Arguing That the Economic Loss Doctrine Should Apply to a Sale of Secured Property Under Article 9 of the UCC and that Connecticut Should Apply the Most Recent FTC Standard Under the Connecticut Unfair Trade Practices Act

This appeal before the Connecticut Supreme Court arose out of a 2006 foreclosure auction held by the defendant bank of real and personal property at a former special events facility. The plaintiff, who was the successful bidder at the auction, later learned that much of the personal property he thought he had purchased was not owned by the defaulting debtor, but leased, and therefore not subject to the sale. The plaintiff sued the debtor, the defendant bank, and the auctioneer, alleging, inter alia, violations of Connecticut’s Unfair Trade Practices Act (“CUTPA”), under which both attorneys’ fees and punitive damages may be awarded.

The case was tried to a jury, which returned a verdict in favor of the plaintiff and awarded compensatory damages, which, after remittitur, amounted to $417,000. The trial judge subsequently added attorneys’ fees and punitive damages under CUTPA, bringing the judgment against the defendants, before interest, to $1.9 million, substantially in excess not only of the value of the leased personal property but also of the amount that the plaintiff had paid at auction.

In the appeal, NELF filed an amicus brief in support of the bank, arguing that the economic loss doctrine, which is recognized in Connecticut, should apply to this case. The economic loss doctrine is a well-settled common law contract rule that limits an injured party to its contract damages when its damages, as in this case, are entirely economic. In Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126 (1998) (“Flagg Energy”), a sale of goods case, the Connecticut Supreme Court applied the doctrine to limit damages to the monetary damages available under the UCC. NELF argued in its brief that in this case, which involves a sale of secured property under Article 9, the plaintiffs should likewise be limited to their economic damages under the UCC, i.e., the value of the personal property that the plaintiff mistakenly thought he was buying at auction. That value would be a fraction of the massive award obtained at trial.

NELF also supported the bank’s position that the trial court applied the wrong standard for assessing whether the Bank’s conduct violated CUTPA. Connecticut law requires that its courts, in construing CUTPA, be guided by the interpretations of unfair trade practices given by the Federal Trade Commission. Here, the trial court applied the so-called “cigarette rule,” a 1964 FTC standard that was later rejected by the FTC and replaced by a more nuanced interpretation embodied in its Policy Statement on Unfairness, adopted in 1980. The Connecticut Supreme Court, obviously cognizant of its responsibility to look to the FTC policy, has recognized on more than one occasion that “a serious question exists as to whether the cigarette rule remains the guiding rule utilized under federal law.” Glazer v. Dress Barn, Inc., 274 Conn. 33, 83 n. 34 (2008). Indeed, the Court has already adopted the FTC’s injury standard, not as a replacement for the cigarette rule, but rather as clarification of the third, “substantial injury,” prong of the rule. See Hartford Elec. Supply Co. v. Allen-Bradley Co., 250 Conn. 334, 368 (1999). NELF supported the Bank’s argument that the 1980 FTC standard should have been applied in this case.

In a disappointing decision issued on November 12, 2013, the Supreme Court of Connecticut, while agreeing with NELF and the Bank that the economic loss doctrine applies to sales under UCC Article 9—and, therefore, that the plaintiff’s tort claims were barred—reversed its own holding in Flagg Energy and held that the economic loss doctrine does not bar a CUTPA claim. The Court reasoned that while all tort claims based on contract are barred by the economic loss doctrine, this does not apply to claims under CUTPA, which are not based on any contract. Furthermore, the Court held (over a dissent) that the Bank had not properly preserved its objection to the application of the “cigarette rule” under CUTPA. In short, although NELF and the Bank were victorious on the application of the economic loss doctrine, the massive judgment against the Bank was upheld.

Arguing That Reliance on the Expertise of an Intermediary Does Not Transform an Arms’ Length Business Transaction Into a Fiduciary Relationship

Priceline.com, Inc., (“Priceline”) operates a website that provides travel related services. In one of its hotel reservation services, “Name Your Own Price” (“NYOP”), consumers bid to obtain a room in a designated city at a discounted rate that would not ordinarily be available to them. Using NYOP, the consumer may only specify the dates when the room is wanted, the geographical area, and the desired quality of the hotel; the consumer gives up the right to choose the hotel by name. The consumer then enters a “bid price” in the amount that the consumer wishes to pay per night, and Priceline attempts to find a room that matches the consumer’s bid price and other criteria. The plaintiffs commenced an action against Priceline in the Connecticut federal district court, alleging that although Priceline provided rooms at the bid price, the rooms actually cost Priceline less than what the plaintiffs had agreed to pay, and that the difference between the bid price and the price paid to the hotel was a “secret profit” that Priceline retained in violation of a fiduciary duty that it owed to the plaintiffs as their “agent.” After the trial court granted Priceline’s motion for summary judgment on the ground that no agent-principal relationship had been created between the plaintiffs and Priceline, the plaintiffs appealed to the Second Circuit. 

In support of Priceline, NELF filed an amicus brief urging the Second Circuit to affirm the dismissal of the plaintiffs’ complaint. NELF argued, first, that under Priceline’s terms and conditions, Priceline agreed only to act as a self-interested service-provider functioning as an intermediary between the plaintiffs and the participating hotels, not as the plaintiff’s agent. NELF also noted that, contrary to the allegations in the complaint, Priceline never represented that all of its compensation would be captured in its “fees and services” charge, rather than in the bid price; in fact, Priceline specifically stated that only “part” of its compensation was found the services charge. Moreover, NELF contended that the elements of the principal-agent relationship simply cannot be found in the actual conduct of the parties. In particular, NELF explained why the conduct of Priceline was indistinguishable from the kinds of ordinary retail customer services one finds in any arms’ length transaction between a customer and a merchant. NELF cautioned against the huge expansion of liability that businesses would face if such services were recognized by the court as fiduciary in nature. Finally, NELF argued that because the plaintiffs chose to use the NYOP bidding method, they cannot now be heard to complain about the unremarkable fact that the bid price may exceed the undisclosed minimum price the seller may be willing to accept (i.e., the reserve price). 

In its decision affirming the dismissal of the complaint, the Second Circuit adopted NELF’s characterization of Priceline as a mere intermediary, not a fiduciary, and agreed that nothing in Priceline’s conduct went beyond ordinary customer service when Priceline used its expertise to check available hotel inventory against the plaintiffs’ requests for reservations. Finally, the court specifically cited NELF’s brief when adopting NELF’s argument about the significance of the reserve price to this case. After the decision issued, a request by the plaintiffs for a rehearing was summarily denied by the panel.

Preventing Disclosure of Trade Secrets and Other Confidential Business Information to Competitors

With its decision in this case, issued on August 10, 2010, the Connecticut Supreme Court has provided much-needed clarity on an issue of great concern to all who do business in the state, namely the scope of protection provided under state law for confidential business information subpoenaed by the state’s Attorney General (“AG”) during an antitrust investigation.   

Connecticut Antitrust Statute § 35-42 authorizes the AG to demand, prior to filing a lawsuit, written and oral discovery from “any person” (including, as in this case, third parties not suspected of violating the law) when the AG has “reason to believe” that an antitrust violation has occurred.  The statute also provides that any subpoenaed materials “shall not be available to the public.”    In this case, in an insurance industry investigation, the AG subpoenaed as a witness Brown & Brown, an insurance intermediary that provides insurance and reinsurance products and services. Seeking to protect its subpoenaed confidential information from disclosure, Brown & Brown attempted to negotiate with the AG for a protective order.  The AG, however, asserted that, despite the express language of the statute, he was not prevented from disclosing a subpoenaed business’s confidential information to third parties in the course of his investigation (e.g., as an exhibit shown to a witness at a deposition).  In the face of the AG’s refusal to agree to any protection for its subpoenaed information, Brown & Brown sued the AG in state court, seeking a declaration that the statute barred the AG from disclosing any of its subpoenaed materials to anyone outside the AG’s office.  The trial court denied Brown & Brown’s motion for summary judgment, and Brown & Brown appealed to the Connecticut Supreme Court.  

NELF filed an amicus briefs in support of Brown & Brown both at the trial and appellate levels, arguing that the plain meaning of the statute’s injunction that subpoenaed materials “shall not be available to the public” is that custody of and access to the materials are restricted solely to the AG’s office and that, therefore, the statute bars anyone else from gaining access to the materials without the targeted business’s consent.  NELF pointed out that this reading of the statute strikes a reasonable balance by allowing the AG broad access to confidential information in the broad exercise of its unreviewable, pre-suit investigatory powers, but precluding the AG from sharing that information with others, thereby preventing potentially irreversible damage to a business’s stability and growth.  

In its decision, the Connecticut Supreme Court, embracing many of NELF’s arguments, reversed the trial court’s decision and held that the Act bars the AG from disclosing subpoenaed materials to anyone else (other than federal or state law enforcement officials, as provided by the Act, so long as they agree to maintain the strict confidentiality of the materials).  The Court agreed with NELF that the clear meaning of the statutory language restricted both custody and access exclusively to the AG, and further agreed with NELF that this legislative choice reflected a careful balance between the needs of government investigations and the proprietary concerns of the business community.  The court explained:  “[A]lthough [the legislature] granted broad investigatory powers to the [AG] to pursue antitrust violators, [it] also intended to afford counterbalancing protections to investigatory targets in recognition of the potential sensitivity of internal business information and the fact that the defendant's investigation need not be founded on any specified level of suspicion and, ultimately, might result in no allegations of wrongdoing.” 

Preventing Disclosure of Trade Secrets and Other Confidential Business Information to Competitors

This case arises under Conn. Gen. Stat. § 35–42, which authorizes the Connecticut Attorney General to subpoena documents from “any person” (including, as in this case, non-party witnesses) when the AG has “reason to believe” that an antitrust violation has occurred, but which also provides that the subpoenaed documents “shall not be available to the public.”  Attorney General Blumenthal asserts that, despite this language, the statute does not limit his discretion to disclose a business’s confidential information and documents obtained by subpoena as part of an antitrust investigation to third parties (including competitors) in the course of conducting investigative depositions and witness interviews.  

Brown & Brown, an insurance intermediary that provides insurance and reinsurance products and services, filed this action seeking injunctive, declaratory and equitable relief restricting disclosure to third parties of documents and information sought by the Attorney General in connection with an ongoing antitrust investigation of the insurance industry.  The trial court denied Brown & Brown’s motion for summary judgment, and Brown & Brown appealed.  

NELF filed an amicus brief in the appeal, as it had in the trial court, arguing in support of Brown & Brown that the statute bars disclosure of subpoenaed documents to anyone outside the Attorney General’s office. NELF argued that, since there is statutory language immediately preceding the disputed provision that clearly limits custody of subpoenaed documents to the Attorney General’s office, the statute equates custody with access and both are restricted to the Attorney General’s office.  NELF further argued that the statute strikes a reasonable balance by allowing the Attorney General broad access to confidential information even before a suit has been commenced, but precluding the Attorney General from sharing that information with others.  Since the Attorney General needs to make at this stage only a preliminary determination whether to commence suit, after which typical rules regarding discovery (including protective orders) would apply, NELF argued that upholding this statutory balance should not hinder the Attorney General’s investigation or filing of claims.  

Unfortunately, the Connecticut Supreme Court, in a September 2008 decision, concluded (contrary to the positions taken by both parties when the Court raised the issue for the first time sua sponte at oral argument) that the trial court’s denial of Brown & Brown’s motion for summary judgment was not an appealable final judgment and dismissed the appeal without addressing the merits. The trial court subsequently received cross-motions for summary judgment from the parties repeating the arguments previously made and issued a decision reiterating its prior position.  The parties again appealed and NELF re-filed its amicus brief.

Opposing Duplicative State Regulation of a National Bank Subsidiary

Agreeing with Wachovia and NELF, the Supreme Court held in a decision rendered on April 17 in the Watters case that Wachovia’s mortgage business, whether conducted by the bank itself or through its wholly owned operating subsidiary, is subject to federal superintendence under the National Bank Act, 12 U.S.C. § 1 et seq. (“NBA”), and not to the regulations of the several states in which the subsidiary operates.  It has long been established that the NBA preempts duplicative or conflicting state regulation of national banks themselves.  Wachovia argued for extension of federal preemption to its wholly owned subsidiary based in part on 12 C.F.R. § 7.4006, a regulation of the Office of the Comptroller of the Currency (“OCC”) which provides that “[u]nless otherwise provided by Federal law or OCC regulation, State laws apply to national bank operating subsidiaries to the same extent that those laws apply to the parent national bank.”  

NELF filed a merits amicus brief in support of Wachovia concentrating on the reasonableness prong of the federal preemption analysis of Chevron, USA, Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), in order to counteract Michigan’s argument that state regulation of national banks’ mortgage subsidiaries is required to prevent abuses like “predatory lending.”  NELF argued that (1) duplicative state and federal regulation is economically inefficient and (2) constitutional history demonstrates the importance of the Supremacy Clause as part of the system of checks and balances in our federal system.  

Justice Ginsburg wrote the majority opinion (joined by Justices Alito, Breyer, Kennedy, and Souter) holding that, while state law may govern issues related to incorporation of a national bank’s subsidiaries, it does not govern the “business of banking” conducted by those entities.  Justice Stevens filed a dissenting opinion joined by Chief Justice Roberts and Justice Scalia (Justice Thomas taking no part in the case), arguing that the majority opinion improperly found preemption based, in the dissenters’ view, on an OCC regulation rather than an explicit federal statute.  On April 27 the Court denied the Connecticut Banking Commissioner’s petition for certiorari in the case of Wachovia Bank, N.A. v. Burke, which raised this same preemption issue and in which NELF had filed a similar amicus brief with the Court of Appeals for the Second Circuit.

Fighting Against Class Action Certification Where Individualized Proof Is Required To Determine Liability

This was an interlocutory appeal to the Connecticut Supreme Court (“Supreme Court”) of the Connecticut Superior Court’s certification of a nationwide class action. The gravamen of the plaintiff’s complaint is her claim that the defendant liability insurer, Travelers Property and Casualty Corporation (“Travelers”), paid less than it had represented for the annuity it purchased to fund her structured settlement of a claim arising from an automobile accident. Specifically, the plaintiff alleged that, unbeknownst to her, because Travelers used a captive annuity company, it received a rebate on the commission it otherwise would have had to pay when it bought the annuity. After the Superior Court dismissed the complaint on the ground that, even if what she alleged were true, the plaintiff had not been damaged by Travelers’ conduct since she had received the settlement she bargained for, the plaintiff appealed.  The Supreme Court reinstated her claim and remanded the matter, finding that there were theories under which she might be able to recover (e.g., if she had known that Travelers was going to receive a rebate, she might have bargained for a higher settlement or, because Travelers paid slightly less for the annuity, she might have overpaid her contingency legal fee). In reversing the dismissal, the Supreme Court held that Travelers had no affirmative duty to disclose what it would be paying for the annuity and that, in order to prove her case, plaintiff (and anyone else in her position) would have to prove exactly what type of representation was made to her by Travelers, whether her reliance was reasonable, and how she had been damaged by it. Upon remand, the Superior Court certified the case as a nationwide class action, despite the Supreme Court’s clear language that individualized proof would be required for each plaintiff. The Superior Court also did not consider that class certification might be unwarranted because different legal standards and statutes of limitation would likely apply to claims based on settlements signed in various states. 

In compliance with Connecticut procedure, Travelers appealed the Superior Court’s decision to the Supreme Court. NELF joined with the Connecticut Business and Industry Association and the American Insurance Association in filing an amicus brief in support of Travelers, arguing that the Superior Court ignored the Supreme Court’s clear holding that individualized proof is essential and also failed to consider the choice of law issues that alone appear sufficient to preclude class certification. 

On April 4, 2006, the Supreme Court reversed the class action certification and remanded the matter to the Superior Court.  Although the Supreme Court agreed with the amici that the plaintiff had failed to establish the common factual and legal elements that would support a class action, it refused to rule definitively that the case was inappropriate for class certification.  The Court noted that the trial court’s decision in favor of class certification had been based on its review of only thirty of Travelers’ voluminous structured settlement files.  The Court expressly disapproved of the trial court having based its decision on such a small sample of the potentially relevant files.  For this reason, it did not preclude the plaintiff from trying on remand to create a better record in support of class action certification.

 

Opposing Duplicative State Regulation of a National Bank Subsidiary

At issue in this case was the claim by Connecticut’s Banking Commissioner that the Connecticut-based Wachovia Mortgage Corp. (“Wachovia Mortgage”) is subject to state regulation even though it is a wholly-owned subsidiary of Wachovia Bank (“Wachovia”), which is a national bank.  Connecticut’s position is directly contrary to 12 C.F.R. § 7.4006, a federal regulation promulgated by the Office of the Comptroller of the Currency, which provides that “[u]nless otherwise provided by Federal law or OCC regulation, State laws apply to national bank operating subsidiaries to the same extent that those laws apply to the parent national bank.”  Since state laws do not apply to national banks, under this regulation they also do not apply to a national bank’s wholly owned subsidiary.  

In this case, Wachovia Mortgage was initially a partially-owned subsidiary of Wachovia and, as such, it complied with Connecticut’s state licensing, inspection and reporting procedures.  When Wachovia Mortgage became a wholly-owned subsidiary on January 1, 2003, it notified the Connecticut Banking Commission and claimed exemption from state regulation under § 7.4006 and the Supremacy Clause.  The Commissioner responded by threatening to issue a cease and desist order, prohibiting Wachovia Mortgage from doing business in Connecticut unless it renewed its state license.  Wachovia and Wachovia Mortgage then initiated a declaratory judgment in the federal district court in Connecticut, obtaining a judgment that Wachovia Mortgage is exempt from state regulatory oversight. Wachovia Bank, N.A. v. Burke, 319 F. Supp. 2d 275 (D. Conn. 2004).  The Connecticut Banking Commissioner appealed to the U.S. Court of Appeals for the Second Circuit.  

Consistent with NELF’s longstanding support for rational administrative procedures that provide adequate oversight without burdening business with conflicting mandates, NELF filed an amicus curiae brief on November 8, 2004, in the Court of Appeals for the Second Circuit appeal in support of Wachovia.  In its brief, NELF concentrated its argument on the reasonableness prong of the federal preemption analysis of Chevron, USA, Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), in order to counteract the Banking Commissioner’s public policy argument that state regulation of national banks’ mortgage subsidiaries is required to prevent abuses like “predatory lending.”  NELF argued that (1) duplicative state and federal regulation is economically inefficient and (2) constitutional history demonstrates the importance of the Supremacy Clause and federal preemption as part of the system of checks and balances in the United States federal system.  

n its decision issued on July 11, 2005, the Court of Appeals affirmed the district court, agreeing with Wachovia and NELF “that federal law preempts state regulation of a national bank operating subsidiary to the same extent that it preempts regulation of the parent national bank.”

Trying to Put Teeth Back Into the “Public Use” Requirement of the Fifth Amendment’s Eminent Domain Power 

The question before the Supreme Court in Kelo v. City of New London was whether New London acted constitutionally when it permitted a private development corporation to use eminent domain to condemn petitioners’ homes as part of a large-scale, largely private development.  New London asserted on the basis of vague projections that the development would increase jobs and tax revenues.  On this basis, New London had prevailed in the Connecticut Supreme Court.  In the U.S. Supreme Court, petitioners argued that New London’s taking of their homes for the purpose of private development violated the Fifth Amendment’s requirement that private property may only be taken for a “public use.” 

NELF filed an amicus brief supporting petitioners on behalf of itself and two New London citizens’ groups that had proposed alternative development plans which didn’t require destruction of petitioners’ homes.  NELF argued, first, that the taking was not for a “public use” under the Fifth Amendment, since the property was going to be privately developed, principally for private or undetermined uses.  NELF noted that the Supreme Court had only permitted the taking of property for private development under exigent circumstances not present in this case (such as the redevelopment of a blighted urban area that was a threat to public health and safety).  For these reasons NELF argued that the Fifth Amendment’s requirements were not satisfied and the development corporation could not take petitioners’ homes.   

In a 5-4 decision issued on June 23, 2005, the Supreme Court majority disagreed, holding that New London’s justification satisfied the “public use” requirement because it was part of a comprehensive economic development plan adopted by the city government to benefit the community as a whole, which the Supreme Court would not second-guess.  In so deciding, as Justice Kennedy states in his concurring opinion, the majority has established a rational basis test for “public use” under the Fifth Amendment:  if the taking is rationally related to a duly adopted plan for beneficial economic development, it will satisfy the Fifth Amendment.  Justice O’Connor’s vigorous dissent (joined by Justices Rehnquist, Scalia and Thomas) echoed each of NELF’s concerns in pointing out the errors of the majority’s approach, which in effect reads the “public use” requirement out of the Fifth Amendment.  She predicted (as did Justice Thomas in a separate dissent) that property owners without political influence (as in this case) or in economically disadvantaged communities would suffer most from the Court’s ruling, which arguably removes any constitutional obstacle to redevelopment of such areas so long as the government asserts a plausible common good.  A public outcry followed the Court’s ruling and NELF submitted a motion in support of Kelo’s petition for rehearing.  The Supreme Court denied the petition for rehearing, but adverse public reaction to the decision has resulted in proposals for legislative nullification in many jurisdictions on the state and local level.  Absent such measures, the Court’s decision means that small businesses and individuals will have a harder time challenging municipalities and developers that push for a free hand in remaking existing communities.  The focus of any future constitutional challenge to such activities will now be limited to the second requirement of the Fifth Amendment’s Takings Clause, whether the property owner has received “just compensation.”

Defending the Rights of the Owners of an Artificial Pond

This case raised the issue whether a property owner has the right to the exclusive use of a manmade pond situated entirely on its own land.  Ace Equipment Sales (“Ace Equipment”) and the Willington Fish and Game Club (“WFGC”) own the land under an artificially created pond, which WFGC maintains for the sole use of its members.  Ace Equipment moved to enjoin the Buccinos, the owners of land bordering the southwesterly shoreline of the pond who sought to use the pond for their own recreational business, and the Buccinos’ licensees, from entering upon the pond and using it for recreational purposes, such as fishing and boating.  The trial court in Connecticut allowed the Buccinos’ motion for summary judgment, ruling, inter alia, that they had riparian rights to use the pond for recreational purposes.  The Appellate Court affirmed and the matter was further appealed to the Connecticut Supreme Court.  

NELF filed an amicus brief  supporting the property owners. NELF argued that prior decisions by the Connecticut Supreme Court strongly supported a property owner’s right to enjoy the fruits of its labor under analogous circumstances and that enforcement of the right to exclude others from benefiting from an owner’s improvements (in this case, the pond) provides the necessary economic incentive for the productive use of private property.  NELF pointed out that, although this was a matter of first impression in Connecticut, the law is settled in the majority of jurisdictions that the owner of land under a manmade pond also owns the pond and has the right to exclude all others from the pond.  In addition, the United States Supreme Court has held, under analogous circumstances involving government use of private property, that the right to exclude others from a private pond is a protected property interest whose deprivation requires just compensation, especially where the property owner has invested considerable resources to improve his land.  

On April 5, 2005, the Connecticut Supreme Court agreed with NELF and the property owners, holding that the owners of subaqueous land have exclusive control over that portion of pond bed they own and the waters above it. 

Opposing Double Compensation under the Workers’ Compensation Act 

This case raised the issue whether the Connecticut Workers’ Compensation Act permits an employer to offset disability retirement payments against wage replacement benefits otherwise due an injured worker under the Act. Eileen Smedley suffered a back injury while employed by the State of Connecticut and received workers’ compensation benefits. In 1999, she retired with State Disability Retirement benefits. Smedley has been employed in private industry earning less than she earned in her former state job, and she is again seeking wage supplement benefits under the Act, which would, if these were awarded without regard to the amount that she is receiving in disability retirement benefits, result in Smedley receiving more income than she had as a state employee.  The Workers’ Compensation trial commissioner included Smedley’s disability retirement benefits in calculating her eligibility for workers’ compensation benefits, and concluded that she was ineligible for workers’ compensation benefits. The Workers’ Compensation Commission upheld that ruling, and Smedley appealed. 

The Connecticut Supreme Court took the appeal, and NELF filed a brief in support of the employer State of Connecticut on its own behalf, and on behalf of the Connecticut Business and Industries Association. In its brief, NELF argued that both the plain language of the Act and case law prohibit double compensation. NELF also argued that there is compelling public policy in favor of preserving the continued financial viability of the workers’ compensation system by avoiding duplicate benefits and excessive compensation. The system is supported by the mandatory contributions of employers, and excessive payouts ultimately have one of two impacts: they force a reduction of wages and benefits available to workers generally, or they increase the cost to employers. If the employer is the state, the result can be tax increases, program cuts, or both.  In its decision, the Connecticut Supreme Court decided against NELF’s position and for Smedley, based entirely on the specific statutory provisions of the State Employees Retirement Act.  Somewhat troubling is dictum in a companion case dealing with the same issue, Starks v. University of Connecticut, 270 Conn. 1, 850 A.2d 1013 (2004), that state disability retirement benefits may be analogous to Social Security or private disability insurance payments.  

Nevertheless, the Connecticut court took NELF’s concern about double dipping seriously. Despite statutory authorization, the state retirement board had not deducted workers’ compensation benefits from retirement benefits because of administrative convenience.  The court held that where the statute explicitly authorized a deduction from retirement benefits to offset workers’ compensation, and not vice versa, the administrative agencies must handle the offset according to the statutory mandate and not based on administrative convenience.

Challenging the Standing of Indirect Purchasers to Recover for Antitrust Violations under the Connecticut Unfair Trade Practices Act

In a similar Connecticut case the plaintiff Vacco, an end purchaser of a computer loaded with Microsoft software, brought claims under the Connecticut Antitrust Act and the Connecticut Unfair Trade Practices Act ("CUTPA"). The trial court ruled that Vacco was an indirect purchaser and held that the Connecticut Antitrust Act incorporated the United States Supreme Court's Illinois Brick prohibition against suits by indirect purchasers. The trial court also dismissed the CUTPA claim, ruling that to permit the CUTPA claim to proceed "would be contrary to Supreme Court authority . . . and would undermine the Supreme Court's policy choices in its interpretation of federal antitrust law, which this court is directed to follow."  

NELF, the Connecticut Business and Industry Association and the Association for Competitive Technology joined in an amicus brief supporting Microsoft's position.  The Connecticut Supreme Court upheld the lower court decision, holding that Vacco’s claimed injuries were too indirect with respect to Microsoft’s allegedly anticompetetive conduct for Vacco to recover under CUPTA.

Preserving the Viability of forum non conveniens

NELF successfully supported the doctrine of forum non conveniens in Connecticut. The issue arose out of a product liability action brought on behalf of sixteen residents of Australia and the administrators of the estates of thirteen deceased residents of Australia stemming from a mid-air collision in Australia of two helicopters owned and operated by the Australian army. Following the accident, a military Board of Inquiry (BOI) conducted an extensive investigation during which it took evidence from 144 witnesses and accepted 215 exhibits. The BOI expressly found that “no aircraft maintenance or engineering factor contributed to this accident.” The plaintiffs, however, alleged in Connecticut superior court that defects in night vision goggles and Blackhawk helicopters caused the collision. The defendants moved to dismiss for forum non conveniens. The trial court denied these motions despite finding that Australia is an adequate forum and that the public interest favors Australia as a forum over Connecticut. 

On behalf of itself and the Connecticut Business and Industry Association, NELF submitted an amicus brief to the Connecticut Supreme Court arguing that if the doctrine of forum non conveniens is not available to foreign plaintiffs, who can satisfy minimal jurisdictional requirements and whose claims would otherwise be dismissed from federal and the vast majority of state courts, would be encouraged to bring their claims in Connecticut at great cost to companies doing business there and the Connecticut judiciary. Connecticut corporations would have been unjustly hindered in their ability to defend such cases if they had to rely upon videotaped depositions, were prevented from providing live witnesses, and were denied the ability to implead third parties. The Connecticut Supreme Court reversed the trial court decision and remanded the case to the trial court to dismiss on the ground of forum non conveniens.

Fighting Regulatory Takings

In 1991, Santini’s fully permitted, ongoing residential development was designated as one of three potential sites in Connecticut for a hazardous waste facility. Not surprisingly, during the time it was so designated, Santini was not able to sell a single home or lot in his development. Indeed, because he was unable to sell any property, he was unable to continue the project. After the designation was rescinded, Santini sought just compensation for a temporary regulatory taking. The Superior Court ruled that there had been no taking because the designation was "mere planning" by the government. The Connecticut Supreme Court affirmed. Santini petitioned the U.S. Supreme Court to review that decision. NELF filed an amicus brief in its own name, urging the Court to take the case and reject the exclusion of "mere planning" from Fifth Amendment scrutiny. The Court denied the petition.