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Connectiuct Business Litigation Blog
Commentary on lawsuits and legal issues impacting Connecticut businesses. Authored by experienced business litigation attorney, Kane Bennett of Aeton Law Partners, LLP.
Can You Fix a Mistake in a Contract after Everyone Signs It?
The answer is – sometimes. A recent case in Connecticut provides an example of how courts can offer a remedy for unilateral and mutual mistakes in a contract by an action for contract reformation. The case was Stamford Property Holdings, LLC v. Dorian Jashari, et al. In the case, a plaintiff lessor sued defendant lessees, J and I, for the reformation of a commercial lease based on unilateral or mutual mistake. The dispute centered around a car wash facility owned by the plaintiff and leased by the defendants. The crux of the controversy was a ‘triple net’ provision, a commonly used term in leases that makes lessees responsible for certain expenses related to insurance, maintenance, and real estate taxes in addition to the base rent. The initial negotiations between the parties and the letter of intent contained this ‘triple net’ provision, however, the provision was inadvertently left out by the plaintiff’s attorney in the final lease. When the plaintiff subsequently sent J an invoice that included reimbursement for real estate taxes, J refused to pay, and the plaintiff took the matter to court. Following a bench trial, the court sided with the plaintiff, reforming the lease to include the ‘triple net’ provision and ordering the defendants to reimburse the plaintiff for the real estate taxes. The defendants appealed. Addressing the appeal, the appellate court upheld the trial court’s judgment, albeit with a nuanced analysis. It rejected the defendants’ claim that the trial court had erred in reforming the contract based
Appellate Court Upholds Unique Method for Shareholders to Access Records
When a minority shareholder in a corporation seeks financial and management records, the shareholder must make a statutory “books and records” request or rely on provisions in a shareholder agreement or corporate by-laws. A recent appellate court case upheld yet a third way for aggrieved shareholders to obtain corporate books and records. It is called a “bill of discovery.” This is a lawsuit purely designed to obtain information about a possible lawsuit. Its a lawsuit about a possible lawsuit. In the case of Nowak v. Environmental Energy Services, Inc., the shareholder brought a petition against the company and majority shareholder for a bill of discovery. The plaintiff alleged probable cause to support claims for breach of fiduciary duty, an accounting, and shareholder oppression. In other words, the plaintiff claimed she might have a lawsuit and needed records to explore the lawsuit. The plaintiff sought seventeen different categories of records, claiming they were material and necessary for her to bring an action on her substantive claims. The court granted her petition as to eleven of the seventeen categories of documents. This case was somewhat unique because at some point the plaintiff commenced the actual lawsuit. Therefore, the bill of discovery was no longer a lawsuit about a lawsuit. There was a pending lawsuit with the actual claims. The defendants argued that the plaintiff could pursue the records in the newly filed case. The court rejected this argument noted that under prior caselaw, a bill of discovery can co-exist with a separate
New Connecticut Law Adds Additional Grounds to Kick Out Member of an LLC
Here’s a common scenario I see as an attorney handling business disputes: Four members start an LLC to engage in business together. They all get along as friends, colleagues, or business associates. Lets call the hypothetical business Harmony LLC. When they start Harmony, each person has an assigned role with ownership of 25% of the company. Harmony has two members with management experience, another member has the sales experience, and the fourth member has the technical expertise. They all verbally agree that each member will work full-time to make the business work. They put a budget together to get started. Someone in the group brings up legal expenses for a partnership or membership agreement. In Connecticut, this governance document is referred to as an operating agreement. The four partners are tight on funds and springing for the legal expenses for a comprehensive operating agreement is not high on the list of priorities. One of the members brings up that in Connecticut, LLCs are not required to have an operating agreement and there are online sources for cheap, inexpensive form agreements. Plus, they figure they all get along so why do they need a comprehensive agreement? As a result, Harmony starts operating in business with either no operating agreement or a bad form agreement. What happens if Harmony struggles at first, or more than anticipated, or circumstances change for some members? For example, what if the business potential in the long run is very strong, but Harmony is not generating enough income in
Can You Seek Damages if You Lose Business Based on an Opponent’s Conduct During Litigation?
Ordinarily, if someone acts in bad faith, or with malice, and interferes with a contract causing lost profits, a party can potentially bring a claim in court for tortious interference with contractual relations. However, the claim is likely unavailable if the basis for the claim arises from a pending litigation case. For example, assume you have a valuable business contract, and the contract gets cancelled because of something an opponent claimed during a litigation proceeding? A recent appellate court case case confirms that immunity applies to bar claims of interference with contractual relations when the actionable conduct arises out of a litigation case. Litigation can be very disruptive to ongoing business relationships. There could be situations where a party in a litigation case loses business because of something someone does or says during a proceeding in litigation, such as a court hearing. Unfortunately, some litigants might do this intentionally as a way to gain advantage in a case. In contrast, some other litigants might seek to raise a claim of interference or infliction of emotional distress even if the conduct in question was fair game in the course of the case. The courts in Connecticut essentially come down on the side of barring subsequent claims of this type that are based on conduct during a litigation proceeding. The reason is policy based, in part, because the courts do not want witnesses and litigants to fear reprisals for raising legitimate facts and arguments in court. Essentially, although there is a
You Must Prove Damages With Reasonable Certainty In Business Lawsuits
Determining if you have provable damages is often the first step in analyzing whether to pursue a business lawsuit as a shareholder, partner, or member of a limited liability company. Likewise, if you have been sued as a result of a partnership or shareholder dispute, reviewing the exposure or possible damages you face is an important part of determining an appropriate litigation strategy. The question that must be answered is, how will the plaintiff prove to a judge or jury that the damages allegedly sustained are real, quantifiable, and reasonably certain. In Connecticut, the party that brings the lawsuit has to prove damages with reasonable certainty. A plaintiff must put forth evidence to afford a judge or jury a sufficient basis for estimating the alleged damages with reasonable certainty. In other words, there must be evidence for the court or jury to calculate damages. You cannot simply state “I have lost money” or “I have damages.” There must be proof beyond speculation or your own subjective belief. On the other hand, Connecticut law does not require exactitude or precision. There are no hard and fast rules as to the level of proof required, but it must rise to the level of reasonable certainty or a reasonable estimate. The level of proof may differ depending on the case facts, and that type of damages at issue. For example, lost business opportunities may be harder to prove for business attorneys than other types of damages. A recent appellate court case highlighted some
Lost Profit Damages in Connecticut for New Business Ventures
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