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Jolen, Inc. v. Brodie and Stone, PLC

Court of Appeals of Connecticut

December 11, 2018

JOLEN, INC.
v.
BRODIE AND STONE, PLC, ET AL.

          Argued October 17, 2018

         Procedural History

         Action to recover damages for, inter alia, breach of fiduciary duties, and for other relief, brought to the Superior Court in the judicial district of Fairfield; thereafter, the court, Krumeich, J., granted the defendants' motion for summary judgment and rendered judgment thereon, from which the plaintiff appealed to this court. Reversed; further proceedings.

          Frank J. Silvestri, Jr., with whom was Kristen G. Rossetti, for the appellant (plaintiff).

          Edward R. Scofield, with whom, on the brief, was Carolyn A. Trotta, for the appellees (defendants).

          Lavine, Keller and Bishop, Js.

          OPINION

          BISHOP, J.

         The plaintiff, Jolen, Inc., appeals from the summary judgment rendered by the trial court in favor of the defendant, Brodie & Stone, PLC, and Brodie & Stone International, PLC, [1] on the plaintiff's claim of breach of fiduciary duty. The plaintiff claims on appeal that, in view of the court's unchallenged determination that an agency relationship existed between the parties, its subsequent failure to conclude that such relationship was per se fiduciary in nature was incorrect as a matter of law.[2] We agree and, accordingly, reverse the judgment of the trial court.

         The following undisputed facts and procedural history are relevant to this appeal. The plaintiff is a United States based manufacturer of various products for the removal or lightening of unwanted body hair, including a bleach product that it produces in Connecticut.[3] The defendant is a United Kingdom based manufacturer, distributor, and seller of personal care products. By written agreement (distribution agreement) executed by the parties in 1995, the defendant agreed to act as the plaintiff's ‘‘sole and exclusive [d]istributing [a]gent'' for the purposes of selling and distributing the plaintiff's bleach product[4] in the United Kingdom and the Republic of Ireland, in exchange for a 20 percent sales commission.

         Under the distribution agreement, the plaintiff had its product shipped to the defendant in the United Kingdom and thereafter relied on the defendant to, inter alia, clear the plaintiff's product through customs; warehouse the product in the United Kingdom; advertise the product; promptly inform the plaintiff of any factors likely to be relevant to the distribution of the product; sell, ship, and invoice the product to customers; and account to the plaintiff for monies received and remit the funds to the plaintiff via a designated bank account. The defendant also was responsible for covering the costs associated with clearing the product through customs and delivering it to customers, albeit the plaintiff was required to reimburse the defendant for these expenses. While vesting the defendant with these broad responsibilities, the agreement concurrently constrained the defendant's conduct in carrying out its duties by requiring the defendant to, among other things, ‘‘at all times give proper consideration and weight to the interests of the [plaintiff] in all dealings and . . . abide by any rules and carry out any instructions from the [plaintiff] as to the sale, storage, pricing, distribution and advertising of the [p]roduct, and other related matters.''

         The parties continually renewed the distribution agreement until the plaintiff notified the defendant in October, 2014, that it would not be renewing the agreement upon its termination.[5] Thereafter, in October, 2015, the plaintiff commenced the present action against the defendant alleging multiple claims arising out of the parties' business relationship. In count two of the operative complaint, [6] the only count at issue in this appeal, [7] the plaintiff alleged, in essence, that by virtue of the distribution agreement, the parties had a principal-agent relationship pursuant to which the defendant owed the plaintiff certain fiduciary duties and that the defendant breached these duties in various respects, thereby causing the plaintiff to suffer damages.

         On May 5, 2017, the defendant moved for summary judgment on the plaintiff's breach of fiduciary duty claim on the ground that no fiduciary relationship existed between the parties.[8] The plaintiff argued in opposition to the motion that, under the operative terms of the distribution agreement, the parties' relationship constituted an agency relationship as a matter of law and that the defendant was therefore a per se fiduciary of the plaintiff. At oral argument on the motion on June 13, 2017, the defendant responded that, even if the parties had a principal-agent relationship, the court nevertheless needed to make an independent determination as to whether this relationship was fiduciary in nature.

         The following day, the court issued a memorandum of decision granting the defendant's motion for summary judgment. The court first addressed the issue of whether a principal-agent relationship existed between the parties. The court began by setting forth the well-established elements required to show the existence of such relationship under Connecticut law: (1) a manifestation by the principal that the agent will act for him, (2) acceptance by the agent of the undertaking, and (3) an understanding between the parties that the principal will be in control of the undertaking.[9] See Beckenstein v. Potter & Carrier, Inc., 191 Conn. 120, 133, 464 A.2d 6 (1983). Regarding the standard by which courts determine whether these elements have been met, the court correctly noted that ‘‘the labels used by the parties in referring to their relationship are not determinative'' and that, therefore, ‘‘a court must look to the operative terms of their agreement or understanding.'' (Internal quotation marks omitted.) Id., 133-34. The court then concluded that its ‘‘[r]eview of the operative [distribution] agreement, ‘interpreted as a whole, with all relevant provisions [considered] together'; [id., 134]; demonstrate[d] that [the defendant] was [the plaintiff's] agent for the distribution of [the plaintiff's] products to customers in the markets in which [the defendant was] the exclusive distributer.''[10]

         The court further concluded, however, that ‘‘a contractual duty to act as [a] distributer of a manufacturer's product does not necessarily impose fiduciary duties on a distributer to the manufacturer'' and that ‘‘[m]erely because the parties use the term agent does not deter- mine whether the parties' relationship is [fiduciary in nature, i.e., ] characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise . . . .'' (Internal quotation marks omitted.) Consequently, notwithstanding its determination that an agency relationship existed between the parties, the court proceeded to consider whether such relationship was fiduciary ...


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