Court Opinion

ID: 7845402
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:09:32.652405+00
Date Added: 2024-06-11T16:21:30.472151
License: Public Domain

MCDONALD, J.,
with whom BERDON, J., joins, dissenting.1 More than 800 investors who were defrauded in the notorious Colonial Realty Company (Colonial Realty) confidence scheme now are required to pay over $5 million to the defendant, Atlantic Bank of New York.
Central to the Colonial Realty fraud was a deliberate and grossly exaggerated valuation of Colonial Realty properties. Based on those figures, the principals of Colonial Realty, Jonathan Googel, Benjamin Sisti and Frank Shuch, promised the plaintiff investors in Colonial Constitution Limited Partnership, in which Colonial Realty was a general partner, a large return on their partnerships in those properties. They also required those investors to sign millions of dollars in notes that were endorsed over to the defendant, which provided financing for Colonial Realty properties. The defendant then gave Colonial Realty loans far exceeding the real value of its properties. Arthur Andersen and Company (Arthur Andersen), an accounting firm, furnished audits supporting Colonial Realty’s extravagant claims. When Colonial Realty collapsed, Googel and Sisti were arrested and prosecuted for federal crimes and Shuch committed suicide after his arrest. The United State’s attorney for the District of Connecticut also began a criminal investigation of Arthur Andersen.
The plaintiff investors, facing the prospect of the defendant seeking to recover on the outstanding notes, brought suit in 1991 against the defendant, alleging that the defendant knowingly participated in the fraud. *99Faced with these allegations, the defendant in 1994 entered into a settlement agreement with the plaintiff investors. In the settlement agreement, the plaintiff investors agreed to pay the defendant reduced “front-end payment[s],” that is, cash payments, as well as one half of any “back end payments” they should receive in the future. “Back end payments” were defined in the settlement agreement as “any recoveries, either by settlement or court award, by any Class Member on any claim against any party . . . arising out of or relating to any Colonial partnerships.”
In 1996, the United States attorney and Arthur Andersen entered into an agreement (criminal agreement) whereby Arthur Andersen established a restitution fund of $10 million for the benefit of the innocent investors, including the plaintiffs. In exchange, the United States government deferred and later closed its criminal investigation and Arthur Andersen was not prosecuted.
The sole issue before us now is whether $5 million of the $10 million restitution fund created by Arthur Andersen constituted a “back end payment” within the meaning of the settlement agreement. I agree with the majority that “ [a] contract must be construed to effectuate the intent of the parties, which is ‘determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction.’ ” Lawson v. Whitey’s Frame Shop, 241 Conn. 678, 686, 697 A.2d 1137 (1997).
The restitution by Arthur Andersen is not a “recovery” within the meaning of the settlement agreement. The usual meaning of recovery is the “restoration or vindication of a right existing in a person, by the formal judgment or decree of a competent court, at his instance and suit.” Black’s Law Dictionary (6th Ed. 1990). The amount to be received from Arthur Andersen does not result from an action brought by the plaintiff investors.
*100The plaintiff investors agreed to share with Atlantic only those recoveries they receive by “settlement or court award.” The Arthur Andersen restitution fund clearly is not a court award. If it is to be a “back end payment,” it must come within the definition of a recovery by a “settlement.” The Arthur Andersen criminal agreement does not constitute a settlement within the plain meaning of that word. A settlement is “an adjustment between persons concerning their dealings . . . .” Black’s Law Dictionary (6th Ed. 1990). Surely, the parties could not have intended a settlement arrived at by a benevolent third party, especially one that could hardly have been envisioned in 1994.2 The criminal agreement between the United States government and Arthur Andersen did not constitute a settlement by any of the plaintiff investors. They were not parties entering into the agreement between the United States government and Arthur Andersen.
Furthermore, the purpose of the $10 million restitution fund reveals that it was not a settlement with respect to the plaintiff investors. The criminal agreement was between the United States government and Arthur Andersen and concerned only the criminal prosecution of Arthur Andersen. Prosecution could have resulted only in Arthur Andersen’s punishment with a criminal fine and not in any award to the plaintiff investors or an adjustment of their claims. Nor was the government forced to require the establishment of a restitution fund for certain of Colonial Realty’s investors, the innocent victims of Colonial Realty’s crimes. The government gratuituosly chose to require the large restitution fund to warn business professionals engaged *101in wrongdoing of the risk of criminal prosecution.3 Neither the criminal agreement nor the restitution payment procedure was a settlement.4
Nothing arising from the United States government’s charity toward the innocent plaintiff investors, many of whom lost their life savings and faced financial ruin, requires that one half of this restitution fund be paid to the defendant. The defendant entered into the settlement agreement with the plaintiff investors due to allegations that it had participated in the Colonial Realty fraud. The United States government chose not to make the defendant an innocent victim to share in the restitution fund, but nonetheless, the defendant now becomes, by this decision, the largest single beneficiary of Arthur Andersen’s payment to the plaintiff investors. Justice here goes awry to the tune of five million dollars.
I respectfully dissent.

 This case was before a panel of five justices of this court, one of whom disqualified himself during oral argument. The parties then entered into a written agreement that the case be decided by the four remaining justices. While the case was under consideration, a fifth justice was added but reargument before the full panel, as required by General Statutes § 51-209, did not occur. We should, I believe, have provided counsel, in these circumstances, with an opportunity to be heard as to the applicability of General Statutes §§ 51-183 (e) and 51-209, and Practice Book § 4111, the provisions of which conflict.

 The majority concludes that because the criminal agreement states that it was “entered . . . for the sole and exclusive purpose of settling and ending the Investigation” by the United States government of Arthur Andersen, it then becomes a settlement by the plaintiff investors. There is nothing in the wording of the criminal agreement nor in logic to support this conclusion.

 See “Review of Developments in State Securities Regulation,” 51 Bus. Law. 223, 269 (1995), describing a similar arrangement in a massive stock fraud case regarding Prudential Securities, Inc., a large brokerage house.

 Arthur Andersen reserved the right to argue for a credit for its restitution. The plaintiffs, however, did not agree to such a credit, and it is far from certain it will be allowed.