Opinion ID: 788137
Heading Depth: 3
Heading Rank: 2

Heading: CUTPA liability.

Text: 27 CUTPA provides: No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. Conn. Gen. St. § 42-110b(a). Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action to recover actual damages, punitive damages, and equitable relief. Conn. Gen. St. 42-110g(a). Subsection (d) of Section 42-110g allows the court to award costs and reasonable attorneys' fees based on the work reasonably performed by an attorney and not on the amount of recovery. 28 CUTPA is to be construed in accord with interpretations by the Federal Trade Commission and by the federal courts interpreting the Federal Trade Commission Act. Conn. Gen. St. § 42-110b(b). Thus, Connecticut has adopted the Commission's cigarette rule to determine whether a practice is unfair under CUTPA. 1 The factors to be weighed under the cigarette rule are 29 (1) Whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers [(competitors or other businessmen)]. 30 Cheshire Mortgage Serv. Inc. v. Montes, 223 Conn. 80, 612 A.2d 1130, 1143 (1992). A CUTPA plaintiff need not establish all three criteria to demonstrate unfairness. Id. Instead, a practice may be shown to be unfair either because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three. Id. at 1143-44 (internal quotation marks omitted). The practice attacked may be actually deceptive or a practice amounting to a violation of public policy. Id. at 1144. The plaintiff need not show intent to deceive. Id. 31 Defendants make three attacks on the CUTPA verdict. First, they argue that because the jury found in their favor on all of the common law grounds, it could have found in the Fabris' favor on the CUTPA claim only by imposing a super-fairness standard. Defendants' argument is subtle and complex, but it ultimately founders on their failure to object to the charge and verdict sheet. Defendants begin by noting that the district court instructed the jury that to defeat the contract claim, defendants must establish that they had a good faith reason to believe that the Fabris had breached the warranties in the SRA. Defendants then reason that, absent a super-fairness standard, they could not have violated CUTPA without also breaching their duty of good faith and fair dealing under the contract. 32 With respect to the contract claim, the court charged the jury: 33 The contract provides that defendants may terminate the contract when in the exercise of good faith and fair dealings they have reason to believe that the plaintiffs violated the sales representation agreement by payment, offer or promise of money or thing of value to an Argentine official. 34 In determining whether the plaintiffs were entitled to payment under the contract, you must determine whether the defendants have proven that they had good-faith reason to believe that plaintiffs violated the sales representation agreement. 35 With respect to the CUTPA claim, the court charged that the plaintiffs must prove an unfair or deceptive act or practice by defendants. It further instructed: 36 There have been certain guidelines established to help you decide what constitutes an unfair trade practice. 37 One, whether the practice, though not previously considered unlawful, offends a public policy established by statutes, common law or otherwise. Whether, in other words, it is within the scope of a concept of unfairness established by the common law or statutes. 38 Two, whether it is immoral, unethical, oppressive or unscrupulous. 39 Three, whether it causes substantial injury to other business persons. 40 The court then went on to tell the jury that it need not find all three factors, that one present to a great extent might demonstrate an unfair practice, and that in order to prevail on the third factor, the plaintiffs must show that the injury was indeed substantial and that it was not outweighed by benefits of the practice. 41 Defendants did not object to either the contract or the CUTPA charge, and they did not object to the verdict sheet, which stated the two claims separately and contained no indication that a verdict in defendants' favor on the common law claims mandated the same verdict on the CUTPA claim. 42 Although defendants frame their challenge to the verdict as a challenge to the sufficiency of the evidence, any problem with the verdict is a result of the charge and verdict sheet, which allowed the jury to find in favor of defendants on all of the common law claims, but also in favor of plaintiffs on the CUTPA claim. Because defendants' sufficiency challenge is truly an attack on the consistency of the contract and CUTPA verdicts, defendants were required to object before the jury began its deliberations. Jarvis, 283 F.3d at 56-57. Since they did not object, defendants must demonstrate fundamental error in the charge and verdict sheet in order to prevail. 2 Id. at 62. Fundamental error is more egregious than the `plain' error that can excuse a procedural default in a criminal trial and is so serious and flagrant that it goes to the very integrity of the trial. Id. (internal quotation marks and citation omitted). 43 Defendants cannot establish fundamental error because none of the authorities on which they rely— Gomes v. Commercial Union, 258 Conn. 603, 783 A.2d 462 (2001); Rudel Mach. Co. v. Giddings & Lewis, Inc., 68 F.Supp.2d. 118 (D.Conn.1999); and McKeown Distribs. v. Gyp-Crete Corp., 618 F.Supp. 632 (D.Conn.1985)—establish that the jury's verdict in favor of defendant on the contract claim precluded it from finding for the Fabris on the CUTPA claim. In Gomes, the only case from Connecticut's highest court, the court dismissed claims for intentional tort and negligence based on: (1) a hotel desk clerk's failure to notify authorities of a break-in at plaintiffs' gas station after the clerk had assured a guest that she would call and (2) an insurance company's subsequent demand that plaintiffs repay money the company had paid due to plaintiffs' alleged negligence. 783 A.2d at 465. The court then held: 44 Having determined that the conduct of the desk clerk was not actionable under either an intentional tort or negligence theory, we conclude that the plaintiffs' CUTPA claim similarly must fail because the factual predicate of the claimed unfair or deceptive act or practice, as required by General Statutes § 42-110b(a), does not exist. 45 Id. at 473. 46 Whatever persuasive authority Gomes might have in a different procedural context, it does not establish fundamental error. The Connecticut court did not hold that a plaintiff could never prevail on a CUTPA claim if it also failed to prevail on a contract claim in which defendants were assigned the burden of proving good faith. Instead, the Gomes court primarily determined whether, under the circumstances of this case, the defendants owed a duty to the plaintiffs to refrain from preventing a third person from rendering aid to prevent damage to the plaintiffs' properties. Id. at 464. Thus cabined, Gomes has little precedential force in determining whether the verdicts in this case are incurably inconsistent. It certainly does not establish that fundamental error occurred. 47 Rudel and McKeown are federal district court decisions. As we have discussed, the fundamental error standard is stricter than the plain error standard that applies when a defendant fails to object to an asserted error in a criminal trial. On plain error review, we typically will not find such error where the operative legal question is unsettled, including where there is no binding precedent from the Supreme Court or this [c]ourt. United States v. Whab, 355 F.3d 155, 158 (2d Cir.) (internal quotation marks omitted), cert. denied, ___ U.S. ___, 124 S.Ct. 2055, 158 L.Ed.2d 519 (2004). Because fundamental error review is even more deferential than plain error review, we doubt that we could find fundamental error in a state law case in the absence of clear authority from the state's highest court. 48 Even if we could, neither Rudel nor McKeown clearly supports defendants' argument. In McKeown, the district court, acting as a fact-finder, rejected a CUTPA claim based on its finding that defendant had good cause to cancel the contract. 618 F.Supp. at 644. However, the court also noted that it was arguable that McKeown could have shown an unfair trade practice simply by showing that the injury it incurred outweighed any benefit to consumers arising from the practice. Id. n. 7. Thus, McKeown does not rule out a CUTPA claim whenever plaintiff fails to prevail on any of its common law claims. Rudel also leaves open the possibility that a CUTPA claim can survive even though the jury finds no breach of contract. 68 F.Supp.2d at 130 (Even assuming that... conduct [not in breach of the contract] could give rise to a claim under the second prong of the cigarette rule, to be cognizable it would have to entail a degree of bad faith not shown here.). 3 49 Therefore, we hold that defendants waived their challenge to the sufficiency of the evidence supporting the CUTPA claim to the extent that the claimed insufficiency rests on an implication that the jury found no bad faith because it held in defendants' favor on the contract claim. Moreover, we find no fundamental error. 50 Putting aside any inference that might be drawn from the verdict on the contract claim, we must nevertheless determine whether there was sufficient evidence to support the CUTPA claim. See Lavoie v. Pacific Press & Shear Co., 975 F.2d 48, 57 (2d Cir.1992) (holding that where defendant waives its objection based on inconsistency in the verdicts, the reviewing court is not limited to considering the sufficiency of the evidence of [the theory on which the jury found for the plaintiff] which is reconcilable with a finding that the [defendant] is not ... liable on another theory). Because of defendants' waiver, and because the jury made no findings as to which of plaintiffs' allegations of misconduct it rejected and which it accepted, we must consider all of plaintiffs' evidence of misconduct in determining whether the jury could have properly found a CUTPA violation. 51 Included in the relevant evidence the Fabris adduced was proof that: (1) they had a thirty-year relationship with defendants in which defendants never had cause to doubt the Fabris' honesty; (2) defendants' investigation of possible misconduct was triggered by Fabri, Jr.'s, report to them of an attempt by an Argentinian government official to corrupt him; (3) defendants knew there were innocent explanations for conduct by the Fabris that defendants viewed as suspicious; (4) defendants terminated the SRA only after the Fabris had effectively obtained the contract for them; (5) after terminating the SRA, defendants offered the Fabris a consulting contract, which required the Fabris to make the same representation that they would not bribe Argentinian officials, but which gave them less compensation than the SRA; and (6) defendants did not reinstate the SRA after the sale went through without a bribe having been paid despite their representative's prior acknowledgment that selling the helicopter without paying a bribe would be substantial evidence of the Fabris' innocence. 52 As we have discussed, a jury can find a violation of CUTPA if a practice, even if not previously deemed unlawful, offends public policy as expressed in the state's statutes and common law, the conduct is immoral, unethical, or oppressive, and/or it causes substantial harm to a business that outweighs benefits of the practice. Cheshire Mortgage Serv., 612 A.2d at 1143. The Fabris have not identified any statute or public policy that defendants' conduct violated. The jury, however, could have found in the Fabris' favor on the other two CUTPA analysis factors. That is, the jury could have found that defendants' investigation and its post-termination actions were unethical and oppressive. Or, it could have found that defendants' failure to reopen their investigation based on new information caused the Fabris significant economic harm without creating a concomitant benefit, especially in light of the thirty-year relationship between the Fabris and defendants. Although defendants certainly had a right and an obligation to act promptly to protect themselves from FCPA liability, they arguably could have reinstated the SRA after receiving more evidence of the Fabris' innocence without jeopardizing their status as government contractors. The jury also could have found that although defendants were entitled to terminate the SRA under its terms, they acted unethically by taking advantage of the Fabris' labor without paying for it. 53 Because in considering the sufficiency of the evidence to support the CUTPA verdict, we must set aside the fact that the jury found in Sikorsky's favor on the contract claim, and because the evidence viewed in the light most favorable to plaintiffs is sufficient to support the verdict, we reject defendants' sufficiency/inconsistency argument. 54 Defendants next argue that the district court's interpretation of CUTPA conflicts with the policies of the FCPA and is thus preempted. Defendants claim that they adequately preserved their preemption defense by: (1) including an assertion in their amended answer that the FCPA compelled them to act as they did; (2) adducing expert testimony concerning their FCPA obligations; and (3) raising the FCPA issue, albeit not specifically preemption, in their Rule 50(b) motion. Defendants point out that it would have made no sense to raise the issue of preemption before the district court held that the jury could have properly interpreted CUTPA as imposing higher standards than the SRA. 55 Whether or not defendants waived their preemption claim, it lacks merit in light of our disposition of the sufficiency issue. Defendants' argument is triggered by the district court's holding that the jury could have imposed a higher standard on defendants with respect to the CUTPA claim than it did with respect to the contract claim. However, our affirmance of the district court's verdict does not rest on the district court's conclusion. Instead, we have held: (1) we must consider all proof offered in support of the CUTPA claim and not just proof that is consistent with the jury's verdict on the contract claim and (2) viewed in this fashion, the evidence was sufficient to support the CUTPA verdict. Because our analysis does not rest on or require a super-fairness standard, there is no merit to defendants' preemption contention. 56 Finally, defendants argue that allowing the Fabris to recover on the CUTPA claim impaired defendants' rights in violation of the Contracts Clause. Defendants concede that they did not raise an impairment of contracts claim in district court. They argue, however, that this court can nevertheless reach the issue because it is a purely legal one requiring no additional fact-finding. See, e.g., Krumme v. WestPoint Stevens Inc., 238 F.3d 133, 142 (2d Cir.2000). 57 Again, defendants could have avoided the procedural dilemma in which they now find themselves by asking the court to charge the jury that plaintiff could not prevail on its CUTPA claim if it found defendants had not breached the duty of good faith implicit in the SRA. Their failure to do so requires us to find fundamental error in the jury charge or verdict sheet to set aside the error. We do not do so for two reasons. First, any error in the district court's analysis is mooted by our conclusion that no super-fairness standard is required to sustain the CUTPA verdict. Second, defendants have not identified any error and certainly have not established fundamental error. The Contract Clause prohibits the impairment by the state of existing contracts. Kinney v. Connecticut Judicial Dep't, 974 F.2d 313, 314 (2d Cir. 1992) (per curiam). Even if it takes a judicial interpretation of a statute to give it unconstitutional effect, the statute must have been passed after the contract was executed. Id. at 315. It is undisputed that CUTPA was passed long before the parties entered into the latest SRA. Therefore, there has been no unconstitutional impairment of a contract. 58