Clinton v. Aspinwall

1

JOHN B. CLINTON v. MICHAEL E. ASPINWALL ET AL.

Nos. SC 20543, SC 20544

Supreme Court of Connecticut

September 20, 2022

Argued April 27, 2022

Procedural History

Action to recover damages for, inter alia, breach of contract, and for other relief, brought to the Superior Court in the judicial district of Hartford, where the court, Robaina J., granted the plaintiffs motion for summary judgment with respect to the defendants' counterclaim; thereafter the case was tried to the jury before Shapiro, J.; verdict for the plaintiff; subsequently, the defendants appealed to the Appellate Court; thereafter, the court Shapiro, J., denied the defendants' motions to set aside the verdict and for judgment notwithstanding the verdict and rendered judgment in accordance with the verdict and the defendants filed an amended appeal; subsequently, the court, Hon. Robert B. Shapiro, judge trial referee, granted the plaintiffs motion for attorney's fees and costs, and the defendants filed a second amended appeal and a separate appeal with the Appellate Court, which consolidated the appeals; thereafter, the Appellate Court, Lavine, Alvord and Harper, Js., reversed the trial court's judgment in part and remanded the case with direction to render judgment in part for the defendants and for further proceedings; subsequently, the defendants and the plaintiff, on the granting of certification, filed separate appeals with this court. Vacated; judgment directed.

Garrett S. Flynn, with whom was Barbara M. Schel-lenberg, for the appellants-appellees (defendants).

Glenn W. Dowd, with whom was Howard Fetner, for the appellee-appellant (plaintiff).

Robinson, C. J., and McDonald, D'Auria, Kahn, Ecker and Keller, Js.

OPINION

D'AURIA, J.

When a court renders judgment in a multicount civil action with fewer than all counts of a plaintiffs complaint accounted for in that judgment, jurisdictional alarm bells should ring if any party files an appeal, alerting the parties and the trial court to a potential final judgment problem. Before the parties and the appellate courts expend resources resolving the appeal, it is important to examine the rules of practice, statutes and our case law to determine whether an appeal can be taken from that judgment. See General Statutes §§ 51-197a and 52-263; Practice Book §§ 61-2 through 61-5. In Meribear Productions, Inc. v. Frank, 328 Conn. 709, 183 A.3d 1164 (2018), we held in the context of a court trial that, when legally consistent theories of recovery have been litigated but not all theories have been ruled on, there is no final judgment. The present appeals require us to determine whether the same threshold jurisdictional rule applies in the context of civil jury trials. We hold that it does and are therefore compelled to vacate the judgment of the Appellate Court and to remand this case to that court with direction to dismiss the appeals for lack of subject matter jurisdiction.

The Appellate Court's opinion contains the relevant facts and procedural history of this case, which we briefly summarize. The plaintiff, John B. Clinton, and the defendants, Michael E. Aspinwall, Steven F. Piaker, and David W. Young, organized CCP Equity Partners, LLC (CCP), as a Delaware limited liability company and executed an amended operating agreement. Clinton v. Aspinwall, 200 Conn.App. 205,207,238 A.3d 763 (2020). The parties founded CCP "to provide management services to, and serve as the general partner of, certain private equity funds. Pursuant to the [operating] agreement, each member was to serve as a manager . . . on the board of managers (board)." Id., 207-208. The operating agreement entrusted the board, but not the members, with the management of CCP. See id., 208 n.2. The board also created a capital reserve fund of $3 million to fund future expenses of the company. Id., 208.

Subsequently, "the members decided not to raise investor capital to create another private equity fund. The members expected all CCP operations to close and that substantially all portfolio companies would be liquidated . . . ." Id. The defendants, "who controlled 61 percent of the interests of CCP, voted to amend § 8.1 of the [operating] agreement, over the objections of the plaintiff and another member, Preston Kavanagh. Id. "Before the amendment, § 8.1 provided that general distributions [from the capital reserve fund] shall be made pro rata among the members, in proportion to their capital accounts. The amendment added language to the section, providing that distributions could otherwise be determined by the consent of all members. The defendants [enacted] this amendment pursuant to § 2.5^[1]of the [operating] agreement." (Footnote added; footnote omitted.) Id., 208-209.

Kavanagh then sued CCP and the remaining members. Id., 209. The defendants held a meeting to vote to remove Kavanagh from CCP. Id. At the same meeting, "the plaintiff challenged the necessity of CCP's $3 million capital reserve. The defendants explained that the reserve was necessary to meet CCP's obligations to investors for several more years, to defend against Kavanagh's lawsuit, and for the possibility that the plaintiff [might] take legal action against CCP." Id. Several years later, "the defendants voted to remove the plaintiff as a member of CCP, also pursuant to § 2.5 of the [operating] agreement." Id., 210.

The plaintiff then brought the present action. After motion practice and amendment, there remained a two count complaint at the time of trial. The operative complaint alleged that the defendants breached their contractual and fiduciary duties based on their having voted to amend the operating agreement (amendment claim), voted to remove the plaintiff as a member of CCP (member removal claim), and maintained a capital reserve fund of $3 million when it was no longer needed (capital reserve claim). Id. The plaintiff alleged that, because of their acts, the defendants had breached the fiduciary duties they owed to him under Connecticut or Delaware law, and breached § 3.4 of the operating agreement, which requires managers to exercise their best judgment in operating the company. Id., 210-11.

Prior to trial, the defendants moved to strike the complaint. Citing Nemec v. Shrader, 991 A.2d 1120 (Del. 2010), the defendants argued that the breach of fiduciary duty claims failed because Delaware law forecloses those claims when they seek to override contractual terms. The trial court denied the motion, ruling that it did not matter if Connecticut or Delaware law governed the breach of fiduciary duty claims because, in either jurisdiction, members and managers of limited liability companies owe each other fiduciary duties, and the plaintiff had alleged facts sufficient to establish a breach of those duties.

The parties tried the case to a jury. See Clinton v. Aspinwall, supra, 200 Conn.App. 212. "The jury verdict form first asked the jury to decide the three breach of contract counts. Only if the jury found in favor of the defendants on those counts . . . was it then asked to address the two breach of fiduciary duty counts, related to the member removal and the capital reserve." (Footnote omitted.) Id., 212-13.^[2] The plaintiff did not object to the jury instructions or the verdict form.^[3] "[T]he jury returned its verdict in favor of the plaintiff on the three breach of contract counts. The jury, therefore, did not reach the two breach of fiduciary duty counts." Id., 214.

The jury awarded the plaintiff $146,901 for breach of contract on the amendment claim, $672,208 for breach of contract on the member removal claim, and $303,426 for breach of contract on the capital reserve claim. Id. The trial court denied the defendants' motions for judgment notwithstanding the verdict and to set aside the verdict and, after an evidentiary hearing, granted the plaintiffs motion for attorney's fees and costs pursuant to the operating agreement, awarding the plaintiff $716,200 in attorney's fees and $6118.75 in costs. See id. Judgment therefore was rendered in the plaintiff's favor on the breach of contract claim contained in count two. No judgment of any kind was rendered on the fiduciary duty count.

The defendants appealed to the Appellate Court, which affirmed in part and reversed in part the judgment of the trial court and remanded the case for a new hearing on the issue of attorney's fees and costs. See id., 229. Specifically, the Appellate Court reversed the judgment as to the plaintiffs amendment and member removal claims and ordered the trial court to render judgment in favor of the defendants on those two claims. Id., 222. The Appellate Court affirmed the judgment as to the plaintiffs capital reserve claim. Id., 228. In a footnote, the Appellate Court also declined the plaintiffs invitation to remand the case to the trial court with direction to render judgment in favor of the plaintiff on the parallel fiduciary duty claim in the event that the judgment as to any of the three breach of contract claims was reversed. See id., 222 n.19. The Appellate Court concluded that, because the plaintiff had not objected to the verdict form instructing the jury to bypass the fiduciary duty counts, "the plaintiff failed to preserve [that] claim." Id.

The plaintiff and the defendants sought certification to appeal from the Appellate Court's judgment. We granted both petitions.^[4] Prior to oral argument before this court and citing Meribear Productions, Inc. v. Frank, supra, 328 Conn. 709, we ordered the parties to file supplemental briefs providing "reasons, if any, why the appeal[s] should not be dismissed for lack of a final judgment because the jury did not reach, and the trial court did not render judgment on, the first count of the complaint, which alleged that the defendants...