United States District Court, D. Connecticut
AASHISH KALRA, et. al. Plaintiffs,
v.
ADLER POLLOCK & SHEEHAN P.C., MICHAEL GILLERAN, Defendants.
MEMORANDUM OF DECISION RE: DEFENDANTS' MOTION TO
DISMISS COUNTS TWO AND THREE (ECF NO. 26)
KARI
A. DOOLEY UNITED STATES DISTRICT JUDGE.
Kari A.
Dooley, United States District Judge The Plaintiffs, Aashish
Kalra (“Kalra”), Asia Pacific Ventures, Ltd
(“Asia”), and Trikona Advisers, Limited
(“TAL”) (collectively, “the
Plaintiffs”), bring this action against their former
attorney, Michael Gilleran, and his (now former) law firm,
Adler Pollock & Sheehan (collectively “the
Defendants”). The Defendants represented the Plaintiffs
in a series of actions litigated in both Connecticut and the
Cayman Islands. In Count One, the Plaintiffs allege legal
malpractice. In Counts Two and Three they assert,
respectively, claims for breach of fiduciary duty and
violations of the Connecticut Unfair Trade Practices Act
(“CUTPA”). The Defendants have moved to dismiss
Counts Two and Three on the basis that neither states a
viable cause of action under Connecticut law. The Plaintiffs
oppose the motion. The Court heard oral argument on January
14, 2019. For the reasons that follow, the motion to dismiss
is GRANTED in part and DENIED in part.
Standard
of Review
In
deciding a motion to dismiss under Rule 12(b)(6), the Court
takes as true all allegations and construes them in a light
most favorable to the Plaintiffs. Hoover v. Ronwin,
466 U.S. 558, 587 (1984). To state an adequate claim,
“a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“A claim has facial plausibility when . . . plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant[s] [are] liable for
the misconduct alleged.” Id. “Although
all allegations contained in the complaint are assumed to be
true, this tenet is ‘inapplicable to legal
conclusions.'” LaMagna v. Brown, 474
Fed.Appx. 788, 789 (2d Cir. 2012) (quoting Ashcroft,
556 U.S. at 678); see also Amaker v. New York State Dept.
of Corr. Servs., 435 Fed.Appx. 52, 54 (2d Cir. 2011)
(same). Accordingly, the Court is not “bound to accept
conclusory allegations or legal conclusions masquerading as
factual conclusions.” Faber v. Metro. Life Ins.
Co., 648 F.3d 98, 104 (2d Cir. 2011) (quoting Rolon
v. Henneman, 517 F.3d 140, 149 (2d Cir. 2008) (internal
quotation marks omitted)). Consequently, “[t]hreadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.”
Ashcroft, 556 U.S. at 678 (citing Twombly,
550 U.S. at 555).
Factual
Allegations
The
complaint's allegations, taken as true for purposes of
this motion, are summarized as follows. The Plaintiffs
entered into an attorney-client relationship with the
Defendants in or around April 2011. Defendant Gilleram
continued in this relationship until October 2015. Defendant
Adler Pollock & Sheehan continued in this relationship
until January 2015. During the course of the attorney-client
relationship, the Defendants represented the Plaintiffs in no
less than five lawsuits or appeals in state, federal and
foreign courts. Prior to and during the period of
representation, the Defendants told the Plaintiffs, inter
alia, that they were experienced commercial litigators,
knowledgeable and well versed in international bankruptcy
law, and highly skilled in the conduct of litigation, to
include achieving prompt and favorable settlements.
Plaintiff
Asia was a 50% owner of TAL, a Cayman Island entity.
Plaintiff Kalra is the controlling principal of Asia. TAL was
also 50% owned either by non-party Rakshitt Chugh or one of
his related entities. As a result of a dispute between Kalra
and Chugh, the Plaintiffs brought suit against Chugh and his
related entities in this Court, Civil Action No. 11-CV-0215
(SRU). Therein, the Plaintiffs claimed that Chugh breached
his fiduciary duties and pleaded related causes of action
arising out of the parties' joint interest in TAL. In
that litigation, a prejudgment remedy was granted and, on
April 9, 2012, Chugh posted a $1 million bond in lieu
thereof.
In
January 2012, the Defendants rendered an opinion letter to
Ravindra Chitnis and Saurabh Killa, directors of TAL, that
concluded that Chugh could be removed from the TAL Board of
Directors without notice and without the need to convene a
Board of Directors meeting. They opined that, under TAL's
Articles of Association, Chugh could be removed by a
resolution in writing signed by all of the Directors, other
than the director being removed. At that time, Kalra, Chugh,
Chitnis, and Killa were the only directors of TAL.
The
purported motive for the opinion letter and the subsequent
removal by resolution of Chugh from the TAL Board of
Directors was to allow TAL to be substituted as the plaintiff
in the Connecticut District Court litigation, thereby
requiring TAL, instead of Kalra or Asia, to pay the legal
fees associated with that litigation. The ability of TAL to
incur and pay those fees “vastly exceeded” the
ability of either Asia or Kalra to pay.
On
February 13, 2012, ARC Capital, Inc. (“ARC”) and
Haida Investments, Ltd. in response to the Connecticut
District Court litigation, filed a Petition in the Grand
Court of the Cayman Islands seeking to wind up TAL and to
divide its assets between Kalra and Chugh. Asia (the entity
through which Kalra owned 50% of TAL), opposed the petition.
In connection with the defense of the Cayman proceeding, the
Defendants told the Plaintiffs that the Cayman Court
proceedings can have “no effect on the U.S.
proceedings, ” that the Judge in the U.S. proceedings
“can never recognize any provisional liquidator
appointed in the Cayman Proceedings, ” and that
“Chapter 15 [of the United States Bankruptcy Code] is
an absolute bar to recognition of foreign liquidators in U.S.
Courts unless the recognition requirements of Chapter 15 are
met.”
The
Defendants advised the Plaintiffs to assert Chugh's
breach of fiduciary duty and related allegations as defenses
to the wind up proceedings in the Cayman Court, which they
did. The Cayman Court held a trial in January 2013 and
rejected each of the defenses asserted by Asia. Thereafter,
this Court gave preclusive effect to the findings of the
Cayman Court. The Plaintiffs' litigation against Chugh
and his related entities then pending in this Court were
accordingly concluded on that basis. The District Court's
decision was affirmed by the Court of Appeals for the Second
Circuit.
Moreover,
the Cayman Court “relied heavily upon what he called a
‘seizure of control' that had serious adverse
consequences for Mr. Chugh and the petitioners ARC Capital
and Haida Investments ‘because it enabled [Kalra] to
misuse the company's money for his own
benefit.'” The benefit referred to was the payment
of the Defendants' invoices and fees. The Cayman Court
ordered Kalra and Asia to pay $700, 000 in costs.
In
addition to these allegations, the Plaintiffs allege in Count
Two that the Defendants breached their duty of loyalty to the
Plaintiffs. The Plaintiffs aver that the decision to remove
Chugh as a director of TAL was “clearly designed to
enrich [the Defendants]” at the expense of the
clients' interests, given the impact of the Cayman
Court's decision. The Plaintiffs further allege that the
Defendants' decision to participate in the Cayman wind up
proceeding permitted the Defendants to extract large amounts
of legal fees “that otherwise would not have been paid
had defendants advised the plaintiffs not to participate in
the Cayman proceeding because of the risk that an adverse
decision would preclude and defeat the Connecticut federal
breach of fiduciary duty action against Chugh.” The
Plaintiffs further aver that the Defendants, as a result,
were “guilty of self-dealing and conflict of interest
when they subordinated the interests of the plaintiffs to the
pecuniary and financial interest of themselves.” In
addition, the Plaintiffs aver that the Defendants breached
their fiduciary duty by “charging exorbitant fees,
churning hours needlessly, and falsely representing that they
had expertise in areas of the law” at issue in the
various forums.
In
2014, ARC brought a vexatious litigation claim against the
Plaintiffs and the Defendants. The claims were voluntarily
dismissed but refiled in 2017. The Defendants settled this
dispute and Plaintiffs allege that, in so doing, the
Defendants further breached their fiduciary duty because the
Defendants settled the lawsuit “knowing that the ...