Reclaimant Corp. v. Deutsch

          Argued November 7, 2018

         Procedural History

         Action to recover damages for unjust enrichment, and for other relief, brought to the Superior Court in the judicial district of Stamford, where the defendants filed a counterclaim; thereafter, the court, Genuario, J., granted the defendants' motion for summary judgment and rendered judgment for the defendants as to the plaintiff's complaint, from which the plaintiff appealed. Reversed; further proceedings.

          David S. Golub, with whom, on the brief, was Jonathan M. Levine, for the appellant (plaintiff).

          Howard Graff, pro hac vice, with whom, on the brief, were Stephen G. Walko and Andrea C. Sisca, for the appellees (defendants).

          McDonald, D'Auria, Mullins, Kahn, Ecker and Vertefeuille, Js.

          OPINION

          ECKER, J.

         The narrow issue presented by this appeal is whether the statute of limitations of the state of Connecticut or the state of Delaware governs the unjust enrichment claims brought by the plaintiff, Reclaimant Corp., against the defendants, William J. Deutsch and Laurence B. Simon, seeking recovery for alleged overpayments issued to the defendants by the plaintiff's putative predecessor in interest pursuant to a limited partnership agreement. The trial court rendered summary judgment in favor of the defendants, concluding that the plaintiff's unjust enrichment claims were governed by Delaware law and were time-barred under the three-year statute of limitations in the Delaware Revised Uniform Limited Partnership Act (DRULPA), Del. Code Ann. tit. 6, § 17-607 (c) (2005).^[1] On appeal, the plaintiff contends that summary judgment was improper because Connecticut law governs the timeliness of its unjust enrichment claims and that those claims timely were filed under Connecticut law.

         We conclude that Delaware law governs the substantive rights and liabilities of the parties arising out of the limited partnership agreement but that Connecticut law governs matters of judicial administration and procedure. We further conclude that, because the plaintiff's unjust enrichment claims have a common-law origin, the limitation period properly is ‘‘characterized as procedural because it functions only as a qualification on the remedy to enforce the preexisting right.'' Baxter v. Sturm, Ruger & Co., 230 Conn. 335, 347, 644 A.2d 1297 (1994). Thus, Connecticut law, rather than Delaware law, controls the timeliness of the plaintiff's claims. We therefore reverse the judgment of the trial court and remand the case for further proceedings.

         I

         The record reveals the following relevant facts and procedural history. In 2007, the defendants entered into a limited partnership agreement with SV Special Situations Fund LP (SV Fund), a Delaware limited partnership formed for the purpose of investing in and trading securities and other investments. In early 2008, the defendants redeemed their respective investments and withdrew from the partnership as of March 31, 2008. Deutsch received approximately 90 percent of the funds in his capital account, for a total distribution in the amount of $22, 309, 473.03, and Simon received approximately 90 percent of the funds in his capital account, for a total distribution in the amount of $2, 176, 785.80.^[2]

         By letters dated September 4, 2012, Scott A. Stagg, the director of SV Fund, informed each of the defendants that the ‘‘net asset value of your interest in the . . . Fund was . . . overstated [at the time you redeemed your investment], resulting in . . . overpayment . . . .'' Stagg alleged that Deutsch had received a total overpayment in the amount of $7, 047, 974.03 and that Simon had received a total overpayment in the amount of $724, 557.80, and he demanded that the defendants return the alleged overpayments within thirty days.

         The defendants responded by requesting documentation and clarification of the alleged overpayments. The defendants also requested payment of the remaining funds in their capital accounts, which had been held back at the time of redemption. Specifically, Deutsch asked for the payment of $807, 127.97 and Simon asked for the payment of $102, 753.

         SV Fund was liquidated in February, 2013, and its claims against the defendants were assigned to the plaintiff. On May 8, 2013, the plaintiff filed a two-count complaint against the defendants, both of whom reside in Connecticut. In the first count, the plaintiff alleged that Deutsch had been ‘‘unjustly enriched as a result of receiving and retaining'' the alleged overpayment in the amount of $7, 047, 974.03. In the second count, the plaintiff alleged that Simon had been ‘‘unjustly enriched as a result of receiving and retaining'' the alleged overpayment in the amount of $724, 557.80.

         The defendants moved to strike the complaint as time-barred under the three-year statute of limitations in § 17-607 (c) of DRULPA because ‘‘the distributions were made in 2008 and the complaint was not filed until 2013 . . . .'' The plaintiff opposed the defendants' motion to strike, contending that, ‘‘if any statute of limitations applies to the plaintiff's equitable unjust enrichment claims . . . it is [Connecticut's] six-year statute [of limitations applicable to contracts] set forth in [General Statutes] § 52-576 (a), and the plaintiff's claims are, therefore, not time-barred.'' The trial court determined that it was ‘‘inappropriate to decide this potentially dispositive issue within the context of a motion to strike'' and, therefore, denied the defendants' motion.

         The defendants filed an answer denying that they had been unjustly enriched and raising the following affirmative defenses: (1) the plaintiff's claims are barred by § 17-607 (b) of DRULPA, ‘‘which specifies that a limited partner who unknowingly receives an alleged overpayment is not liable for returning the amount of that distribution''; (2) the plaintiff's claims are barred by the three-year statute of limitations in § 17-607 (c) of DRULPA; (3) the plaintiff's complaint fails to state a claim on which relief maybe granted because SVFund ‘‘could have prevented and/or addressed any potential alleged overpayments''; (4) the plaintiff's claims are barred by the three-year statute of limitations governing torts in General Statutes § 52-577; (5) the plaintiff ‘‘lacks standing because [it] has not established its right to bring a cause of action on behalf of SV Fund''; (6) the plaintiff ‘‘lacks standing because [it] has not established that SV Fund or its assignees have a right to bring a cause of action on behalf of 3V Capital Partners, LP'';^[3](7) the plaintiff's claims are barred by the doctrine of laches due to its ‘‘inexcusable delay'' in filing suit; (8) the plaintiff's claims are ‘‘barred by the doctrine of waiver''; (9) the plaintiff's claims are ‘‘barred by the doctrine of estoppel''; (10) the plaintiff's claims ‘‘are barred by the equitable doctrine of unclean hands''; (11) the plaintiff's claims ‘‘are barred by the doctrine of satisfaction and accord''; and (12) the plaintiff ‘‘failed to mitigate its damages, if any exist.'' The defendants also filed a counterclaim against the plaintiff on the basis of SV Fund's alleged failure to distribute the funds remaining in their capital accounts.

         The plaintiff moved for summary judgment on the defendants' second and fourth special defenses, contending that ‘‘Connecticut's statute of limitations law applies to the plaintiff's common-law unjust enrichment claims'' and ‘‘Connecticut law provides that either no statute of limitations applies to an equitable action for unjust enrichment, or, at a minimum, that a six-year statute of limitations applies, and this action is timely under either measure.'' The defendants opposed the plaintiff's motion for summary judgment and moved for summary judgment on their first, second, third, fourth, and seventh special defenses. The essence of the defendants' argument was that the plaintiff's ‘‘contention that Connecticut law applies to [this] dispute is academic since neither Connecticut nor Delaware law . . . permit[s] parties to pursue unjust enrichment claims as a means to rewrite the express terms of a written agreement governing the payments at issue'' and the plaintiff's unjust enrichment claims are time-barred under both Delaware and Connecticut law.

         The trial court's resolution of the parties' competing motions for summary judgment was guided largely by the fact that the limited partnership agreement contains a choice of law provision, which states: ‘‘This [a]greement and all rights and liabilities of the parties hereto shall be governed by and construed in accordance with the laws of the [s]tate of Delaware, without regard to its conflicts of law principles.'' The trial court observed that § 187 (1) of the Restatement (Second) of Conflict of Laws ‘‘requires that the law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue was one which the parties could have resolved by an explicit provision in their agreement directed to that issue.'' The trial court determined that the contractual choice of law provision here ‘‘expressly elects Delaware law for all issues regarding the parties' rights and liabilities including those set forth in [§] 17-607 (c) of . . . DRULPA.'' In arriving at its decision, the trial court rejected the plaintiff's contention that the choice of law provision governed the substantive law of the contract but not procedural matters like the applicable statute of limitations, reasoning that the ‘‘broad and clear'' language of the contract ‘‘evidences an intent to include all issues (whether substantive or procedural) concerning rights, and all issues concerning liabilities, to be governed by Delaware law within the breadth of the choice of law election.'' Having determined that ‘‘the parties clearly and unambiguously ...