Priority Sales Management, Inc. v. Carla's Pasta, Inc. et al

Filing 48

RULING denying 18 Motion to Stay; granting in part and denying in part 18 Motion to Dismiss. Signed by Judge Christopher F. Droney on 8/26/2011. (Gothers, M.)(7 pages)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
PRIORITY SALES MANAGEMENT, INC.,
Plaintiff,

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v.
CARLA’S PASTA, INC., and
CROSSMARK, INC.,
Defendants.

3:10-cv-1918 (CFD)

RULING ON MOTION TO STAY AND MOTION TO DISMISS
The plaintiff, Priority Sales Management, Inc. (“Priority Sales”), brought this action
against Carla’s Pasta, Inc. (“Carla’s Pasta”) and Crossmark, Inc. (“Crossmark”) alleging breach
of contract, breach of implied covenant of good faith and fair dealing, violation of the
Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen. Stat. § 42-110b, and tortious
interference with a business relationship. Defendant Carla’s Pasta now moves to stay the
proceedings, or in the alternative, moves to dismiss Counts Two and Three of the Complaint
pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the defendant’s
motion to stay is denied and the defendant’s motion to dismiss is granted in part and denied in
part.
I.

Factual Background1
Priority Sales entered into a consulting agreement with Carla’s Pasta on July 21, 2009

(the “Agreement”). The Agreement provided that Priority Sales was required to “use its best
efforts to assist [Carla’s Pasta] in the development and execution of its marketing and sales

1

These facts are taken from the allegations of the plaintiff’s complaint. The allegations
must be assumed true for the purpose of resolving the motion to dismiss.
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strategy for a line of pasta products packaged for retail sales . . . .” Under the Agreement,
Priority Sales was entitled to receive between $15,000 to $20,000 per month for its services.
The Agreement also provided that Carla’s Pasta may terminate Priority Sales for “cause”
or “for any or no reason.” Carla’s Pasta was required to give Priority Sales at least sixty days
notice of “no cause” termination. Under the Agreement,“cause” was defined as either (1) “the
willful engaging (including without limitation or failure to act) by [Priority Sales] in conduct
which is or could reasonably be expected to be materially injurious to [Carla’s Pasta]”; or (2)
“the demonstrated voluntary unwillingness of [Priority Sales] to perform its Duties.” To
terminate Priority Sales for “cause,” Carla’s Pasta was required to give Priority Sales notice of its
failed performance and allow Priority Sales twenty days to cure such performance before
terminating the Agreement.
On October 1, 2010, Carla’s Pasta provided Priority Sales with written termination,
claiming “for cause” termination. On October 5, 2010, Priority Sales responded to Carla’s Pasta,
disputing the existence of “cause” for termination. On October 12, 2010, Priority Sales received
a response from Carla’s Pasta counsel, which more fully articulated Carla’s Pasta’s reason for
initiating “for cause” termination and stated that the termination was retroactive to September 22,
2010.
Priority Sales alleges that Carla’s Pasta’s reasons for termination do not constitute
“cause” under the Agreement, and claim that Carla’s Pasta “for cause” termination was a pretext
for “no cause” termination. As a result of its termination, Priority Sales brought this lawsuit.

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II.

Discussion
A.

Motion to Stay

Pursuant to Connecticut General Statute § 33-921(a), “[a] foreign corporation transacting
business in this state without a certificate of authority may not maintain a proceeding in any court
in this state until it obtains a certificate of authority.” A court may stay a proceeding until the
foreign corporation obtains a certificate of authority. Conn. Gen. Stat. § 33-921(c). Since filing
this lawsuit in December 2010, Priority Sales, a foreign corporation with a principal place of
business in Florida, has filed a certificate of authority.2 Accordingly, Carla’s Pasta’s motion to
stay is denied.
B.

Motion to Dismiss

To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a plaintiff must state a
claim for relief that is plausible on its face. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). A claim is facially plausible if “the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged. The
plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949
(2009) (internal citations omitted). In determining whether the plaintiff has met this standard, the
Court must accept the allegations in the complaint as true and draw all reasonable inferences in
the light most favorable to the non-moving party. In re NYSE Specialists Sec. Litig., 503 F.3d
89, 95 (2d Cir. 2007).

2

An application for Certificate of Authority was filed with the Secretary of the State of
Connecticut on March 28, 2011.
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1.

Breach of Implied Covenant of Good Faith and Fair Dealing

Carla’s Pasta claims that Priority Sales has failed to state a claim in Count Two for an
alleged breach of the covenant of good faith and fair dealing with respect to Carla’s Pasta’s
termination of Priority Sales.
“Every contract carries an implied covenant of good faith and fair dealing requiring that
neither party will do anything that will injure the right of the other to receive the benefits of the
agreement.” Habetz v. Condon, 618 A.2d 501, 505 (Conn. 1992); Fairfield, Inc. v. Infiniti Div.
of Nissan N. Am., Inc., 579 F. Supp. 2d 294, 313 (D. Conn. 2008). Connecticut courts have held
that to constitute a breach of the covenant of good faith, the defendant’s acts must have been
taken in bad faith. See, e.g., Alexandru v. Strong, 837 A.2d 875, 883 (Conn. App. Ct. 2004). A
party acts in bad faith if the party commits “actual or constructive fraud, or [has] a design to
mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual
obligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested
or sinister motive. Bad faith means more than negligence; it involves a dishonest purpose.”
Habetz, 618 A.2d at 504 (internal quotations and citations omitted).
To bring a claim for breach of the covenant of good faith and fair dealing, the plaintiff
must prove three elements: (1) that the plaintiff and the defendant were parties to a contract
under which the plaintiff reasonably expected to receive certain benefits; (2) that the defendant
engaged in conduct that injured the plaintiff’s right to receive some or all of those benefits; and
(3) that when committing the acts by which it injured the plaintiffs right to receive those benefits,
the defendant acted in bad faith. See Franco v. Yale Univ., 238 F. Supp. 2d 449, 455 (D. Conn.

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2002) (citing Fairfield Fin. Mortg. Grp., Inc. v. Salazar, No. CV000339752S, 2002 WL 1009809,
at *3 (Conn. Super. Ct. Apr. 23, 2002)).
Priority Sales has alleged that it had a contractual relationship with Carla’s Pasta,
pursuant to which it expected to receive between $15,000 to $20,000 monthly for providing
consulting services. Priority Sales has also alleged that Carla’s Pasta engaged in conduct that
injured Priority Sales’ right to receive that compensation by terminating it without cause.
Furthermore, Carla’s Pasta allegedly did not provide adequate notice of termination, thereby
preventing Priority Sales from having a twenty day period to cure its performance as was
required under the Agreement. Finally, Priority Sales has alleged that Carla’s Pasta acted in bad
faith in terminating it; Carla’s Pasta allegedly claimed “for cause” termination as a pretext for
“no cause” termination and Carla’s Pasta allegedly refused to pay amounts owed to Priority Sales
pursuant to any termination. Therefore, Priority Sales has adequately alleged that Carla’s Pasta
acted in bad faith and has set forth an actionable claim for breach of the implied covenant of
good faith and fair dealing. Accordingly, Carla’s Pasta’s motion to dismiss Count Two is denied.
2.

CUTPA

In Count Three, Priority Sales alleges that Carla’s Pasta violated CUTPA, Conn. Gen.
Stat. § 42-110b, by committing an unfair deceptive trade practice.
Conn. Gen. Stat. section 42-110b(a) states that “no person shall engage in unfair methods
of competition and unfair or deceptive acts or practices in the conduct of any trade or
commerce.” To prevail on a CUTPA claim, the plaintiff must establish both that the defendant
engaged in a prohibited act and that the prohibited act was the proximate cause of the harm to the
plaintiff. Abrahams v. Young & Rubicam, Inc., 692 A.2d 709, 712 (Conn. 1997).
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To determine whether a practice violates CUTPA, courts examine three factors, which are
commonly referred to collectively as the “cigarette rule”: “(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].” Rosenthal v. Ford Motor
Co., 462 F. Supp. 2d 296, 310 (D. Conn. 2006) (citing Sanghavi v. Paul Revere Life Ins. Co., 572
A.2d 307, 311 (Conn. 1990)). A “simple breach of contract,” however, does not offend
traditional notions of fairness and does not constitute a violation of CUTPA. See Aztec Energy
Partners, Inc. v. Sensor Switch, Inc., 531 F. Supp. 2d 226, 232 (D. Conn. 2007) (noting that a
plaintiff must allege “sufficient aggravating circumstances” beyond merely a breach of contract
to state a CUTPA claim).
Priority Sales has failed to sufficiently allege a violation of CUTPA. Although Priority
Sales alleges that Carla’s Pasta used “for cause” termination as a pretext for “no cause”
termination and acted in bad faith, Priority Sales has not alleged sufficiently more than a “simple
breach of contract.” See Aztec Energy, 531 F. Supp. 3d at 232. Instead, Priority Sales
incorporates by reference its allegations from its breach of contract claim in Count One and only
alleges that the “actions of Defendant Carla’s constitute an unfair or deceptive trade practice
within the meaning of CGS § 42-110(b) [sic].” Courts have held that “merely stating that the
defendant’s conduct violates public policy or is unfair and/or deceptive is not sufficient to sustain
a CUTPA claim.” Edmond v. Promus Hotel Corp., No. CV990118824S, 2001 WL 92294, at *3
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(Conn. Super. Ct. Jan. 17, 2001); see Aussenhandel v. Grant Airmass Corp., No. CV89
0103541S, 1990 WL 283750, at *1 (Conn. Super. Ct. Oct. 15, 1990) (striking a CUTPA claim
where the plaintiff merely incorporated by reference its breach of contract claim and did “not set
forth how or in what respect the defendants’ alleged activities are either immoral, unethical,
unscrupulous or offensive to public policy”). Accordingly, Carla’s Pasta’s motion to dismiss
Count Three is granted.
III.

Conclusion
Accordingly, the defendant’s motion to stay [Dkt. #18] is DENIED and the defendant’s

motion to dismiss [Dkt. #18] is GRANTED IN PART and DENIED IN PART.
SO ORDERED this 26th day of August 2011, at Hartford, Connecticut.

/s/ Christopher F. Droney
CHRISTOPHER F. DRONEY
UNITED STATES DISTRICT JUDGE

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