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Harrier Technologies, Inc. v. Kenyon & Kenyon, LLP

United States District Court, D. Connecticut

July 12, 2017

HARRIER TECHNOLOGIES, INC., Plaintiff,
v.
KENYON & KENYON, LLP, Defendant.

          MEMORANDUM OF DECISION ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          WARREN W. EGINTON, SENIOR UNITED STATES DISTRICT JUDGE

         In this action, plaintiff Harrier Technologies alleges that defendant Kenyon & Kenyon breached its fiduciary duty and committed fraud by concealing that Harrier's Saudi patent application for an oil extraction pump design had irrevocably lapsed. Harrier had retained Kenyon to oversee its patent renewals in various jurisdictions, and Harrier contends that Kenyon failed to pay the Kingdom of Saudi Arabia's annual renewal fee in 2006, which resulted in the loss of the patent. Thereafter, Kenyon concealed the lapse in payment and its corresponding responsibility for the lapse from Harrier. Harrier did not learn the full extent of Kenyon's responsibility until revealed through discovery in this case.[1]

         Kenyon has now moved for summary judgment. For the following reasons, summary judgment will be granted in part and denied in part.

         Lack of Proximate Cause

         Kenyon argues that its breach of fiduciary duty or fraud was not the proximate cause of Harrier's loss of the Saudi patent application, as both causes of action stem from concealment that occurred after the patent application had lapsed. Harrier responds that it incurred damages after the Saudi patent application lapsed, and that Kenyon breached its fiduciary duty not only by concealing the lapse but also by failing to make the 2006 payment in the first place.

         The Court agrees that Harrier has adequately demonstrated damages resulting apart from lapse itself, based on Kenyon's concealment of the lapse. As detailed by Harrier:

Harrier was damaged by Kenyon's covering up the patent's lapse because it continued to pay annuity fees on the Saudi Arabia PHG Patent after it had irrevocably lapsed.
***
Kenyon's actions caused [Harrier] to waste valuable time and resources in a fruitless investigation to determine whether the patent could be restored, and delayed and complicated the instant litigation by obscuring Kenyon's culpability and attempting to have Harrier's claims against it dismissed based upon the fraudulent release and Harrier's delay in bringing suit against Kenyon. If Kenyon had informed Harrier in 2009 that it had already investigated what restoration procedures were available and had determined in 2006 that there were none, Harrier would not have spent time investigating this issue in 2009. Additionally, had Harrier known the full extent of Kenyon's knowledge and responsibility for paying the missed annuity, it would have brought suit against Kenyon at the same time it filed its initial complaint against CPA. Because Kenyon lied to Harrier and hid relevant information, Harrier did not file a lawsuit against Kenyon initially and was forced to later bring a contested motion to amend its complaint against Kenyon.

         Kenyon replies that the “American rule” proscribes Harrier from collecting damages based on the burdens of litigation. See Rizzo Pool Co. v. Del Grosso, 240 Conn. 58, 72 (1997). But the rule, employed by Connecticut, merely disallows attorneys' fees to the successful party as a general principle of litigation. Id. It does not speak to the instant case, where Harrier alleges that Kenyon, in an effort to deflect, intentionally and fraudulently induced Harrier to sue another party. Considering that Harrier did not learn the extent of Kenyon's actions until discovery in this case revealed it, Harrier will be permitted to supplement or correct its damage disclosures. The parties may have additional time for discovery if necessary, and Harrier shall be permitted to demonstrate its concealment-based damages at trial.

         Harrier next argues that Kenyon's failure to make the 2006 annuity payment itself was a breach of Kenyon's fiduciary duty because it resulted from Kenyon placing its own interests before those of Harrier.

         Harrier characterizes Kenyon's failure of care as resulting from a failure of loyalty. Virtually any failure to use reasonable care could be framed rhetorically as a failure to adequately consider the interests of others, but Connecticut courts differentiate between a negligence claim - which implicates a duty of care, and a breach of a fiduciary duty - which implicates a duty of loyalty. See Beverly Hills Concepts, Inc., v. Schatz and Schatz, Ribicoff and Kotkin, 247 Conn. 48, 57 (1998). Here, Harrier's own valuation expert, Rosenfarb, explains in his executive summary that he calculated the damages “caused by the alleged negligence of Kenyon . . . for failure to pay the required annuity . . .” “This alleged negligence caused the irrevocable loss of Harrier's Saudi patent rights . . .” (emphasis supplied).

         “Unlike breach of fiduciary duty claims, professional negligence claims implicate only a duty of care, rather than a duty of loyalty and honesty.” Short v. Connecticut Community Bank, N.A., 2012 WL 1057302 *11 (D. Conn. March 28, 2012). Here, there is no allegation or evidence that Kenyon deliberately allowed Harrier's patent application to lapse or that Kenyon benefited from the lapse. Disloyalty was not the proximate cause of the patent application loss, as Kenyon did not advance its own interests by failing to pay the annuity. See Bozelko v. Papastavros, 323 Conn. 275, 283 n. 10 (2016) (“[A] plaintiff alleging a breach of fiduciary duty must show that any damages sustained were proximately caused by the fiduciary's breach of his or her fiduciary duty.”).

         Kenyon's alleged incompetence, not its disloyalty, was the substantial factor that caused the Saudi patent application to lapse. See 2 Nat. Place, ...


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