Milford Hospital, Inc. v. Retirement Planning Group, LLP

MILFORD HOSPITAL, INC. v. RETIREMENT PLANNING GROUP, LLP et al.

No. CV186076809S

Superior Court of Connecticut, Judicial District of New Haven, New Haven

November 23, 2018

UNPUBLISHED OPINION

Wilson, J.

STATEMENT OF CASE AND PROCEDURAL HISTORY

On January 26, 2018, the plaintiff, The Milford Hospital, Inc. as plan administrator and on behalf of the Milford Hospital Pension Plan, filed a five-count amended complaint alleging the following facts. Beginning in approximately 2000 and continuing until October 2016, the plaintiff engaged the defendant Retirement Planning Group, LLP (RPG), an employee benefits and actuarial consulting firm, and the defendant Stuart Schoenly, as RPG’s principal actuary, to provide advice, analyses, and recommendations concerning the Milford Hospital Pension Plan (plan). In the course of providing such services, RPG and Schoenly engaged in nearly one hundred miscalculations of the plan’s pension benefits, approved incorrect distributions from the plan because of those miscalculations, and approved improper lump sum distributions to restricted employees that did not comply with the plan document and applicable federal tax laws. RPG and Schoenly then inaccurately reported the plan’s liabilities and wrongly certified the plan’s compliance with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. The plan was further damaged as a result of the errors and failures of the defendant Marcum LLP (Marcum) relating to its annual audits of the plan, which began in 2010, and continued until 2016. After failing to discover or report RPG and Schoenly’s errors on an annual basis, Marcum then issued faulty opinions regarding the plan’s liabilities and compliance with ERISA. On the basis of these allegations, count one of the plaintiff’s amended complaint alleges professional negligence against RPG and Schoenly; count two alleges negligent misrepresentation against RPG and Schoenly; count three alleges breach of contract against RPG and Schoenly; count four alleges professional negligence against Marcum; and count five alleges negligent misrepresentation against Marcum.

On March 29, 2018, RPG and Schoenly^[1] filed the instant motion to dismiss, along with a supporting memorandum of law with exhibits attached. They argue that the plaintiff’s claims against them should be dismissed because their services were provided to the plaintiff pursuant to an agreement requiring the parties to arbitrate any disputes arising out of those services. On May 18, 2018, the plaintiff filed a memorandum of law in opposition to the defendants’ motion to dismiss and a supporting affidavit. The defendants subsequently filed a reply brief in further support of their motion to dismiss. The court heard oral argument on the matter on August 13 2018.

DISCUSSION

"[A] motion to dismiss ... properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Internal quotation marks omitted.) Santorso v. Bristol Hospital, 308 Conn 338, 350, 63 A.3d 940 (2013). "A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) MacDermid, Inc. v Leonetti, 310 Conn. 616, 626, 79 A.3d 60 (2013). "A court deciding a motion to dismiss must determine not the merits of the claim or even its legal sufficiency, but rather, whether the claim is one that the court has jurisdiction to hear and decide." (Internal quotation marks omitted.) Hinde v. Specialized Education of Connecticut, Inc., 147 Conn.App. 730, 740-41, 84 A.3d 895 (2014).

I MOTION TO DISMISS

The defendants argue that the court lacks subject matter jurisdiction over the plaintiff’s claims because they provided their services to the plaintiff pursuant to agreement requiring the arbitration of any disputes arising from such services. The plaintiff counters that the defendants’ motion is procedurally improper because the existence of an arbitration clause does not implicate the court’s subject matter jurisdiction, and thus, the defendants’ motion should be denied. The existence of a signed contract providing that the parties to an action would submit any disputes arising from the agreement to final and binding arbitration does not deprive a court of subject matter jurisdiction. Catrini v. Erickson, 113 Conn.App. 195, 196-98, 966 A.2d 275 (2009). In Catrini, the trial court granted the defendants’ motion to dismiss the action on the ground that the court lacked subject matter jurisdiction because the parties entered into a signed contract providing that they would arbitrate any disputes arising from the agreement. Id., 196. In reversing the judgment of the trial court, our Appellate Court cited to General Statutes § 52-409, ^[2] explaining that "[i]f the existence of an arbitration agreement in a contract implicated the court’s jurisdiction to hear an action, then a court would, accordingly, not have jurisdiction to stay such a matter because, in the absence of jurisdiction, the court may only dismiss a matter. In short, because the power to order a stay implies that the court has jurisdiction over a matter, the legislature could not have empowered the court to enter a stay in such a matter unless the court has jurisdiction over it." Id., 197. "Similarly, courts have jurisdiction to enforce arbitration agreements and to enforce, modify or vacate arbitration awards, and are often called upon to interpret and construe the enforceability and scope of such agreements." Id., 197 n.2. The court remanded the case for further proceedings. Id., 198.

In light of the court’s holding in Catrini, even assuming that the plaintiff entered into an arbitration agreement with the defendants covering the present dispute the court would not be deprived of subject matter jurisdiction. See also, e.g., Burdett v. Oldani, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-11-5013562-S (May 24, 2011, Jennings, J.T.R.) ("[t]his court, under the rule of Catrini, then, has continuing subject matter jurisdiction over this case despite the existence of the arbitration clause of the retainer agreement, and the defendant’s motion to dismiss is therefore denied"). Accordingly, the defendants’ motion to dismiss is procedurally improper and therefore, it is denied.

The defendants further argue that the services they provided to the plaintiff involve commerce, and thus, implicate the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. They assert that, even if disallowed by Connecticut state procedure, this court may dismiss the plaintiff’s action pursuant to 9 U.S.C. § 3.^[3]

"Arbitration is essentially a creature of contract, a contract in which the parties themselves charter a private tribunal for the resolution of their disputes ... Arbitration agreements are contracts and their meaning is to be determined ... under accepted rules of [state] contract law ... Judicial construction of an arbitration agreement, however, is not guided solely by the principles of relevant state contract law. The [FAA] governs written arbitration agreements that pertain to contracts involving interstate commerce. 9 U.S.C. §§ 1 and 2. The [FAA] creates a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the [a]ct ..." (Citations omitted; footnote omitted; internal quotation marks omitted.) Hottle v. BDO Seidman, LLP, 268 Conn. 694, 701-02, 846 A.2d 862 (2004).

"While [the United States Supreme Court has] held that the FAA’s ‘substantive’ provisions-§§ 1 and 2-are applicable in state as well as federal court, see Southland Corp. v. Keating, 465 U.S. 1, 12, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984), [it has] never held that §§ 3 and 4, which by their terms appear to apply only to proceedings in federal court, see 9 U.S.C. § 3 (referring to proceedings ‘brought in any of the courts of the United States’); § 4 (referring to ‘any United States district court’), are nonetheless applicable in state court. See Southland Corp. v. Keating, supra, 16 n.10 (expressly reserving the question whether ‘§§ 3 and 4 of the [FAA] apply to proceedings in state courts’); see also id., 29 (O’Connor, J., dissenting) (§§ 3 and 4 of the FAA apply only in federal court)." Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 477 n.6, 109 S.Ct.1248, 103 L.Ed.2d 488 (1989).

Although the FAA has been held to supersede state substantive arbitration law when applied to written arbitration agreements that pertain to contracts involving interstate commerce, "[t]he [FAA] has not been held to supersede state procedural laws." (Internal quotation marks omitted.) Hottle v. BDO Seidman, LLP, supra, 268 Conn. 698 n.5. "[T]he [FAA] does not preempt state procedural rules governing the conduct of arbitration, so long as the state procedural rule does not undermine the goals of the act." Doctor’s Associates, Inc. v Searl, 179 Conn.App. 577, 585 n.7, 180 A.3d 996 (2018). "The [FAA] covers both substantive law and a procedure for federal courts to follow where a party to arbitration seeks to enforce or vacate an arbitration award in federal court. The procedural aspects are confined to federal cases." Sultar v. Merrill Lynch, Superior Court, judicial district of New Britain, Docket No. CV-04-0527411-S (October 13, 2004, Cohn, J.) (38 Conn.L.Rptr. 108, 109). Connecticut law "does not conflict with the primary purpose of the [FAA], which is to encourage arbitration to the fullest scope of the parties’ agreement to arbitrate." Id. "Therefore, when a cause of action related to an arbitration is heard in a Connecticut...