Smith v. Snyder

839 A.2d 589, 267 Conn. 456, 2004 Conn. LEXIS 11
CourtSupreme Court of Connecticut
DecidedJanuary 27, 2004
DocketSC 16801
StatusPublished
Cited by72 cases

This text of 839 A.2d 589 (Smith v. Snyder) is published on Counsel Stack Legal Research, covering Supreme Court of Connecticut primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Snyder, 839 A.2d 589, 267 Conn. 456, 2004 Conn. LEXIS 11 (Colo. 2004).

Opinions

Opinion

ZARELLA, J.

The defendants, Bettina Snyder, Donald Snyder and CS Industries, LLC (CS Industries),1 appeal from the judgment of the trial court2 awarding damages to the plaintiffs, Patricia Smith,3 Carol Tartagni and Lectron Labs, Inc. (Lectron). The defendants claim that there was insufficient evidence to support the trial court’s award of damages. The defendants alternatively claim that, even if the evidence supported the award of damages, the trial court improperly determined the amount of damages and attorney’s fees. We conclude that the trial court properly determined that Lectron was entitled to damages and affirm the trial court’s award of attorney’s fees.

The following facts and procedural history are relevant to this appeal. In October, 1999, the plaintiffs brought an action against the defendants alleging, inter alia, that the named defendant, Charles Snyder,4 while serving as a director and officer of Lectron, breached a fiduciary duty that he owed to Lectron by engaging [459]*459in a pattern of self-dealing and other abuses of his position that were designed to destroy or devalue Lectron. The plaintiffs further alleged that certain other defendants conspired with Charles Snyder in his alleged improprieties. Among other things, the plaintiffs claimed that the defendants misappropriated corporate property and that their conduct violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq.

Thereafter, the plaintiffs moved for a default judgment on the basis of the defendants’ repeated failure to comply with discovery orders. The trial court granted the plaintiffs’ motion and rendered judgment in their favor on the issue of liability. Subsequently, the trial court held a hearing on damages at which three witnesses testified. Vincent Sorrentino, Smith’s agent and husband, testified on behalf of the plaintiffs. David Veilleux, a certified public accountant, testified on behalf of the plaintiffs with respect to the common stock value of Lectron as of December, 1998. And Bettina Snyder, a former employee of Lectron and current employee of CS Industries, testified on behalf of the defendants.

The trial court set forth the following findings of fact in its memorandum of decision. “The plaintiffs protected their suppliers, customers, pricing schemes and processes, and treated them as proprietary information. The defendants kept [a] competing venture secret from the plaintiffs. Specifically, the defendants, while in the plaintiffs’ employ: (1) started a competing business, (2) utilized fraudulent means to misappropriate the plaintiffs’ most productive and efficient machine, (3) [discouraged] the plaintiffs’ existing customers by over-quoting jobs, (4) disrupted the plaintiffs’ cash flow by not sending out bills, (5) altered the plaintiffs’ company records to prevent the plaintiffs from being able to rehire employees who had been laid off, and (6) solic[460]*460ited the plaintiffs’ customers and diverted them to the defendants’ new business venture.”

The trial court concluded that the plaintiffs were entitled to damages under common law, the Uniform Trade Secrets Act, General Statutes § 35-50 et seq., and CUTPA. The trial court awarded the plaintiffs the following: (1) $235,000 in compensatory damages on the basis of the defendants’ violation of the common law, CUTPA and the Uniform Trade Secrets Act; (2) $40,000 in punitive damages under the Uniform Trade Secrets Act; (3) $40,000 in punitive damages under CUTPA; and (4) $20,000 in attorney’s fees.

I

Prior to addressing the defendants’ claims on appeal, we address the issue of whether the individual shareholder plaintiffs, Smith and Tartagni, have standing.5 “The issue of standing implicates this court’s subject matter jurisdiction. . . . Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy. . . . When standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue .... Standing requires no more than a colorable claim of injury; a [party] ordinarily establishes . . . standing by allegations of injury. Similarly, standing exists to attempt to vindicate arguably protected interests. . . .

“Standing is established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved. . . . The fundamental test for [461]*461determining aggrievement encompasses a well-settled twofold determination: first, the party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in [the subject matter of the challenged action], as distinguished from a general interest, such as is the concern of all members of the community as a whole. Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the [challenged action], . . . Aggrievement is established if there is a possibility, as distinguished from a certainty, that some legally protected interest . . . has been adversely affected.” (Citations omitted; internal quotation marks omitted.) AvalonBay Communities, Inc. v. Orange, 256 Conn. 557, 567-68, 775 A.2d 284 (2001).

“Since at least the middle of the [nineteenth] century, it has been accepted in this country that the law should permit shareholders to sue derivatively on their corporation’s behalf under appropriate conditions. . . . [I]t is axiomatic that a claim of injury, the basis of which is a wrong to the coiporation, must be brought in a derivative suit, with the plaintiff proceeding secondarily, deriving his rights from the corporation which is alleged to have been wronged.” (Citation omitted; internal quotation marks omitted.) Fink v. Golenbock, 238 Conn. 183, 200, 680 A.2d 1243 (1996).

“[I]n order for a shareholder to bring a direct or personal action against the corporation or other shareholders, that shareholder must show an injury that is separate and distinct from that suffered by any other shareholder or by the corporation.” Id., 201. It is commonly understood that “[a] shareholder—even the sole shareholder—does not have standing to assert claims alleging wrongs to the corporation.” Jones v. Niagara, Frontier Transportation Authority, 836 F.2d 731, 736 [462]*462(2d Cir. 1987), cert. denied, 488 U.S. 825, 109 S. Ct. 74, 102 L. Ed. 2d 50 (1988).

We conclude, therefore, that Smith and Tartagni lacked standing to bring this action in their individual capacities because the allegations in the plaintiffs’ complaint, if true, demonstrate that Lectron was harmed, but that no specific shareholder sustained an injury separate and distinct from that suffered by any other shareholder or by the corporation. Accordingly, the individual claims of Smith and Tartagni must be dismissed.

II

The defendants’ first claim on appeal involves the trial court’s determination that the plaintiffs were entitled to compensatory damages.

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Cite This Page — Counsel Stack

Bluebook (online)
839 A.2d 589, 267 Conn. 456, 2004 Conn. LEXIS 11, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-snyder-conn-2004.