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*********************************************** 
ROGER L. SAUNDERS v. CLARK BRINER ET AL.

(SC 19940)

Robinson, C. J., and Palmer, McDonald, D’Auria,

Mullins, Kahn and Ecker, Js.*

Syllabus

The plaintiff sought to recover damages from the defendants, B and two

limited liability companies solely owned by B, C Co. and T Co., for

their mismanagement in connection with certain business transactions,

alleging, inter alia, breach of contract, fiduciary duty, and the implied

covenant of good faith and fair dealing, and violations of the Connecticut

Unfair Trade Practices Act (CUTPA) (§ 42-110a et seq.) and the Connecticut Limited Liability Company Act (CLLCA) ([Rev. to 2017] § 34-100 et

seq.). The plaintiff also sought the judicial dissolution of R Co. and F

Co. R Co. was a limited liability company owned equally by T Co. and

S, the plaintiff’s son, and had been formed for the purpose of conducting

a commercial real estate lending business. S later transferred his 50

percent interest in R Co. to the plaintiff. F Co., a limited liability company

owned by the plaintiff and B, was created to act as the controlling

general partner of a related fund, which provided a vehicle for pooling

outsider investor capital for R Co.’s loans. The plaintiff agreed to source

loans, secure investors and financers, and provide bridge financing, and,

in return, the plaintiff would receive certain profits and fees from the

loan transactions. When the plaintiff and S rejected B’s request for a

larger share of the profits, B created C Co. in order to divert outsider

capital away from R Co., negatively affecting R Co.’s profits. B also

allegedly misallocated investor profits, improperly increased investments by his insider investors and improperly charged R Co. for expenses

incurred by T Co. After the plaintiff initiated the present action, the

parties agreed to hire a joint, court-appointed fiduciary, A Co., to wind

up the fund and F Co. A Co. issued a report detailing the lack of internal

controls and concluded that R Co., the fund, and F Co. had underpaid

the investors and principals, particularly the plaintiff. At trial, the court

allowed W, a partner of A Co., to testify about his findings and admitted

A Co.’s report into evidence. Following a bench trial, the court rendered

judgment for the plaintiff on four of his derivative counts alleging, on

behalf of R Co., breach of contract against T Co., and violations of

CUTPA against all of the defendants, and, on behalf of R Co. and F Co.,

breach of fiduciary duty against T Co. The trial court rendered judgment

for the plaintiff on four of his direct counts alleging breach of the implied

covenant of good faith and fair dealing and breach of fiduciary duty by

T Co. and B for their failure to repay a portion of a loan funded by the

plaintiff’s single-member limited liability company, S Co. The trial court

found against the plaintiff on his claim that B should be required to

reimburse the plaintiff for fees relating to tax and accounting services

provided by A Co. but awarded the plaintiff attorney’s fees in connection

with his derivative CUTPA claim. On appeal, the defendants claimed

that the trial court lacked subject matter jurisdiction to review the

plaintiff’s derivative claims because CLLCA did not provide a derivative

remedy, and, in the absence of a statutory remedy, the common law

did not afford a member or manager of a limited liability company

derivative standing because CLLCA, the statutory scheme that created

the limited liability company structure, exclusively governs such claims.

The defendants also claimed that the trial court incorrectly rendered

judgment for the plaintiff on his direct claims concerning the failure of

B and T Co. to repay one of the plaintiff’s loans to R Co. because the

plaintiff lacked standing to seek repayment on the ground that S Co.

provided the investment and was the proper party to have asserted that

claim. The defendants further claimed on appeal that the trial court had

abused its discretion in admitting W’s testimony relating to certain of the

plaintiff’s derivative claims and that the trial court improperly awarded

attorney’s fees associated with both the plaintiff’s CUTPA and nonCUTPA claims rather than those fees attributable to only the CUTPA

claims. The plaintiff cross appealed, claiming that the court had abused
its discretion in declining to order B to reimburse R Co. for the fees

incurred for work performed by W and another accountant retained by

the plaintiff or to hold a hearing for the purpose of apportioning those

fees. Held:

1. This court concluded that, in the absence of a provision in the operating

agreements of R Co. and F Co. authorizing the filing of a derivative

action, the plaintiff lacked standing to bring his derivative claims on

behalf of those companies because neither CLLCA nor the common law

provided for a derivative remedy when the plaintiff commenced the

present action, and, accordingly, the trial court improperly exercised

subject matter jurisdiction over the plaintiff’s derivative claims: CLLCA

([Rev. to 2017] § 34-187) authorized only members or managers to collectively commence an action in the name of the limited liability company

upon a requisite vote of disinterested members or managers, the common law of this state does not recognize limited liability companies,

which were created by the enactment of CLLCA, and recognition of a

common-law remedy would conflict with or frustrate the purpose of

CLLCA; moreover, because the plaintiff lacked standing to assert its

derivative CUTPA claim, the trial court’s order awarding the plaintiff

attorney’s fees and costs under CUTPA was vacated, and this court did

not need to address the issues of whether the trial court properly admitted W’s testimony and whether the trial court incorrectly apportioned

the plaintiff’s award of attorney’s fees between his CUTPA and nonCUTPA claims.

2. The plaintiff had standing to bring direct claims with respect to the failure

of B and T Co. to repay a portion of S Co.’s loan to R Co., and, accordingly,

the trial court properly exercised subject matter jurisdiction over the

plaintiff’s direct claims: this court concluded that, when the member of

a single-member limited liability company seeks to remedy a harm suffered by the company, the trial court may, in its discretion, permit the

member to bring an action raising derivative claims as a direct action

and may order an individual recovery if it finds that to do so will not

unfairly expose the company or defendants to a multiplicity of actions,

will not materially prejudice the interests of creditors of the company,

and will not negatively impact other owners or creditors of the company

by interfering with a fair distribution of the recovery among all interested

parties; the record revealed that there was no dispute that the plaintiff

was the sole member of S Co. and that the loan from S Co. was funded

with the plaintiff’s personal funds, there was no evidence that creditors

of S Co. existed that would have been prejudiced by the plaintiff’s

recovery, and the trial court’s decision to permit the plaintiff to recover

directly would not lead to a multiplicity of actions or interfere with a

fair distribution of recovery with respect to other interested parties.

3. The trial court did not abuse its discretion in declining to order the

defendants to reimburse the plaintiff for the fees he incurred from work

performed by W and another accountant retained by the plaintiff to

effectuate the winding up process; on the basis of the numerous findings

made by the trial court, including the discrepancy of the experience

between the parties and the fact that the plaintiff did not timely protect

his interests insofar as he failed to hire professional legal and accounting

experts to ensure that the management duties of the companies were

properly performed, it was reasonable for the court to determine that

the plaintiff’s neglect contributed to the complex untangling that W and

the other accountant faced during the winding up process.

(Three justices concurring in part and dissenting

in part in one opinion)

Argued December 20, 2018—officially released December 17, 2019

Procedural History

Action to recover damages for, inter alia, breach of

contract, and for other relief, brought to the Superior

Court in the judicial district of Fairfield, where the

named defendant et al. filed a counterclaim; thereafter,

the case was transferred to the judicial district of Waterbury, Complex Litigation Docket, where Sloan Saunders

et al. were added as counterclaim defendants; subsequently, the case was tried to the court, Zemetis, J.;
judgment in part for the plaintiff on the complaint and

on the counterclaim, from which the named defendant

et al. appealed and the plaintiff cross appealed; thereafter, the court awarded the plaintiff attorney’s fees,

and the named defendant et al. filed an amended appeal.

Reversed in part; order vacated.

David P. Friedman, with whom were Proloy K. Das

and, on the brief, Marilyn B. Fagelson, Taruna Garg,

David S. Hoopes and Jay R. Lawlor, for the appellantscross appellees (named defendant et al.).

David Feureisen, pro hac vice, with whom were

Edward N. Lerner and, on the brief, George Kent Guarino, for the appellee-cross appellant (plaintiff).
Opinion

KAHN, J. This appeal requires us to consider five

issues: (1) whether, in the absence of authorization in

a limited liability company’s operating agreement, its

members or managers lack standing to bring derivative

claims on behalf of it under either the Connecticut

Limited Liability Company Act (CLLCA), General Statutes (Rev. to 2017) § 34-100 et seq.,1 or, in the alternative,

the common law; (2) whether a trial court may exempt

single member limited liability companies from the

direct and separate injury requirement necessary to

bring a direct action; (3) under what circumstances may

a trial court admit opinion testimony of a joint, courtappointed fiduciary hired to wind up the companies at

issue when the party who proffered the testimony of

the fiduciary failed to disclose him as an expert witness

under Practice Book § 13-4; (4) under what circumstances, if any, may the trial court apportion its award

of attorney’s fees under the Connecticut Unfair Trade

Practices Act (CUTPA), General Statutes § 42-110a et

seq., between the plaintiff’s CUTPA claims and nonCUTPA claims; and (5) the parameters under which a

trial court may order reimbursement for fees incurred

by a joint, court-appointed fiduciary hired to wind up

the companies at issue. The defendants, Clark Briner

and two entities solely owned by Briner, a Connecticut

limited liability company and a Texas limited liability

company with the same name, Revere Capital, LLC

(respectively, Revere Capital CT and Revere Capital

TX),2 appeal,3

following a bench trial, from the trial

court’s judgment. The plaintiff, Roger L. Saunders, cross

appeals from the trial court’s judgment. We reverse the

trial court’s judgment rendered in favor of the plaintiff

as to his derivative claims because we conclude that

the plaintiff lacked standing to bring them under the

CLLCA or the common law. We, therefore, do not reach

the issues of whether the trial court improperly admitted the testimony of a joint, court-appointed fiduciary

or whether the trial court incorrectly apportioned the

plaintiff’s award of attorney’s fees under CUTPA. We

affirm the trial court’s judgment rendered in favor of

the plaintiff as to his direct claims and conclude that

the trial court did not abuse its discretion in refusing

to order the defendants to reimburse the plaintiff for

the fees incurred by the joint, court-appointed fiduciary

and an accountant hired by him.

The present case arises from the deterioration of a

business relationship between three individuals: Briner,

the plaintiff, and the plaintiff’s son, Sloan Saunders

(Saunders). The trial court found the following facts

that are relevant to our resolution of this appeal. In 2009,

while working together at Deutsche Bank, Saunders

and Briner decided to enter into the high interest, high

yield commercial real estate lending business by setting

up a limited liability company, Revere Investments, LLC
(Revere Investments), to act as a servicer of the loans.

Initially, Saunders and Revere Capital TX each owned

50 percent of Revere Investments and constituted its

comanagers.4 Although Saunders and Briner chose to

enter an industry in which they had little experience,

Saunders introduced Briner to the plaintiff, Saunders’

father, who had successfully navigated the ‘‘hard money

lending business’’ for forty years. Briner and Saunders

sought the plaintiff’s help in two respects. First, they

wanted the plaintiff, who had many contacts in that

industry, to help them ‘‘establish the relationships necessary to create and maintain’’ the business.

Second, Briner and Saunders also needed access to

the plaintiff’s capital ‘‘to fund the high interest loans’’

before they secured investors to participate in them.

The parties often did not secure all the investors necessary to fund a loan prior to closing the transaction with

the borrower. Throughout their business relationship,

therefore, the plaintiff helped Revere Investments succeed by lending it the capital necessary to close loans

before the parties raised the necessary capital to finance

it (bridge financing). After Revere Investments raised

capital from investors to participate in the loan, it repaid

the plaintiff the principal amount of his bridge loan

with interest. The trial court found that, without the

plaintiff’s bridge financing, Revere Investments ‘‘would

have had little or no business.’’

The plaintiff, who ‘‘desired to teach his son’’ the business, agreed to source loans, secure investors and

financers, and provide bridge financing. Although the

plaintiff agreed to provide assistance ‘‘to his economic

detriment and for the equal and joint benefit’’ of Saunders and Briner, he ‘‘was not willing to forgo the . . .

profits on his investment or [on] the investment of

[others] that he would have earned if he simply invested

in hard money loans outside of [Revere Investments].’’

(Emphasis in original.) The plaintiff, Saunders, and

Briner, therefore, created a business arrangement in

which the plaintiff and his contacts sourced most of

the loans and most of the financing, especially at the

beginning of their relationship. Revere Investments

would charge the borrower a high interest rate. The

parties then found investors to purchase a ‘‘participation interest’’ in the loans on a deal specific basis (outside investors). Outside investors would provide capital

in exchange for a return of the principal invested plus

a negotiated interest rate.

Revere Investments profited from outside investors

by offering them a lower interest rate than it received

from the borrower on the underlying loan, which provided Revere Investments with a profit equal to the

difference between the two interest rates (interest rate

spread profit). Revere Investments also withheld from

outside investors various fees that it charged the borrower, such as extension fees, late fees, and servicing
fees. Revere Investments charged the borrower

‘‘points’’5

‘‘in connection with most of its loans,’’ and,

‘‘[i]n all cases where points were charged, [they] were

financed by Revere Investments as part of a loan, so that

Revere Investments did not advance to the borrower

the full principal amount of the loan, but advanced the

principal amount less the points’’ (net funding). Revere

Investments did not pass the points to outside investors,

however, who received a return of principal and interest

only on the amount they actually invested.

Saunders, Briner, the plaintiff, or their respective

family members (inside investors) who participated in

a loan, by contrast, did profit from points charged to

borrowers. The advantageous treatment for inside

investors derived from the fact that, unlike the outside

investors, they received a return of principal plus interest on the face amount of their investment in the loan,

despite the fact that they had not funded the full face

amount.6 This technique of ‘‘grossing up’’ allowed inside

investors to receive a higher return on their investment

than an outside investor who participated equally in

a loan.

As part of the parties’ agreement7

to gross up inside

investments, the parties additionally agreed that—in

exchange for his help—the plaintiff ‘‘would also keep

both the ‘interest rate spread profit’ . . . and the ‘fees’

earned on certain identified and agreed upon nonfamily

[investments].’’ (Emphasis added.) This allowed the

plaintiff to earn profits that Revere Investments otherwise would have earned on the outside investors he

sourced. The oral agreement, however, did not give

Briner the same rights with respect to the outside investors he sourced.

By mid-2011, Briner had grown dissatisfied with the

arrangement allowing the plaintiff but not Briner to

profit from outside investors sourced by each of them

respectively, because, by that time, Revere Investments’

business model and the parties’ respective responsibilities had changed. Saunders, Briner and the plaintiff

had created—at the request of Briner—a second entity,

Revere High Yield Debt Fund, L.P. (Fund), which provided a vehicle for pooling outside investor capital, and

a controlling general partner of the Fund, Revere High

Yield, GP, LLC (Fund GP), which ‘‘was owned equally

[and comanaged] by [the plaintiff] and Briner . . . .’’

Under this revised arrangement, Revere Investments’

loans were funded by various combinations of investments, including (1) financing from the Fund, which

would pool money from outside investors and buy a

single participation interest in a loan, (2) capital from

inside investors, and (3) capital from outside investors

that chose to participate in a particular loan alongside

the Fund (side car investments)8

.

The parties’ formation of the Fund and Fund GP

expanded Revere Investments’ ‘‘loan portfolio size . . .
[thereby] increasing the ‘back office’ workload.’’ During

that time, however, Saunders had accepted and begun a

full-time job at another investment firm, which required

him to work sixty to seventy hours per week. This

placed a strain on Briner’s relationship with Saunders,

because Briner—concerned that Saunders left him to

handle much of the work himself, including sourcing

the loans and finding the Fund investors—felt that he

worked ‘‘disproportionately greater’’ than Saunders yet

profited less because he could not derive profits from

the outside investors he sourced in the same way as

the plaintiff did.

Eventually, Briner demanded that the plaintiff and

Saunders allow him to ‘‘skim the same . . . profits’’

from Revere Investments and the Fund on his outside

investors that the plaintiff received on the investors

he sourced. Both the plaintiff and Saunders refused.

Despite their refusal, and without their knowledge,

Briner created Revere Capital CT, which constituted

an inside investor as Briner owned 100 percent and

which enabled Briner to conceal the true source of the

funds he sourced by placing investments of outsider

capital into that company as opposed to the Fund or

Revere Investments. Consequently, when Revere Capital CT participated in Revere Investments’ loans, either

through the Fund or as a side car investment, Briner

was able to treat those outside investments as insider

capital, allowing him to retain ‘‘100 percent of the profits

associated therewith,’’ including a benefit from the elevated treatment of points. This conduct effectively

‘‘erased the distinction between the treatment of [Briner’s] ‘inside and outside investors,’ negatively affecting

the profits of [Revere Investments] and/or the Fund and

correspondingly increasing [Briner’s] personal profits.’’

In addition to diverting outside capital away from

Revere Investments and the Fund in order to profit off

of those investments as if they were his own insider

capital, Briner also misallocated investor profits by

withholding interest on points from the other inside

investors, so that they received a return only on the

net amount they invested. At the same time, Briner

grossed up investments made by his inside investors.

Briner also improperly9 charged Revere Investments for

expenses incurred by Revere Capital TX,10 including

employment, rent, travel and advertising expenses. In

mid-2012, after Saunders discovered Briner’s misallocation of points in some of Revere Investments’ loan

spreadsheets, he and the plaintiff hired outside accountants and legal counsel, who exposed11 ‘‘the extent of

[Briner’s] incompetent and inconsistent management

of [Revere Investments], the Fund, and Fund GP . . . .’’

In November, 2012, the plaintiff commenced this

action and, in May, 2014, filed the operative twentyseven count second amended complaint12 against the

defendants, consisting of fourteen direct counts
brought by the plaintiff, individually, and thirteen derivative counts brought on behalf of Revere Investments,

Fund GP, or both.13 In addition to moving for judicial

dissolution of Revere Investments and Fund GP in

direct count one, the plaintiff asserted both direct and

derivative counts alleging common-law fraud,14 breach

of contract,15 breach of the implied covenant of good

faith and fair dealing,16 breach of fiduciary duty,17 and

violations of CUTPA and the Connecticut Uniform Securities Act.18

After the plaintiff initiated the action, the parties

agreed to hire a joint, court-appointed fiduciary, Citrin

Cooperman and Company, LLP (Citrin), to wind up the

Fund and Fund GP. After a team led by Citrin’s partner

Alan A. Schachter examined sixteen of Revere Investments’ loans, ‘‘totaling nearly $18 million’’ of Revere

Investments’ approximately $40 million loan portfolio,

Schachter wrote a report containing Citrin’s findings.

In that report, Schachter noted that the team ‘‘found a

lack of internal controls’’ and ‘‘a number of . . .

reporting and recording problems,’’ which he noted

were ‘‘not surprising . . . given the lack of oversight

and the complexity of the investments.’’ Schachter concluded that Revere Investments, the Fund, and Fund

GP, ‘‘as managed by Briner, had underpaid both the

investors and the principals, particularly [the plaintiff].’’

During the bench trial, the plaintiff called Schachter to

testify at trial regarding the findings he outlined in his

report. Over Briner’s objection, the trial court allowed

Schachter to testify and admitted his report into

evidence.

Following a ten day bench trial, in which the parties

distilled ‘‘897 trial exhibits exceed[ing] several hundred

thousand pages in length,’’ the trial court rendered judgment in favor of the plaintiff on four of his thirteen

derivative counts and four of his fourteen direct counts.

Under derivative counts two and six, which alleged,

on behalf of Revere Investments, breach of contract

against Revere Capital TX and violations of CUTPA

against the defendants, respectively, the trial court

ordered the defendants to pay Revere Investments one

payment of $284,600. Under derivative counts seven

and eight, which alleged breach of fiduciary duty on

behalf of Revere Investments and Fund GP, respectively, the trial court ordered Revere Capital TX to pay

Revere Investments and/or the Fund GP one payment of

$92,797, under counts seven and eight, and an additional

$71,000 under count seven. Under direct counts four

and six, alleging breach of the implied covenant of good

faith and fair dealing against Revere Capital TX and

Briner, respectively, and counts nine and ten, alleging

breach of fiduciary duty on the part of Briner and Revere

Capital TX, the trial court awarded the plaintiff one

payment of $85,078 in connection with the failure to

repay one of the plaintiff’s loans to Revere Investments.

As to direct counts four and six, however, the court
rejected the plaintiff’s claim that the court should direct

Briner to reimburse him for ‘‘fees [related to] tax and

accounting experts,’’ including Schachter.

After the court rendered judgment, it held a hearing

to determine the appropriate amount of attorney’s fees

to award the plaintiff under derivative count six, which

alleged that the defendants had violated CUTPA

through Briner’s diversion of outside capital into Revere

Capital CT. After the posttrial hearing, the trial court

filed a memorandum of decision and supplemental

order awarding the plaintiff $639,054.91 in attorney’s

fees pursuant to General Statutes § 42-110g. This

appeal followed.

The issues presented for resolution on appeal are

numerous. The defendants first challenge the plaintiff’s

standing to bring any of the direct or derivative counts

for which the trial court rendered judgment in his favor.

The defendants appeal from the trial court’s judgment

in favor of the plaintiff as to his claims under derivative

counts two, six, seven, and eight—alleging breach of

contract, violations of CUTPA, and breach of fiduciary

duty—claiming that the trial court lacked subject matter

jurisdiction to review the plaintiff’s derivative counts,

because the CLLCA, the statutory scheme in place at

the time the plaintiff commenced his action, did not

provide a derivative remedy. Additionally, the defendants claim that, in the absence of such statutory

authority by the legislature under the CLLCA, the common law does not afford a member or manager of a

limited liability company derivative standing, because

the CLLCA, the statute that created that company structure, solely governs this issue. The plaintiff responds

that trial courts have interpreted the CLLCA as permitting derivative claims. In the alternative, the plaintiff

claims that this court should conclude that the common

law grants him derivative standing.

The defendants also appeal from the trial court’s judgment in favor of the plaintiff as to his claims under

direct counts four, six, nine, and ten, alleging breach

of fiduciary duty and breach of the implied covenant

of good faith and fair dealing. The defendants claim

that the plaintiff lacked standing to challenge Briner’s

failure to repay one of the plaintiff’s loans to Revere

Investments, because the plaintiff’s single-member limited liability company, Saunders Capital, LLC (Saunders

Capital), provided the investment at issue and, therefore, constituted the proper party to bring the action.

The plaintiff responds that, because he funded the

investment with his personal capital, he satisfies the

requirements for direct standing regardless of the

source of his investments.

Additionally, the defendants appeal from the trial

court’s judgment in favor of the plaintiff as to derivative

counts seven and eight, claiming, specifically, that the

trial court abused its discretion in admitting Schachter’s
testimony because the plaintiff failed to disclose him

as an expert pursuant to Practice Book § 13-4. The

plaintiff responds that the trial court did not abuse its

discretion in admitting Schachter’s testimony in the

absence of expert disclosure because he did not call

Schachter to testify as an expert but, rather, as a fact

witness testifying in his capacity as the court-appointed

fiduciary. To the extent that the trial court allowed

Schachter to provide expert opinion, the plaintiff

claims, Briner suffered no prejudice from its admission,

and the trial court needed Schachter’s assistance in

understanding the complex calculations required to

determine what Revere Investments owed to its investors and principals.

Finally, the defendants appeal from the trial court’s

award of attorney’s fees under derivative count six, on

which the trial court rendered judgment for the plaintiff

under CUTPA. The defendants claim that the trial court

improperly awarded attorney’s fees associated with

both the plaintiff’s CUTPA and non-CUTPA claims,

rather than those fees attributable only to the CUTPA

claims. The plaintiff responds that the trial court properly apportioned attorney’s fees under CUTPA because,

when parties litigate both CUTPA and non-CUPTA

claims in the same action and those claims involve the

same inextricably entwined facts, the trial court does

not need to apportion the payment of attorney’s fees

only to work performed on the CUTPA related claims.

The plaintiff cross appeals from the trial court’s judgment on his direct counts four and six insofar as he

claims that the trial court abused its discretion in refusing either to order Briner to reimburse Revere Investments for the fees incurred by Schachter and another

accountant hired by him or to hold a hearing for the

purpose of apportioning those fees. The defendants

respond that the trial court properly rejected the plaintiff’s request for reimbursement because it determined

that all of the owners of Revere Investments, including

the plaintiff, bore some responsibility for failing to

ensure that Revere Investments operated in accordance

with proper bookkeeping and accounting procedures.

We affirm the trial court’s judgment rendered in favor

of the plaintiff on his direct counts, including its determination not to apportion the fees incurred by

Schachter and another accountant hired by him.

Because we conclude, however, that the plaintiff lacked

standing to bring his derivative claims, we reverse the

trial court’s judgment in favor of the plaintiff on his

derivative counts and vacate the court’s award of attorney’s fees under CUTPA. Additionally, because we conclude that the plaintiff lacked standing to bring his

derivative claims, we do not reach the issue of whether

the trial court improperly admitted Schachter’s testimony.

I
STANDING

The first two issues we resolve, regarding the standing our state affords to members of limited liability

companies to bring derivative claims under the CLLCA

and certain direct claims, present matters of first

impression. First, the defendants claim that the trial

court incorrectly determined that the plaintiff had

standing to bring derivative claims against them. Second, the defendants contend the plaintiff lacked standing to bring direct claims against Briner for failing to

repay the remainder of one of the plaintiff’s loans to

Revere Investments when that company’s books and

records indicate that the plaintiff’s solely owned limited

liability company, Saunders Capital, rather than the

plaintiff himself, provided the capital.

A

Derivative Standing

We begin by addressing whether, in the absence of

authorization in the operating agreements of Revere

Investments and Fund GP,19 the plaintiff lacked standing

to bring derivative claims on behalf of those companies

under either General Statutes (Rev. to 2017) § 34-187

or, in the alternative, the common law. The defendants

claim for the first time on appeal that the plaintiff, a

50 percent member of Revere Investments and Fund

GP, lacked standing to bring derivative claims on behalf

of those companies under § 34-187 of the CLLCA, the

operative statute at the time the plaintiff commenced

the present litigation. Further, the defendants claim

that, in the absence of legislative authority under the

CLLCA, there is no common-law authority granting a

member or manager of a limited liability company derivative standing. The plaintiff responds that, although

this court has never addressed whether limited liability

company members or managers can sue derivatively,

other courts have interpreted the CLLCA as permitting

it. In the alternative, the plaintiff claims that this court

should conclude, as other courts have, that the common

law grants him derivative standing.20 We conclude that,

in the absence of a provision in the operating agreements of the respective companies authorizing the filing

of derivative lawsuits, the plaintiff lacked standing to

bring his derivative claims on behalf of Revere Investments and Fund GP because neither the CLLCA nor

the common law provided for a derivative remedy at

the time the plaintiff commenced the present action.21

The record reveals the following additional facts that

are relevant to our resolution of this claim. The

operating agreements of Revere Investments and Fund

GP list Briner and/or Revere Capital TX as both a 50

percent member and comanager of those companies.

The operating agreement of Fund GP also lists the plaintiff as a 50 percent member and comanager of that

company, and evidence at trial indicated that Saunders
transferred his 50 percent interest in Revere Investments to the plaintiff in February, 2012.22 Additionally,

the operating agreements of both companies vest the

authority to manage the business of each company in

its managers (manager-managed). Neither company’s

operating agreement, however, authorizes its members

or managers to bring a derivative action.

In his second amended complaint, in which the plaintiff added derivative claims on behalf of Revere Investments and Fund GP in thirteen separate counts, the

plaintiff alleged that, as a member or manager of the

companies, he ‘‘fully and adequately represent[ed]

[their] interests . . . .’’ He further alleged that he

‘‘made demands . . . of Briner on behalf of Revere

Investments and [Fund] GP to remedy the issues’’ upon

which he based his claims. To the extent that he failed

to make ‘‘any formal demand,’’ the plaintiff claimed, ‘‘it

was [because] such a demand would be futile . . . .’’

In its memorandum of decision, the trial court concluded that the plaintiff had standing. With respect to

the four derivative counts on which the trial court rendered judgment in favor of the plaintiff, the court noted

that, ‘‘[i]nsofar as [the plaintiff] alleges misconduct that

damaged investors, other than himself, he fairly and

adequately represents the interests of investors in

[Revere Investments] and . . . Fund [GP].’’ The court

reasoned that the plaintiff constituted ‘‘an investor . . .

and a co-owner of [Revere Investments] (after February, 2012),’’ and ‘‘a manager and co-owner of Fund GP.’’

We begin our review of the trial court’s determination

with the general principles governing standing to sue.

‘‘If a party is found to lack standing, the court is without

subject matter jurisdiction to determine the cause. . . .

A determination regarding a trial court’s subject matter

jurisdiction is a question of law. When . . . the trial

court draws conclusions of law, our review is plenary

and we must decide whether its conclusions are legally

and logically correct and find support in the facts that

appear in the record.’’ (Internal quotation marks omitted.) PNC Bank, N.A. v. Kelepecz, 289 Conn. 692, 704–

705, 960 A.2d 563 (2008). ‘‘In addition, because standing

implicates the court’s subject matter jurisdiction, the

issue of standing is not subject to waiver and may be

raised at any time.’’ Equity One, Inc. v. Shivers, 310

Conn. 119, 126, 74 A.3d 1225 (2013).

‘‘Standing is not a technical rule intended to keep

aggrieved parties out of court; nor is it a test of substantive rights. Rather it is a practical concept designed to

ensure that courts and parties are not vexed by suits

brought to vindicate nonjusticiable interests and that

judicial decisions which may affect the rights of others

are forged in hot controversy, with each view fairly and

vigorously represented. . . . These two objectives are

ordinarily held to have been met when a complainant

makes a colorable claim of direct injury he has suffered
or is likely to suffer, in an individual or representative

capacity. Such a personal stake in the outcome of the

controversy . . . provides the requisite assurance of

concrete adverseness and diligent advocacy. . . . The

requirement of directness between the injuries claimed

by the plaintiff and the conduct of the defendant also

is expressed, in our standing jurisprudence, by the focus

on whether the plaintiff is the proper party to assert

the claim at issue. . . .

‘‘Two broad yet distinct categories of aggrievement

exist, classical and statutory.’’ (Internal quotation

marks omitted.) PNC Bank, N.A. v. Kelepecz, supra, 289

Conn. 705. The issue of whether the CLLCA provided the

plaintiff with a derivative remedy implicates statutory

aggrievement, which ‘‘exists by legislative fiat, not by

judicial analysis of the particular facts of the case. In

other words, in cases of statutory aggrievement, particular legislation grants standing to those who claim

injury to an interest protected by that legislation.’’

(Internal quotation marks omitted.) Id.

‘‘In order to determine whether a party has standing

to make a claim under a statute, a court must determine

the interests and the parties that the statute was

designed to protect. . . . Essentially the standing question in such cases is whether the . . . statutory provision on which the claim rests properly can be understood as granting persons in the plaintiff’s position a

right to judicial relief. . . . [Stated differently, the]

plaintiff must be within the zone of interests protected

by the statute.’’ (Citation omitted; internal quotation

marks omitted.) McWeeny v. Hartford, 287 Conn. 56,

65, 946 A.2d 862 (2008).

The issue of whether the CLLCA authorizes a member

or manager of a limited liability company to bring a

derivative action on its behalf presents a question of

statutory interpretation, over which we exercise plenary review, guided by well established principles

regarding legislative intent. See, e.g., Kasica v. Columbia, 309 Conn. 85, 93, 70 A.3d 1 (2013) (explaining plain

meaning rule under General Statutes § 1-2z and setting

forth process for ascertaining legislative intent). We

begin by noting that Connecticut first recognized the

limited liability company structure in 1993 when our

legislature enacted the CLLCA, a statutory scheme it

modeled after the Prototype Limited Liability Company

Act (Prototype Act).23 See Scarfo v. Snow, 168 Conn.

App. 482, 500 n.9, 146 A.3d 1006 (2016) (Connecticut’s

limited liability company statutory provisions were

modeled after Prototype Act). We recently recognized

that our legislature enacted the CLLCA in order to establish ‘‘the right to form [a limited liability company] and

all of the rights and duties of the [limited liability company], as well as all of the rights and duties of members

. . . .’’ Styslinger v. Brewster Park, LLC, 321 Conn.

312, 317, 138 A.3d 257 (2016).
On the basis of the plain language of the act, we

conclude that the CLLCA does not permit members or

managers to file derivative actions but, rather, authorizes them to collectively commence an action in the

name of the limited liability company upon a requisite

vote of disinterested members or managers (member

initiated action). The CLLCA recognizes the right of the

limited liability company ‘‘to . . . sue and be sued.’’

General Statutes (Rev. to 2017) § 34-124 (b). General

Statutes (Rev. to 2017) § 34-186 generally authorizes

‘‘[s]uits . . . brought by or against a limited liability

company in its own name.’’ (Emphasis added.) Section

34-18724 provides the procedure that members or managers must follow if they wish to file a lawsuit in the

name of the company. Section 34-187 (a) (1) and (b)

authorizes any member of a limited liability company,

regardless of whether that company vests management

responsibilities in its members or managers, to bring

an action in the name of the company upon the vote of

a majority of disinterested members. Likewise, § 34-

187 (a) (2) authorizes any manager of a manager-managed limited liability company to bring an action in the

name of that company upon the vote necessary under

General Statutes (Rev. to 2017) § 34-142 (a), which

requires ‘‘more than one-half by number of [disinterested] managers . . . .’’

Connecticut modeled the procedure set forth in § 34-

187 on § 1102 of the Prototype Act.25 The drafters of

the Prototype Act expressly ‘‘emphasize[d] that [§ 1102]

does not permit derivative suits unless they are provided for in the operating agreement.’’ 3 L. Ribstein &

R. Keatinge, Limited Liability Companies (2d Ed. 2011)

Appendix C, p. App. C-109.26 Instead, the drafters

intended to create a substitute for the derivative action,

which they deemed more appropriate ‘‘in closely held

firms like the typical [limited liability company] . . .

[in which] members can be expected to be actively

interested in the firm, and . . . can readily be coordinated for a vote on a suit by the firm.’’ Id., p. App. C-110.

The ‘‘extra expense’’ and procedural hurdles required

to bring a derivative action, the drafters reasoned, ‘‘may

not be worth it’’ in the limited liability company context;

id.; which differs from that of ‘‘public corporations . . .

[where] the members are generally passive . . . uninvolved in management and . . . too numerous to coordinate effectively for action against errant managers.’’

Id., p. App. C-109.

We conclude, therefore, that, in adopting a functionally identical provision to § 1102 of the Prototype Act,

our legislature chose to omit the derivative action under

the CLLCA for members and managers of limited liability companies.27 Consequently, the plaintiff in the present case failed to allege that he undertook the proper

procedure to maintain standing under the CLLCA.

Although the allegations set forth in the plaintiff’s sec-
ond amended complaint—namely, that he was a member or manager of both companies and that either he

made demands on Briner or such demands were futile—

comport with the procedural requirements for bringing

a derivative action under the CULLCA, they do not

comply with the requirements for bringing a member

initiated action under the CLLCA.28

The plaintiff asks this court, however, to look past

the CLLCA and conclude that, despite our legislature’s

omission of a derivative remedy in the CLLCA, limited

liability company members and managers may sue

derivatively under the common law.29 We have recently

explained, however, that ‘‘[o]ur common law does not

recognize [limited liability companies], which were first

created by [the enactment of the CLLCA].’’ Styslinger

v. Brewster Park, LLC, supra, 321 Conn. 317. The question we must resolve, therefore, is ‘‘whether the recognition of [this] common-law remedy would conflict with

or frustrate the purpose of the [CLLCA] . . . .’’ (Internal quotation marks omitted.) Caciopoli v. Lebowitz,

309 Conn. 62, 69, 68 A.3d 1150 (2013). For the reasons

we have already explained, we conclude that it would.

Consistent with our reasoning, we observe that other

Prototype Act jurisdictions have held that members and

managers of limited liability companies must follow the

procedure for bringing a member initiated action and,

as such, lack standing to bring derivative actions under

the common law. See, e.g., Marx v. Morris, 386 Wis. 2d

122, 148, 925 N.W.2d 112 (2019) (declining to ‘‘judicially

import . . . corporate derivative standing provisions

into the [limited liability company] context where the

legislature has not done so’’).30 Consequently, we conclude that the trial court improperly exercised subject

matter jurisdiction over the plaintiff’s claims on behalf

of Revere Investments and Fund GP.

B

Direct Standing

We next address whether the trial court incorrectly

determined that the plaintiff had standing to bring direct

claims alleging breach of fiduciary duty and breach of

the implied covenant of good faith and fair dealing

against Briner and Revere Capital TX for failure to repay

one of his loans, the LR Global bridge loan. The defendants claim that, because Saunders Capital made the

investment at issue, the plaintiff lacked standing to

bring a direct claim seeking repayment, as he lacked a

distinct and separate injury from the company.

According to the defendants, therefore, we should

reverse the trial court’s judgment as to those claims

because the plaintiff was required to bring the action on

behalf of Saunders Capital.31 The plaintiff acknowledges

the general rule prohibiting a member of a limited liability company from bringing a direct action when seeking

to recover for a harm suffered by the company. He

argues, however, that the general rule should not apply
because he financed the loan with his personal capital

through his wholly owned company. The plaintiff, therefore, asks this court to conclude that he satisfies the

requirements for direct standing regardless of his use

of Saunders Capital as a conduit. We conclude that, in

the present case, the trial court correctly concluded

that the plaintiff had standing to bring direct claims

with respect to the LR Global bridge loan.

The record reveals the following additional facts that

are relevant to our resolution of this claim. In connection with one particular loan made by Revere Investments to LR Global, the plaintiff loaned Revere Investments, through his single-member, solely owned

company, Saunders Capital, $398,000 of bridge financing. Saunders Capital appears on the spreadsheets for

these loans as the provider of the bridge capital.32

Although other investors eventually participated in the

loan to LR Global, the plaintiff later converted a portion

of his bridge capital, the amount of which was disputed

at trial, into a permanent investment. After the parties

began winding down the companies, however, the plaintiff learned that Briner, whom he had ‘‘entrusted . . .

to perform [Revere Investments’] ‘back office’ duties,’’

failed to repay him the remainder of the amount he

initially funded.

In direct counts four, six, nine, and ten, and derivative

counts seven and eight of his second amended complaint, the plaintiff claimed, inter alia, that Briner and

Revere Capital TX breached their fiduciary duty and

the implied covenant of good faith and fair dealing by

failing to repay the remainder owed to the plaintiff on

his LR Global bridge loan. In their posttrial brief, the

defendants claimed, for the first time, that the plaintiff

lacked standing to seek damages with respect to the

LR Global bridge loan because Saunders Capital provided the funding. Although the trial court did not

address the defendants’ argument in its memorandum

of decision, it rendered judgment in favor of the plaintiff

with respect to the aforementioned counts, finding that

Briner had failed to repay the plaintiff $55,000 of his

bridge loan and, after including accrued interest,

awarded him a total of $85,078.

On appeal, the defendants claim that the trial court

improperly exercised subject matter jurisdiction over

the plaintiff’s direct claims for breach of fiduciary duty

and the implied covenant of good faith and fair dealing

with respect to the LR Global bridge loan. The defendants cite to our decision in Channing Real Estate,

LLC v. Gates, 326 Conn. 123, 138, 161 A.3d 1227 (2017),

in which this court held that members of limited liability

companies cannot bring direct actions to recover for

injuries suffered by the company. The plaintiff responds

that our rule in Channing Real Estate, LLC, does not

apply to this case because, as the sole member and

owner of his company, he had exclusive authority33 to
‘‘withdraw and use [personally owned capital].’’34 The

question presented, therefore, is whether to exempt

single-member limited liability companies from the

direct and separate injury requirements necessary to

bring a direct action. We conclude that, when the unique

circumstance arises in which the sole member of a

limited liability company seeks to remedy a harm suffered by it, a trial court may permit such a member to

bring his claims in a direct action, as long as doing so

does not implicate the policy justifications that underlie

the distinct and separate injury requirement.

We begin with the general principles governing classical aggrievement. Although the question of whether

the plaintiff lacked derivative standing concerned the

CLLCA—which provided a substitute to the derivative

remedy—and, therefore, implicated statutory

aggrievement principles, the plaintiff does not assert

that § 34-187 authorized him to bring his direct claims.

‘‘The fundamental test . . . [therefore is] twofold

. . . . [F]irst, the party claiming aggrievement must

successfully demonstrate a specific, personal and legal

interest in [the subject matter of the challenged action],

as distinguished from a general interest, such as is the

concern of all members of the community as a whole.

Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the

[challenged action].’’ (Internal quotation marks omitted.) Wilcox v. Webster Ins.,Inc., 294 Conn. 206, 214–15,

982 A.2d 1053 (2009).

This court has not addressed the specific question of

whether the member of a single-member limited liability

company has standing to bring an action directly on

behalf of the company. We derived the general rule

outlined in Channing Real Estate, LLC—that members

of limited liability companies cannot bring a direct

action alleging harm to the company—from the direct

injury requirements imposed on shareholders.35 Consequently, the rationale behind the distinct and separate

injury requirement as explained in the corporate law

context provides an informative backdrop. We

explained in Channing Real Estate, LLC, that ‘‘[a] distinction must be made between the right of a shareholder to bring suit in an individual capacity as the sole

party injured, and his right to sue . . . on behalf of

the corporation alleged to be injured.’’ Yanow v. Teal

Industries,Inc., 178 Conn. 262, 281, 422 A.2d 311 (1979).

The distinction between a direct and derivative action

turns on whether the alleged ‘‘injury sustained . . . is

peculiar to [that shareholder] alone’’ or whether, by

virtue of harm suffered by the company, it affects all

of the shareholders collectively. Id., 282 n.9. In the latter

situation, the plaintiff must proceed ‘‘ ‘secondarily,’

deriving his rights from the corporation which is alleged

to have been wronged.’’ Id., 281.
We observe that the rule prohibiting shareholders

from bringing a direct action to recover for a harm

suffered by the corporation addresses the following

policy rationales: (1) the protection of other shareholders and creditors of the company; (2) the avoidance of

multitudinous litigation; and (3) the equal distribution

of recovery to injured parties. See, e.g., Barth v. Barth,

659 N.E.2d 559, 561 (Ind. 1995). The American Law

Institute explains that, if a shareholder sues directly for

a harm that impacts multiple shareholders, the ‘‘injured

shareholders other than the plaintiff will [not] share in

the [plaintiff’s] recovery [unless] the action is [brought

as] a class action . . . on behalf of all [of] these shareholders.’’ 2 A.L.I., Principles of Corporate Governance:

Analysis and Recommendations (1994) § 7.01, comment

(d), p. 20. Likewise, a plaintiff’s direct action can prevent creditors of the corporation from sharing in any

recovery. Id.; see also May v. Coffey, 291 Conn. 106,

119 n.9, 967 A.2d 495 (2009) (noting, in dictum, that

allowing minority shareholders to bring direct action

for majority’s dilution of preexisting shares ‘‘would

encourage . . . multiple lawsuits’’). Consequently, a

direct action alleging harm to multiple shareholders can

‘‘unfairly expose the corporation or the defendants to

a multiplicity of actions’’ by shareholders or creditors

that later bring claims and affect the ability of those

later plaintiffs to receive ‘‘a fair distribution of the recovery . . . .’’ 2 A.L.I., supra, § 7.01 (d), p. 17.

An action brought by one shareholder on behalf of

the company or derivative action, by contrast, alleviates

the concerns posed by the direct action. It ‘‘distributes

the recovery more broadly and evenly than a direct

action . . . [because it] goes to the corporation,

[allowing] creditors and others having a stake in the

corporation [to] benefit financially from [it] . . . .’’ Id.,

§ 7.01, comment (d), p. 20. Similarly, because the corporation’s recovery will be distributed to other shareholders, ‘‘[that derivative] action will have a preclusive effect

that spares the corporation and the defendants from

being exposed to a multiplicity of suits.’’ Id. Courts,

therefore, can protect the interest of other shareholders

and creditors of the corporation, avoid a multiplicity of

actions, and distribute equal recovery to all the injured

parties by requiring shareholders to bring an action on

behalf of the corporation.

The law, however, has recognized some exceptions

to this corporate rule. The United States Court of

Appeals for the Ninth Circuit, for example, recognized

that, in some circumstances, the policy reasons for

requiring shareholders to bring an action on behalf of

the corporation may not be present even though the

action alleges in substance a corporate injury. Watson

v. Button, 235 F.2d 235, 237 (9th Cir. 1956); see id.

(concluding that Oregon law would permit individual

recovery by shareholders, although injury belonged to
corporation, where rights of creditors and other shareholders are not prejudiced and there exists no threat

of multiplicity of actions); see also 2 A.L.I., supra, § 7.01,

comment (e), p. 21, citing Watson v. Button, supra,

237. Partly in response to Watson, the American Law

Institute promulgated a rule for actions brought by

members of closely held corporations that permits trial

courts to treat the shareholders’ otherwise indirect

claims as direct claims.36 See 2 A.L.I., supra, § 7.01 (d),

p. 17. According to the American Law Institute, before

a trial court can ‘‘treat an action raising derivative

claims as a direct action, exempt it from those restrictions and defenses applicable only to derivative actions,

and order an individual recovery, it [must first find]

that to do so will not (i) unfairly expose the corporation

or defendants to a multiplicity of actions, (ii) materially

prejudice the interests of creditors of the corporation,

or (iii) interfere with a fair distribution of the recovery

among all interested persons.’’37 Id.

Following the American Law Institute’s rationale,

courts from other jurisdictions38 have adopted exceptions permitting trial courts to treat otherwise derivative claims in a direct action where the plaintiff shareholder belongs to a closely held corporation. See, e.g.,

Trieweiler v. Sears, 268 Neb. 952, 983, 689 N.W.2d 807

(2004) (‘‘the concept of a corporate injury that is distinct

from any injury to the shareholders approaches the

fictional in the case of a firm with only a handful of

shareholders’’); Durham v. Durham, 151 N.H. 757, 762,

871 A.2d 41 (2005) (‘‘[T]he derivative/direct distinction

makes little sense when the only interested parties are

two individuals or sets of shareholders, one who is in

control and the other who is not. In this context, the

debate over derivative status can become purely technical. . . . In cases . . . [in which] the principles underlying the derivative proceeding are not served, the trial

court [may] allow the plaintiff to pursue a direct claim

against the corporate officers.’’ [Citation omitted; internal quotation marks omitted.]); Aurora Credit Services,

Inc. v. Liberty West Development, Inc., 970 P.2d 1273,

1280 (Utah 1998) (permitting minority ‘‘[s]hareholders

in a closely held corporation [to] bring directly claims

which are by nature derivative’’); see also Thomas v.

Dickson, 250 Ga. 772, 774–75, 301 S.E.2d 49 (1983) (holding that derivative action was properly maintained as

direct action where factors outlined in Watson v. Button, supra, 235 F.2d 237, were not implicated); Barth

v. Barth, supra, 659 N.E.2d 562 (adopting American

Law Institute approach); Mynatt v. Collis, 274 Kan. 850,

872–73, 57 P.3d 513 (2002) (adopting American Law

Institute approach); Derouen v. Murray, 604 So. 2d

1086, 1091 n.2 (Miss. 1992) (approving of American Law

Institute approach in dictum); R. Thompson, ‘‘The

Shareholder’s Cause of Action for Oppression,’’ 48 Bus.

Law. 699, 735 (1993) (noting that ‘‘[a] growing number

of courts . . . [have] permit[ed] direct suits in close
corporation settings where the complaint is one that,

in a public corporation setting, must be brought as a

derivative action’’). At least one other jurisdiction has

extended this concept to limited liability companies.

See Dalton v. McLarty, 671 Fed. Appx. 247, 248 (5th Cir.

2016) (citing corporate law case recognizing exception

and anticipating that Mississippi law would allow direct

action by member of limited liability company); see

also S. Miller, ‘‘What Buy-Out Rights, Fiduciary Duties,

and Dissolution Remedies Should Apply in the Case of

the Minority Owner of a Limited Liability Company?,’’

38 Harv. J. on Legis. 413, 453 (2001) (‘‘Because of the

closely held nature of the [limited liability company],

there may be little practical difference between a direct

suit and a derivative suit. Therefore, the [American Law

Institute’s] analysis of derivative and direct suits with

respect to close corporations may well apply to privately owned [limited liability companies].’’).

These authorities persuade us that, in cases such as

this one, a narrowly tailored exception can provide a

more flexible mechanism for addressing member standing.39 This is especially true under circumstances, like

those in the present case, in which both the parties

and the court system expended time and resources to

litigate these matters and the ‘‘concept of a corporate

injury that is distinct from any injury to [its sole member] approaches the fictional . . . .’’ (Internal quotation marks omitted.) Aurora Credit Services Inc. v.

Liberty West Development, Inc., supra, 970 P.2d 1280.

Consequently, we conclude that the trial court may

permit the member of a single-member limited liability

company to bring an action raising derivative claims as

a direct action and may order an individual recovery if

it finds that to do so will not (1) unfairly expose the

company or defendants to a multiplicity of actions, (2)

materially prejudice the interests of creditors of the

company, or (3) negatively impact other owners or creditors of the company by interfering with a fair distribution of the recovery among all interested parties.40

In the present case, the trial court properly exercised

subject matter jurisdiction over the plaintiff’s direct

claims. Although the defendants did not challenge the

plaintiff’s standing to directly recover the remainder of

his LR Global bridge loan until after the close of evidence in their posttrial brief, the trial court’s exercise

of jurisdiction implicitly relies on and is supported by

the three factors set forth by the American Law Institute. See 2 A.L.I., supra, § 7.01, p.17. The record reveals

that, at trial, neither party disputed that the plaintiff

constituted Saunders Capital’s sole member or that he

funded the bridge loan with his personal funds. The

trial court explicitly found that the capital provided for

that loan belonged to the plaintiff personally. Moreover,

because neither the record nor either party suggests

that any creditors of Saunders Capital exist and would

be prejudiced by the plaintiff’s recovery, we observe
that the trial court’s decision to permit the plaintiff to

recover directly will not lead to a multiplicity of actions

or interfere with a fair distribution of recovery with

respect to other members or creditors. Under the circumstances, we believe that prohibiting the plaintiff,

the sole member of Saunders Capital, from bringing a

direct action ‘‘would ‘exalt form over substance’

[because] . . . none of the reasons underlying the [distinct and separate injury] requirement [is] present.’’

Barth v. Barth, supra, 659 N.E.2d 560.

II

REIMBURSEMENT FOR FEES AND COSTS

The final issue we resolve in this appeal concerns a

prevailing party’s ability to receive reimbursement for

the work performed by a joint fiduciary appointed by

the court to wind up the companies at issue in a dissolution proceeding. The plaintiff claims that the trial court

abused its discretion in refusing to order Briner to reimburse him for fees incurred by Schachter in his capacity

as the joint, court-appointed fiduciary and Nicholas

Puglisi, an accountant engaged by Schachter to assist

in winding up the Fund and Fund GP. The plaintiff

argues that, because the trial court rendered judgment

in his favor on counts four and six, and determined

that Briner and Revere Capital TX breached their fiduciary duty and the implied covenant of good faith and

fair dealing in failing to repay the amount owed to the

plaintiff on his LR Global bridge loan, the trial court

should have either apportioned the fees or ‘‘[held] a

hearing to apportion [the] fees’’ incurred by Schachter

and Puglisi to the extent that the services performed

were to correct tax and accounting errors caused by

Briner’s misconduct. The defendants respond that the

trial court did not abuse its discretion in rejecting the

plaintiff’s request for reimbursement, as it properly

determined that all of the owners of Revere Investments

and Fund GP, including the plaintiff, bore responsibility

for failing to ensure that the bookkeeping and accounting of those companies were properly performed. We

conclude that the trial court did not abuse its discretion.

The following additional facts are relevant to our

resolution of this issue. The trial court found that the

plaintiff ‘‘trusted [Briner] to properly manage the daily

operations of [Revere Investments], the Fund, and Fund

GP and to service the loans to [his] expectations, but

. . . failed to verify, or to hire competent help [to]

verify, that [Briner] was managing and servicing [the

loans] as expected and required . . . [even] when

[Briner] increasingly complained about [a] disparate

workload . . . .’’ ‘‘[E]ven after discovering [that Briner

placed] his outside investor money in [Revere Capital

CT] and [kept] the profits associated therewith from

[Revere Investments] . . . neither [the plaintiff] nor

[Saunders] exercised [his] powers in [the companies]

to manage and supervise the investments and hire com-
petent bookkeeping, tax, legal, and accounting experts

to review [their] books and records . . . .’’

Consequently, although the trial court determined

that Briner and Revere Capital TX owed the plaintiff

$85,078 in connection with failing to repay the LR Global

bridge loan, it rejected the plaintiff’s request to order

the defendants to reimburse him for the fees incurred

by Schachter and Puglisi, who analyzed ‘‘the complex

payment structures’’ for errors and consulted on ‘‘tax

implications’’ associated with winding down the companies. That court noted that ‘‘[t]he cause of those fees

was the bookkeeping and accounting that all the owners

and managers were responsible [for] assur[ing] were

correctly performed . . . [and] all owners failed to

assure that appropriate bookkeeping and accounting

were regularly performed and supervised.’’ (Emphasis

in original.)

We note at the outset of our analysis that, although

the CLLCA contains a provision governing the ability

of members and managers to wind up a company’s

affairs; General Statutes (Rev. to 2017) § 34-208; it does

not provide guidance on reimbursement of fees

incurred by receivers appointed to effectuate the winding up process. We begin, therefore, with the legal principles governing the review of a trial court’s order

awarding attorney’s fees or other litigation expenses.

We have explained that ‘‘Connecticut adheres to the

‘American rule’ . . . [which reflects the idea that] in

the absence of statutory or contractual authority to the

contrary, a successful party is not entitled to recover

attorney’s fees or other ‘ordinary expenses and burdens

of litigation . . . .’ ’’ Total Recycling Services of Connecticut, Inc. v. Connecticut Oil Recycling Services,

LLC, 308 Conn. 312, 326, 63 A.3d 896 (2013). ‘‘It is well

established that we review the trial court’s decision to

award attorney’s fees for abuse of discretion. . . . This

standard applies to the amount of fees awarded . . .

and also to the trial court’s determination of the factual

predicate justifying the award. . . . Under the abuse

of discretion standard of review, ‘[w]e will make every

reasonable presumption in favor of upholding the trial

court’s ruling, and only upset it for a manifest abuse

of discretion. . . . [Thus, our] review of such rulings

is limited to the questions of whether the trial court

correctly applied the law and reasonably could have

reached the conclusion that it did.’ ’’ (Citations omitted.) Schoonmaker v. Lawrence Brunoli, Inc., 265

Conn. 210, 252–53, 828 A.2d 64 (2003).

We conclude that the trial court did not abuse its

discretion in refusing to order the defendants to reimburse the plaintiff for the fees incurred by Schachter

and Puglisi. The trial court found that, in failing to ‘‘hire

professional bookkeeping, tax and legal professionals

to assure that the management duties of [the companies] were properly performed . . . [and] [leaving
Briner] largely unsupervised,’’ the plaintiff did not

timely protect his interests. On the basis of the trial

court’s numerous findings, including the discrepancy

of experience between the parties, it was reasonable

for the trial court to determine that the plaintiff’s neglect

contributed to the magnitude of complexity required for

Schachter and Puglisi to untangle Revere Investments’

books and records.41 The trial court did not abuse its

discretion in refusing to order Briner to reimburse the

plaintiff for fees incurred by Schachter and Puglisi in

winding up the Fund and Fund GP.

For the reasons set forth in this opinion, we conclude

that, in the absence of a provision in the operating

agreement of a limited liability company authorizing

the filing of derivative lawsuits, members and managers

lacked standing to bring derivative claims under the

CLLCA and the common law at the time the plaintiff

commenced the present action; although the general

rule prohibits a derivative action, the trial court may,

in its discretion, permit a member of a single-member

limited liability company to bring an action raising

derivative claims as a direct action and to order an

individual recovery if the court finds that it will not

(1) unfairly expose the company or defendants to a

multiplicity of actions, (2) materially prejudice the interests of creditors of the company, or (3) interfere with

a fair distribution of the recovery among all interested

parties. We further conclude that the trial court did not

abuse its discretion in refusing to order the defendants

to reimburse the plaintiff for his portion of the fees

incurred by the joint, court-appointed fiduciary and an

accountant hired by him. We therefore affirm the trial

court’s judgment rendered in favor of the plaintiff as

to his direct claims, reverse the trial court’s judgment

in favor of the plaintiff as to his derivative claims, and

vacate the trial court’s order awarding the plaintiff attorney’s fees and costs under CUTPA.

The judgment is reversed with respect to the plaintiff’s derivative claims and the case is remanded with

direction to vacate the order awarding attorney’s fees

to the plaintiff; the judgment is affirmed in all other

respects.

In this opinion PALMER, D’AURIA and ECKER,

Js., concurred.

* This case originally was scheduled to be argued before a panel of this

court consisting of Chief Justice Robinson and Justices Palmer, McDonald,

D’Auria, Mullins, Kahn and Ecker. Although Justice Palmer was not present

when the case was argued before the court, he has read the briefs and

appendices, and listened to a recording of the oral argument prior to participating in this decision.

1 All references herein to the CLLCA are to the 2017 revision. We note

that the events underlying this case occurred over the course of several

years; we use the 2017 revision in the interest of simplicity. Our legislature

has since repealed the CLLCA, effective July 1, 2017, and replaced it with

the Connecticut Uniform Limited Liability Company Act, General Statutes

§ 34-243 et seq.

2 Revere Investments, LLC, Revere High Yield GP, LLC, Madison Mott,

Inc., Revere High Yield Fund, L.P., and Revere Capital Management, LLC,
were also named as defendants but are not parties to this appeal. All references herein to the defendants are to Briner, Revere Capital CT and Revere

Capital TX.

3 The defendants appealed from the judgment of the trial court to the

Appellate Court, and we transferred the appeal to this court pursuant to

General Statutes § 51-199 (c) and Practice Book § 65-1.

4

In February, 2012, as the relationship between Briner and Saunders

became increasingly hostile, Saunders transferred his membership interest

in Revere Investments to the plaintiff.

5 One point equaled 1 percent of the face or ‘‘gross’’ amount of the loan.

6 The trial court provided the following example: ‘‘If an inside investor

invested [$1 million], and received six ‘points’ (a 6 percent of the gross loan

‘origination fee’ from the borrower), the inside investor could either . . .

present a [$1 million] check to [Revere Investments] and receive back a

$60,000 check (points fee on the investment) from [Revere Investments] or

simply present [to Revere Investments] a $940,000 check—but either way,

the inside investor would be paid interest by [Revere Investments] on the

[$1 million] investment.’’

7 The trial court found that ‘‘[t]he partners initially [orally] agreed that

inside investors would receive interest on the ‘face amount’ of their investment (not reduced by the origination fee they received during the loan

closing), including a pro rata share of the points Revere Investments charged

on a loan. Using this method, inside investors rather than Revere Investments

would also receive interest-on-points profit regarding investments of

[insider] capital. [The plaintiff] would also keep both the ‘interest rate spread

profit’ and the ‘fees’ earned on certain identified and agreed upon [nonfamily]

‘inside investors’ funds. During the years of operation, these agreements

deprived [Revere Investments] of considerable profits and benefitted [the

plaintiff], but this was obvious and understood when the parties agreed

upon this conduct at the inception of their business. . . . Though [Briner]

denied such an agreement, the court rejects his testimony on this point and

accepts the evidence, testimonial and documentary, confirming the parties’

agreement.’’ (Footnote omitted.)

8 Side car investments ‘‘differ from investments in the Fund in that, [as

a side car] an investor invests in a single loan chosen by the investor, while

in the [Fund] the investment is . . . pooled’’ with other capital and

‘‘invest[ed] in multiple loans.’’ (Emphasis in original.)

9 The trial court found that Briner ‘‘mistreated his business partners by

. . . improperly allocating expenses for employees, equipment, supplies,

travel, and rent from his privately owned [Revere Capital] to [Revere Investments] and the Fund, by unilaterally altering the long-standing and agreed

upon allocation of profits amongst inside/outside/and owners of [Revere

Investments] and the Fund, and by improper accounting methods.’’

10 The trial court found that, ‘‘[i]n 2006, [Briner] had created, and solely

owned, Revere Capital [TX], a Texas entity . . . and engaged in the business

of ‘hard money lending’ before partnering with [Saunders and the plaintiff]

in the involved ventures. In 2010, [Briner] created, and solely owned, Revere

Capital [CT], a Connecticut entity . . . .’’ The record reveals that, in addition

to owning Revere Capital TX prior to the inception of Revere Investments,

the parties orally agreed to use ‘‘Revere Capital [TX] as the marketing

arm’’ of Revere Investments, as Briner—who made two equity investments

through that entity prior to forming Revere Investments with Saunders—

felt that he already ‘‘had investors that were used to investing in Revere

Capital [TX].’’ Saunders testified that, around the time that the plaintiff

commenced litigation, he and the plaintiff learned that Briner had created

Revere Capital CT after the parties started Revere Investments. The trial

court found that, ‘‘[o]n four loans . . . [Briner] intentionally and deliberately violated the agreement [he had] reached with [the plaintiff and Saunders] in the operation of [Revere Investments] and the Fund by placing

undisclosed outside capital in [Revere Capital TX and/or Revere Capital CT]

then having [Revere Capital TX and/or Revere Capital CT] participate in the

loans as an ‘inside investor.’ ’’ (Footnote omitted.) When questioned at trial

whether Briner placed outside capital into Revere Capital CT, rather than

Revere Capital TX, to treat those outside investments as his own insider

capital and divert profits from Revere Investments, Briner testified that he

did not keep separate books and records for each company and could not

distinguish between them.

11 The trial court found that, ‘‘[b]y July, 2012 . . . [b]ookkeeping and

accounting errors in the management of [Revere Investments] and the Fund

were identified by accountants and counsel. The extent of [Briner’s] incom-
petent and inconsistent management of [Revere Investments], the Fund,

and Fund GP was discovered and identified, the misallocation of investors’

profits uncovered, and the attribution of [Briner’s] solely owned company

expenses to [Revere Iinvestments]/Fund was exposed.’’

12 The defendants asserted ten special defenses and a thirty-three count

counterclaim. The trial court deemed the defendants’ special defenses abandoned, as the defendants ‘‘neither briefed nor argued’’ them. The defendants

withdrew all but nine counts of their counterclaim before the trial court

rendered judgment. Following a bench trial, that court then rendered judgment in favor of the plaintiff on counts three, nineteen through twenty-two,

and twenty-eight of the defendants’ counterclaim. The trial court rendered

judgment in favor of the defendants on their counterclaim counts thirty

through thirty-three and ordered a declaratory judgment in connection with

those counts.

13 Prior to trial, the trial court granted the defendants’ motion to strike the

following counts: direct count seven, alleging a violation of the Connecticut

Uniform Securities Act; direct count eleven and derivative count nine, alleging statutory theft; direct count twelve and derivative count ten, alleging

conversion; and derivative counts three and five, alleging breach of the

implied covenant of good faith and fair dealing. The plaintiff withdrew

derivative count thirteen, alleging breach of the Fund’s limited partnership agreement.

Following trial, the court also rendered judgment in favor of Madison

Mott, Inc., a company owned by Briner’s wife, on direct counts thirteen and

fourteen and derivative counts eleven and twelve, alleging facilitation of

breach of fiduciary duty and violations of CUTPA.

14 In direct count two and derivative count one, the plaintiff alleged common-law fraud against the defendants.

15 In direct count three and derivative count two, directly and on behalf

of Revere Investments, the plaintiff alleged breach of Revere Investments’

operating agreement against Revere Capital TX. In direct count five and

derivative count four, directly and on behalf of Fund GP, the plaintiff alleged

breach of Fund GP’s limited liability company agreement against Briner.

16 In direct counts four and six, the plaintiff alleged breach of the implied

covenant of good faith and fair dealing against Revere Capital TX and

Briner, respectively.

17 In direct counts nine and ten and derivative counts seven and eight,

the plaintiff alleged breach of fiduciary duty directly and on behalf of Revere

Investments and Fund GP against Revere Capital TX and Briner, respectively.

In direct count thirteen and derivative count eleven, the plaintiff alleged

facilitation of the breach of fiduciary duty against Madison Mott, Inc.

18 In direct count seven and derivative count twelve, the plaintiff alleged

violations of the Connecticut Uniform Securities Act, directly against the

defendants and on behalf of Revere Investments against Madison Mott, Inc.,

as to the derivative claim. In direct count eight and derivative count six,

directly and on behalf of Revere Investments, respectively, the plaintiff

alleged violations of CUTPA against the defendants. Moreover, in addition

to his CUTPA claims against the defendants, in direct count fourteen, the

plaintiff alleged violations of CUTPA against Madison Mott, Inc.

19 The parties could have authorized the filing of derivative actions in the

operating agreements of Revere Investments and Fund GP. See Styslinger

v. Brewster Park, LLC, 321 Conn. 312, 317, 138 A.3d 257 (2016) (noting

that CLLCA provides default rules regarding operation of limited liability

companies but permits ‘‘members to supplement these statutory provisions

by adopting an operating agreement to govern the [company’s] affairs’’);

418 Meadow Street Associates, LLC v. Clean Air Partners, LLC, 304 Conn.

820, 837, 43 A.3d 607 (2012) (‘‘[T]he statutory scheme controls and provides

for the default method of operation, unless the organizers or members of

the limited liability company contract, through the operating agreement, for

another method of operation. Indeed, this is one of the foundational principles of the law governing limited liability companies.’’); 3 L. Ribstein & R.

Keatinge, Limited Liability Companies (2d Ed. 2011) Appendix C, p. App.

C-109 (‘‘this section does not permit derivative suits unless they are provided

for in the operating agreement’’). Because the operating agreements of

Revere Investments and Fund GP are silent as to the parties’ abilities to

bring a derivative action, however, we conclude that no such contractual

authorization exists in the present case, and the plaintiff’s right to sue in

a derivative capacity, if it exists, must emanate from the CLLCA or the

common law.

20 As a second alternative—that is, if this court were to conclude that the
plaintiff lacked standing under the CLLCA and the common law to bring

his derivative claims—the plaintiff asks that we conclude, nevertheless, that

the trial court retained subject matter jurisdiction over his claims because

‘‘the same judicial result would [have] occur[ed] under the court’s order

awarding judicial dissolution’’ pursuant to General Statutes (Rev. to 2017)

§ 34-207. The defendants respond that, because the parties agreed to dissolve

the companies, the trial court did not need to make any of its findings to

resolve that count. We conclude that, ‘‘[b]ecause the plaintiff did not request

with specificity any other form of relief besides a dissolution’’ in count one

of his complaint, the plaintiff lacked a legal basis to seek ‘‘some other form

of relief besides dissolution and winding up.’’ Styslinger v. Brewster Park,

LLC, 321 Conn. 312, 315, 138 A.3d 257 (2016).

In Styslinger, this court was asked to determine whether an assignee of

a membership interest in a limited liability company had standing to seek

a court order winding up the company. Id., 313–14. After concluding that

assignees lack standing to seek such orders, we noted that, ‘‘[a]ssuming for

the sake of argument that an assignee is entitled to seek some other relief,

including money damages, for wrongful conduct on the part of the members

or managers of [a limited liability company], the plaintiff did not explicitly

ask for any other relief besides a court-ordered dissolution and winding up

of [that company’s] affairs in his complaint. Although the plaintiff requested

‘[s]uch other and further relief as in law or equity may appertain,’ the trial

court properly concluded that a more specific request was necessary to put

the defendants on notice that the plaintiff was seeking some other form of

relief besides dissolution and winding up.’’ Id., 315 n.2.

In Styslinger, therefore, we indicated that we would reject a ‘‘catchall

prayer for relief’’ to satisfy a claim for money damages when dissolving and

winding up a limited liability company. Id. In the present case, the plaintiff

failed to ask for any form of damages under count one but, rather, asked

only that the court judicially dissolve Revere Investments and Fund GP.

Although the plaintiff requested additional relief at the end of his fifty-one

page complaint, the specific requests for damages expressly relate to other

counts of the complaint. Additionally, where the plaintiff lists an individual

request for relief asking solely for judicial dissolution, he fails to mention

any additional damages. Finally, as we noted in Styslinger, the plaintiff’s

catchall prayer requesting ‘‘such other and further relief, both legal and

equitable, as the court, in its discretion, may deem just and proper,’’ does

not suffice to confer standing to seek damages based on the derivative

counts in his complaint.

21 Our conclusion that the plaintiff lacked standing to bring the derivative

claims, including the CUTPA counts, disposes of the issues relating to attorney’s fees under CUTPA and the challenges to the admission of expert

testimony. We observe that, in order to sustain a legal basis for attorney’s

fees, a plaintiff must first succeed on the merits of his CUTPA claim. See, e.g.,

Total Recycling Services of Connecticut, Inc. v. Connecticut Oil Recycling

Services, LLC, 308 Conn. 312, 329, 63 A.3d 896 (2013) (‘‘CUTPA . . . affords

a trial court discretion to award attorney’s fees if a violation is established’’);

Vezina v. Nautilus Pools, Inc., 27 Conn. App. 810, 821, 610 A.2d 1312 (1992)

(‘‘[t]he moving party must prevail on the CUTPA cause of action before

such fees and damages must be awarded’’). Accordingly, because we conclude that the plaintiff lacked standing to bring derivative CUTPA claims

under the CLLCA, and he has not articulated an alternative basis upon which

to grant him attorney’s fees, we do not reach the issue of whether the trial

court incorrectly apportioned attorney’s fees under the plaintiff’s derivative

CUPTA counts.

In addition, because we conclude that the plaintiff lacked standing to

bring derivative counts seven and eight—which alleged breach of fiduciary

duty on behalf of Revere Investments and Fund GP, respectively—we do

not reach the issue of whether we should reverse the trial court’s judgment

in favor of the plaintiff as to those counts on the ground that it abused its

discretion in admitting the opinion testimony of Schachter—the joint, courtappointed fiduciary hired to wind up the companies at issue—when the

plaintiff, who called Schachter to testify, failed first to disclose him as an

expert witness under Practice Book § 13-4.

22 The record indicates that, although Saunders transferred his membership interest in Revere Investments to the plaintiff, the plaintiff did not

become a comanager of that company. The plaintiff’s status as a member

but not a manager of Revere Investments does not affect our legal analysis

under § 34-187, as that statute clearly provides that any member of a limited

liability company, regardless of whether that company vests management
responsibilities in its members or managers, may bring an action in the

name of the company upon the vote of a majority of disinterested members.

23 The Prototype Act was drafted in 1992 by the Working Group on the

Prototype Limited Liability Company Act, Subcommittee on Limited Liability

Companies, Committee on Partnerships and Unincorporated Business Organizations of the Business Law Section of the American Bar Association. See

3 Ribstein & R. Keatinge, Limited Liability Companies (2d Ed. 2011) Appendix

C, p. App C-109.

24 General Statutes (Rev. to 2017) § 34-187 provides: ‘‘(a) Except as otherwise provided in an operating agreement, suit on behalf of the limited liability

company may be brought in the name of the limited liability company by:

(1) Any member or members of a limited liability company, whether or not

the articles of organization vest management of the limited liability company

in one or more managers, who are authorized to sue by the vote of a majority

in interest of the members, unless the vote of all members shall be required

pursuant to subsection (b) of section 34-142; or (2) any manager or managers

of a limited liability company, if the articles of organization vest management

of the limited liability company in one or more managers, who are authorized

to sue by the vote required pursuant to section 34-142.

‘‘(b) In determining the vote required under section 34-142 for purposes

of this section, the vote of any member or manager who has an interest in

the outcome of the suit that is adverse to the interest of the limited liability

company shall be excluded.’’

25 Section 1102 of the Prototype Act provides: ‘‘Unless otherwise provided

in an operating agreement, a suit on behalf of the limited liability company

may be brought only in the name of the limited liability company by:

‘‘(a) One or more members of a limited liability company, whether or not

an operating agreement vests management of the limited liability company

in one or more managers, who are authorized to sue by the vote of more

than one half by number of the members eligible to vote thereon, unless

the vote of all members shall be required pursuant to § 403 (B), provided

that in determining the vote required under § 403, the vote of any member

who has an interest in the outcome of the suit that is adverse to the interest

of the limited liability company shall be excluded; or

‘‘(b) One or more managers of a limited liability company, if an operating

agreements vests management of the limited liability company in one or

more managers, who are authorized to do so by the vote required pursuant

to § 403 of the members eligible to vote thereon, provided that in determining

such required vote, the vote of any manager who has an interest in the

outcome of the suit that is adverse to the interest of the limited liability

company shall be excluded.’’ See 3 L. Ribstein & R. Keatinge, Limited Liability

Companies (2d Ed. 2011) Appendix C, pp. App. C-107 through App. C-108.

26 The type of action contemplated in the Prototype Act differs from a

derivative action, the drafters explained, because § 1102 of the Prototype

Act creates procedures to permit disinterested members or managers who

agree to sue in the company’s name to bring an action—that is, to initiate

a suit by the company—rather than permitting ‘‘a single member to sue on

behalf of the [limited liability company] . . . .’’ See 3 L. Ribstein & R.

Keatinge, supra, p. App. C-109; id., pp. App. C-109 through App. C-110 (‘‘[s]uit

by a single member arguably is appropriate in public corporations because

the members are generally passive and uninvolved in management and in

any event too numerous to coordinate effectively for action against errant

managers . . . [whereas] it may not be worth it in closely held firms like

the typical [limited liability company] . . . [in which] members can be

expected to be actively interested in the firm, and . . . can readily be

coordinated for a vote on a suit by the firm’’); J. Burkhard, ‘‘Resolving LLC

Member Disputes in Connecticut, Massachusetts, Pennsylvania, Wisconsin,

and the Other States that Enacted the Prototype LLC Act,’’ 67 Bus. Law.

405, 409 (2012) (comparing derivative action’s ‘‘dual purpose,’’ in which

shareholders first compel corporation to sue and then file suit on its behalf,

with Prototype Act’s direct action, which lacks precondition that company

failed to act). We observe that, unlike the member initiated action provided

in § 34-187, the section authorizing a single member to bring a derivative

action under our new limited liability company statute—the Connecticut

Uniform Limited Liability Company Act (CULLCA), General Statutes § 34-

243 et seq.—requires a two step process. First, under General Statutes § 34-

271a, a member of a manager-managed limited liability company who desires

to bring a derivative action must first attempt to compel the company to

sue by serving upon the other managers ‘‘a demand . . . [to] cause the

company to bring an action . . . .’’ Second, if the managers fail to ‘‘bring
the action within ninety days’’ or a demand on them ‘‘would be futile,’’ then

the member may file suit on behalf of the company. General Statutes § 34-

271a (1) and (2).

Burkhard and other commentators have noted that some courts, apparently overlooking commentary by the drafters of the Prototype Act, have

conflated the member initiated action with the derivative action. See, e.g.,

J. Burkhard, supra, 67 Bus. Law. 411 (‘‘[i]n spite of the rather clear direction

that Prototype Act [§] 1102 replaces the derivative suit . . . such has not

always been how the courts have applied their respective statutes, and there

appears to be substantial confusion among the courts as to how the statute

should be applied’’); A. Gladden, ‘‘Beyond Direct vs. Derivative: What Muccio

v. Hunt Tells Us about Arkansas LLCs,’’ 51 Ark. Law. 34, 35 (2016) (questioning decision of Arkansas Supreme Court applying shareholder derivative

action principles to limited liability companies despite existence of member

initiated action in its limited liability company statute).

27 Our conclusion is consistent with the context surrounding our legislature’s enactment of the CLLCA and its enactment of our current limited

liability company statute, the Connecticut Uniform Limited Liability Company Act (CULLCA), General Statutes § 34-243 et seq. Not only did our

legislature decline to provide for a derivative cause of action in the CLLCA

but, when it enacted the CLLCA, it also did not modify our derivative action

statute, General Statutes § 52-572j, to include limited liability companies.

See Ward v. Gamble, Docket No. CV-08-5017829-S, 2009 WL 2781541, *3

(Conn. Super. July 23, 2009). The fact that the legislature did not modify

§ 52-572j after its enactment of the CLLCA suggests that it did not intend

to allow derivative actions for that type of corporate structure. See, e.g.,

Hartford/Windsor Healthcare Properties, LLC v. Hartford, 298 Conn. 191,

198, 3 A.3d 56 (2010) (‘‘[t]he legislature is always presumed to have created a

harmonious and consistent body of law’’ [internal quotation marks omitted]).

Additionally, our interpretation that the legislature intended to omit a

statutory derivative remedy in the CLLCA is strengthened by its later choice

to expressly include that authority in the CULLCA. See, e.g., Celentano v.

Oaks Condominium Assn, 265 Conn. 579, 597, 830 A.2d 164, 176 (2003)

(citing cases that note that ‘‘subsequent legislative act may throw light on

the legislative intent of an earlier related act’’ [internal quotation marks

omitted]). The defendants claim that the legislature did not intend for the

CULLCA to apply retroactively. Because the CULLCA expressly provides

that it applies prospectively; see General Statutes § 34-283b; and the plaintiff

filed the present action in November, 2012, we agree. See, e.g., D’Eramo v.

Smith, 273 Conn. 610, 621, 872 A.2d 408 (2005) (‘‘procedural or remedial

statutes are intended to apply retroactively [only] absent a clear expression

of legislative intent to the contrary’’ [internal quotation marks omitted]).

28 We recognize that, ‘‘because of the closely held nature of many [limited

liability companies] there may be little difference between the derivative

remedy and the one proposed in this section.’’ 3 L. Ribstein & R. Keatinge,

supra, p. App. C-110. Practically, the two types of actions—member initiated

and derivative—differ in that, in a derivative action, the parties litigate

whether demand was made or whether it was futile and, in a member

initiated action, the parties litigate whether a given member’s or manager’s

interest was adverse to the company. The plaintiff in the present case,

however, was required to follow the procedure provided by statute in this

jurisdiction at the time he filed his action. As such, the CLLCA required him

to allege that he did not need to request a vote of Briner, whose interests

were adverse to that of both companies.

Our interpretation regarding the mutual exclusivity of the two types of

actions finds support in later versions of the Prototype Act and decisions

by other legislatures that adopted the Prototype Act. In 2011, the Revised

Prototype Limited Liability Company Act (Revised Prototype Act) was published by the Revised Prototype Limited Liability Company Act Editorial

Board, Subcommittee on Limited Liability Companies, Partnerships and

Unincorporated Entities of the Business Law Section of the American Bar

Association. The Revised Prototype Act contains provisions permitting both

the member initiated and derivative causes of action, derived from, inter

alia, the Revised Model Business Corporation Act of 2007. See 3 L. Ribstein &

R. Keatinge, Limited Liability Companies (Rev. Ed. 2019) Appendix G (noting

that ‘‘[t]he original Prototype Act did not provide for derivative actions’’

but not explaining reasons for providing both remedies). Additionally, we

observe that at least one other state that adopted the member initiated

action from the Prototype Act chose to include, although absent from the

Prototype Act itself, a separate provision permitting derivative actions. See
Ky. Rev. Stat. Ann. § 275.330 (LexisNexis 2012) (authorizing suit by or against

limited liability company in its own name); Ky. Rev. Stat. Ann. § 275.335

(LexisNexis Supp. 2018) (providing for member initiated action authorizing

members or managers to sue in name of company). But see Ky. Rev. Stat. Ann.

§ 275.337 (LexisNexis Supp. 2018) (providing members of limited liability

companies with derivative remedy).

29 The plaintiff relies on state trial court and federal District Court cases

to claim that Connecticut courts have recognized a common-law derivative

action for limited liability company members. Those decisions, however, are

not binding on our court. Moreover, we are not persuaded by the reasoning

in those cases, as the standing challenges in those cases chiefly contemplate

a member’s ability to bring direct, not derivative, causes of action. See, e.g.,

Channing Real Estate, LLC v. Gates, 326 Conn. 123, 138, 161 A.3d 1227

(2017) (limited liability company member lacked standing to bring direct

claim because company was party directly harmed); Scarfo v. Snow, supra,

168 Conn. App. 497 (same); O’Reilly v. Valletta, 139 Conn. App. 208, 214–15,

55 A.3d 583 (2012) (same), cert. denied, 308 Conn. 914, 61 A.3d 1101 (2013).

The most compelling case, Ward v. Gamble, Docket No. CV-08-5017829-

S, 2009 WL 2781541 (Conn. Super. July 23, 2009), in which the trial court

contemplated whether the plaintiff in that case could maintain a direct

action against the other members of the limited liability company, directly

addressed whether our common law provides members of limited liability

companies with a derivative cause of action. Id., *3–4. In concluding that

the plaintiff could not bring a direct action to remedy alleged harm to the

company, the trial court noted that he had to bring those claims as a

derivative action on behalf of the company. Id.

In reaching that conclusion, however, the trial court recognized that ‘‘there

is no appellate authority in Connecticut directly addressing the applicability

of derivative actions to [limited liability companies]’’ but, nonetheless, concluded that derivative actions are available to limited liability company

members because the decision of ‘‘the Appellate Court in Wasko [v. Farley,

108 Conn. App. 156, 947 A.2d 978, cert. denied, 289 Conn. 922, 958 A.2d 155

(2008)] . . . supports [the] conclusion’’ that, ‘‘[if] . . . a member may not

sue individually for an injury to the [limited liability company] . . . [then]

the need for a derivative action is virtually self-evident.’’ (Footnote omitted;

internal quotation marks omitted.) Ward v. Gamble, supra, 2009 WL 2781541,

*4. Because, as we have explained in this opinion, the CLLCA provided

members with the member initiated action, an alternative standing proposition, in which members could collectively bring suit in the company’s name,

we disagree with the reasoning in Ward. In addition, for the same reasons,

we decline to adopt the reasoning in Beckworth v. Bizer, 138 F. Supp. 3d

144 (D. Conn. 2015), in which the United States District Court for the District

of Connecticut relied on Ward. Id., 157.

30 But see In re Patel, 536 B.R. 1, 16 (Bankr. D.N.M. 2015) (‘‘The fact that

[New Mexico’s member initiated action section] does not address whether

a claim is direct or derivative does not mean the legislature intended to

dispense with long-standing [common-law] principles governing shareholder/member derivative actions. . . . The [c]ourt will therefore apply

principles of common law governing corporations—and in particular New

Mexico law—to determine whether [the plaintiffs’] claims [were] direct or

derivative.’’ [Citation omitted.]).

31 The defendants claim that the plaintiff would have had to bring a derivative action on behalf of Saunders Capital. Because this court concludes,

however, that our legislature did not provide for and our common law did

not recognize a derivative cause of action for limited liability companies at

the time the plaintiff filed his action, we observe that, were this court to

conclude that the plaintiff lacked direct standing, the proper procedure for

bringing an action on behalf of Saunders Capital under the CLLCA would

have been for the plaintiff to bring an action in the name of Saunders Capital

under § 34-187.

32 The defendants suggest that some investments made by the plaintiff

originated from the plaintiff’s pension plan. We observe that the defendants

do not directly state that the loans at issue in this appeal came from the

plaintiff’s pension plan, and the record does not suggest it. Accordingly, we

confine our discussion to whether the plaintiff could assert direct claims

to recover the outstanding bridge capital even though the investment funds

came from his limited liability company and not directly from him.

33 The record reveals that, before trial and at trial, the parties did not

dispute that the capital loaned by the plaintiff was personally owned by him.

34 The plaintiff further argues ‘‘that the defendants’ multiple admissions
of liability for the LR Global [bridge] loan’’ amount to a judicial admission

that should afford him standing. We observe, however, that an admission

that the plaintiff was personally injured does not resolve the issue of whether

he ‘‘sustain[ed] a loss [that was] separate and distinct from that of’’ Saunders

Capital. Yanow v. Teal Industries, Inc., 178 Conn. 262, 282, 422 A.2d 311

(1979).

35 Our conclusion in Channing Real Estate, LLC, reflects the well established corporate law principle that a shareholder must bring a derivative,

rather than a direct, action to seek redress for injuries to the corporation.

See, e.g., Yanow v. Teal Industries, Inc., 178 Conn. 262, 281, 422 A.2d 311

(1979) (‘‘a claim of injury, the basis of which is a wrong to the corporation,

must be brought in a derivative suit, with the plaintiff proceeding ‘secondarily,’ deriving his rights from the corporation which is alleged to have

been wronged’’).

36 We recognize that the commentary to § 1102 of the Prototype Act

rejected a wholesale adoption of 2 A.L.I., supra, § 7.01 (d), as part of the

general rule. See 3 L. Ribstein & R. Keatinge, supra, pp. App. C-111 through

App. C-112. The commentary also acknowledged, however, that, when it

comes to closely held corporations, there may be little difference between

direct and derivative claims, and recognized that ‘‘[c]ourts may permit claims

that essentially seek redress on behalf of the firm to be brought directly.’’

Id., p. App. C-111. Thus, the commentary contemplated exceptions to the

general rule that would allow, under certain narrow circumstances such as

those in the present case, a member to bring direct claims on behalf of

the LLC.

37 We disagree with the dissent’s suggestion that, by looking to Watson v.

Button, supra, 235 F.2d 235, and the American Law Institute for guidance,

our decision implicates the concerns this court expressed in Blumberg

Associates Worldwide, Inc. v. Brown & Brown of Connecticut, Inc., 311

Conn. 123, 148–49, 84 A.3d 840 (2014). In the present case, this court did

not raise the issue sua sponte. The plaintiff has raised the issue of whether

he has direct standing to sue in light of his status as the sole owner and

member of the company. In resolving that issue, which has been presented

to the court, we are not limited to the authorities relied on by the parties.

We therefore disagree with the dissent that it is necessary to seek further

briefing from the parties in order to resolve the issue.

38 We recognize that this court declined to adopt the American Law Institute’s exception in the corporate law context in Fink v. Golenbock, 238

Conn. 183, 202–203, 680 A.2d 1243 (1996), and May v. Coffey, supra, 291 Conn.

111, 120–22. Those cases, however, are distinguishable from the present

case. In Fink, a 50 percent shareholder filed suit against the other 50 percent

shareholder and an employee of the shareholders’ pediatric practice, alleging

that the defendants violated, inter alia, CUTPA. Fink v. Golenbock, supra,

185–86. The trial court rendered judgment for the plaintiff, and the defendants appealed, claiming that the plaintiff lacked standing to bring his CUTPA

claims derivatively. Id., 211–13. On appeal, this court affirmed the trial court’s

judgment on the ground ‘‘that the plaintiff’s derivative action was proper’’

and, therefore, did not reach the issue of whether the plaintiff could have

brought a direct action. Id., 198, 200. This court recognized in Fink, however,

that ‘‘there may be some instances in which the facts of a case give rise

either to a direct or to a derivative action—such as when an act affects

both the relationship of a particular shareholder to the corporation and

the structure of the corporation itself, causing or threatening injury to the

corporation.’’ Id., 202.

In May, minority shareholders of Latex Foam International Holdings, Inc.

(Latex), alleged that the majority shareholders of Latex set the price of

shares during a multiphase stock offering ‘‘too low, resulting in the dilution

of the plaintiffs’ percentage ownership in the company.’’ May v. Coffey,

supra, 291 Conn. 110–11. This court concluded that the facts presented in

May did not ‘‘allow for the [trial] court to exercise . . . discretion’’ in

permitting the plaintiffs to bring their claims in a direct action, because—

regardless of whether Latex constituted a closely held corporation—the

harm was suffered by all the shareholders collectively, and, as such, the

plaintiffs could not allege a separate and distinct injury. Id., 119–20; cf.

Wilcox v. Webster Ins., Inc., supra, 294 Conn. 216–21 (members of limited

liability company sufficiently alleged standing because their allegations that

they were insureds under limited liability company’s insurance policy demonstrated individual interests sufficient to challenge recovery under those

policies). We reasoned, therefore, that the facts in May did not rise to the

type of dual standing contemplated in Fink. May v. Coffey, supra, 120. We
observe, however, that, even under § 7.01 (d) of the Principles of Corporate

Governance, the plaintiff shareholders in May would lack standing because

the fact that all of the shareholders suffered harm would lead to a risk of

a multiplicity of suits and uneven distribution of recovery. See, e.g., Trieweiler v. Sears, 268 Neb. 952, 982, 689 N.W.2d 807 (2004). In the present

case, by contrast, the ‘‘fraud affecting [the plaintiff] . . . does not fall alike

upon other shareholders’’; id., 982; because none exists.

Additionally, we observe that the question before us differs from the

questions presented to this court in May and Fink. Unlike in those cases—

in which we contemplated whether the plaintiffs sustained an injury that

was sufficiently separate and distinct from the other shareholders of the

same corporation in order to allow them to bring their claims in a direct

action—in the present case, we are not presented with whether, through

Briner’s failure to repay the plaintiff’s LR Global bridge loan, the plaintiff

sustained an injury sufficiently separate and distinct from that of Briner,

the other 50 percent shareholder of Revere Investments but, rather, whether

the plaintiff suffered an injury separate and distinct from Saunders Capital,

which provided the bridge funding at issue, in order to justify bringing a

direct action for harm suffered by that company.

We additionally acknowledge that, in May, we quoted Smith v. Snyder,

267 Conn. 456, 461, 839 A.2d 589 (2004), in which we alluded to the principle

that even a sole shareholder lacks standing to assert claims alleging wrongs

to the corporation. See May v. Coffey, supra, 291 Conn. 115. We observe,

however, that these cases are distinguishable because neither of them

involved limited liability companies or sole shareholders. The question presented in this appeal, therefore, is one of first impression. We observe,

additionally, that the question remains one of first impression, notwithstanding decisions on the subject by the Appellate Court. We recognize that the

Appellate Court did not allow a sole member of a limited liability company

to bring a direct action alleging breach of contract arising out of the failed

sale of a limited liability company to the defendant; see Padawer v. Yur,

142 Conn. App. 812, 813–15, 66 A.3d 931, cert. denied, 310 Conn. 927, 78

A.3d 145 (2013); however, there was no indication in Padawer that the

Appellate Court considered the American Law Institute principles we

adopt today.

39 We recognize that trial courts will apply this exception only in rare

circumstances, such as those in the present case, in which neither party

disputed that the plaintiff belongs to a single member limited liability company or that the capital he seeks to recover belonged to him personally.

We observe that had the defendants raised this issue earlier, the plaintiff

could have readily addressed and cured it by amending his complaint.

We also recognize the concerns articulated by jurisdictions that have

declined to adopt a version of the closely held corporate exception. See 2

A.L.I., supra, § 7.01 (d), p. 17. Courts in those jurisdictions require shareholders to bring their claims derivatively on the basis of two main policy rationales. First, those courts articulate the goal of promoting the consistency

and predictability of corporate rules. See, e.g., Simmons v. Miller, 261

Va. 561, 575, 544 S.E.2d 666 (2001) (noting that corporate rules should be

predictable, ‘‘allowing . . . investors . . . to vary the rules by contract if

they think deviations are warranted’’ [internal quotation marks omitted]).

Similarly, the dissent suggests that the majority’s approach undermines the

advantages of predictability and stability. As we explained, however, this

limited exception would apply in rare circumstances, under which the plaintiff would have been entitled to the same relief by a simple amendment to

the form of the pleading. There is no indication from the significant number

of jurisdictions that have adopted the exception that doing so has resulted

in corporate unpredictability or instability. See, e.g., Trieweiler v. Sears,

supra, 268 Neb. 983; Durham v. Durham, supra, 151 N.H. 762. Indeed as

the Supreme Court of New Hampshire noted, although ‘‘consistency in the

law is important . . . the derivative proceeding involves burdensome, and

often futile, procedural requirements . . . .’’ Durham v. Durham, supra,

762. This is especially true in a case such as this one, in which the parties

agreed that the bridge loan consisted of the plaintiff’s money.

Second, courts rejecting the closely held corporation exception note that

individuals employing the corporate structure to enjoy limited liability

should not also be able to disregard that form to recover for corporate

losses. See, e.g., Landstrom v. Shaver, 561 N.W.2d 1, 14 (S.D. 1997) (The

court noted that the plaintiff sought ‘‘the best of both business entities:

limited liability provided by a corporate structure and direct compensation

for corporate losses. ‘That cushy position is not one the law affords. Investors
who created the corporate form cannot rend the veil they wove.’ ’’). Allowing

investors to disregard the corporate form in order to recover for corporate

losses owed to them individually, however, is consistent with our treatment

of corporate entities in other contexts. For example, our jurisdiction allows

trial courts to disregard the corporate form under circumstances in which

a creditor seeks to pierce the corporate veil and reach the assets of a sole

or majority shareholder who exercises such domination and control that

the corporation is considered to have ‘‘no separate . . . existence of its

own.’’ Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., 187

Conn. 544, 553, 447 A.2d 406 (1982) (looking to control and domination over

corporation as factor in determining whether to pierce corporate veil);

see also Public Acts 2019, No. 19-181, §§ 1 and 2 (codifying traditional

veil piercing).

Further, there is no risk of double recovery by the shareholder and the

company, as this court has stated that, ‘‘[i]f the corporation is closely held,

in that one or a few persons hold substantially the entire ownership in it,

the judgment in an action by . . . the holder of ownership in it is conclusive

upon the [corporation] as to issues determined therein,’’ and reasoning, in

part, that the ‘‘interests of the corporation’s management and stockholders

and the corporation itself generally fully coincide . . . [and, therefore] there

is no good reason why a closely held corporation and its owners should be

ordinarily regarded as legally distinct.’’ (Internal quotation marks omitted.)

Joe’s Pizza, Inc. v. Aetna Life & Casualty Co., 236 Conn. 863, 869, 675 A.2d

441 (1996).

40 We observe that a majority of the jurisdictions that have adopted a

version of the American Law Institute’s provision, § 7.01 (d), have applied

an abuse of discretion standard of review. See, e.g., Barth v. Barth, 693

N.E.2d 954, 957–58 (Ind. App. 1998) (reviewing, under abuse of discretion

standard, trial court’s dismissal of action after that state’s Supreme Court

had adopted American Law Institute’s provision and remanded case to trial

court to determine whether plaintiff met three factors); Mynatt v. Collis,

supra, 274 Kan. 873 (noting that ‘‘[a] trial court’s reason for its decision is

immaterial if the ruling is correct for any reason’’ [internal quotation marks

omitted]); Mathis v. ERA Franchise Systems, Inc., 25 So. 3d 298, 302 (Miss.

2009) (‘‘trial judge did not abuse his discretion in holding that [the plaintiff]

could not pursue his derivative claims in a direct action’’); Schumacher v.

Schumacher, 469 N.W.2d 793, 799 (N.D. 1991) (‘‘[t]he ultimate question is

whether the trial court’s refusal to allow [the plaintiffs] to bring a direct

action constituted an abuse of the court’s discretion’’). But see Trieweiler

v. Sears, supra, 268 Neb. 983–84 (applying de novo standard of review to

facts of that case upon adoption of the American Law Institute’s § 7.01 [d]).

We follow the majority of cases and direct our appellate courts to review

the trial court’s application of the rule we adopt in part I B of this opinion

under an abuse of discretion standard.

41 We therefore reject the plaintiff’s claim that ‘‘a party who has already

suffered injury by the tort of another is entitled to recover for expenditures

reasonably made or harm suffered in a reasonable effort to avert further

harm.’’ (Internal quotation marks omitted.) Although, to support this claim,

the plaintiff states that he ‘‘made every reasonable effort to avoid the expense

of a judicial dissolution and to amicably resolve the parties’ issues,’’ the

record reveals e-mails that paint the plaintiff in a less angelic light, such as

two e-mails that the plaintiff sent to Briner’s outside investors, the first in

which he discussed the litigation and noted that ‘‘Briner . . . may seek

. . . to prevent the dissemination of [Schachter’s] report’’ and a second, in

which he attached Schachter’s report revealing Briner’s misdealing, which

was against Schachter’s express instructions that the parties not release the

report prior to his amending it.

Additionally, we reject the plaintiff’s claim that the trial court’s findings

were contradictory in that it found both that the defendants’ misappropriated

and failed to adequately account for funds and also that all the parties were

responsible for ensuring proper bookkeeping and accounting. The trial court

explained that, although Briner inadequately ‘‘perform[ed] the duties associated with operating’’ Revere Investments, the Fund, and Fund GP, the plaintiff and Saunders failed to properly and adequately supervise Briner’s management of those companies.

Lastly, we reject the plaintiff’s claim that Briner was solely responsible

for ensuring proper bookkeeping and accounting merely because the plaintiff

paid him 85 percent of the management fee to perform those tasks. The

trial court found that both Briner and the plaintiff, who were equal members

and comanagers, owed a fiduciary duty to the Fund. In fact, the trial court
noted that ‘‘[t]he fiduciary relationship is not singular. The relationship

between sophisticated partners in a business venture may differ from the

relationship involving lay people who are wholly dependent upon the expertise of a fiduciary. . . . Falls Church Group LTD. v. Tyler, Cooper & Alcorn,

LLP, 281 Conn. 84, 108, 912 A.2d 1019 (2007).’’ (Internal quotation marks

omitted.) The record reveals that the parties created ‘‘ ‘a complex and arcane

web of business entities’ ’’ in a field in which the plaintiff benefited from

expertise and Briner struggled from his inexperience. (Footnote omitted.)

Additionally, Saunders—who entered the business with much more experience than Briner in Excel and Quickbooks—reviewed Briner’s work and

gave him feedback but failed to take further steps to prevent him from

mismanaging and misallocating funds. We observe, therefore, that the record

supports the trial court’s finding that ‘‘all [the] owners failed to assure that

appropriate bookkeeping and accounting were regularly performed and

supervised.’’ (Emphasis in original.)