finally did answer the phone, he told the plaintiff that he had decided not to go through with the formation of the law partnership of Adler and Rosenthal, LLC. In response, the plaintiff told the defendant that he had breached their preliminary agreement and that he planned to sue the defendant as a result.

         On December 24, 2008, the plaintiff filed an application for a prejudgment remedy, which the trial court, Aurigemma, J., denied on March 10, 2009. The plaintiff's complaint was dated April 17, 2009. On April 23, 2009, the plaintiff served the defendant with a writ of summons and complaint, which were returned to the court on April 30, 2009. In the four count complaint, the plaintiff pleaded causes of action sounding in breach of contract, detrimental reliance, negligent misrepresentation, and intentional misrepresentation.

         The defendant filed a motion to dismiss the plaintiff's action on May 18, 2009. In his motion, the defendant claimed that the plaintiff's action should be dismissed because he failed to comply with General Statutes § 52-278j[2] by not serving process and returning it to the court [163 Conn.App. 670] within thirty days of the court's denial of the plaintiff's prejudgment remedy application. The defendant also argued that the plaintiff had failed to comply with General Statutes § 52-45a[3] in not designating a return date on the writ of summons and complaint. Subsequent to the defendant's filing his motion to dismiss, the plaintiff twice filed a request for leave to amend his writ of summons and complaint to include a proper return date.[4] The first request was filed on May 19, 2009, to which the defendant filed an objection on June 9, 2009. The second request was filed on June 12, 2009, and the defendant filed an objection on June 19, 2009. On September 9, 2009, the trial court, Hon. Jerry Wagner, judge trial referee, denied the defendant's motion to dismiss, noting that § 52-278j did not mandate dismissal of the action due to the fact that there was no prejudice to the defendant by the amendment of the return date.[5]

          [163 Conn.App. 671] Between 2010 and 2012, the plaintiff filed several motions for default against the defendant for his failure to plead. Ultimately, on December 19, 2012, the court entered a default judgment against the defendant for his failure to file an answer to the plaintiff's complaint, as ordered by the court at a dormancy calendar hearing. The plaintiff then claimed the matter for a hearing in damages, which the court, Vacchelli, J., held over the course of two days, July 10, 2013, and October 22, 2013. The court heard testimony from the plaintiff and the defendant and admitted exhibits into evidence during this hearing.

         On February 7, 2014, the court issued a memorandum of decision wherein it rendered judgment for the plaintiff upon the default of the defendant on all counts of the complaint and awarded the plaintiff damages in the amount of $42,447.72, plus costs. The court awarded the plaintiff $38,786.93 as damages for lost profits and $3678.79 as reliance damages for costs that the plaintiff incurred prior to the breach. The latter amount reflected costs incurred by the plaintiff in preparation for the start of the partnership, which included costs for recording with the secretary of the state's office, printing stationery, reconfiguring computers, and changing domain names. This appeal followed. On March 6, 2014, the plaintiff filed a cross appeal. Additional facts will be set forth as necessary.

         I

         DEFENDANT'S APPEAL

         A

         Motion to Dismiss

         We first address the defendant's claim that the court improperly denied his motion to dismiss the plaintiff's action. The following additional facts are relevant to our resolution of this claim. In the defendant's May 18, [163 Conn.App. 672] 2009 motion to dismiss, he argued, as he does now on appeal, that the court should have dismissed the plaintiff's civil action because he failed to comply with § 52-278j (b) by not serving process and returning it to the court within thirty days of the court's denial of the plaintiff's prejudgment remedy application and, in the alternative, because he failed to comply with § 52-45a by not designating a return date on the writ of summons.

         The record reflects that the court, Aurigemma, J., denied the plaintiff's prejudgment remedy application on March 10, 2009. The plaintiff then served the defendant with a writ of summons and complaint in this civil action on April 23, 2009, more than thirty days beyond the court's denial of the plaintiff's prejudgment remedy application. The defendant claims that the plaintiff's failure to serve the writ of summons and complaint and to file a return with the court within thirty days of the date on which his application for prejudgment remedy was denied by the court resulted in an effective withdrawal of his civil action pursuant to § 52-278j (b). After the defendant had filed his motion to dismiss, the plaintiff apparently realized the defects in process due to the failure to designate a return date and twice requested leave to amend the writ of summons and complaint. In the plaintiff's first request, dated May 19, 2009, he requested that the court permit him to amend the writ of summons and complaint to include a return date of June 30, 2009. In his second request, filed June 12, 2009, he requested that the court permit him to amend his process to include a return date of June 16, 2009, given that this date was inside of the sixty day window[6] from the date of the original summons, April 17, 2009.

          [163 Conn.App. 673] The court, Hon. Jerry Wagner, judge trial referee, ultimately denied the defendant's motion to dismiss on September 9, 2009. In its order denying the motion, the court stated: " § 52-278j does not mandate dismissal of this action. No prejudice to defendant by amended return date."

         On appeal, the defendant claims that the court's denial of his motion to dismiss was error because the plaintiff's civil action was a " nullity," over which the court had no subject matter jurisdiction, because he violated § 52-278j (b) by failing to serve the defendant with the writ of summons and complaint and to return it to court within thirty days of the court's denial of the plaintiff's application for a prejudgment remedy. Further, the defendant argues that the court erred by denying the defendant's motion to dismiss because the plaintiff's civil action became a " nullity" once he failed to comply with § 52-45a by not designating a return date on the writ of summons and complaint that he served upon the defendant. The defendant also argues that the court erred because, even after the court granted the plaintiff's motion to amend to include a return date, the new return date fell outside of the sixty day window following the date of the process, which violated § 52-48 (b) and rendered the plaintiff's action " a nullity." In ...


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