Harrier Technologies, Inc. v. CPA Global Limited et al
Filing
117
ORDER denying 89 MOTION to Dismiss 2nd Amended Complaint by Kenyon & Kenyon, LLP. Signed by Judge Warren W. Eginton on 4/30/14. (Ladd-Smith, I.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
HARRIER TECHNOLOGIES INC.,
Plaintiff,
v.
CPA GLOBAL LIMITED,
KENYON & KENYON LLP,
Defendants.
:
:
:
:
:
:
:
:
3:12-cv-00167-WWE
MEMORANDUM OF DECISION ON DEFENDANT KENYON & KENYON’S
MOTION TO DISMISS
This is an action by a patent holder, Harrier, against its patent management company,
CPA, and its former intellectual property firm, Kenyon, for failure to make a timely 2006 annuity
payment on behalf of Harrier for an oil-well pumping system patent in Saudi Arabia. Count I
alleges breach of agreement by CPA; Count II alleges breach of fiduciary duty by Kenyon; and
Count III alleges fraudulent concealment by Kenyon. Kenyon has moved to dismiss both counts
against it. For the following reasons, Kenyon’s motion to dismiss will be denied.
BACKGROUND
For purposes of a motion to dismiss, the Court accepts all well-pleaded allegations as true
and draws all reasonable inferences in favor of the plaintiff.
Harrier has designed and developed a breakthrough oil-pumping technology for use in the
petroleum industry and has protected that technology with a series of patent filings on a
worldwide basis.
Harrier has used the services of Kenyon for years to prepare and file patent applications,
both in the United States and in foreign countries. Harrier also used Kenyon to make annual
annuity payments until this responsibility was transferred to CPA in 2006.
Kenyon was aware that the annuity for Harrier’s Saudi patent application was due the first
quarter of 2006 as evidenced by Kenyon’s own docketing system. CPA reminded Kenyon that
the annuity was due, but Kenyon failed to pay the annuity during the first quarter of 2006,
resulting in the lapse of the patent application.
In August 2006, Kenyon learned that the Saudi patent application had lapsed for failure to
pay. Kenyon failed to notify Harrier that the patent had lapsed, later asserted it was not
responsible for the lapse, and hid from Harrier documents that implicated Kenyon.
The failure to pay the Saudi annuity caused the irrevocable loss of the underlying patent
rights with no possibility of revival. Accordingly, Harrier has sustained a substantial reduction in
any potential share of the multi-million dollar artificial lift market in Saudi Arabia.
As part of the discovery process, CPA subpoenaed documents from Kenyon. Kenyon
produced some documents but refused to produce others, claiming that the withheld documents
were protected under the attorney-client privilege and/or work product doctrines. In order to
prevent production of the requested documents and to prevent Harrier, its own client, from seeing
the documents, Kenyon filed a motion to quash CPA’s subpoena and for a protective order.
Kenyon’s motion to quash was denied by Magistrate Judge Holly B. Fitzsimmons on
December 14, 2012. Upon review of the documents that Kenyon was ordered to produce, Harrier
was shocked to learn that Kenyon knew as early as August 14, 2006, that Harrier’s Saudi patent
application had lapsed and never told Harrier. In addition, Harrier learned that Kenyon’s docket
manager, Lorrie McArdle, specifically stated that Kenyon was responsible for making the annuity
payment that was missed. Harrier also learned that CPA had sent at least three reminders to
Kenyon regarding the Saudi patent annuity deadline.
2
Not only did Kenyon conceal from Harrier in 2006 that its Saudi patent application had
lapsed, but also, when Harrier finally learned in 2009 that the patent application had lapsed and
asked Kenyon for help, Kenyon intentionally misled Harrier and feigned an investigation into
why the application had lapsed, even though Kenyon knew that it was responsible.
Mr. Miller, President of Harrier, met with Mr. Loughnane, Managing Partner of Kenyon,
in February 2011. At the meeting, Mr. Loughnane specifically denied that Kenyon had any
responsibility for the lapsed annuity. Kenyon’s misrepresentations continued at least until April
6, 2011, when Mr. Loughnane advised Harrier in writing that Kenyon assumed no responsibility
for the missed payment.
Kenyon convinced Harrier that CPA had assumed complete responsibility for paying the
2006 annuity because Kenyon consistently and falsely asserted that responsibility for paying the
annuity for the Saudi Patent was transferred to CPA in December 2005.
Based on Kenyon’s failure to inform Harrier that its patent application had lapsed, its
attempt to conceal documents from Harrier, and a false written denial of responsibility by its
managing partner, Kenyon convinced Harrier to sign a release on May 26, 2011. In exchange for
forgiveness of attorneys’ fees, Harrier signed an agreement with Kenyon releasing Kenyon from
any and all liability by reason of work performed prior to the date of the agreement. Harrier
contends that it relied on Kenyon’s misrepresentations that CPA had assumed complete
responsibility for paying the 2006 annuity when it agreed to enter into the settlement agreement
and release with Kenyon. Harrier argues that the release is unenforceable because it was based
completely on Kenyon’s fraudulent concealment of the most critical facts.
3
DISCUSSION
The function of a motion to dismiss is "merely to assess the legal feasibility of the
complaint, not to assay the weight of the evidence which might be offered in support thereof."
Ryder Energy Distribution v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir.
1984). When deciding a motion to dismiss, the Court must accept all well-pleaded allegations as
true and draw all reasonable inferences in favor of the pleader. Hishon v. King, 467 U.S. 69, 73
(1984). The complaint must contain the grounds upon which the claim rests through factual
allegations sufficient “to raise a right to relief above the speculative level.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007). A plaintiff is obliged to amplify a claim with some factual
allegations in those contexts where such amplification is needed to render the claim plausible.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Kenyon argues that Harrier’s second amended complaint fails to state a claim upon which
relief may be granted (1) because Harrier’s claims are time-barred by the applicable statute of
limitations and (2) because Harrier has already released Kenyon from the asserted liability.
Alternatively, Kenyon contends that Harrier’s Count III should be dismissed because Connecticut
common law does not recognize fraudulent concealment as an independent cause of action.
Statute of Limitations
Under Connecticut law, breach of fiduciary duty is governed by the three-year statute of
limitations for tort actions. Conn. Gen. Stat. § 52-577; Censor v. ASC Techs. of Conn., LLC,
900 F. Supp. 2d 181, 215 (D. Conn. 2012). Ordinarily, “[w]hen conducting an analysis under §
52-577, the only facts material to the trial court's decision . . . are the date of the wrongful
conduct alleged in the complaint and the date the action was filed.” Farnsworth v. O’Doherty, 85
4
Conn. App. 145, 149-50 (2004). However, here, Harrier alleges that Kenyon fraudulently
concealed information that would have given Harrier knowledge that Kenyon had breached its
fiduciary duty to Harrier. Specifically, Kenyon never told Harrier that: (1) it knew about the
patent lapse as early as August 2006; (2) it was responsible for paying the 2006 annuity when it
became due on January 1, 2006, until May 1, 2006, when the responsibility was transferred to
CPA; (3) it received at least three reminders that the 2006 annuity was due; and (4) its own
docket manager admitted that Kenyon was responsible for paying the 2006 annuity. Instead,
Kenyon convinced Harrier that CPA had assumed complete responsibility for paying the 2006
annuity because Kenyon consistently and falsely asserted that responsibility for paying the
annuity for the Saudi Patent was transferred to CPA in December 2005. Harrier believed and
relied on Kenyon’s representations because Kenyon was Harrier’s longtime legal counsel, and
Harrier trusted the firm. Indeed, Kenyon’s misrepresentations continued at least until April 6,
2011, when Michael Loughnane, Kenyon’s managing partner, advised Harrier that “Kenyon
assumed no responsibility for payment of annuities” after “the transfer of responsibility of
annuity payments from Kenyon to CPA in 2005 . . .” 2d Am. Compl. Ex. Q. Accordingly,
Harrier submits that the statute of limitations for Harrier’s claims against Kenyon was tolled due
to Kenyon’s fraudulent concealment.
In order to constitute fraudulent concealment, a defendant must (1) have actual awareness
of the facts necessary to establish the plaintiff’s cause of action; (2) have intentionally concealed
these facts from the plaintiff; and (3) have concealed the facts for the purpose of obtaining delay
on the plaintiff’s part in filing a complaint on their cause of action. Falls Church Group, Ltd. v.
Tyler, Cooper and Alcorn, LLP, 281 Conn. 84, 105 (2007) (citing Bartone v. Robert L. Day Co.,
5
232 Conn. 527, 532 (1995)). Moreover, “when a defendant is sued by a person to whom it owes
a fiduciary duty and that person is trying to extend the limitations period, Connecticut law
requires that the burden shift to the defendant to prove that one of the three Bartone elements has
not been met.” Martinelli v. Bridgeport Roman Catholic Diocesan Corp., 196 F.3d 409, 420
(1999).
At this stage of the proceedings, Harrier has plausibly alleged that Kenyon intentionally
concealed information about its alleged breach of its fiduciary duty to Harrier for the purpose of
obtaining delay. Nevertheless, in order for the statute of limitations to toll under § 52-595, the
plaintiff must be ignorant of the facts that the defendant has sought to conceal. Id. at 427.
Accordingly, the viability of Harrier’s claims against Kenyon depends on when Harrier learned
of the facts necessary to bring its cause of action. See Dennany v. Knights of Columbus, 2011
WL 3490039 at *5 (D. Conn. 2011).
Kenyon argues that Harrier had knowledge of the facts necessary to raise the claims at
issue no later than September 29, 2009–meaning the statute of limitations began to run at least by
that date. Kenyon cites Exhibits C, D, and P to Harrier’s Second Amended Complaint as
evidence of Harrier’s knowledge. Exhibit C contains correspondence between Kenyon and
Harrier, dated March 21 and 29, 2005, about 2005 annuity payments; it is unclear how this
evidence relates to Harrier’s knowledge of a 2006 lapse in annuity payments. Exhibit D is an
April 28, 2006 letter from CPA to Harrier explaining that CPA would assume responsibility for
renewal of patents from May 1, 2006, the inference being that Kenyon maintained responsibility
for payments until May 1, 2006. Exhibit P is a September 29, 2009 email chain between Harrier
and Kenyon wherein Harrier asserts that the Saudi matter is fully the responsibility of Kenyon.
6
Harrier responds that when it finally learned in 2009 that its Saudi patent had lapsed, it
asked Kenyon for help. Not only did Kenyon decline to disclose that it knew of the lapse as early
as August 14, 2006, but Kenyon intentionally misled Harrier and feigned an investigation into
why the application had lapsed–even though Kenyon knew that its docket manager had already
confirmed in writing that Kenyon was responsible for the failed annuity payment. As discussed
above, Kenyon continued to insist that its responsibility for the payment ended in December of
2005–despite the clear evidence that its responsibility lasted until May 1, 2006.
Harrier did not learn that Kenyon knew of the patent lapse in 2006 until Kenyon’s motion
to quash in this case was denied by Magistrate Judge Fitzsimmons. Harrier also learned of
Kenyon’s docket manager’s acknowledgment of responsibility upon review of the documents
that Kenyon was ordered to produce.
Essentially, Harrier contends that its own law firm, Kenyon, convinced Harrier that
Kenyon was not responsible for any lapse in payment by fraudulently concealing the true facts
from its client. Kenyon’s misrepresentations continued at least until April 6, 2011, well within
three years of the filing of Harrier’s Second Amended Complaint on May 7, 2013. Accepting
Harrier’s allegations as true and drawing all reasonable inferences in favor of the Harrier, the
Court finds that the statute of limitations should not bar Harrier’s claims at this stage.
Release of Liability
Kenyon next argues that Harrier has already released Kenyon from the liability asserted in
this case. Specifically, on May 31, 2011, in exchange for forgiveness of attorneys’ fees, Harrier
signed an agreement with Kenyon releasing Kenyon from any and all liability by reason of work
performed prior to the date of the agreement. Harrier responds that the release is not effective
7
because of Harrier’s fraudulent concealment of critical facts. Harrier contends that it relied on
Kenyon’s misrepresentations that CPA had assumed complete responsibility for paying the 2006
annuity when it agreed to enter into the settlement agreement and release with Kenyon. See
Little Mountains Enterprises, Inc. v. Groom, 141 Conn. App. 804, 812 (2013) (“Rescission of a
contract is an appropriate remedy if there has been a material misrepresentation of fact upon
which a party relied and which caused it to enter the contract.”).
Kenyon argues that by May 2011, when Harrier signed the release, Harrier was aware of
the all the facts relevant to its cause of action, including that Kenyon was handling annuities for
Harrier until May 1, 2006. However, as discussed above, Kenyon’s misrepresentations
continued at least until April 6, 2011, when Mr. Loughnane, Kenyon’s managing partner, advised
Harrier that “Kenyon assumed no responsibility for payment of annuities” after “the transfer of
responsibility of annuity payments from Kenyon to CPA in 2005 . . .” 2d Am. Compl. Ex. Q.
Moreover, Harrier argues that it did not learn the extent of Kenyon’s misrepresentations and
intentional concealment until 2012, when Kenyon was forced to produce documents under orders
from this Court.
Essentially, Kenyon asks the Court to find that Harrier disbelieved Kenyon, its own law
firm, whom Harrier hired to investigate the lapsed payments. However, for purposes of a motion
to dismiss, the Court accepts all well-pleaded allegations as true and draws all reasonable
inferences in favor of the plaintiff. Accordingly, at this stage, Harrier’s allegations against
Kenyon will not be dismissed because of the May 31, 2011 release.
Fraudulent Concealment
Count III of Harrier’s complaint alleges fraudulent concealment against Kenyon, but
8
Kenyon argues that Connecticut does not recognize an independent cause of action for fraudulent
concealment. Harrier responds that the tort of “fraudulent nondisclosure” does exist. See
Bernard v. Gershman, 18 Conn. App. 652, 656 (1989) (“Nondisclosure may . . . amount to fraud
when there is a failure to disclose known facts under circumstances that impose a duty to
speak.”). Fraudulent nondisclosure is simply a form of fraud. Id.
The essential elements of an action in fraud are: “(1) that a false representation was made
as a statement of fact; (2) that it was untrue and known to be untrue by the party making it; (3)
that it was made to induce the other party to act on it; and (4) that the latter did so act on it to his
injury.” Miller v. Appleby, 183 Conn. 51, 54-55 (1981). Harrier’s complaint easily satisfies all
four elements. Moreover, Harrier has adequately identified the speaker, the location and timing
of the statements, and the nature of the allegedly fraudulent statements in accordance with the
heightened pleading standard of Rule 9(b). See Mills v. Polar Molecular Corp., 12 F.3d 1170,
1175 (2d Cir. 1993). Accordingly, Count III alleging fraud against Kenyon will not be dismissed
for failure to state a claim.1
CONCLUSION
For the foregoing reasons, Kenyon’s motion to dismiss [Doc. # 89] is DENIED.
Dated this 30th day of April, 2014, at Bridgeport, Connecticut.
/s/Warren W. Eginton
WARREN W. EGINTON
SENIOR UNITED STATES DISTRICT JUDGE
1
The Court is not persuaded that Count III’s label of “fraudulent concealment” rather than
“fraud” is material to the analysis.
9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?