Alpha Beta Capital Partners, L.P. v. Pursuit Inv. Mgmt., LLC

198 Conn.App. 671

234 A.3d 997

ALPHA BETA CAPITAL PARTNERS, L.P.

v.PURSUIT INVESTMENT MANAGEMENT, LLC, et al.

AC 41986

Appellate Court of Connecticut.

Argued January 13, 2020

Officially released July 7, 2020

Michael S. Taylor, with whom was Brendon P. Levesque, Hartford, for the appellants (defendants).

James C. Graham, New Haven, with whom was Dennis M. Carnelli, for the appellee (plaintiff).

Prescott, Devlin and D'Addabbo, Js.

PRESCOTT, J.

This appeal involves a challenge to sanctions imposed by the trial court to remedy extensive discovery abuses by the defendants that frustrated the plaintiff's attempt to collect on a significant monetary judgment. The defendants, Pursuit Opportunity Fund I, L.P. (POF), Pursuit Opportunity Fund I Master Ltd. (POF Master), Pursuit Capital Management Fund I, L.P. (PCM), Pursuit Capital Master (Cayman) Ltd. (PCM Master), Pursuit Investment Management, LLC (PIM), Northeast Capital Management, LLC (Northeast), Anthony Schepis, and Frank Canelas, Jr.,¹ appeal from the trial court's order of sanctions, in which the court awarded the plaintiff, Alpha Beta Capital Partners, L.P., attorney's fees and litigation costs for the defendants’ discovery abuses. On appeal, the defendants claim that the court's order of sanctions constituted an abuse of discretion because the order failed to meet the three requirements that a trial court must deem satisfied before imposing sanctions and that this court must analyze to determine whether the trial court's order constituted an abuse of discretion. See Ridgaway v. Mount Vernon Fire Ins. Co. , 328 Conn. 60, 70–71, 176 A.3d 1167 (2018) (citing Millbrook Owners Assn., Inc. v. Hamilton Standard , 257 Conn. 1, 17–18, 776 A.2d 1115 (2001) ).² We disagree with the defendants’ claim and, accordingly, affirm the judgment of the trial court.

The following facts and procedural history are relevant to the defendants’ claims on appeal. In September, 2015, the plaintiff "filed an application for a prejudgment remedy and a proposed summons and complaint against the defendants."³

Alpha Beta Capital Partners, L.P. v. Pursuit Investment Management, LLC , 193 Conn. App. 381, 398, 219 A.3d 801 (2019) ( Alpha Beta I ), cert. denied, 334 Conn. 911, 221 A.3d 446 (2020). The plaintiff then filed a seven count amended substitute complaint against the defendants, alleging "(1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) unjust enrichment, (4) conversion, (5) statutory theft under General Statutes § 52-564, (6) violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., and (7) civil conspiracy." Id.

In June, 2016, the trial court granted the plaintiff's application for a prejudgment remedy in the amount of $5,421,582. Id., at 399, 219 A.3d 801. After a bench trial held later that year, "the court rendered judgment [partially] in favor of the plaintiff against PCM, POF, PIM, Schepis, Canelas, and Northeast in the total amount of ... $5,422,540." (Internal quotation marks omitted.) Id., at 401, 219 A.3d 801. Then, "[o]n January 4, 2017 ... the court granted the plaintiff's motion to increase the [judgment] amount by $947,731 to a total of $6,369,313 .... On the same date, the court granted the plaintiff's motion for disclosure of assets to assist with ... securing ... the additional [$947,731]." Id., at 401–402, 219 A.3d 801.

Ultimately, "[t]he defendants appeal[ed], and the plaintiff cross appeal[ed], from the judgment of the trial court ... [In this appeal], the defendants also [challenged] the [order] of the trial court granting the plaintiff's postjudgment motion to increase the amount of [the judgment] and [the order] granting the plaintiff's motion" to discover assets that could be used to satisfy the judgment, $947,731 of which had not been secured by a prejudgment remedy. Alpha Beta I, supra, 193 Conn. App. at 389, 219 A.3d 801. This court disposed of that appeal in Alpha Beta I . See id., at 389–90, 219 A.3d 801.

At a hearing before the trial court on January 12, 2017, the defendants stated that they would disclose assets sufficient to satisfy the increase in the judgment amount within thirty days. Accordingly, the court ordered the defendants to make these disclosures by February 14, 2017.

On March 31, 2017, the plaintiff moved the court for an order requiring the defendants to comply with its January 12, 2017 order and to impose sanctions against the defendants because they had failed to make the disclosures that the court had ordered them to make by February 14, 2017. In light of the defendants’ failure to comply with its previous order, the court, on April 12, 2017, ordered the defendants to provide the plaintiff with documents spanning sixty-six categories. The court required them to provide these documents by May 3, 2017. The defendants agreed that they would provide these documents to the plaintiff by this date. Moreover, the court stated that, if the defendants failed substantially to comply with its order by May 3, 2017, then Schepis and Canelas would be required to appear for an examination. Instead of complying with this order, however, the defendants, on May 3, 2017, moved for a protective order in which they challenged, inter alia, the court's authority to order postjudgment asset discovery. The court denied this motion.

On that same date, the plaintiff served postjudgment interrogatories on the defendants, in accordance with General Statutes § 52-351b(a). The defendants’ responses were due to the plaintiff on June 2, 2017. After the defendants failed to respond by this date, the plaintiff moved the court to order supplemental discovery and to compel Schepis and Canelas to appear in person before the court for an examination of judgment debtor (EJD), in accordance with § 52-351b(c) and General Statutes § 52-397.⁴

On August 21, 2017, the court granted this motion. The court also reiterated that the defendants were obligated to provide the plaintiff with the disclosures that the court previously had ordered them to make in its January 12 and April 12, 2017 orders. The court ordered compliance by October 6, 2017. The court also advised the defendants that they should begin gathering these documents and responding "immediately " and that they should not return to court on October 6, 2017, claiming that they had insufficient time to comply with the court's orders.⁵ (Emphasis added.) The defendants again failed to comply.

On October 20, 2017, the plaintiff moved for the court to order the defendants to produce the required documents and to appear for an EJD, and requested that the court impose sanctions against the defendants for failing to comply with the court's discovery orders. On November 6, 2017, the court ordered the defendants to provide the plaintiff with the disclosures that the court had ordered them to make in its January 12, April 12, and August 21, 2017 orders. The court ordered the defendants to comply with this order by November 16, 2017, or risk being held in contempt of court. The court also agreed to sanction the defendants and ordered them to reimburse the plaintiff for the cost of preparing the plaintiff's October 20, 2017 motion.⁶ As for further sanctions, the court stated that it would "reserve decision on the need for [them] depending on the defendants’ compliance with this order." The court also ordered "Schepis and ... Canelas ... to appear on November 22, 2017 ... to be examined as [j]udgment debtors." The court later granted a motion by the defendants asking the court to move the deadline for document disclosures to December 8, 2017, and the date of the EJD to December 13, 2017.

By the time that the EJDs commenced on December 13, 2017, the defendants had provided the plaintiff with only a small fraction of the sixty-six categories of documents that they had agreed to make available pursuant to the April 12, 2017 agreement and that the court most recently ordered them to produce in its November 6, 2017 order.⁷ The defendants told the court that they had not produced many of the documents that they were required to disclose because they did not have them in their possession.

Both Schepis and Canelas testified under oath during the EJD. Despite being sophisticated investors with significant assets, however, Schepis and Canelas claimed that they were able to recall little information about their finances. For example, when asked which accountant prepared his personal tax returns, Schepis represented that he could not remember who prepared them. Canelas provided similar answers concerning the tax returns about which he was asked. For example, he asserted that he did not know who had prepared the 2016 tax return for one of the entities that he controlled and operated with Schepis.

Schepis and Canelas were also asked about their sources of income and where they deposit their earnings. During his testimony, Schepis was presented with a document purporting to show that he received a disbursement of $931,383 from his former attorney in September, 2015. Schepis claimed, however, that he could not recall receiving this large sum of money, even though he received it only two years prior. Schepis also represented that he could not remember receiving cash distributions in the past three or four years from the entities that he controlled and operated and claimed that he had not received a distribution from Pursuit Partners, LLC, "in quite a while." Moreover, he asserted that he did not know where he deposited earnings from these distributions when he was receiving them. Indeed, Schepis claimed that he did not have a checking account and could not remember the last time he had one.⁸ Moreover, Schepis represented that he paid for everything in cash.

Canelas provided similarly evasive answers to questions about his personal finances. He claimed that he could not recall receiving a $776,000 disbursement from his former attorney and could not recall whether he received...