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Armour Capital Management LP v. SS&C Technologies, Inc.

United States District Court, D. Connecticut

January 5, 2020




         Plaintiff ARMOUR Capital Management LP (“ACM”) is a registered investment advisor that focuses on mortgage-related securities. In mid-2014, ACM sought to purchase a package of software and services to assist in managing client portfolios. For several months ACM engaged in discussions for this purpose with defendant SS&C Technologies, Inc. (“SS&C”). The discussions focused on SS&C's software product known as “CAMRA.” The parties eventually entered into a Master Agreement in December 2014 but-for reasons hotly disputed by the parties-the implementation of CAMRA with ACM did not succeed after many months of efforts on both sides.

         ACM sued SS&C in 2017, and the parties have remained enmeshed in years of litigation about their failed business relationship. I have previously ruled on numerous dispositive motions, [1] and the trial of this action will now proceed next week on two of ACM's claims: (1) that SS&C engaged in pre-contractual negligent misrepresentations, and (2) that SS&C's pre- contractual conduct violated the Connecticut Unfair Trade Practices Act (“CUTPA”).

         On January 3, 2020, I conducted a hearing on the parties' respective motions in limine. In light of the parties' arguments at this hearing and my further consideration of the parties' papers, this ruling now addresses seriatim the multiple motions in limine. I will first discuss the motions that seek general limitations on the scope of trial evidence before turning to the motions relating to expert testimony.

         SS&C's first motion in limine to preclude punitive damages (Doc. #214-1)

         SS&C moves in limine to preclude evidence, testimony, or argument relating to punitive damages on the ground that none of ACM's remaining claims could support an award of punitive damages. The complaint, however, seeks an award of punitive damages for both the negligent misrepresentation and CUTPA claims. Doc. #35 at 19, 21. A cause of action under CUTPA allows for the recovery of punitive damages if it is shown that the defendant engaged in outrageous conduct, such as with a bad motive or reckless indifference to the rights of others. See, e.g., Doctor's Assocs., Inc. v. Kaur, 2019 WL 7290950, at *2 (D. Conn. 2019). Similarly, for a common law claim like negligent misrepresentation, punitive damages may be awarded if the evidence shows a reckless indifference to the rights of others or an intentional and wanton violation of those rights. See Dunn v. Peter L. Leepson, P.C., 79 Conn.App. 366, 371 (2003). Accordingly, I will deny SS&C's motion without prejudice to renewal at the close of trial evidence if SS&C has grounds at that time to argue that the evidence is not legally sufficient to allow for a jury finding of intentional misconduct or reckless indifference as required to sustain a claim for punitive damages.[2]

         SS&C's second motion in limine to preclude evidence of lost employee time (Doc. #214-1)

         SS&C moves in limine to preclude evidence, testimony, or argument relating to damages resulting from “lost employee time” that ACM's employees allegedly devoted to trying to implement CAMRA. SS&C relies on the following damages limitation set forth in Section 6.2.2 of the parties' Master Agreement:

Exclusion of Consequential Damages and Absolute Limitation on SS&C's Liability. SS&C is not liable for any indirect, special, incidental or consequential damages of any kind, including without limitation, loss of profits, loss of use, business interruption, loss of data, or cost of cover in connection with or arising out of the furnishing, performance of any services under the Master Agreement, any Attachment or any Work Request, or use of the Software furnished hereunder or for breach of this Master Agreement, whether alleged as a breach of contract or tortious conduct, even if SS&C has been advised of the possibility of such damages.

         For essentially the same reasons that I have previously ruled that the Master Agreement's merger clause does not preclude a claim for negligent misrepresentation stemming from pre-contractual conduct, ARMOUR Capital Mgmt. LP, 2019 WL 4307001, at *4-*5, and because of the absence of specific language in Section 6.2.2 purporting to limit SS&C's liability for pre-contractual conduct, I conclude that Section 6.2.2 does not apply to limit the scope of damages that may be awarded as a result of pre-contractual tortious conducting involving negligent misrepresentation and CUTPA violations. If ACM was wrongly induced in the first place to enter into the Master Agreement, it makes little sense to hold ACM to a limitation on damages that it was wrongly induced to agree to as part of the Master Agreement. Accordingly, I will deny SS&C's motion in limine with respect to lost employee time.

         SS&C's third motion in limine to preclude characterization of evidence as lies or as intentional misrepresentations (Doc. #214-1)

         SS&C moves in limine to preclude any evidence, testimony, or argument that characterizes SS&C as lying, making intentional misrepresentations, or otherwise intentionally deceiving or misleading ACM. As SS&C notes, I have previously dismissed ACM's claim for intentional misrepresentation for failure to have pleaded the claim with sufficient particularity as required under Fed.R.Civ.P. 9(b). See ARMOUR Capital Mgmt. LP, 2018 WL 1368908, at *6. SS&C argues that ACM should not be allowed to undo this ruling by injecting argument and claims of intentional misrepresentation at trial. I agree. Although I declined to dismiss ACM's negligent misrepresentation claim for failure to comply with the pleading requirement of Rule 9(b), it was on the basis that this claim as pleaded relied solely on negligent-rather than intentional-misrepresentations. Ibid.; see also Doc. #35 at 20-21. It is true that a claim for negligent misrepresentation may be based not only on statements that a defendant knew to be false but also should have known to be false. See Coppola Const. Co. v. Hoffman Enterprises Ltd. P'ship, 309 Conn. 342, 351-52 (2013). Still, a negligent misrepresentation or a CUTPA claim is equally subject to the pleading requirements of Rule 9(b) to the extent that it rests on fraud or intentional misrepresentations, as distinct from negligent or reckless conduct. See Karazin v. Wright Med. Tech., Inc., 2018 WL 4398250, at *6 (D. Conn. 2018) (concluding that Rule 9(b) applies to a negligent misrepresentation claim where it was “couched in fraud-like terms of known falsity”), reconsideration denied, 2018 WL 6067235 (D. Conn. 2018); Milo v. Galante, 2011 WL 1214769, at *8-*9 (D. Conn. 2011) (discussing how Rule 9(b) applies to negligent misrepresentation and CUTPA claims to the extent they are based on alleged fraudulent statements).

         Consistent with my ruling dismissing ACM's claim for intentional misrepresentations and to prevent an end-run of Rule 9(b)'s requirement that allegations of fraud be pleaded with particularity, I will preclude ACM from predicating its negligent misrepresentation or CUTPA claims on an argument that SS&C engaged in intentional misrepresentations. Accordingly, I will grant SS&C's motion in limine to the extent that it seeks to preclude ACM from adducing evidence or argument of intentional misrepresentations that resulted in ACM's agreement to purchase CAMRA. This ruling does not preclude ACM from challenging the credibility of SS&C's witnesses or otherwise arguing that SS&C acted intentionally in a manner apart from the making of misrepresentations that serve as the basis for ACM's negligent misrepresentation and CUTPA claims. Nor does this ruling necessarily limit the scope of the Court's jury instructions subject to further discussions with counsel.

         SS&C's fourth motion in limine to preclude ACM from trying a breach of contract or warranty case (Doc. #214-1)

         SS&C moves in limine to preclude ACM from presenting to the jury a case based on the previously dismissed claims of breach of contract and breach of warranty. I will grant this motion on the ground that the breach of contract claim was dismissed and that the parties' contract, the Master Agreement, bars a breach of warranty claim. This ruling, however, is without prejudice to the introduction of post-contractual evidence to the extent that such evidence is shown to be relevant to the pre-contractual negligent misrepresentation and CUTPA claims.

         SS&C's fifth motion in limine to preclude evidence of Bimini Capital Management (Doc. #214-1)

         SS&C moves in limine to preclude adverse evidence, argument or testimony concerning a different SS&C mortgage REIT client known as Bimini Capital Management (“Bimini”). SS&C argues that this evidence is not relevant because SS&C did not contract with Bimini until September 2015-approximately nine months after its entry into the Master Agreement with ACM-and because the Bimini evidence will lead to a “mini-trial within the trial” and will be used for prejudicial propensity purposes. I do not agree.

         To begin with, it is well-established that a defendant's subsequent conduct may be relevant to a jury's consideration of the significance or nature of a defendant's prior conduct. See, e.g., Associated Constr. / AP Constr., LLC v. Hanover Ins. Co., 2018 WL 3998971, at *9 (D. Conn. 2018) (“Subsequent conduct may be probative of whether a declarant knew or should have known a statement was false at the time it was made.”) (quoting Glazer v. Dress Barn, Inc., 274 Conn. 33, 76 (2005)). Here, ACM argues that-to the extent that SS&C's implementation of CAMRA failed with Bimini and to the extent that Bimini is substantially similar to ACM-that SS&C should have known that the representations it was making to ACM were false. Given the time lapse of nine months, this inference seems a bit tenuous to me. But I am not prepared to say that such evidence fails altogether to meet the broad standard of relevance, which looks simply to whether “it has any tendency to make a fact more or less probable than it would be without the evidence, ” and if “the fact is of consequence in determining the action.” Fed.R.Evid. 401 (emphasis added); see also Fed. R. Evid. 402 (all relevant evidence generally admissible).

         But beyond the issue of what SS&C should have known, I conclude that the Bimini evidence is relevant to the issue of whether the representations made by SS&C were false at all. ACM argues in essence that it was false for SS&C to claim that CAMRA could be implemented on the basis of a hybrid “hosted” model similar to the model it also pursued with Bimini-a method allegedly distinct from SS&C implementation of CAMRA with other mortgage REIT customers. If so, then the failed implementation with Bimini is relevant to whether SS&C's specific representations about implementation to ACM were false in the first place (regardless whether it also shows that SS&C should have known this to be so). Moreover, to the extent that the representations made to Bimini were similar to those made to ACM and to the extent that Bimini relied on those representations, the Bimini evidence is relevant to the issue of reasonable reliance on the allegedly false representations.

         Having concluded that the Bimini evidence meets the test of relevance under Fed.R.Evid. 401, I conclude that its probative value is not substantially outweighed by unfair prejudice. Rule 403 of the Federal Rules of Evidence provides that “[t]he court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.” Fed.R.Evid. 403. As stated by counsel for ACM during the course of the January 3 hearing on the motions in limine, the Bimini evidence will be quite limited in scope: it will consist of an approximately two-hour deposition of a Bimini representative and limited other testimony. Although SS&C will be fully entitled to respond to this evidence, I am not convinced that there will be a protracted “mini-trial” about Bimini that would distract or confuse the jury.

         Likewise, I conclude that the Bimini evidence is not improper propensity evidence. Rule 404 provides in part that “[e]vidence of a crime, wrong, or other act is not admissible to prove a person's character in order to show that on a particular occasion the person acted in accordance with the character.” Fed.R.Evid. 404(b). The Second Circuit, however, “follows the ‘inclusionary' approach, which admits all ‘other act' evidence that does not serve the sole purpose of showing the defendant's bad character and that is neither overly prejudicial under Rule 403 nor irrelevant under Rule 402.” United States v. Moran-Toala, 726 F.3d 334, 345 (2d Cir. 2013). The factors relevant to determining the admissibility of “other act” evidence include whether (1) the evidence is offered for a proper purpose, (2) the evidence is relevant to a disputed issue pursuant to Rule 402, (3) the probative value of the evidence is substantially outweighed by its potential for unfair prejudice pursuant to Rule 403, and (4) the evidence was admitted in conjunction with an appropriate limiting instruction, if requested. Ibid.

         Here, I have concluded that the Bimini evidence is offered for a proper non-propensity purpose, as discussed above, that it is otherwise admissible as relevant evidence under Rule 402, that it is not subject to preclusion for reasons of unfair prejudice under Rule 403, and I will give a limiting instruction to the jury that such evidence should not be considered as propensity evidence if ...

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