Devine Enterprises, Inc. v. Sportech Venues, Inc.

DEVINE ENTERPRISES, INC. v. SPORTECH VENUES, INC.

No. DBDCV186026367S

Superior Court of Connecticut, Judicial District of Danbury, Danbury

January 22, 2019

UNPUBLISHED OPINION

OPINION

Kowalski, J.

The issue presented is whether the court should grant the defendant’s motion to strike counts two through five of the plaintiff’s five-count complaint, which sound in breach of the covenant of good faith and fair dealing, negligent misrepresentation, fraudulent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act (CUTPA), respectively. Because the facts as alleged in the complaint, construed in favor of the plaintiff, sufficiently allege each of the foregoing causes of action, the motion to strike is denied.

I. BACKGROUND

The plaintiff, Devine Enterprises, Inc., is a Connecticut corporation that operates a restaurant, bar and catering facility known as Two Steps Downtown Grille in Danbury Connecticut. The defendant, Sportech Venues, Inc., is a Connecticut corporation headquartered in New Haven Connecticut. Sportech is a wholly owned subsidiary of Sportech PLC, which is based in the United Kingdom. In its complaint, the plaintiff alleges the following facts. The defendant operates 16 off-track betting (OTB) facilities across Connecticut and employs roughly 425 people in Connecticut. The OTB facilities offer legal pari-mutuel wagering on thoroughbred and harness horse racing, greyhound races, and jai-alai. Prior to 2017, the defendant attempted to open an OTB facility in Danbury, Connecticut, and decided that the plaintiff’s Two Steps location (the facility) was a viable site for an OTB facility. On March 16, 2017, the plaintiff and defendant executed a contract (the agreement) for lease and use of the facility. Under the terms of the agreement, the plaintiff leased the second and third floors of the facility to the defendant, and the defendant was to pay the plaintiff a base rent, as well as additional rent for insurance, taxes, utilities and other expenses related to the property. As part of the agreement, the facility was also to undergo extensive remodeling.

Section 7 of the agreement provided that it was conditioned upon the plaintiff and defendant procuring and maintaining all governmental consents, licenses, approvals and permits necessary for the defendant to operate a lawful and licensed OTB facility. The defendant was required to obtain approvals from the Zoning Commission of the City of Danbury (zoning commission), and the approval by the Danbury City Council (city council). The agreement also afforded the defendant an option to terminate the agreement in the event that the permits had not been obtained by September 12, 2017. If the defendant failed to terminate the agreement by that date however, the defendant’s option to terminate would expire.

When the parties executed the agreement, the zoning regulations for the City of Danbury did not permit the operation of an OTB facility. Thus, the defendant was required to submit an application to the zoning commission to amend the existing regulations to permit the operation of an OTB facility at the Two Steps location. On March 20, 2017, the defendant filed an application with the zoning commission to amend the City of Danbury’s zoning regulations. The zoning commission accepted the defendant’s application at its March 28, 2017 meeting, and on May 9, 2017, the zoning commission voted to approve the application.

On May 25, 2017, Andrea Gartner, a Danbury resident and downtown business owner, appealed that approval to State of Connecticut Superior Court for the judicial district of Danbury, alleging statutory aggrievement and that the zoning commission’s decision was not properly noticed, and was illegal, arbitrary, capricious, and constituted an abuse of discretion.

The defendant subsequently filed a second application to the zoning commission that was approved on August 22, 2017. With that approval in-hand, the defendant was next required to obtain approval by the city council for the proposed facility. The plaintiff alleges that the defendant, knowing that the agreement was conditioned upon its ability to procure the necessary permits, unilaterally elected not to submit the application for location approval to the city council at the council’s next meeting on September 6, 2017. However, on September 12, 2017, the last day the defendant could exercise its option to terminate the agreement, the defendant requested that the parties modify the agreement to extend the date within which the defendant could exercise its option. The plaintiff, believing the request was made in good faith, wanting to be amenable to the defendant, and relying on the representations made by the defendant during their discussions, agreed to modify the agreement (the modification). Pursuant to the modification, the defendant now had the option to terminate the agreement by a contingency date, defined as a date three months after the "official conclusion" of the Gartner appeal, or any further appeal therefrom, in the event the necessary permits were not procured by that date. Additionally, the defendant represented in the modification that it would have sufficient time to obtain all the necessary permits, that it would use its best efforts to do so, and that it wanted to follow through with its obligations to the plaintiff under the agreement.

Following the zoning commission’s approval of the defendant’s second application, Gartner filed a motion to dismiss her court challenge to the commission’s first approval for lack of subject matter jurisdiction, and an order of dismissal was entered on November 6, 2017. That dismissal started the clock running on the contingency date in the modification, since there was no further appeal taken from the dismissal of the Gartner appeal.

Although the city council met on October 3, 2017, and November 9, 2017, the defendant did not submit an application to the city council for location approval until November 27, 2017. That application indicated that the proposed facility would only allow for legal pari-mutuel wagering on thoroughbred and harness horse races, greyhound races, and jai-alai events, and would not allow any other types of wagering. The defendant’s application was initially placed on the city council’s December 5, 2017 agenda, but it was later referred to an ad-hoc committee to be heard on January 29, 2018. The ad-hoc committee’s preliminary vote was fifteen to five in favor of the locational approval for the facility. After the ad-hoc committee approval, the application was put on the agenda of the city council’s meeting on February 6, 2018, for a formal, final approval vote. However, on that date, the defendant sent a letter to the plaintiff terminating the agreement.

The plaintiff also alleges that a case pending in the United States Supreme Court has significant bearing on the present action. On June 27, 2017, just more than three months after the execution of the agreement, the United States Supreme Court granted a petition for a writ of certiorari in Murphy v. National College Athletic Assn., 138 S.Ct. 1461, 200 L.Ed.2d 854 (2018). At issue in Murphy is whether the federal Professional and Amateur Sports Protection Act (PAPSA), which operates to prohibit sports betting in Connecticut, is unconstitutional under the 10th Amendment.^[1] The outcome in Murphy will significantly impact the defendant’s business within Connecticut because the defendant is currently the sole entity authorized to operate OTB facilities in Connecticut, and aside from the Mohegan Sun and Foxwoods casinos, the defendant’s OTB facilities are the only wagering facilities lawfully permitted in Connecticut. However, the plaintiff alleges that even if the Murphy decision were to remove the statutory impediments to sports betting in Connecticut, the defendant would be precluded from implementing sports betting at the proposed Danbury facility due to the scope of both the parties’ agreement and the municipal permits.

In count one of its complaint, which is incorporated into the subsequent counts challenged by the motion to strike, the plaintiff alleges that the defendant breached the agreement by failing to terminate the modification agreement by a written notice to either party by 5:00 p.m. on the contingency date as provided for in the modification. In paragraph fifty of count one, the plaintiff alleges that as a result, it suffered the following pecuniary harm: (1) at least $ 750, 000 for loss of renovations to Two Steps; (2) at least $ 475, 600 for rent, utilities, and fees; (3) at least $ 2, 400, 000 for loss of future additional business; (4) at least $ 25, 200 for loss of business the plaintiff turned away from the agreement and modification between the parties; and (5) at least $ 1, 000, 000 for loss of goodwill and community standing. Additional necessary facts will be set forth in the discussion below.

III. DISCUSSION

The governing standards applicable to a motion to strike are well settled. "The purpose of a motion to strike is to contest ... the legal sufficiency of the allegations of any complaint ... to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498 815 A.2d 1188 (2003). "The role of the trial court [is] to examine the [complaint], construed in favor of the plaintiffs, to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint ... If facts provable in the complaint would support a cause of...