Asnat Realty, LLC v. United Illuminating Co.

ASNAT REALTY, LLC, ET AL. v. UNITED ILLUMINATING COMPANY ET AL.

AC 42893

COURT OF APPEALS OF THE STATE OF CONNECTICUT

Argued November 16, 2020

May 4, 2021

Elgo, Cradle and Alexander, Js.

Syllabus

The plaintiffs, A Co. and E Co., sought damages from the defendants U Co., a utility company, U Co.'s parent company, and several individuals for, inter alia, fraudulent nondisclosure for concealing the true cost of environmental remediation on property the plaintiffs acquired from Q Co. Q Co. had purchased the property from U Co., which contaminated the site with hazardous materials. Prior to selling it to Q Co., U Co. had a study conducted to estimate the cost of remediation and the decommissioning of the site and designated a certain amount of money for that purpose. It was later discovered that U Co. concealed the true cost of remediating the site and that the cost was much higher than was originally estimated. The trial court granted the defendants' motion to strike several counts of the complaint, pleading fraud and unjust enrichment against the various defendants, from which the plaintiffs appealed to this court. Held that the trial court did not err in its decision to strike portions of the complaint that pleaded fraud and unjust enrichment, as that court properly concluded that the complaint contained broad allegations that were insufficient to satisfy the pleading requirements for fraud and that the complaint failed to allege, with the requisite specificity, that the defendants' alleged fraud was done to induce the plaintiffs to act, and failed to allege that the defendants had a duty of full and fair disclosure of known facts to the plaintiffs as it pertained to the property: the plaintiffs' claims of fraud did not plead specific acts and merely referenced the defendants' filings and representations as proof of fraudulent conduct, the complaint failed to allege that the defendants' fraudulent conduct was done with the intention or purpose to induce the plaintiffs to act to their detriment, as the complaint did not allege that the defendants had any knowledge that Q Co. would sell the site to future purchasers at the time it acquired the property, the plaintiffs were not parties to the proceedings regarding environmental remediation that preceded the plaintiffs' entering into the leasing agreement with Q Co., and, therefore, there was no special relationship that existed between the parties; moreover, the defendants' conduct with regulatory authorities and their filings with the Securities and Exchange Commission did not give rise to a duty of disclosure from the defendants to the plaintiffs; furthermore, this court declined to review the plaintiffs' claim that the trial court improperly struck their claim of unjust enrichment and that the claim should be reinstated, as that claim was inadequately briefed.

Procedural History

Action to recover damages for, inter alia, fraud, and for other relief, brought to the Superior Court in the judicial district of New Haven, where the matter was transferred to the judicial district of Stamford-Norwalk, Complex Litigation Docket; thereafter, the trial court, Lee, J., granted the defendants' motion to strike certain counts of the revised complaint and rendered judgment thereon, from which the plaintiffs appealed to this court. Affirmed.

Jules A. Epstein, with whom were Stephen G. Walko, and, on the brief, Joshua L. Mallin and Andrea C. Sisca, for the appellants (plaintiffs).

Elizabeth C. Barton, with whom were Taylor C. Amato, and, on the brief, Andraya Pulaski Brunau, for the appellees (defendants).

Opinion

ALEXANDER, J. The plaintiffs, Asnat Realty, LLC (Asnat), and Evergreen Power, LLC (Evergreen), appeal from the judgment of the trial court, Lee, J., rendered after the court granted, in part, the defendants'¹ motion to strike certain portions of their revised complaint (complaint).² Specifically, the trial court granted the defendants' motion to strike counts one, three, five, six, seven, eight, nine, and ten of the complaint, pleading counts of fraud as to the various defendants,³ and count four, pleading unjust enrichment against the defendant UIL Holdings Corporation (UIL). On appeal, the plaintiffs claim that the court erred in granting the motion because (1) the complaint sufficiently pleaded claims for both fraudulent nondisclosure and fraudulent misrepresentation, (2) the defendants had a duty to the plaintiffs to disclose truthful information, (3) the complaint pleaded the fraud claims with the requisite specificity, (4) the complaint adequately alleged that the plaintiffs relied on the defendants' misrepresentations and nondisclosure to their detriment, and (5) the complaint adequately stated causes of action against the defendants. We are not persuaded and, accordingly, affirm the judgment of the trial court.

In a comprehensive and well reasoned opinion, the trial court set forth the following relevant factual history as alleged in the plaintiffs' complaint. "[The defendant United Illuminating Company (UI)] is the former owner of a parcel of land located in New Haven, Connecticut (site), where it maintained a power plant for [sixty-three] years until 1992. In doing so, UI contaminated the site with hazardous materials. Before UI sold the site, at some time around June, 1999, the Connecticut Department of Public Utility Control (DPUC)⁴ ordered UI to solicit bids for remediation and decommissioning work on the site so that the DPUC could approve the sale.

"UI hired TLG Services, Inc. (TLG), to perform a study [TLG study] of the cost of remediation and decommissioning. After performing a complete study of the site, TLG concluded that remediation would cost approximately $7.6 million, and that decommissioning would cost approximately $13.2 million. On or about April 4, 2000, UI filed a motion for a protective order with the DPUC, in order to keep the TLG study confidential. The DPUC granted UI's motion for a protective order on or about May, 2000.

"On or about May 8, 2000, UI made confidential written representations to the DPUC that the TLG study revealed costs exceeding the previously estimated $8 million cost associated with decommissioning the site,⁵ and through [Robert L.] Fiscus, its [chief financial officer], acknowledged to the DPUC in closed door hearings that the true cost of decommissioning was closerto $20 million. In public hearings on that same date, UI represented that remediation costs were estimated at [$2 million] rather than the significantly higher number identified by the TLG study, and that decommissioning costs were estimated at [$6 million]. . . . The plaintiffs also allege 'UI executives falsely represented in public hearings before the DPUC that the costs associated with decommissioning the site was [$8 million]. . . .'

"On August 16, 2000, UI conveyed the site to the nonparty Quinnipiac Energy, LLC (Quinnipiac Energy), which planned to operate the plant. Under the terms of that sale, UI was to pay Quinnipiac Energy $4.25 million to take the site, and the site was to be transferred with all permits in place to generate and sell electric power. As a further part of that sale, UI paid $1.9 million to fund a Remedial Action Plan (RAP) escrow to allow Quinnipiac Energy to remediate contamination on the site. UI repeated the $2 million RAP figure in Form 10-K statements filed with the [Securities and Exchange Commission (SEC)] in 2005, 2011, and 2013, despite the $7.6 million figure indicated in the TLG study. UI failed to update the $2 million figure in its SEC statements even after it became clear that it was not enough even to pay for the environmental studies necessary to characterize the site. In all its SEC statements, UI made no mention of the TLG study, the $7.6 million estimated cost of removing hazardous material, or the $20.8 million full decommissioning estimate. . . .

"About five years after its purchase of the site, Quinnipiac Energy divided it into two parcels known as parcel A and parcel B. Around May 6, 2005, Evergreen and Quinnipiac Energy entered into an indenture of lease agreement with an option to Evergreen to buy the site (lease agreement). The lease agreement provides that Quinnipiac Energy had rights to a fund created by a 'prior owner of the site' [UI] for environmental remediation, and that such fund shall be applied toward remediation of the site without regard to whether Quinnipiac Energy or Evergreen own it at the time of remediation. In December, 2006, Quinnipiac Energy transferred parcel A to Evergreen and parcel B to Asnat. . . .

"On February 9, 2012, the Department of Energy and Environmental Protection (DEEP) issued a cease and desist order preventing anyone from entering the site due to the presence of hazardous contaminants. In 2013, DEEP issued administrative orders to the plaintiffs and UI requiring that the plaintiffs ensure that no activity of any kind took place on the site other than activities related to the disposal of contaminants, and that no person enter the buildings located on the site other than certain specified persons. On September 19, 2014, the Coast Guard issued an administrative order to the plaintiffs, and a substantively identical administrative order to UI, notifying them that contaminants at the site posed a threat to the public health, and directingthem to submit a plan to abate such threat. Thereafter, the Coast Guard conducted its own removal activities due to a lack of compliance with its administrative orders, and initiated an enforcement action against the plaintiffs seeking reimbursement for the resulting costs. In the spring of 2017, the plaintiffs paid $700,000 to be released from the claims asserted by the Coast Guard.

" 'On or about June 6, 2015, the defendants' actions in concealing the true cost of the remediation and decommissioning, and thereby deceiving the public with the false $8 million remediation cost estimate, were exposed in a front page story in the Hartford...