United States District Court, D. Connecticut
RULING ON MOTION FOR PREJUDGMENT REMEDY AND MOTION
Michael P. Shea, U.S.D.J.
contractual dispute between two financial services firms, the
plaintiff, NovaFund Advisors, LLC (“NovaFund”),
filed a motion seeking a prejudgment remedy against the
defendant and counterclaim plaintiff, Capitala Group, LLC
(“Capitala”), together with a motion for
disclosure of assets. I held an evidentiary hearing on the
motion for prejudgment remedy on March 28, 2019. This ruling
sets forth my findings of fact and conclusions of law.
forth more fully below, I find that there is not probable
cause to believe that a judgment in the amount sought by
NovaFund - over $8.5 million - will be rendered in its favor,
but that there is probable cause that a judgment in the
amount of $250, 000, taking into account defenses,
counterclaims, and setoffs, will be rendered in its favor.
Specifically, there is probable cause to believe that a $250,
000 judgment will be rendered in favor of Novafund on its
claim for breach of the covenant of good faith and fair
dealing, and there is not probable cause to believe that any
specific amount will be rendered in favor of Capitala on its
counterclaims. NovaFund has demonstrated probable cause that,
as the placement agent for Capitala's investment fund, it
would have earned additional fees of $250, 000 had Capitala
not taken steps to frustrate and undermine the objectives of
the agreement between the parties. These fees would have been
generated by a large investment made into the fund by an
investor courted by NovaFund, and from which Capitala later
unilaterally obtained a substantial investment outside the
fund without NovaFund's knowledge. There is also probable
cause to find that Capitala acted in bad faith. Accordingly,
I GRANT IN PART and DENY IN PART the motion for prejudgment
remedy (ECF No. 15) and GRANT the motion for disclosure of
assets (ECF No. 19).
Civ. P. 64(a) provides in relevant part that
“throughout an action, every remedy is available that,
under the law of the state where the court is located,
provides for seizing a person or property to secure
satisfaction of the potential judgment.” Fed.R.Civ.P.
64(a). I thus apply Connecticut's prejudgment remedy
statute, Conn. Gen. Stat. §§ 52-278a, et
seq. Under that statute, “[a] prejudgment remedy
is available upon a finding by the court that there is
probable cause that a judgment in the amount of the
prejudgment remedy sought, or in an amount greater than the
amount of the prejudgment remedy sought, taking into account
any defenses, counterclaims or set-offs, will be rendered in
the matter in favor of the plaintiff . . . .” TES
Franchising, LLC v. Feldman, 286 Conn. 132, 137 (2008)
(citation and internal quotation marks omitted); see
also Conn. Gen. Stat. § 52-278d(a)(1).
probable cause standard is modest, and “not as
demanding as proof by a fair preponderance of the
evidence.” TES Franchising, LLC, 286 Conn. at
137. “The legal idea of probable cause is a bona fide
belief in the existence of the facts essential under the law
for the action and such as would warrant a man of ordinary
caution, prudence and judgment, under the circumstances, in
entertaining it.” Id. (citation omitted). It
is “a flexible common sense standard” that
“does not demand that a belief be correct or more
likely true than false.” Id. (citation
omitted). “[T]he trial court's function [under this
standard] is to determine whether there is probable cause to
believe that a judgment will be rendered in favor of the
plaintiff in a trial on the merits.” Id.
(citation omitted). The trial court has “broad
discretion” to make this determination, and “a
prejudgment remedy hearing is not contemplated to be a full
scale trial on the merits.” Id. at 143.
addition, the statute “requires that a trial court make
a probable cause determination as to both the validity of the
plaintiff's claim and the amount of the remedy
sought.” Id. at 145-46 (citation omitted).
“[T]he party seeking the prejudgment remedy must
present evidence that is sufficient to enable the court to
determine the probable amount of the damages involved.”
Id. at 146 (citation and internal quotation marks
omitted). “Although the likely amount of damages need
not be determined with mathematical precision . . . the
plaintiff bears the burden of presenting evidence that
affords a reasonable basis for measuring her loss.”
Id. (internal quotations and alterations omitted).
Nonetheless, the “court may grant a prejudgment remedy
order that authorizes an attachment for an amount less than
that sought in the application for prejudgment remedy as long
as there is probable cause that a judgment in that lesser
amount, taking into account any defenses, counterclaims or
setoffs, will be rendered in the plaintiff's
favor.” Connecticut Light & Power Co. v.
Gilmore, 89 Conn.App. 164, 176 (2005).
under Conn. Gen. Stat. § 52-278n, “the court may,
on motion of a party, order an appearing defendant to
disclose property in which he has an interest or debts owing
to him sufficient to satisfy a prejudgment remedy.”
Conn. Gen. Stat. § 52-278n(a). “Generally, under
Connecticut law, a disclosure of assets is ordered if a
prejudgment remedy is ordered.” Wachovia Bank, N.A.
v. Cummings, No. 309CV957SRU, 2010 WL 466160, at *9 (D.
Conn. Feb. 8, 2010); see also Conn. Gen. Stat.
§ 52-278n(c) (authorizing same).
Implied Covenant of Faith and Fair Dealing
Connecticut law,  the covenant of good faith and fair
dealing is implied in every contract and “requir[es]
that neither party do anything that will injure the right of
the other to receive the benefits of the agreement.”
De La Concha of Hartford, Inc. v. Aetna Life Ins.
Co., 269 Conn. 424, 432 (2004) (citation omitted).
“Essentially the implied covenant of good faith and
fair dealing is a rule of construction designed to fulfill
the reasonable expectations of the contracting parties as
they presumably intended.” Geysen v. Securitas Sec.
Servs. USA, Inc., 322 Conn. 385, 399 n.11 (2016)
(citation and alterations omitted). “The principle,
therefore, cannot be applied to achieve a result contrary to
the clearly expressed terms of a contract, unless, possibly,
those terms are contrary to public policy.”
Id. “To constitute a breach of the implied
covenant of good faith and fair dealing, the acts by which a
defendant allegedly impedes the plaintiff's right to
receive benefits that he or she reasonably expected to
receive under the contract must have been taken in bad
faith.” De La Concha of Hartford, Inc., 269
Conn. at 432 (alterations and citation omitted). “Bad
faith in general implies both actual or constructive fraud,
or a design to mislead or deceive another, or a neglect or
refusal to fulfill some duty or some contractual obligation,
not prompted by an honest mistake as to one's rights or
duties, but by some interested or sinister motive . . . . Bad
faith means more than mere negligence; it involves a
dishonest purpose.” Id. (citation omitted).
“Bad faith may [also] include one party's
performance or interpretation of the contract in a manner
that evades its spirit and is unfaithful to its purpose,
resulting in a denial of the justified expectations of the
other party.” Landry v. Spitz, 102 Conn.App.
34, 48 (2007).
Findings of Fact & Conclusions of Law
assume familiarity with the pleadings, NovaFund's motion
for a prejudgment remedy and motion for disclosure, as well
as the testimony and exhibits admitted at the March 28
hearing. I emphasize that I make the following findings based
on the probable cause standard, not by a preponderance of the
evidence. The parties have not yet taken any significant
discovery, and it remains to be seen whether either party
will be able to prove its claims and defenses by a
preponderance of the evidence.
NovaFund, was, at the relevant time, a business located in
Darien, Connecticut, focused on providing investment advisory
and investment placement services. Capitala, which is located
in Charlotte, North Carolina, “organize[s] and
manage[s] various types of investment funds and provide[s]
investment management ...