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System Pros, Inc. v. Kasica

Court of Appeals of Connecticut

July 12, 2016

SYSTEM PROS, INC., ET AL.
v.
GENE KASICA

          Argued February 16, 2016

         Appeal from Superior Court, judicial district of Hartford, Hon. Richard M. Rittenband, judge trial referee.

          Michelle M. Seery, with whom was William J. O'Sulli-van, for the appellant (defendant).

          Peter A. Ventre, for the appellee (plaintiff Robert J. Majewicz).

          Gruendel, Lavine and Beach, Js. [*]

          OPINION

          GRUENDEL, J.

         This appeal concerns the disintegration of a business relationship. The defendant, Gene Kasica, appeals from the judgment of the trial court in favor of the plaintiff Robert J. Majewicz[1] on all eight counts of the operative complaint. On appeal, the defendant challenges the propriety of the court's award of damages in numerous respects. Specifically, he claims that the court improperly awarded the plaintiff (1) one half of the value of System Pros, Inc. (corporation), as that corporation was valued on December 31, 2012, (2) $467, 786 in lost wages, (3) $18, 149 attributable to certain tax penalties the plaintiff sustained as a result of the defendant's actions, (4) $103, 835 in obligations that the court found the plaintiff owed his former wife in his marital dissolution proceeding, (5) $326, 864 in prejudgment interest pursuant to General Statutes § 37-3a, and (6) damages for violating the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The defendant also argues that, should he prevail on the aforementioned claims, the court's supplemental judgment awarding the plaintiff $146, 440 in attorney's fees should be vacated. We affirm in part and reverse in part the judgment of the trial court.

         In its memorandum of decision, the court found the following facts. The parties formed the corporation ‘‘on or about January 12, 1993, for the purpose of supplying consulting services, particularly in the areas of computers and computer software to insurance companies. . . . Each owned . . . fifty percent of the stock of [the] corporation. They were and are the only members of [its] board of directors. [The plaintiff] was elected president and treasurer, and [the defendant] vice president and secretary. The division of duties and responsibilities of the corporation were that [the defendant] would be in charge of marketing and sales, and [the plaintiff] would be in charge of administration of the corporation, although [the plaintiff] was to be assigned by the corporation to do consulting work for various insurance companies. This division of duties and responsibilities was admittedly oral but performed by each party. It has been contested by [the defendant] that there was such an agreement. However, this court after listening to the testimony, in particular the testimony [of] James Valenski . . . who testified that he was an independent contractor hired by the corporation and, during the time that he was so involved, that he fully understood that the division of responsibility was as set forth above. The court also believes [the plaintiff] as to this arrangement and finds such arrangement to have taken place. When [the plaintiff] did consulting work for an insurance company, his income from that consulting work would go into his account, and when [the defendant] did consulting work for an insurance company, his income went into his account. There was also an account for work done by employees/independent contractors which would go into a corporate account which would then be divided between [the plaintiff] and [the defendant] after payment of expenses.

         ‘‘This arrangement worked quite well and was financially profitable for both individuals up until 2009 when [the defendant], unhappy with [the plaintiff], took over the corporation and in effect locked [the plaintiff] out of any further dealings involving [the corporation]. [The plaintiff] was no longer allowed on the premises, and, as of the end of 2009, he became a nonentity as far as [the defendant] and the corporation were concerned. There is no question that the individuals no longer trusted each other and were very critical of each other, which has led this court to grant an application of dissolution of the corporation. There were personality differences and differences as to how the operation of the corporation was being conducted. . . . Part of the problem between the parties was that [the defendant] wanted to make Valenski a member and/or partner of the corporation to which [the plaintiff] objected. Valenski was hired as an independent contractor to promote marketing and sales and develop clients for himself and clients [for] whom [the defendant] and [the plaintiff] would perform consulting work. [The plaintiff] believed that Valenski was doing work that was really the responsibility of [the defendant]. Although [the plaintiff] objected to retaining Valenski, he signed the contract between [the corporation] and Valenski as the president of [the corporation], thereby approving the independent contract with Valenski. [The parties] were unable to work out their differences . . . .''

         In late October, 2009, the defendant commenced an action to dissolve the corporation pursuant to General Statutes § 33-896 (dissolution action). The plaintiff at that time declined his option to purchase all shares owned by the defendant pursuant to General Statutes § 33-900. The plaintiff also declined the defendant's offer to appoint a receiver to operate the corporation while the dissolution action was pending. The plaintiff thereafter filed an answer and counterclaim.[2]

         In February, 2010, the plaintiff commenced the present action. The operative complaint, the plaintiff's January 30, 2014 amended complaint, contained eight counts. The first count sought an accounting, and the second count alleged tortious interference with business relationships. Counts three through six alleged that the defendant breached a fiduciary obligation, an implied covenant of good faith and fair dealing, the standards of a corporate director under General Statutes § 33-756, and the standards of a corporate officer under General Statutes § 33-765. In count seven, the plaintiff alleged a CUTPA violation. The eighth and final count alleged that the defendant breached an oral con- tract between the parties. On March 8, 2010, the court granted a motion to consolidate that action with the dissolution action.

         By order dated October 19, 2012, the court appointed Attorney Atherton B. Ryan as custodian of the corporation and certified public accountants Bart Giustina and Bruno Passacantano as auditors thereof, as well as a third auditor to be determined by agreement of the parties.[3] Those auditors were directed to ‘‘reconcile the books and records of [the corporation] from October 1, 2009, to date . . . . In addition, each of the auditors shall independent of one another determine the [corporation's] fair value as of October 1, 2009, and a current date on or before January 31, 2013. The auditors shall file a report with the court of their findings by February 15, 2013.''

         A court trial commenced in June, 2013. Although consolidated four years earlier, the court bifurcated the trials of the dissolution action and the present action. The court first conducted a trial on the dissolution action over the course of four days. It thereafter rendered a judgment that dissolved the corporation in accordance with General Statutes § 33-897 et seq., and designated Ryan as the receiver charged with winding up and liquidating the business and affairs of the corporation. The propriety of that judgment is not contested in this appeal.

         Trial of the present action began on October 30, 2013, and was continued over ten additional days. All but two days consisted of the testimony of the plaintiff. The defendant did not testify, but the court did hear the testimony of Giustina, Passacantano, Philip J. DeCaprio, Jr., Valenski, and Attorney Douglas Manion. In its memorandum of decision, the court found that the plaintiff ‘‘was a very credible and honest witness. . . . [H]e was particularly honest, candid and forthcoming.'' The court also credited the testimony of DeCaprio, finding that ‘‘[h]e was devoid of any bias and was independent, and he gave a good basis for his evaluation of the [corporation].'' The court credited Valenski's testimony as it pertained to the affairs of the corporation and credited Passacantano's testimony on the ‘‘sole point'' of whether the plaintiff ‘‘had to cash in his 401 (K) and/ or IRAs and suffered a penalty'' due to ‘‘his involuntary departure from [the corporation] . . . .'' The court did not credit the testimony of Giustina or Manion.

         In its July 30, 2014 memorandum of decision, the court concluded that the defendant was liable to provide an accounting of the corporation. The court also ruled in favor of the plaintiff on counts two through eight of the operative complaint while rejecting the defendant's statute of limitations and laches special defenses. With respect to damages, the court reiterated that it found the plaintiff ‘‘credible and trusts his valuation of the damages he suffered as set forth in [his] exhibit 87 with any exceptions described herein. [The plaintiff's] testimony and his list of damages, as well as the basis and computation thereof, the court finds to be credible.''[4] The court then summarized its award of damages as follows: ‘‘(1) Lost Wages - $467, 786; (2) Half of the value of the corporation as of December 31, 2012 - $86, 500; (3) Penalties re: 401 (K) and IRAs - $18, 149; (4) Obligations [the plaintiff] has to fulfill pursuant to the marriage dissolution case of Majewicz v. Majewicz - $103, 835; (5) Sua sponte interest at 10 percent per annum, for money wrongfully withheld pursuant to [§] 37-3a from November 1, 2009 to August 1, 2014 - $326, 864 [for a total of] $1, 003, 134.'' The court also awarded the plaintiff punitive damages in the form of attorney's fees, noting that ‘‘[a] supplemental judgment will be rendered following the hearing on attorney's fees and receipt of [an updated audit of the books and records of the corporation from DeCaprio] for the period January 1, 2013 to date, the request to [have DeCaprio complete that audit] having been by stipulation of the parties.''

         Following that hearing, the court, on August 28, 2014, awarded the plaintiff the sum of $146, 440 in attorney's fees. In a report dated September 5, 2014, DeCaprio provided the court an updated analysis of the books and records of the corporation, which was accompanied by a detailed ‘‘Schedule of Adjustments.'' That analysis concluded that there existed ‘‘a financial obligation in favor of [the plaintiff] in the amount of $140, 322.55.'' On September 30, 2014, the court rendered a supplemental judgment in favor of the plaintiff, which reflected both the $146, 440 award of attorney's fees and the $140, 322.55 award on the audit of the corporation, as documented in DeCaprio's report. The court thus concluded that ‘‘[j]udgment is hereby entered in favor of [the plaintiff] against [the defendant for a total of] $1, 289, 895.55.'' This appeal followed.

         Before considering the specific claims advanced by the defendant in this appeal, we first note what is not in dispute. In its July 30, 2014 memorandum of decision, the court determined, inter alia, that the defendant was liable on counts one through six for providing an accounting of the corporation, interfering with the plaintiff's business relationships, breaching his fiduciary obligation to the plaintiff, breaching the implied covenant of good faith and fair dealing between the parties, breaching the standards of a corporate director under § 33-756, and breaching the standards of a corporate officer under § 33-765. In this appeal, the defendant does not contest his liability on those counts. In addition, the court expressly found ‘‘that the actions of the corporation, once [the defendant] took control thereof, were the actions of [the defendant] on the basis that his conduct pierced the corporate veil. . . . [T]his court finds that the corporate veil was pierced and that [the defendant] was an alter ego of the corporation and that [the defendant] is individually liable to [the plaintiff] . . . for all actions of himself and of [the corporation].'' That determination also is not challenged in this appeal.

         We further note the standard of review that governs challenges to damages awards. ‘‘[T]he trial court has broad discretion in determining damages. . . . The determination of damages involves a question of fact that will not be overturned unless it is clearly erroneous.'' (Internal quotation marks omitted.) Russell v. Russell, 91 Conn.App. 619, 643, 882 A.2d 98, cert. denied, 276 Conn. 924, 925, 888 A.2d 92 (2005). ‘‘When, however, a damages award is challenged on the basis of a question of law, our review . . . is plenary.'' (Internal quotation marks omitted.) Landry v. Spitz, 102 Conn.App. 34, 49-50, 925 A.2d 334 (2007).

         I

         The defendant first claims that the court improperly awarded the plaintiff one half of the value of the corporation, as it was valued by DeCaprio as of December 31, 2012, as part of its award of damages on the accounting count of the operative complaint.[5] We agree.

         The following additional facts are relevant to this claim. The first count of the operative complaint sought an accounting of the corporation. On October 19, 2012, the parties appeared before the court to submit a proposed order regarding the appointment of three auditors in connection therewith. After brief discussion on the language employed, the court approved the order largely ‘‘as submitted by counsel for all parties . . . .'' That order stated in relevant part that ‘‘[a]n accounting of [the corporation] . . . is warranted.'' The order then assigned the auditors two distinct tasks. First, the auditors were to ‘‘reconcile the books and records'' of the corporation. Second, each auditor was charged with rendering a valuation of the corporation as of both ‘‘October 1, 2009, and a current date on or before January 31, 2013.'' A review of both the transcript of the October 19, 2012 proceeding and the court order entered on that date confirms that two distinct issues were before the court with respect to the accounting count of the operative complaint. First, the plaintiff sought an audit of the books, records, and assets of the corporation. Second, the plaintiff sought a valuation of the corporation.

         The proper valuation of a corporation ‘‘presents a factual determination subject to the clearly erroneous standard.'' Russell v. Russell, supra, 91 Conn.App. 643. ‘‘A finding of fact is clearly erroneous when there is no evidence in the record to support it . . . or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'' (Internal quotation marks omitted.) Murtha v. Hart- ford, 303 Conn. 1, 12-13, 35 A.3d 177 (2011).

         It is undisputed that the plaintiff owned 50 percent of the stock of the corporation. It further is undisputed that the defendant was liable for his tortious conduct under counts two through six of the complaint, which transpired, the court found, once the defendant seized control of the corporation and effectively locked the plaintiff out. As an equal shareholder in the corporation, the plaintiff plainly had a compensable interest in the corporation. Indeed, the defendant does not argue otherwise.

         The question, then, is whether the court erred in awarding the plaintiff the sum of $86, 500 as compensation for his one-half interest of the corporation, as it was valued as of December 31, 2012, by DeCaprio in his February 25, 2013 report.[6] In his report, DeCaprio valued the corporation at $81, 000 as of October 1, 2009, and at $173, 000 as of December 31, 2012. Admittedly, DeCaprio's report complied with the October 19, 2012 order of the court to ‘‘determine the [corporation's] fair value as of October 1, 2009, and a current date on or before January 31, 2013.'' The court nevertheless provided no explanation for its decision to impose damages in accordance with the later date in either its July 30, 2014 memorandum of decision or its June 19, 2015 articulation.[7]

         In his February 25, 2013 report, DeCaprio expressly indicates that ‘‘[t]he standard of value used in [his] valuation'' was that set forth in General Statutes § 33-855 (4), which provides in relevant part that ‘‘ ‘fair value' means the value of the corporation's shares determined: (A) Immediately before the effectuation of the corporate action to which the shareholder objects . . . .'' The corporate action to which the plaintiff, as a shareholder, objected was the commencement of the dissolution action and related conduct of the defendant that began on October 30, 2009. Consistent with the standard of value employed by DeCaprio, the proper valuation in the present case was his valuation of the corporation as of October, 2009.

         That determination is consonant with the testimony of the plaintiff. At trial, the plaintiff agreed that the proper valuation date was the fall of 2009, rather than December, 2012. He testified that, as part of his claim for damages, he was seeking half of the value of the corporation as of November, 2009. When asked by his attorney why he was not ‘‘going to give any adjustment for the valuation as of December 31, 2012, '' the plaintiff answered, ‘‘[b]ecause if the [corporation] is dissolved, the value is zero, so therefore the damages are half the value of the corporation as of November 2, 2009.'' When his attorney then inquired as to precisely what his claim for damages was, the plaintiff testified, ‘‘half the value of what [the corporation] was in November [of] 2009.''

         In light of both the standard of value employed by DeCaprio in his valuation of the corporation and the unequivocal testimony of plaintiff at trial, we are left with a definite and firm conviction that a mistake has been committed with respect to the proper valuation of the corporation. Accordingly, the plaintiff's recovery for one half of the value of the corporation must be reduced from $86, 500 to $40, 500, which figure represents half of the $81, 000 valuation of the corporation, as of October, 2009, furnished by DeCaprio.[8]

         II

         The defendant next challenges the award of $467, 786 in lost wages, claiming that the plaintiff failed to establish this award with reasonable certainty. By contrast, the plaintiff maintains that his testimony at trial, in tandem with the documentary evidence he submitted, substantiates the award for lost wages. We agree with the defendant.[9]

         ‘‘It is axiomatic that the burden of proving damages is on the party claiming them. . . . When damages are claimed they are an essential element of the plaintiff's proof and must be proved with reasonable certainty. . . . Damages are recoverable only to the extent that the evidence affords a sufficient basis for estimating their amount in money with reasonable certainty.'' (Internal quotation marks omitted.) Ulbrich v. Groth, 310 Conn. 375, 441, 78 A.3d 76 (2013). ‘‘[T]he court must have evidence by which it can calculate the damages, which is not merely subjective or speculative . . . but which allows for some objective ascertainment of the amount. . . . This certainly does not mean that mathematical exactitude is a precondition to an award of damages, but we do require that the evidence, with such certainty as the nature of the particular case may permit, lay a foundation [that] will enable the trier to make a fair and reasonable estimate. . . . Evidence is considered speculative when there is no documentation or detail in support of it and when the party relies on subjective opinion.'' (Citations omitted; internal quotation marks omitted.) Weiss v. Smulders, 313 Conn. 227, 254, 96 A.3d 1175 (2014).

         As the court found in its memorandum of decision, the corporation supplied consulting services to insurance companies. The plaintiff and the defendant equally divided the profits of the corporation, which resulted primarily from the placement of other consultants in service contracts.[10] The plaintiff retained all earnings from consulting services that he personally rendered to clients, which earnings were not considered profits of the corporation. In addition, the plaintiff never received a salary from the corporation. As he testified at trial, ‘‘[t]he only compensation [he] ever received was 50 percent of the profits'' of the corporation.

         The plaintiff's claim for lost wages is predicated on his allegation, which the court credited, that the defendant failed to disclose available consulting positions to the plaintiff after locking him out of the corporation in late 2009. The plaintiff testified that, prior to 2009, he routinely received e-mail communications regarding existing or potential clients that were looking for consultants. As he stated, ‘‘I was regularly contacted and given information about positions that were available to [the corporation] both from the standpoint if I wished to have a position or if I knew somebody that could be used to fill one of the positions.'' The plaintiff also testified that, once the defendant seized control of the corporation, he no longer received such communications, stating that he was ‘‘cut off from everything at the end of 2009.''

         Critical to our analysis are three pieces of documentary evidence that the plaintiff introduced at trial in support of his claim for lost wages. First, the plaintiff submitted exhibit 70, which is a document he prepared that lists ‘‘various individuals [who] were placed at [the corporation's] clients'' from August 1, 2009 to June 30, 2013. That document includes a total of twenty-one placements and notes the start and end dates of each placement, as well as the hourly rate of compensation. The rate of compensation varied for each placement and ranged from $63 to $100 per hour. Second, more than 300 pages of invoices from the corporation regarding those placements were admitted as exhibit 71.

         Third, the plaintiff introduced a detailed spreadsheet, admitted as exhibit 75, that he had prepared titled ‘‘Lost Wages January 1, 2010 to November 1, 2013.'' For every week during that period, the document specifies an amount of lost wages, predicated on a forty hour work week and calculated at an hourly rate of $85 for weeks in which he was unemployed, and at an hourly rate of $35 for weeks in which he allegedly was underemployed.[11] The sum of lost wages specified on that document is $533, 400.[12]

         The plaintiff augmented that documentary evidence with his testimony at trial. He testified that he ‘‘created [exhibit 75] out of an Excel spreadsheet for the time period that I was unemployed or underemployed and the amount of time I would have lost as a result of being locked out of [the corporation]. . . . Exhibit 70 shows that there were numerous jobs that were available to me during that period of time that I was not given an opportunity to apply for . . . and this is the amount of money that I would have lost as a result of not having those jobs.'' The plaintiff testified that he calculated his rate of compensation at $85 per hour, which was a rate he previously received from a prior client.[13] The plaintiff also opined that exhibit 75 represented a summary of hours that he would have been able to work had ‘‘all of the openings that were available'' been disclosed to him. In awarding the plaintiff $467, 786 in damages for lost wages, the court credited the plaintiff's ‘‘testimony and his list of damages, as well as the basis and computation thereof . . . .''

         Assuming arguendo that the court properly determined that the defendant breached an agreement to disclose available consulting positions to the plaintiff, as the plaintiff alleged in the operative complaint, [14]there nonetheless remains an enormous evidentiary gap between that improper conduct and the $467, 786 award for lost wages. Although the plaintiff presented ample evidence regarding the nature of the opportunities for employment that were not communicated to him, his testimony as to whether he would in fact have secured such employment resorted to conjecture and subjective opinion, which cannot constitute the basis for an award of damages. See American Diamond Exchange, Inc. v. Alpert, 302 Conn. 494, 513, 28 A.3d 976 (2011) (‘‘the plaintiff bears the burden of producing evidence of sufficient quality to permit the fact finder to award damages without resort to conjecture or speculation''); Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 247 Conn. 48, 76, 717 A.2d 724 (1998) (‘‘[i]n order to remove the assessment of damages from the realm of speculation, it is necessary to tie the award of damages to objective verifiable facts''); Viejas Band of Kumeyaay Indians v. Lorinsky, 116 Conn.App. 144, 163, 976 A.2d 723 (2009) (‘‘[e]vidence is considered speculative . . . when the party relies on subjective opinion''); CAS Construction Co. v. East Hartford, 82 Conn.App. 543, 557, 845 A.2d 466 (2004) (‘‘[s]peculative evidence is not sufficient evidence for the trier to make a fair and reasonable estimate of the plaintiff's damages'').

         In his testimony, the plaintiff acknowledged that his claim for lost wages was predicated on various assumptions. For example, when asked whether it was ‘‘fair to say that you base [the calculation of lost wages in exhibit 75] on the assumption that you would have obtained [employment] at $85 an hour, '' the plaintiff answered, ‘‘That's one of the assumptions, yes.''

         Even more significantly, the plaintiff failed to produce sufficient nonspeculative evidence that he would have secured the positions detailed in exhibit 70, which listed various consultants placed by the corporation. At trial, Valenski was asked to describe the process of securing a placement with one of the corporation's clients. He testified that it involved ‘‘all kinds of competition. You have to find a manager who's looking for an opening for an[information technology] programmer kind of person. Then you put the phone down. You have to go run around, try to do recruiting, try to find a candidate. You submit the candidate's resume. The manager looks at it. Half the times he gets back to you; half the times he doesn't get back to you. If he does, he interviews your candidate. There's no guarantee that you[r] candidate's gonna get the job in any way, shape, or form because there's other firms that are interviewing other candidates. Yeah, it's a very tedious process, you know. It's not like you put a resume in and it's a guarantee that the guy's gonna get the job.'' Valenski also explained that there were ‘‘thousands of companies'' engaged in the same business as the corporation, which made employment opportunities ‘‘very, very competitive . . . .'' In addition, the plaintiff introduced into evidence an e-mail correspondence between himself and Valenski from the spring of 2009, in which the plaintiff inquired as to whether the corporation ‘‘currently . . . had any requests for services from any company.'' Valenski replied that ‘‘[t]here is nothing open at this time. I have marketed and networked all around and it is the worst I have seen.'' At that time, the United States was mired in the great recession, as DeCaprio noted in his February 25, 2013 report.

         In his testimony, the plaintiff admitted that, had he applied for any of the positions detailed in exhibit 70, he would have been competing with a number of other candidates. He also testified that, to secure such employment, he would have had to submit a resume and to participate in interviews. At the same time, when asked whether it was possible that he might not have been hired for any of those positions, the plaintiff answered, ‘‘No.'' The plaintiff also offered his subjective opinion that ‘‘I think my past history of being employed . . . having positions in multiple companies for multiple years would prove that I'd wind up getting hired by them.''

         The undisputed documentary and testimonial evidence in the record nonetheless indicates that the plaintiff on numerous occasions was unsuccessful in securing employment for such positions in this particular industry during the time period in question. At trial, the plaintiff introduced into evidence a ‘‘job search log'' that he created to keep track of various employment inquiries that he made in the years following his ouster from the corporation. When questioned about that job search log, the plaintiff acknowledged that he had applied for, or inquired about, hundreds of positions that he ultimately did not secure. The plaintiff also testified that he had applied for ‘‘four or five permanent positions'' in his particular area of expertise, but did not obtain any of those positions. In addition, the plaintiff conceded at trial that, although he was claiming damages for lost wages, he did not subpoena or call any witnesses from any of the employers listed on exhibit 70 to establish his claim for damages. The plaintiff further did not offer any expert testimony thereon. In so doing, the plaintiff failed to remove his claim for lost wages from the realm of speculation and conjecture. See Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, supra, 247 Conn. 76; Viejas Band of Kumeyaay Indians v. Lorinsky, supra, 116 Conn.App. 163.

         The plaintiff's lost wages calculation rests on an additional assumption-namely, that he was qualified for all of the opportunities described in exhibit 70. The record indicates otherwise.

         In his testimony, the plaintiff detailed his background in ‘‘mainframe and CICS programming, '' explaining that his ‘‘specialty'' was programming in the Vantage-One system, a computer system widely used in the insurance industry. The plaintiff testified that, at the time of the trial, he had twenty-seven years of programming experience. The plaintiff distinguished between programming and business analysis work, and admitted that he had very little experience as an analyst or as a project manager. Rather, his experience was limited to ...


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