Appendix — Chartschlaa v. Nationwide Mutual Insurance

Supreme Court US.

A (1)... 08-933 JAN 13 2009

RK

IN THE

Supreme Court of the Anited States

PETER CHARTSCHLAA and ANGELA SAWICKI KING, as

personal representatives of ALEX CHARTS, deceased, doing

business as Alex Charts Agency, Inc. and Charts

Insurance Associates, Inc.

Petitioners

Vv.

NATIONWIDE MUTUAL INSURANCE COMPANY, NATIONWIDE

MUTUAL FIRE INSURANCE COMPANY, NATIONWIDE LIFE

INSURANCE COMPANY, NATIONWIDE PROPERTY AND

CASUALTY COMPANY, NATIONWIDE VARIABLE LIFE

INSURANCE COMPANY AND COLONIAL INSURANCE COMPANY

OF CALIFORNIA

Respondents

On Petition for Writ of Certiorari

To The United States Court of Appeals for the Second

Circuit

APPENDIX

RAYMOND A. GARCIA, ESQ.

Counsel of Record

JANE I. MILAS, ESQ.

NICOLE LIGUORI MICKLICH, ESQ.

MICHAEL V. PEPE, ESQ.

GARCIA & MILAS, P.C.

44 TRUMBULL STREET

New HAVEN, CT 06510

(203) 773-3824

Jan. 13, 2009

erm ee ee oe —

Chartschlaa v. Nationwide Mut. Ins. Co., 538 F.3d

116 (2d Cir. 2008) (“Charts VI’)

United States Court of Appeals,

Second Circuit.

Peter CHARTSCHLAA and Angela Sawicki King as

personal representatives of Alex Charts, deceased, doing

business as Alex Charts Agency Inc. and Charts Insurance

Associates, Inc.,! Plaintiffs-Appellees-Cross-Appellants,

Vv.

NATIONWIDE MUTUAL INSURANCE COMPANY,

Nationwide Mutual Fire Insurance Company, Nationwide

Life Insurance Co., Nationwide Property and Casualty

Company, Nationwide Variable Life Insurance Company

and Colonial Insurance Company of California,

Defendants-Appellants-Cross-Appellees,

Helena Charts and Christopher L. Garcia, Plaintiffs.

Docket Nos. 05-5988-cv(1.), 05-6603-cv(xap).

Argued: Oct. 23, 2006.

Decided: Aug. 14, 2008.

Before: WINTER, McLAUGHLIN, and STRAUB, Circuit

Judges.

PER CURIAM:

Defendants-Appellants-Cross-Appellees Nationwide

1 Alex Charts died during the pendency of these proceedings, and by

order of this Court filed June 26, 2008, Peter Chartschlaa and Angela

Sawicki King were substituted as parties pursuant to Federal Rule of

Appellate Procedure 43(a)(1).

2

Mutual Insurance Company, Nationwide Mutual Fire

Insurance Company, Nationwide Life Insurance Company,

Nationwide Property and Casualty Company, Nationwide

Variable Life Insurance Company, and Colonial Insurance

Company of California (collectively, “Nationwide”), appeal

from a judgment entered by the United States District

Court for the District of Connecticut (Droney, J.) upon a

jury verdict in favor of Plaintiffs-Appellees-Cross-

Appellants Alex Charts and Charts Insurance Associates,

Inc. (““CIAI”). Charts and CIAI cross-appeal the district

court's denial of their motion for prejudgment interest and

grant of Nationwide's motion for judgment as a matter of

law on one of their claims.

Charts and CIAI, former sellers of Nationwide insurance

policies, sued on several claims arising out of Nationwide's

termination of their relationship. For the reasons that

follow, we hold that those claims belong to the bankruptcy

estate of Alex Charts and not to either of the plaintiffs.

Accordingly, we reverse the judgment of the district court

and direct that judgment be entered in favor of

Nationwide.

BACKGROUND

We assume familiarity with the district court's and our

prior decisions in this case. See Charts v. Nationwide

Mut. Ins. Co., 16 Fed.Appx. 44 (2d Cir.2001) (“ Charts I ”;)

Charts v. Nationwide Mut. Ins. Co., 300 B.R. 552

(D.Conn.2003) (“ Charts II”); Charts v. Nationwide Mut.

Ins. Co., 397 F.Supp.2d 357 (D.Conn.2005) (“ Charts IIT ”).

We recount here only those facts necessary for resolution

of this appeal.

Since at least 1979, Alex Charts has been in the business

of selling Nationwide insurance. He started as an

3

individual agent with an individual agent's agreement. In

1986, Charts entered into a new agency agreement (the

“Corporate Agency Agreement”) with Nationwide through

a corporation called Alex Charts Agency, *120 Inc. (the

“Old Agency”), of which Charts was the sole shareholder.

In October 1992, Charts formed CIAI as a new corporate

entity for his insurance business. That month, the officers

and directors of CIAI, including Charts, held an

organizational meeting. Charts prepared the incorporation

papers for CIAI, but delayed filing them.

In December 1992, Charts and his wife filed a Chapter 7

bankruptcy petition in the United States Bankruptcy

Court for the District of Connecticut. As required in a

Chapter 7 bankruptcy proceeding, Charts filed various

schedules of assets and liabilities. See1l U.S.C. § 521.

Charts listed the Old Agency as the name of his insurance

business. He did not list his interest in CIAI as an asset of

his estate.

In January 1993, Charts formally filed the certificate of

organization for CIAI with the Connecticut Secretary of

State.

In May 1993, while still in bankruptcy proceedings, Charts

executed a new agency agreement with Nationwide on

behalf of CIAI (the “CIAI Agreement”). The CIAI

Agreement, which had an effective date retroactive to

January 1, 1980, allowed CIAI to market and service

Nationwide insurance contracts as Charts had done in the

past individually and through the Old Agency.

In 1995, Nationwide launched an internal investigation

into potential misconduct by its Connecticut agents.

During that investigation, several agents alleged that

Charts engaged in prohibited business practices.

In January 1996, Nationwide terminated the CIAI

Agreement.

In February 1996, Charts obtained an order of discharge in

his bankruptcy proceedings, and the bankruptcy court

closed the case.

In August 1997, Charts and CIAI sued Nationwide in the

United States District Court for the District of Connecticut

(Droney, J.). The plaintiffs alleged that Nationwide

terminated the CIAI Agreement because of Charts's age

and in retaliation for Charts's own reporting of misconduct

by Nationwide employees to Nationwide management. The

plaintiffs contended that these actions violated the

covenant of good faith and fair dealing implied in the CIAI

Agreement as well as Connecticut statutory law.

Nationwide moved for summary judgment on the ground

that the CIAI Agreement and any cause of action based on

that contract were part of the bankruptcy estate.

In August 2000, a Magistrate Judge (Garfinkel, M.-J.)

recommended that the district court grant Nationwide's

motion, finding that Charts's claims belonged to the

bankruptcy estate and that his failure to disclose the

existence of CIAI in the bankruptcy case was “clearly not

inadvertent.” In September 2000, the district court

adopted this recommendation. Charts appealed that

judgment to this Court, and we vacated the judgment,

without reaching the merits, on the ground that the estate

should have been joined as a party to the suit. Charts J, 16

Fed. Ay ox. at 44.

On remand, the district court reopened the bankruptcy

case for the purpose of appointing a trustee to represent

the estate's interests in this litigation. Nationwide

5

thereafter renewed its motion for summary judgment,

iterating its position that the claims belonged to the

bankruptcy estate. The trustee then entered an

appearance and expressed his intent to abandon the

claims against Nationwide under 11 U.S.C. § 554(a) by

filing a notice of proposed abandonment. Nationwide

objected to the proposed abandonment.

*121 At a December 2002 hearing, the trustee informed

the district court that he had entered negotiations to sell

the claims to Nationwide, and soon planned to file a

proposed notice of sale of the claims. On that basis, the

trustee requested that the court take no action with

respect to the proposed abandonment.

In September 2003, the district court denied Nationwide's

renewed motion for summary judgment, reversing its

earlier position. This time, the district court held that

Charts owned the disputed claims after all, because the

claims arose after the bankruptcy fiiig and such “post-

petition” claims generally do not belong to the estate.

Charts II, 300 B.R. at 556-58. In its ruling, the district

court noted its understanding that the trustee had sold,

rather than abandoned, whatever interest it held in the

claims. Id. at 556 n. 5. Thus, the court observed, “if the

Court were to hold that these claims were property of the

estate, ... Charts would not have standing to assert them

because any claim owned by the estate is now held by

Nationwide.” Jd. In fact, however, the proposed sale of

the claims to Nationwide was never finalized.

The case proceeded to a jury trial. At trial, Charts testified

that CIAI was simply the new name and corporate identity

of the very same insurance business he had previously

operated through the Old Agency:

6

Q: So that business from Alex Charts Agency, Inc., the

Nationwide policies for which that company was receiving

commissions, that was all rolled over to the new company?

A: Everything stayed the samce....

Q@: When you say everything stayed the same, am I

characterizing this fairly by essentially saying-and tell me

if I'm wrong-that all of the business that you had been

doing as Alex Charts Agency, Inc. for which you were

receiving ongoing commissions, that ... was simply moved

over to the new company, Charts Insurance Associates,

Inc.?

A: Yes.

Q. Did you have employees of Alex Charts Agency, Inc.?

A. Yes.

Q. Did all of those incividuals who were employees of Alex

Charts Agency, Inc. at the time you wound down that

business, that corporation, become employees of Charts

Insurance Associat¢ s, Inc.?

A. Yes.

The jury returned a verdict for Charts on all counts,

awarding $2.3 million in « «mages.

Nationwide filed a post-verdict motion for judgment as a

matter of law. The plaintiffs moved for prejudgment

interest and for attorneys’ fees. The district court denied

Nationwide's motion except as to the plaintiffs’ claim for

7

breach of the implied covenant of good faith and fair

dealing; denied the plaintiffs' motion for prejudgment

interest; and awarded the plaintiffs $750,000 in attorneys'

fees. Charts III, 397 F.Supp.2d at 370, 372, 374, 385-86.

On appeal, Nationwide continues to press its argument

that the claims belong to Charts's bankruptcy estate, and

not to the plaintiffs. We agree. Because ownership of the

claims is a threshold issue, we need not reach the

numerous other arguments raised in the appeal and cross-

appeal.

DISCUSSION

This Court reviews de novo a district court's resolution of a

motion for *122 judgment as a matter of law under Federal

Rule of Civil Procedure 50(b), applying the same standard

that the district court was required to apply. Diesel v.

Town of Lewisboro, 232 F.3d 92, 103 (2d Cir.2000). Thus,

we “consider the evidence in tl e light most favorable to the

non-moving party and give that party the benefit of all

reasonable inferences from the evidence that the jury

might have drawn in that party's favor.” Jd. Whether a

cause of action belongs to a bankruptcy estate is a question

of Jaw, which we review de novo. See In re Swift, 129 F.3d

792, 795 (5th Cir.1997).

Our analysis begins with 11 U.S.C. § 541(a)(1), which

defines the »ankruptcy estate as including “all legal or

- equitable interests of the debtor in property as of the

commencement of the case.” “It would be hard to imagine

language that would be more encompassing” than this

broad definition. 4 Collier on Bankruptcy J 541.01 (15th

ed.2001). “[E]very conceivable interest of the debtor,

future, nonpossessory, contingent, speculative, and

derivative, is within the reach of § 541.” Jn re Yonikus,

8

996 F.2d 866, 869 (7th Cir.1993). Contractual rights

clearly fall within the reach of this section, see, e.g., Cohen

v. Drexel Burnham Lambert Group, Inc. (In re Drexel

Burnham Lambert Group, Inc.), 138 B.R. 687, 701

(Bankr.S.D.N.Y.1992), as do causes of action owned by the

debtor or arising from property of the estate, see Seward

v. Devine, 888 F.2d 957, 963 (2d Cir.1989)

Given the wide scope of § 541, the debtor's obligation to

disclose all his interests at the commencement of a case is

equally broad. Seell U.S.C. § 521(a)(1)(B)(i), (iii)

(requiring debtor to “file ... a schedule of assets and

liabilities ... and a statement of the debtor's financial

affairs”). Because full disclosure by debtors is essential to

the proper functioning of the bankruptcy system, the

Bankruptcy Code severely penalizes debtors who fail to

disclose assets: While properly scheduled estate property

that has not been administered by the trustee normally

returns to the debtor when the bankruptcy court closes the

case, undisclosed assets automatically remain property of

the estate after the case is closed. Seell U.S.C. § 554(c),

(d); Collier, supra, 9 554.03. “A debtor may not conceal

assets and then, upon termination of the bankruptcy case,

utilize the assets for [his] own benefit.” Kunica v. St.

Jean Fin., Inc., 233 B.R. 46, 53 (S.D.N.Y.1999).

Because assets within the estate are those that exist “as of

the commencement of the case,"11 U.S.C. § 541(a),

property acquired by the debtor after the filing of a

bankruptcy petition generally does not become part of the

estate. Benjamin Weintraub & Alan N._ Resnick,

Bankruptcy Law Manual § 5:6 (5th ed.2008). However,

“la]fter-acquired” property wil] vest in the estate if it is

derived from property that was part of the estate as of the

commencement of the bankruptcy. Seell U.S.C. §

541(a)(6) (making “[p]roceeds, product(s], offspring, rents

9

or profits of or from property of estate” part of bankruptcy

estate). Post-petition property will become property of the

estate only if it is “sufficiently rooted in the pre-

bankruptcy past.” Segal v. Rochelle, 382 U.S. 375, 380,

86 S.Ct. 511, 15 L.Ed.2d 428 (1966) (interpreting

Bankruptcy Act of 1898).

The plaintiffs argue that Charts had no duty to disclose

the existence of CIAI because it was not formally

incorporated until after the date of the bankruptcy

petition, and therefore is not part of the bankruptcy estate.

We disagree. Charts readily admitted in deposition

testimony that CIAI was formed in October 1992, *123

prior to filing his bankruptcy petition. Charts also

conceded that CIAI was incorporated simply to change the

name of his preexisting insurance business, and that this

change occurred in October 1992, when CIAI was

organized. The Bankruptcy Code is premised on full and

complete disclosure of the debtor's finances. A debtor who

“elects to avail himself of the benefits of the federal

bankruptcy laws by the filing of a petition ... can no longer

expect to have any financial secrets.” In re Trout, 108

B.R. 235, 238 (Bankr.D.N.D.1989). The existence of CIAI-

the formal incorporation of which Charts delayed until

soon after filing for bankruptcy and which was intended as

simply a renamed successor to Charts's Old Agency-should

have been disclosed to the bankruptcy trustee.2 And

2 When he filed for bankruptcy, Charts listed the Old Agency as an

exemption under 11 U.S.C. § 522(d)(5), valuing the business at a mere

$1. That provision allows debtors to exempt from the bankruptcy

estate up to $11,200 in estate property. 11 U.S.C. § 522(d)(5). The

plaintiffs have not argued that CIAI was subject to this exemption or

that the CIAI Agreement is not a product of the bankruptcy estate by

virtue of the exemption. In a dispute that has entered its second

decade, we will not take up this argument for them. See Norton v.

San's Club, 145 F.3d 114, 117 (2d Cir.1998) (issues not sufficiently

argued considered waived).

10

because CIAI's existence was not disclosed, it remains part

of the bankruptcy estate. See Kunica, 233 B.R. at 53.

Further, the CIAI Agreement is also an asset of the

bankruptcy estate, even though it was not signed until

May 1993. During his deposition, Charts conceded that

Nationwide issued a new contract to CIAI at his request

because of the change of his business's name. Even more

telling, the CIAI Agreement had a retroactive effective

date of January 1, 1980-the approximate date that Charts

began doing business with Nationwide. The parties thus

perceived the CIAI Agreement as merely a continuation of

their longstanding business relationship. See Weintraub

& Resnick, supra, § 5:6 n. 1 (“It is important to

distinguish between property that is acquired after the

case is commenced and property that merely changes in

form.”). Accordingly, tiie CIAI Agreement is deeply rooted

in the pre-bankruptcy past, and should be considered part

of the bankruptcy estate.

Because the claims asserted by the plaintiffs arose from

CIAI and the CIAI Agreement, they are also property of

the bankruptcy estate, and those claims may not be

brought by the plaintiffs.

Finally, we reject the plaintiffs’ argument that the rights

in Charts's insurance business were abandoned to Charts

after the trustee filed and served on creditors a notice of

proposed abandonment of the claims. Abandonment is not

a process to be taken lightly. Once an asset is abandoned,

it is removed from the bankruptcy estate, and this removal

is irrevocable except in very limited circumstances. See

Catalono v. Comm'r, 279 F.3d 682, 686 (9th Cir.2002). In

light of the impact of abandonment on the rights of

creditors, a trustee's intent to abandon an asset must be

clear and unequivocal. See In_re Sire Plan, Inc., 100 B.R.

11

690, 693 (Bankr.S.D.N.Y.1989).

Here, the trustee informed the district court that it

intended to sell the claims to Nationwide. This

representation was inconsistent with the _ trustee's

previously evinced intent to abandon the property to

Charts. Indeed, the trustee specifically requested that the

court take no action on the abandonment issue while the

negotiations were pending. Although the sale was never

consummated, there is no indication*124 that the trustee

ever renewed its request to abandon the claims. Under

these circumstances, the trustee's intent to abandon the

claims was ambiguous. Absent an unambiguous intent to

abandon estate property, the proposed abandonment is not

effective.

CONCLUSION

For the foregoing reasons, the judgment of the district

court is REVERSED. We direct the district court to enter

judgment for Nationwide.

12

Charts v. Nationswide Mut. Ins. Co., 397 F. Supp. 2d

357 (D. Conn. 2005) (“Charts IIT”)

United States District Court,

D. Connecticut.

Alex CHARTS and Charts Insurance Assuciates, Inc.

Plaintiffs,

V.

NATIONWIDE MUTUAL INSURANCE CO., et al.

Defendants

No. Civ.A. 397CV1621CFD.

Oct. 25, 2005.

DRONEY, District Judge.

The plaintiffs, Charts Insurance Associates, Inc. (“CIAI”)

and Alex Charts (collectively “Charts”), brought this three-

count action against Nativnwide,! alleging violations of the

Connecticut Franchise Act (“the Franchise Act”), Conn.

Gen. Stat. § 42-133e et seqg., the Connecticut Unfair *362

Trade Practices Act (““CUTPA”), Conn. Gen.Stat. § 42-110a

et seq., and the implied covenant of good faith and fair

dealing. Following a nine-day trial, the jury returned a

verdict in favor of Charts on all three counts and awarded

damages of $2,300,000. Judgment was entered on

December 13, 2004. Pending are three post-trial motions:

(1) Nationwide's motion for judgment as a matter of law on

all three counts pursuant to Fed.R.Civ.P. 50, or, in the

alternative, for a new trial pursuant to Fed.R.Civ.P. 59; (2)

Charts' motion for attorney's fees; and (3) Charts’ motion

for prejudgment interest. For the following reasons,

' The defendants are Nationwide Mutual Insurance Company,

Nationwide Mutual Fire Insurance Company, Nationwide Life

Insurance Company, Nationwide Property and Casualty Insurance

Company, Nationwide Variable Life Insurance Company, and Colonial

Insurance Company of California. They will be referred to collectively

as “Nationwide.”

13

Nationwide's motion is granted in part and denied in part.

Charts' motion for prejudgment interest is denied, and

Charts’ motion for attorney's fees is granted, as modified

by the Court.

The procedural background of this case has been recounted

in prior rulings. See Alex Charts and Charts Ins. Assoc.,

Inc. v. Nationwide Mutual Ins. Co., 16 Fed.Appx. 44 (2d

Cir.2001); Charts _v. Nationwide Mut. Ins. Co., 300 B.R.

552, 553 (2003). In order to frame the discussion of the

parties’ post-trial motions, however, the Court sets forth

the following hmited background: Charts brought this

action against Nationwide on August 11, 1997, claiming

various violations of Connecticut law arising from

Nationwide's termination of Charts' insurance agency.

After three years of contested motion practice, Magistrate

Judge William I. Garfinkel issued a recommended ruling

granting Nationwide's motion for summary judgment on

the ground that, inter alia, Charts' claims against

Nationwide were part of the bankruptcy estate of Alex and

Helena Charts, and as such could not be asserted here by

Alex Charts and CIAI.? On September 29, 2000, this Court

approved the recommended ruling on that ground, over

Charts’ objection, and judgment entered for Nationwide.

The Second Circuit, without addressing the merits of this

Court's ruling, remanded to the District Court, concluding

that the bankruptcy trustee was a necessary party in

making a determination as to standing. On remand,

2“On December 14, 1992, Alex Charts and his wife Helena filed their

voluntary petition under Chapter 7 of the Bankruptcy Code with the

United States Bankruptcy Court for the District of Connecticut. On

February 13, 1996, the Bankruptcy Court issued an Order of

Discharge of Debtor, and the bankruptcy case was closed on March 1,

1996.” Charts v. Nationwide Mut. Ins. Co., 300 B.R. 552, 553 (2003).

3 Judge Garfinkel also recommended that the action be dismissed on

the basis of judicial estoppel, but that ground was not adopted by the

District Court.

14

therefore, this Court vacated its prior ruling and the action

was consolidated with the bankruptcy action. Nationwide

then filed a new motion for summary judgment, essentially

relying on the same arguments presented in its first

motion. On September 30, 2003, after reconsidering the

parties’ arguments, and hearing from the trustee of

Charts' bankruptcy, the Court denied Nationwide's motion

for summary judgment, finding that the claims were not

property of the bankruptcy estate and Charts and CIAI

had standing to assert them in this_ case.

On November 29, 2004, the case proceeded to trial. At the

conclusion of Charts’ case-in-chief, Nationwide made an

oral motion for judgment as a matter of law pursuant to

Rule 50. The Court denied that motion without prejudice

to Nationwide renewing it at the conclusion of all the

evidence. Nationwide made a second motion for judgment

as a matter of law at the conclusion of all the evidence.

The Court reserved judgment until after the jury had

reached its verdict. On December*363 10, 2004, the jury

returned its verdict in favor of Charts on all three counts.

On December 13, 2004, the Court entered judgment in

accordance with the jury's verdict. On December 23, 2004,

Nationwide renewed its request for judgment as a matter

of law or a new trial by filing a motion with this Court.

Both parties subsequently submitted numerous

memoranda of law in response to Nationwide's motion.

On January 12, 2005, Charts filed a motion for attorney's

fees and a motion for prejudgment interest. Those motions

also have been fully briefed by the parties. The Court

heard arguments on all pos*-trial motions on July 20,

2005.4

4 Nationwide filed its post-verdict motion for a judgment as a matter of

law or, in the alternative, for a new trial, within the ten-day hmitation

set forth in Fed.R.Civ.P. 50(b). At that time, however, the transcript of

NATIONWIDE'S MOTION FOR JUDGMENT AS A

MATTER OF LAW, OR, IN THE ALTERNATIVE, FOR

A NEW TRIAL

Nationwide's post-verdict motion seeks judgment as a

matter of law as to all counts pursuant to Rule 50, or, in

the alternative, a new trial on all counts and/or damages

pursuant to Rule 59. The Court turns to the motion for

judgment as a matter of law firs’

I Motion for Judgment as a Matter of Law

A) Standard of Review

“If, for any reason, the court does not grant a motion for

judgment as a matter of law made at the close of all the

evidence, the court is considered to have submitted the

action to the jury subject to the court's later deciding the

legal questions raised by the motion. The movant may

renew its request for judgment as a matter of law by filing

a motion no later than 10 days after entry of judgment....”

Fed.R.Civ.P. 50(b). When ruling on such a post-verdict

motion for judgment as a matter of law, a district court

may allow the judgment to stand, order a new trial or

direct entry of judgment as a matter of law. /d.

A Court may properly grant a post-verdict Rule 50 motion

when “there can be but one conclusion as to the verdict

that reasonable men could have reached.” Merrill Lynch

Interfunding, Inc. v. Argenti, 155 F.3d 113, 120 (2d

Cir.1998) (quoting Samuels v. Air Transport Local 504,

992 F.2d 12, 14 (2d Cir.1993)). In other words, “a Rule 50

motion for judgment as a matter of law must be granted

this trial had not been completed. Consequently, the Court allowed the

parties additional time beyond the date when the transcript was

completed to file their memoranda.

16

where ‘(1) there is such a complete absence of evidence

supporting the verdict that the jury's findings could only

have been the result of sheer surmise and conjecture, or (2)

there is such an overwhelming amount of evidence in favor

of the movant that reasonable and fair minded men could

not arrive at a verdict against him.’ ” Hernandez v. Keane,

341 F.3d 137, 143-44 (2d Cir.2003) (quoting Newmont

Mines Ltd. v. Hanover Ins. Co., 784 F.2d 127, 132 (2d

Cir.1986)). In making such a determination, a court “must

view the evidence in a light most favorable to the

nonmovant and grant that party every reasonable

inference that the jury might have drawn in its favor.”

Samuels, 992 F.2d at 16. A court “cannot assess the weight

of conflicting evidence, pass on the credibility of the

witnesses, or substitute its judgment for that of the jury.”

Id. (quoting Mattivi_v. South African Marine Corp., 618

F.2d 163, 168 (2d Cir.1980)). Instead, a court “must defer

to the credibility assessments *364 that may have been

made by the jury and the reasonable factual inferences

that may have been drawn by the jury.” Williams uv.

County of Westchester, 171 F.3d 98, 101 (2d Cir.1999).

In considering the forgoing principles of law, it has been

noted that the moving party bears a “heavy burden” on a

post-verdict Rule 50 motion. Concerned Area Residents for

the Enu't v. Southview Farm, 34 F.3d 114, 117 (d

Cir.1994); Matthews v. Armitage, 36 F.Supp.2d 121, 124

(N.D.N.Y.1999); see also Holt v. Home Depot, U.S.A. Inc.,

2004 WL 178604 ‘D.Conn. Jan.22, 2004) (finding that the

“stringent standards that apply to” a post-verdict Rule 50

motion were not met). Moreover, “[blecause a judgment as

a matter of law intrudes upon the rightful province of the

jury, it is highly disfavored.” Sabir vu. Jowett, 214

F.Supp.2d 226, 236 (D.Conn.2002) (quotations and

citations omitted).

17

Nationwide's renewed motion for judgment as a matter of

law challenges the jury's verdict on each count separately.

Each argument will be addressed in turn.®

B) Connecticut Franchise Act

[3] The jury found that Nationwide violated the

Franchise Act when it terminated its contracts with

Charts and CIAI, and Nationwide now challenges this

finding on several grounds.

5 Nationwide does make one argument directed at all three counts,

however: renewing the argument that it presented in its summary

judgment papers, Nationwide's post-verdict Rule 50 motion argues

that it is entitled to judgment as a matter of law on all three counts on

the ground that Charts lacked standing because the claims were part

of the bankruptcy estate. The Court rejected that argument when

ruling on Nationwide's second motion for summary judgment. The

Court need not revisit that decision at this time, however, because

Nationwide failed to make this argument in its original pre-verdict

Rule 50 motion for judgment = 1 matter of law. As the Second Circuit

recently has noted, a party may only “renew” an earlier “request for

judgment as a matter of law” in a post-verdict Rule 50 motion.

Broadnax v. City of New Haven, 415 F.3d 265, 268 (2d Cir.2005); see

also See Fed.R.Civ.P. 50 advisory committee's note (re 1991

Amendment, Subdivision (b)) (“A post-trial motion for judgment can be

granted only on grounds advanced in the pre-verdict motion”); Rand-

Whitney Containerboard Ltd. Partnership v. Town of Montville, 289

F.Supp.2d 62, 67 (D.Conn.2003) (A post-verdict Rule 50 motion

“cannot assert new grounds; the rules limit the grounds for post-

verdict judgment as a matter of law to those ‘specifically raised’ in the

pre-verdict motion”)(quoting Lambert v. Genesee Hosp., 10 F.3d 46, 53-

54 (2d Cir.1993)).The Second Circuit has indicated, however, “a [post-

verdict] Rule 50(b) motion should not be granted [on a ground not

raised previously] unless it is required to prevent manifest injustice.”

Broadnax, 415 F.3d at 268 (quotations omitted). Nationwide has not

responded to Charts' argument that this issue was not properly raised

in the pre-verdict Rule 50 motion, much less argued that the Court

should address it to prevent a “manifest injustice.” In any event, the

Court finds that such a result will not occur, as the evidence at trial

did not alter the Court's prior conclusion on the standing issue.

18

i) Jury Issue

Nationwide first claims that the Franchise Act claim

should not have gone to the jury. The Court rejects this

argument for several reasons. First, and most important, it

was not raised in the pre-verdict Rule 50 motion. See

Rand-Whitney _Containerboard Ltd. Partnership, 289

F.Supp.2d at 67; see also footnote 5 of this ruling. Second,

although Charts' complaint and jury demand was filed

August 11, 1997, at no subsequent time did Nationwide

object to the submission of the Franchise Act claim to the

jury.® See *365 Fed.R.Civ.P. 39(a)(2) (allowing for a party

to object to a jury demand). Indeed, although Nationwide

made several objections to the Court's proposed

instructions on the Franchise Act count at the charging

conference, none addressed the underlying question of

whether the Franchise Act claim should be submitted to

the jury. Only now, after the matter already has been

submitted to the jury and a plaintiffs' verdict returned,

Nationwide raises its objection. The Court finds that such

an objection has been waived.? Compare Thompson _v.

Parkes, 963 F.2d 885 (6th Cir.1992) (finding that the

district court improperly found that the claims were

equitable and took them from the jury one week after the

jury had returned its verdict) with Merex A.G. v. Fairchild

Weston Sys., Inc., 29 F.3d 821, 822 (2d Cir.1994) (finding

that the district court properly took an equitable claim

from the jury at the close of evidence, before the case was

6 Because the jury demand did not specify which counts should be

submitted to the jury, Charts was “deemed to have demanded trial by

jury for all the issues so triable.” Fed. R.Civ.P. 38(c).

? Nationwide also requests that the Court certify this question to the

Connecticut Supreme Court. This request is also rejected as untimely,

as this is the first time that Nationwide has made such a requcst.

19

given to the jury).8

Prior decisions from the Connecticut Supreme Court and

the United States Court of Appeals for the Second Circuit

buttress this conclusion. In Associated Investment Co. Ltd.

Partnership v. Williams Associates IV, 230 Conn. 148, 162,

645 A.2d 505 (1994), the Connecticut Supreme Court held

that plaintiffs were not entitled to a jury trial on CUTPA

claims.’ In a subsequently issued decision, however, that

Court stated: “A party who wishes CUTPA issues to be

tried to the court, therefore, need only move to strike such

a case from the jury list. Jf the parties fail to take such

action, however, CUTPA issues may be tried to the jury.”

Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 490 n.

13, 656 A.2d 1009 (1995) (emphasis added).

The Second Circuit recently addressed a similar issue,

which was also an issue of first impression in this circuit,

namely “whether, where one party requests a jury trial on

the lost wages issue [under Title VII] and the party's

opponents fail to object, the court is permitted, because the

8 In addition, the Court notes that the pretrial order indicated that

this case would be a jury trial, and that the jury would be comprised of

nine jurors. At no time did Nationwide object to the pretrial order, or

otherwise seek clarification that the Franchise Act claim would not be

submitted to the jury. See Fed.R.Civ.P. 16(e) (“[a pretrial order] shall

control the subsequent course of the action unless modified by a

subsequent order”); Cross & Cross Properties, Ltd. v. Everett Allied

Co., 886 F.2d 497, 503 (2d Cir.1989) (noting that, although “total

inflexibility is undesirable,” a “pretrial order[ } should not be changed

lightly”) (quoting Fed.R.Civ.P. 16(e) advisory committee notes and

Clark v. Pennsylvania R.R. Co., 328 F.2d 591, 594-95 (2d Cir.1964)).

9 The Connecticut legislature subsequently amended CUTPA to

provide a right to jury trial in such actions. See Conn. Gen.Stat. § 42-

110g (“In any action brought by a person under this section there shall

be a right to a jury trial....”); Lorenzetti v. Jolles, 120 F.Supp.2d 181,

187 _(1D.Conn.2000) (noting the legislature's response to Williams

Associates IV ).

20

opponents may be deemed to have consented, to submit

the issue for a non-advisory jury determination.”

Broadnax, 415 F.3d at 271. The Second Circuit, adopting

the positions taken by the Fifth and Seventh Circuits, held

that “that when a party demands jury consideration of lost

wages under Title VII and the party's opponent fails to

object, Rule 39(c) permits the district court to submit the

lost wages issue for a non-advisory jury determination.” Jd.

at 272. The Second Circuit *366 concluded that the district

court's submission of the issue of lost wages to the jury

was not reversible error because “the [defendant] failed to

object to sending the lost wages issue to the jury, despite

[plaintiff's including in her Complaint the statement that

‘[t]he plaintiff claims trial by jury of the issues in this

case.’ ” Id.

Although the Court believes that Nationwide has waived

its objection to the submission of the Franchise Act claim

to the jury, it nevertheless bears noting that there is no

decision from the Connecticut appellate courts addressing

the question of whether a Franchise Act claim may be

submitted to a jury, or holding that a Frauachise Act claim

was improperly submitted to a jury. There are, however,

conflicting trial court decisions on this issue. One judge on

the Connecticut Superior Court has found that a plaintiff

does not have a right to a jury trial on a Franchise Act

claim. Hartford Electric Supply Co. v. Allen-Bradley Co.,

Inc., 28 Conn. L.. Rptr. 447, 2000 WL _ 1918005

(Conn.Super.Ct., Dec.18, 2000) (“[n]o Connecticut cases

have accorded a right to trial by jury in a [Franchise Act]

case”). A judge in this District, however, has submitted

such a claim to a jury and entered judgment in accordance

with that jury's verdict. In Valentino v. S.B. Thomas, Inc.,

2001 WL 34118029 (D.Conn., Oct.28, 2001), after a five-

day trial, a jury found that there was a franchise

agreement between the parties and that the defendants

21

had violated the Connecticut Franchise Act when it

terminated the plaintiffs franchise and awarded the

plaintiff $60,000 in damages. Although the defendants

moved for judgment as a matter of law pursuant to Rule

50, it appears that their motion focused on the evidentiary

support for the jury's findings, and it did not raise the

preliminary issue of whether the Franchise Act claim

should have been submitted to the jury. Judge Eginton

denied the defendants' motion in its entirety, entered

judgment in accordance with the jury's verdict, and

awarded the plaintiff prejudgment interest and attorney's

fees.

In any event, because Nationwide failed to timely raise

this issue at any time during this litigation, much less in

its pre-verdict Rule 50 motion, it is not a proper ground for

a post-verdict Rule 50 motion for judgment as a matter of

law.

ii) The Connecticut Insurance Code

Nationwide next argues that because insurance companies

and their agents are subject to extensive regulation by the

Connecticut Insurance Code, § 38a-702 et seqg., the

Connecticut legislature could not have intended for

insurance agents to also be protected by the Franchise Act.

More specifically, Nationwide argues that because the

legislature has failed to enact a “good cause” termination

requirement within the Insurance Code, the legislature

could not have intended for the “good cause” requirement

set forth in the Franchise Act to apply to insurance agents.

See Conn. Gen.Stat. § 42-133f(a). This argument was

initially raised in Nationwide's Motion to Dismiss. See

“Reply to Plaintiff's Objection to Defendant's Motion to

Dismiss” [doc. # 15] at 2-4. The Court rejected that

argument in its Ruling on the Motion to Dismiss [doc. # 6].

22

Counsel also briefly raised this issue in its initial Rule 50

argument.

The Court reaffirms its decision denying the Motion to

Dismiss, and no evidence was presented at trial which

alters the Court's conclusion that the Connecticut

legislature did not intend to preclude insurance agents

from invoking the protections of the Connecticut Franchise

Act. The decisions from other jurisdictions cited by

Nationwide to support its view that the Connecticut

legislature intended its *367 franchise act to not cover

insurance agents concern factual settings and legislative

and regulatory schemes different from the Connecticut

statutes and regulations. Also, Nationwide's catalogue of

failed legislative attempts to impose a specified good cause

termination requirement for insurance agents’ in

Connecticut-submitted after trial was completed-shows no

clear indication that the Connecticut legislature intended

such preemption by the insurance statutes and

regulations. Finally, Nationwide has not made a

compelling argument in the absence of clear legislative

intent why an insurance agent should not be protected by

the Connecticut Franchise Act if a jury concludes that he

or she otherwise meets the tests for a _ franchise

relationship.

111) Evidentiary Support

The Court instructed the jury that a “franchise”

relationship exists only when both of two requirements are

met:

(1) There must be an oral or written agreement or

arrangement in which a franchisee is granted the right to

engage in the business of offering, selling, or distributing

services under a marketing plan or system prescribed in

substantial part by a franchisor; and

23

(2) The operation of the franchisee's business pursuant to

this marketing plan or system must be substantially

associated with the franchisor's trademark, service mark,

tradename, logotype, advertising, or other commercial

symbol designating the franchisor or its affiliate.

Nationwide claims that there was insufficient evidence

before the jury to find in favor of Charts on the first

element, and, therefore, it is entitled to judgment as a

matter of law on the Franchise Act count (Nationwide does

not challenge the jury's finding as to the second element).

As to the first element, the Court further instructed the

jury as follows: “The first element has a two step inquiry.

First, Charts must prove by a preponderance of the

evidence that there was an oral or written agreement or

arrangement in which it was granted the right to engage

in the business of offering, selling, or distributing

insurance policies offered by Nationwide.” It is undisputed

that Nationwide had entered into contracts with both Alex

Charts and CIAI. Moreover, according to the parties’

stipulation of facts, “Alex Charts was the President of

Charts Insurance Associates, Inc. (‘CIAI’), which was a

Connecticut corporation engaged in the b:'siness of selling

and servicing Nationwide insurance policies and other

related products within the State of Connecticut.” This

stipulation was read to the jury and was also supported by

other evidence at trial, including testimony from Ruben

Gainey, Nationwide's Vice President and _ Regional

Manager for New England, that an agent was in the

business of selling and servicing Nationwide polices.

(Trans.12/1/04, pg.109).!° Therefore, this admission and

10 Gainey was initially unavailable to testify at trial, and, therefore,

his deposition transcript was read into evidence, absent objection. At

that time, the Court instructed the jury as follows: “Ladies and

24

the consistent evidence gave the jury sufficient evidentiary

support for its finding that Nationwide had granted Charts

and CIAI “the right to engage in the business of offering,

selling, or distributing*368 services....". In addition,

although not discussed by either party, the Court notes

that the Franchise Act may apply if a party was granted a

right to “engage in the business of offering” services.

Although Nationwide disputes whether Charts had the

ability to bind it to a policy of insurance, and therefore

actually could “sell” such a policy, there is no dispute as to

Charts' ability to “offer” Nationwide policies to customers,

and to execute an initial, non-binding contract with

customer. Moreover, as to Charts’ ability to bind

Nationwide to a policy of insurance, Charts testified that,

based on his prior success with Nationwide, he was made a

“plus agent,” and therefore he did have the ability to bind

Nationwide. (Trans.12/01/04, pg.36-37). In sum, there was

substantial evidence from which the jury could have found

that Charts satisfied the first step of the first element.

As to the second step of the first element, namely whether

Charts offered, sold or distributed Nationwide policies

pursuant to a marketing plan or system which was

prescribed in substantial part by Nationwide, the Court

instructed the jury as follows:

This requirement focuses on the amount of control

exercised in the conduct of Charts' business as a

significant factor in determining whether a franchise was

Gentlemen of the jury, you will now be read a transcript of testimony

given previously by a witness in this case who is now unavailable to

testify in person at this trial. You are not to speculate as to why this

witness is unavailable and you are to regard this testimony in the

same way as if it were given at trial in person before you.” Gainey

testified by deposition during the Plaintiffs’ case, and personally

apneared to testify during the Defendants’ case. (Trans.11/29/04,

pg.62).

25

created. You should consider several factors to determine

whether the control, if any, exercised by Nationwide over

Charts rose to the level of a prescribed marketing plan or

syster.. You should consider whether it was Nationwide or

Charts that had the power to set the retail prices charged

to Charts' customers. Price is perhaps the most

fundamental aspect of a marketing plan, and the ability to

set prices is quite indicative of a franchisor's control.

However, fixing prices alone may not be determinative of a

franchisor's control. You also should consider, for example,

whether Nationwide had the power to control other

aspects of operation of Charts' insurance agency, including

its hours of operation, its days of operation, its advertising,

its lighting, its sales quotas and its hiring. In addition, you

should consider whether Nationwide provided Charts with

such things as financial support and management

training.

There is no precise formula as to how many of these

factors must be present to find the level of control

indicative of a franchise, or as to the weight each factor

should be given in each case. Instead, you should consider

these factors and give each the weight you believe it

deserves, considering the significance of each factor to the

business relationship between Nationwide and Charts.

(Emphasis added).

As evidenced by that charge, the second step of the first

factor is a balancing test, and the jury had considerable

discretion to consider evidence concerning the business

relationship between the parties. After reviewing the

transcripts and the parties’ memoranda of law, the Court

is unable to find that, when exercising this discretion, the

jury employed “sheer surmise and conjecture.” Hernandez,

341 F.3d at 143-44. Indeed, there was considerable

testimony from Mr. and Mrs. Charts, as well as other

26

Nationwide employees, that supports the jury's finding

that Charts operated pursuant to a marketing plan or

system prescribed in substantial part by Nationwide. For

example, when asked if agents operated under a

marketing plan prescribed by Nationwide, Gainey

answered “yes.” In addition, Gainey testified that

Nationwide employed Agency Managers to ensure that

agents met Nationwide's standards, that Nationwide

provided agents with samples *369 to use as local

advertisements and that Nationwide had to sign off on any

use of the Nationwide logo in local advertisements.

(Trans.12/1/05, pg.103-05). An Agency Manager that was

assigned to the Charts franchise, Mark Kapatoes, testified

that, as part of his job, he would “sit down with [the

agents] and go through what they had in plans as far as

advertising, marketing, really anything that you would do

to run a good business.” (Trans.11/30/2004, pg.47)

(emphasis added).'! In addition, in response to a question

asking “in what sorts of matters would you act as a liaison

between the agents and Nationwide,” Kapatoes replied

that, for example, “we would run through marketing

plans.” ( /d. at 48) Although Nationwide contends that it

presented evidence to refute a finding that Charts

operated pursuant to a marketing plan or system

subscribed in substantial part by Nationwide, the Court

“cannot assess the weight of conflicting evidence” at this

stage of the litigation. Sarmuels, 992 F.2d at 16; Mattivi,

618 F.2d at 168. Thus, Nationwide's post-verdict Rule 50

motion on this ground is denied.

ili) “Good Cause” Shown

Finally, Nationwide argues that, even if Charts was a

franchise, it had “good cause” to terminate that franchise.

See Conn. Gen.Stat. 42-133fla). Specifically, Nationwide

'' Kapatoes was unavailable to testify at trial, and, therefore, his

deposition transcript was read into evidence, absent objection

27

contends that Charts violated the Connecticut Insurance

Code by paying for the policies of at least two individuals,

and, therefore, they had “good cause” to terminate him. As

Charts notes in response, however, at no time during the

trial did Nationwide introduce the appropriate provisions

of the Insurance Code into evidence, or elicit testimony

from any witness stating that the reasons underlying the

termination of the franchise were violations of state law.

Indeed, in the opening statement made by Nationwide's

counsel, the jury was told that Nationwide “investigated

the allegations that the Charts had engaged in [rebating]”

and “conclud[ed] that he had violated company policy and

practice.” In conformance with this opening statement,

Nationwide failed to present any evidence to the jury that

Charts had violated the provisions of the Insurance Code,

and that this was the reason for his termination. It was

not until after the evidence was concluded and when

Nationwide filed a proposed supplemental jury instruction

on the Insurance Code and rebating that this issue was

raised before the Court. For that reason, the Court denied

the supplemental request, and the provisions of the

Insurance Code were never presented to the jury.

Moreover, the jury could have found that the evidence

submitted by Nationwide on this ground was _ not

persuasive. Nationwide's argument essentially is that

because Alex Charts paid the premiums on policies for the

policy holder, he engaged in illegal “rebating,” and,

therefore, it had “good cause” to terminate his franchise.

There appear to be three incidents in which Alex Charts

initially paid the premiums for the policy holder. In the

first incident, Charts paid the $54 premium for the first

year of a policy issued to Anne Elizabeth Turoczi, the niece

of Missy Brayton, a woman who worked for CIAI.

Although Brayton testified at trial that Charts had paid

the premium on her niece's policy, she admitted on cross-

28

examination that she was unaware that her niece's

parents had reimbursed Charts the full premium amount

a short time thereafter, and a copy of the Turoczis' check to

*370 Charts was submitted into evidence. (Trans. 12/2/04,

pg. 137-38, and Plaintiffs' Ex. 81). Charts also testified

that he was reimbursed for this advance of the Turoczi

premium. (Trans.12/01/04, pg.48).

In the second incident, it appears that Charts paid some

premiums on a $1,000,000 life insurance policy issued to

Mario Boccarossa, his Nationwide Agency Manager at the

time. At trial, Alex Charts testified that: “|Wjhen

(Boccarossa] came to me, I reminded him that I didn't

want to get involved in paying any premiums. Okay. He

was responsible for all the premiums. Okay. Like even

when we started the policy, and he assured me that would

be the case.” (Trans.12/01/04, pg.61). Charts further

testified that, although Boccarossa had paid some of the

premiums a “few months” later, he was then replaced by

Kapatoes as Agency Manager. Boccarossa asked Charts to

pay some of the outstanding premiums, in the amount of

$6,000, and “he would make it up as soon as he could.”

(Id). Although Boccarossa failed to pay that money back,

Charts testified that he did not sue for the money because

he didn't think he was at the “stage” to sue “his manager,”

and, moreover, “[it] wasn't enough money for me to bother

payl[ing] a lawyer and going after.” (Id. at 62).

In the third incident, Charts paid the first year premiums

for two policies issued for the twin sons of Linda Mello,

soon after Mello's husband had died. Mello was a secretary

in Nationwide's district office, and she worked for both

Kapatoes and Boccarossa when those individuals served as

the Agency Manager for the Charts franchise. The total

amount advanced by Charts’ for those policies totaled

$250. Although Mello never repaid that amount, she has

29

kept those policies active and has paid all of the remaining

premiums herself. Charts testified that he expected to

receive the advanced premium back from Mello, but that

he did not “see any reason to chase her for it” and that he

considered it a “charitable gift.” (Trans. 12/1/04, pg.45-46).

Nationwide may be correct in arguing that the evidence

concerning these three incidents could provide the jury

with enough evidentiary support for a finding that

Nationwide had “good cause” terminate the franchise.

However, the jury also had enough evidentiary support to

find that there was not “good cause” for termination. For

example, the termination letter sent by Nationwide to

Charts, which was entered into evidence, fails to mention

the “rebating” incidents as a ground for the termination.

(Plaintiffs Ex. 49). In addition, other Nationwide

employees testified that they had engaged in similar

actions when selling Nationwide policies. Because a court

“cannot assess the weight of conflicting evidence” at this

stage of the litigation, Samuels, 992 F.2d at 16, the motion

for judgment as a matter of law on this ground must be

denied.

In sum, Nationwide's post-verdict Rule 50 motion for

judgment as a matter of law on the Franchise Act count is

denied.

C) Connecticut Unfair Trade Practices Act

Nationwide challenges the jury's finding on the CUTPA

count on several grounds.

i) Applicability of CUTPA

CUTPA provides that “|nlo person shall engage in unfair

methods of competition and unfair or deceptive acts or

practices in the conduct of any trade or commerce.” Conn.

Gen.Stat. § 42-110b(a). Nationwide first argues that it is

30

entitled to judgment as a matter of law on the CUTPA

count because the acts complained of by Charts did not

occur “in the conduct of any trade *371 or commerce.”

Instead, Nationwide contends that the parties’

relationship was similar to a traditional

employer/employee relationship-to which CUTPA does not

apply. See Fenn v. Yale University, 283 F.Supp.2d 615, 639

(D.Conn.2003) (citing cases).

CUTPA defines trade and commerce as “the advertising,

the sale or rent or lease, the offering for sale or rent or

lease, or the distribution of any services and any property,

tangible or intangible, real, personal or mixed, and any

other article, commodity, or thing of value in this state.”

Conn. Gen.Stat. § 42-110a(4). Again, one of the facts

stipulated to by the parties was that “Alex Charts was the

President of Charts Insurance Associates, Inc. (‘CIAI’),

which was a Connecticut corporation engaged in the

business of selling and servicing Nationwide insurance

policies and other related products within the State of

Connecticut.” (emphasis added). This — stipulation

demonstrates that the plaintiffs are a Connecticut

corporation and its president, not employees of Nationwide

or similar to employees of Nationwide. Indeed, the jury

specifically found that they were not employees when it

found that the plaintiffs were Nationwide franchisees.

Therefore, there was sufficient evidence from which the

jury could have found that the acts complained of occurred

in the conduct of trade or commerce. In so finding, the

Court notes that the Connecticut state courts read CUTPA

broadly, and the Connecticut Supreme Court has rejected

the argument that CUTPA claims may only be brought by

a consumer, and not a business. See, e.g., Larsen, 232

Conn. at 492, 656 A.2d 1009 (““CUTPA, by its own terms,

applies to a broad spectrum of commercial activity,” and,

because it is “remedial in nature,” it must “be liberally

31

construed in favor of those whom the legislature intended

to benefit”) (citations omitted). Therefore, the Court finds

that the stipulated fact, as well as the evidence presented

at trial conforming to that stipulation, provided the jury

with a sufficient evidentiary basis for finding that the acts

complained of occurred in “the conduct of any trade or

commerce.” § 42-110b(a).

ii) Evidentiary Support

Nationwide's next argument can be summarized as

follows: (1) for the reasons set forth in its memorandum, it

is entitled to judgment as a matter of law on both the

Franchise Act count and the good faith and fair dealing

count; (2) the CUTPA count is derivative of those two other

counts; and, therefore (3) it is also entitled to judgment as

a matter of law on the CUTPA count, as there is no other,

independent basis for the jury's verdict. This argument is

flawed, however, because the Court has found that

Nationwide is not entitled to judgment as a matter of law

on the Franchise Act claim. The jury was instructed that

in order for it to find that Nationwide engaged in unfair or

deceptive trade practices, it may find that “(t]he practices

proved by Cha-:ts, without necessarily having been

previously considered unlawful, offend public policy as it

has been established by statutes, the common law, or

otherwise-in other words, it is within at least the

penumbra of some common law, statutory, or other

established concept of unfairness.” (emphasis added).!2

*372 Thus, a finding that Nationwide violated the

12 Further, the Court instructed the jury that it could find that

Nationwide engaged in unfair or deceptive trade practices if “the

practices proved by Charts are immoral, unethical, or unscrupulous”

and “the practices proved by Charts cause unjustified, substantial

injury to consumers, competitors, or other businessmen.” The Court

also instructed the jury that “a practice can be unfair under CUTPA

because of the degree to which it meets one of the ciiteria or because,

to a lesser degree, it meets all three.”

32

Franchise Act, and the public policy expressed therein,

could support a finding that Nationwide also violated

CUTPA. See Hartford Electric Supply Co. v. Allen-Bradley

Co., 250 Conn. 334, 368, 736 A.2d 824 (1999) (concluding

that the trial court's properly found that the defendant

had violated CUTPA, because “the defendant's conduct in

attempting to terminate the plaintiffs franchise without

good cause is a practice that offends the public policy of

Connecticut to promote fairness among businesses behind

the franchise act”). Consequently, tiie Court finds that the

conduct underlying the Franchise Act count provided the

jury with a basis for finding that Nationwide also violated

CUTPA.}3

13 Because the Court has found that the Franchise Act violation

provides a sufficient evidentiary basis for the jury finding in regard to

CUTPA, it need not reach the question of whether the jury's finding in

regard to the implied covenant of good faith and fair dealing also could

support a finding that Nationwide violated CUTPA.Alex Charts also

alleged in his complaint that Nationwide discriminated against him on

the basis of age and disability when it terminated his agency, thereby

violating CUTPA. In its post-verdict Rule 50 motion, Nationwide

argues that this claim was either abandoned by Charts or not

supported by sufficient evidence. Because the Court has found that the

jury's CUTPA verdict was supported by its finding on the Franchise

Act, Nationwide's argument need not be addressed. The Court notes,

however, that the instruction given to the jury did not include age or

disability discrimination references. Finally, Nationwide claims that

the allegations of “computer crimes” by Nationwide employees should

not have been considered because that alleged conduct was outside of

the limitations period. However, in its portion of the jury charge

concerning unfair trade practices, the Court specifically instructed the

jury that it could not consider “any actions taken by Nationwide or its

employees prior to August 11, 1994 [three years before the suit was

brought] on Charts' CUTPA claim.” The evidence presented at trial of

the “computer crime” concerned events in May, 1994. ‘“hus, the jury

could not have based its CUTPA decision on that evidence, in light of

the charge.

33

In sum, Nationwide's motion for judgment as a matter of

law on the CUTPA count is denied.

D) Good Faith and Fair Dealing

The jury found that Nationwide had violated the covenant

of good faith and fair dealing implied into the parties'

contracts. As with the previous counts, Nationwide

advances several grounds upon which it claims it is

entitled to judgment as a matter of law on this count. Each

will be addressed in turn.

i) Good Cause for Termination

Nationwide first argues that the evidence adduced at trial

conclusively demonstrates that it terminated its

relationship with Charts for good cause, and, therefore, it

is entitled to judgment as a matter of law. More

specifically, Nationwide argues: that, because it had good

cause to terminate the franchise relationship under the

Franchise Act, it also had good cause to terminate the

parties' relationship for purposes of the implied covenant

of good faith and fair dealing. The Court has rejected,

however, Nationwide's argument that it is entitled to

judgment as a matter of law on the issue of “good cause”

under the Franchise Act. Consequently, its related

argument concerning “good cause” under the implied

covenant of good faith and fair dealing must also be

rejected.

ii) No Good Cause Requirement

Nationwide next argues that it did not need to

demonstrate good cause to terminate its contracts with

Charts and CIAI, as both contracts provided that they

were terminable “at any time after written *373 notice.”

More specifically, Nationwide argues that the implied

covenant of good faith and fair dealing cannot incorporate

a “good cause” termination requirement into the parties’

34

contracts because it would be counter to the express terms

of those contracts. Charts argues that there was sufficient

evidentiary support for the jury to find that, despite the

language in the agreements, the parties’ agreements

contained an implied promise that they would only be

terminated for good cause. The Court agrees with

Nationwide, and finds that it is entitled to judgment as a

matter of law on the implied covenant of good faith and

fair dealing count.

In Connecticut the implied covenant of good faith and fair

dealing cannot be used “to achieve a result contrary to the

clearly expressed terms of a contract, unless, possibly,

those terms are contrary to public policy.” Verrastro_uv.

Middlesex Ins. Co., 207 Conn. 179, 190, 540 A.2d_ 693

(1988) (quoting Magnan v. Anaconda Industries, Inc., 193

Conn. 558, 566, 479 A.2d 781 (1984)).

Charts presented the following evidence in support of the

argument that, despite the plain language of the

agreements, there was an implied promise that the agency

would not be terminated without good cause: Gainey, who

worked for Nationwide for over thirty-five years, testified;

“I do not recall any agent being terminated without cause.”

(Trans.11/19/04, pg.100). Helena Charts testified that, in

her experience, the types of things that lead to agents

being terminated were taking clients’ money or stealing.

(Trans.11/30/04, pg.134).!4 Finally, Charts entered

Nationwide's Agency Administration Handbook (the

“Handbook”) into evidence, which provides that company-

initiated termination of an agency would be “primarily

limited” to circumstances involving, inter alia, “criminal

acts,” “dishonesty or fraud” and “breach of contract,” and

that termination on non-enumerated grounds would be

14 Helena Charts was unavailable to testify at trial, and, therefore, her

deposition testimony was read into evidence, absent objection.

35

“rare.” (Plaintiffs' Ex. 83, pg. 21). This Handbook also sets

forth the procedure for the Agency Review Board, which

was an internal Nationwide procedure for agents to appeal

“problems which have not been solved to the agent's

satisfaction.” (Id. at 154).15 None of this evidence, however,

altered or amended the plain language of the parties’

agency agreements, which provide that they are

terminable “at any time after written notice.” The

testimony of Gainey and Helena Charts was based on their

general experience, and failed to address the specific

agreements between the Charts and Nationwide. Aithough

the Handbook does seem to imply that a heightened

standard will apply to possible agency terminations, it also

states in bold type on the cover page that: “The contents of

the Handbook are presented as a matter of information

only. The only contractual matters are those expressed in

your Agent's Agreement and specifically incorporated by

reference made within that contract.” (Id. at cover). It also

provides that “|the] language used in this handbook is not

intended to create nor it is *874 to be construed to

constitute a contract between Nationwide and any or all of

its employees, agents or officers.” (Id.) Finally, the Court is

not convinced that Nationwide's provision of an internal

appeal process, the Review Board, serves to modify the

termination language in the agency agreements, or

imposes a good cause requirement for termination.

15 More specifically, the Handbook provides that: “The purpose of the

Agent Administrative Review Board is to ensure’ mutual

understanding and good communication between the agents and the

Companies. To this end, the Review Board only hears one party at a

time, does not permit attorneys for the Companies or the agent to

attend, not is there any written or electronic record kept. These

procedures have been developed over time to enhance and freely

encourage the open communication by all participants as well as

involvement of the members of the Review Board.”

iittala

36

The Court finds that this evidence is insufficient to alter or

amend the plain language of the parties' agreements.

Consequently, Nationwide is entitled to judgment as a

matter of law on this count.

E) Conclusion

Nationwide's motion for judgment as a matter of law [Doc.

# 254] is GRANTED as to the implied covenant of good

faith and fair dealing count, and DENIED as to the

Franchise Act count and the CUTPA count.

II Motion for a New Trial

Nationwide next argues that it is entitled to a new trial

pursuant to Rule 59.

A) Standard of Review

Fed.R.Civ.P. 59 provides, in relevant part, that: “A new

trial may be granted to all or any of the parties and on all

or part of the issues ... in an action in which there has been

a trial by jury, for any of the reasons for which new trials

have heretofore been granted in actions at law in the

courts of the United States....” Thus, a motion for a new

trial may be based on, inter alia, an argument that “the

trial was not fair to the party moving,” or on “questions of

law arising out of alleged substantial errors in admission

or rejection of evidence or instructions to the jury.”

Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251, 61

S.Ct. 189, 85 L.Ed. 147 (1940).

“A motion for a new trial should be granted when, in the

opinion of the district court, ‘the jury has reached a

seriously erroneous result or ... the verdict is a miscarriage

of justice.’ ” Song v. Ives Labs., Inc., 957 F.2d 1041, 1047

(2d Cir.1992) (quoting Smith v, Lightning Bolt Prods., Inc.,

861 F.2d 363, 370 (2d Cir.1988)). Unlike with a post-

verdict Rule 50 motion for judgment as a matter of law, a

37

Rule 59 motion for a new trial “may be granted even if

there is substantial evidence to support the jury's verdict

... land] a trial judge hearing a motion for a new trial is

free to weigh the evidence himself and need not view it in

the light most favorable to the verdict winner.” Jd.

(quotations and citations omitted). “A court considering a

Rule 59 motion for a new trial must bear in mind,

however, that the court should only grant such a motion

when the jury's verdict is egregious.... Accordingly, a court

should rarely disturb a jury's evaluation of a witness's

credibility.” Sabir, 214 F.Supp.2d at 244 (quoting DLC

Mgmt. Corp. v. Town of Hyde Park, 163 F.3d 124, 133 (2d

Cir.1998)); see also Dunlap-McCuller__v. Riese

Organization, 980 F.2d 153, 158 (2d Cir.1992) (“the grant

of a new trial on weight of evidence grounds should be

reserved for those occasions where the jury's verdict was

egregious”).

Nationwide sets forth several arguments in support of its

request for a new trial, each of which will be addressed in

turn.

B) Failure to Preclude Expert Testimony

Nationwide first argues that the Court erred in permitting

Charts' damages expert to testify as to the daiiayes

allegedly sustained by Charts. This argument, which was

set forth in a footnote to its memorandum in support of its

motion, merely cites to objections it raised previously*375

in the context of its pre-trial motion in limine to preclude

the expert, John Allen Kosowsky, from testifying, as well

as some of the relevant legal authorities. This footnote

fails to raise any arguments that have not been considered

by the Court previously. Consequently, to the extent

Nationwide's motion seeks a new trial on the ground that

Kosowsky should not have been permitted to testify as an

expert, it is denied for the same reasons set forth in the

38

ruling on Nationwide's motion in limine. See Ford_uv.

Nationwide Mut. Fire Ins. Co., 214 F.Supp.2d 11, 15-16

(D.Me.2002) (denying a Rule 59 motion because “the record

supports my decision as gatekeeper under Daubert, Kumho

Tire, and Evidence Rule 702 to let the jury hear his

testimony and to let the jury decide what weight to give it.

No more need be said”).

C) Insufficiency of the Evidence Concerning Damages

Nationwide next argues that Kosowsky's testimony was

insufficient to establish Charts' damages to a reasonable

degree of certainty, and, therefore, it is entitled to a new

“iy on rang A at the = See Expressway Associates Ll

e Jorp. of Connectic

476 71, 590 ‘A2d 431 431 ( 1991) (“It is axiomatic that the

burden of proving damages is on the party claiming

them.... When damages are claimed they are an essential

element of the plaintiffs proof and must be proved with

reasonable’ certainty”) (citations omitted). More

specifically, Nationwide maintains that there were four

major errors in the analytical method used by Kosowsky.

Again, this argument already was presented to the Court

through the pre-tria! motion in limine, which was denied.

Kosowsky's testimony at trial was fully consistent with the

methodology at issue in the motion in limine. Moreover,

Nationwide conducted a thorough cross-examination of

Kosowsky at trial and highlighted what it claimed were

deficiencies in his methodology and conclusions.'® Because

16 For example, Nationwide argues that Kosowsky was unqualified as

an expert on lost future earnings for Mr. Charts, and his resulting

calculations of lost future earnings were flawed, because Kosowsky's

experience primarily involved valuing businesses. Nationwide had an

opportunity to present this argument to the jury, which was free to use

it when determining what weight to give Kosowsky's testimony. See,

e.g., Bohus v. Beloff, 1991 WL 21654 (b&.D.Pa.) (fact that expert

witness had participated in “relatively few complete podiatric

evaluations goes to the weight of his testimony and opinions, not to the

39

Kosowsky testified to a reasonable degree of certainty that

Charts' damages were $2,316.857, and the jury awarded

Charts actual damages of $2,300,000, it appears that the

jury found Kosowsky credible, and credited his testimony

accordingly.'? The Court concurs with the jury's apparent

credibility determination, and notes that Kosowsky's

testimony at trial was more specific, detailed and informed

than even anticipated, and fully supported the jury's

finding concerning damages. See Song, 957 F.2d at 1047

(“a trial judge hearing a motion for a new trial is free to

weigh the evidence himself and need not view it in the

light most favorable to the verdict winner”). Therefore,

Nationwide's motion for a new trial is denied. See Braun

Elevator Co. v. Thyssenkrupp Elevator Co., 379 F.Supp.2d

993 (W.D.Wis.2005) (“the challenged factual

determinations [of lost profits] were the subject of genuine

factual dispute at trial and there was ample support for

the jury to have resolved those disputes in plaintiff's*376

favor based on the evidence presented”).

D) Insufficiency of Jury Instructions

Nationwide next argues that the Court's final instruction

to the jury was insufficient because it: (1) failed to instruct

the jury that Charts’ admitted payment of the premiums

for insurance policies for unrelated persons constituted

“good cause” for termination; (2) failed to instruct the jury

as to “the proper standard for finding the existence of a

franchise” under the Frarchise Act; and (3) failed to

instruct the jury as to the “proper standard for ‘good cause’

" under the Franchise Act. These claims are all without

merit. Nationwide was accorded ample time to review the

Court's proposed jury instructions and was allowed to

make objections to such instructions at the charging

issue of his qualifications as an expert witness”), reversed on other

grounds, 950 F.2d 919 (3d Cir.1991).

'? Nationwide did not provide its own expert at trial.

40

conference. See Fed.R.Civ.P. 51(b)(2). To the extent that

Nationwide already raised some of these objections at the

charging conference, the Court considered them before

issuing the final jury instruction and believes that they

were properly decided at that time. As to the new

objections to the jury instruction raised in Nationwide's

Rule 59 motion, the Court believes that it fairly and

accurately charged the jury on the appropriate law in this

case and, therefore, finds the new objections to be without

merit. Accordingly, Nationwide is not entitled to a new

trial on the ground of improper jury instruction.

E) Inconsistent Verdicts

Finally, Nationwide argues that it is entitled to a new trial

because the jury's verdict was inconsistent in that it found:

(1) that Nationwide had acted in bad faith when it violated

the implied covenant of good faith and fair dealing; yet

also found (2) that Nationwide should not be held liable for

punitive damages under CUTPA. Once again, any

substantive merit to Nationwide's argument is precluded

from consideration by the Court due to Nationwide's

failure to raise a proper objection at an earlier stage of the

litigation. Although not phrased as an attack on the

sufficiency of the Court's instructions and verdict form, it

is properly construed as such because both the instructions

and the verdict form allowed the jury to find as it did. The

Second Circuit recently construed a similar argument as

an attack on the sufficiency of the instructions and verdict

form:

Although defendants frame their challenge to the verdict

as a challenge to the sufficiency of the evidence, any

problem with the verdict is a result of the charge and

verdict sheet, which allowed the jury to find in favor of

defendants on all of the common law claims, but also in

favor of plaintiffs on the CUTPA claim.

41

Fabri_v. United Technologies Intl., Inc., 387 F.3d 109, 121

(2d Cir.2004). Consequently, Nationwide was required to

raise this objection to the verdict form and instructions,

namely that they would permit an inconsistent verdict,

prior to their submission to the jury. Jarvis v. Ford Motor

Co., 283 F.3d 33, 56-57 (2d Cir.2002) (“When a charge or

verdict sheet may lead to inconsistent verdicts, a party

must object before the jury begins its deliberations”) (citing

Fed.R.Civ.P. 51). In addition, once the jury returned with

the allegedly inconsistent verdict, Nationwide was

required to raise its objection while that jury was still

empaneled. DiBella v. Hopkins, 403 F.3d 102, 117 (2005)

(“It is well settled that if a party does not challenge the

consistency of jury verdicts while the jury is still

empaneled, the objection is waived”) (citing cases). At no

time prior to their submission to the jury did Nationwide

object to either the verdict form or the jury instruction on

the ground that they would permit an inconsistent verdict.

Indeed, Nationwide's proposed jury instructions*377 and

verdict form fail to include any language that would guard

against the allegedly inconsistent verdict reached by the

jury. Moreover, once the jury returned its verdict,

Nationwide failed to raise any inconsistency objection.

Even if this argument were properly before the Court,

however, it would be rejected. The Court instructed the

jury that, in order to award punitive damages, it must find

that “Nationwide acted with reckless indifference to the

rights of others or an intentional and wanton violation of

those rights.” As to “bad faith,” however, the Court

instructed the jury that: “Bad faith in general implies both

actual or constructive fraud, or a design to mislead or

deceive another, or a neglect or refusal to fulfill some duty

or some contractual obligation, not prompted by an honest

mistake as to one's rights or duties, but by some interested

42

or sinister motive. Bad faith means more than mere

negligence; it involves a dishonest purpose.” The Court

does not interpret these standards as being harmonious,

and believes that a jury could properly find that

Nationwide's actions met the standard for “bad faith,” yet

did not meet the standard for punitive damages.

Moreover, as Charts notes in its opposition memorandum,

the Court instructed the jury that if it found in favor of

Charts on any of the claims, it “may also make a separate

and additional award of punitive damages.” (emphasis

added). Consequently, even if Nationwide is correct that

the standard for a finding of “bad faith” under the implied

covenant of good faith and fair dealing and the standards

for awarding punitive damages under both CUTPA and

the common law are substantially similar, the jury's

discretion to award punitive damages renders its

inconsistency challenge meritless.!8 See Wright v. Hoover,

329 F.2d 72, 76 (8th Cir.1964) (“fixing damages is

peculiarly a jury function”); Lee v. Coss, 39 F.Supp.2d 170

172 (D.Conn.1999) (“It is well settled that calculation of

damages is the province of the jury”) (quoting /smail_v.

Cohen, 899 F.2d 183, 186 (2d Cir.1990)); see also Bennett v.

Rhodes, 34 Fed.Appx. 963 (5th Cir.2002) (“The failure to

render an award of punitive damages does not render the

jury verdict inconsistent, and Bennett does not otherwise

persuade us that an award of punitive damages was

compelled by the evidence”). Charts has not challenged the

18 The Supreme Court has instructed that a facially inconsistent

verdict in a civil action is not an automatic ground for vacating the

verdict, Fuizmnount Glass Works v. Cub Fork Coal Co., 287 U.S. 474,

485, 53 S.Ct. 252, 77 L.Ed. 439 (1933), and that a court “must attempt

to reconcile the jury's findings, by exegesis if necessary ... before [it is]

free to disregard [them].” Gallick v. Bultimmore & Ohio R. Co., 372 U.S.

108, 119, 83 S.Ct. 659, 9 L.Ed.2d 618(1963).

43

jury's failure to award punitive damages in a post-trial

motion.

Consequently, to the extent the motion for a new trial

claims that the jury's verdict was inconsistent, it is denied.

F) Remittitur

Rule 59(e) also provides that a party may move “to alter or

amend a judgment....” Therefore, “[w|lhen a defendant's

Rule 59 motion contests the size of a damage award, a

court must decide whether or not the verdict is excessive ...

If a district court finds that a verdict is excessive ... under

the practice of remittitur [it] may condition a denial of a

motion for a new trial on the plaintiff's accepting damages

in a reduced amount ... It may not, however, reduce the

damages without offering the prevailing party the option

of a new trial.” 7d. (quotations and citations omitted). “A

jury verdict is excessive if it *378 is so high as to ‘shock

judicial conscience.’ ” Schneider _v. Nat'l R.R. Passenger

Corp., 987 F.2d 132, 136 (2d Cir.1993) (quoting Nairn v.

Nat'l R.R. Passenger Corp., 837 F.2d 565, 567 (2d

Cir.1988). In addition, “[a] damage award is excessive if it

is the result of a miscarriage of justice and represents a

windfall to the plaintiff without regard to [his] injury.”

Sabir, 214 F.Supp.2d at 245 (quoting Oliver v. Cole Gift

Ctrs., Inc., 85 F.Supp.2d 109, 114 (D.Conn.2000)). In other

words, “[t]he court is ‘not ... justified’ in substituting its

judgment for that of the combined experience of twelve

jurors ... unless it conscientiously believe[s] that the jury

has exceed the bounds of propriety.” Pace v. National R.R.

Passenger Corp., 291 F.Supp.2d 93, 104 (D.Conn.2003)

(quoting Earl v. Bouchard Transp. Co., 917 F.2d 1320,

1329 (2d Cir.1990)).

Although Nationwide briefly requested that this Court

order a remittitur in its original Rule_59 motion, it has

a

44

failed to address this issue in its subsequently filed

memoranda of law. Rather, it has only challenged the

damages award on the ground that Kosowsky's testimony

failed to prove Charts' damages with reasonable certainty.

Nationwide has not explained why, in the event that the

Court finds that damages were proved with reasonable

certainty, that the amount awarded was _ excessive.

Consequently, Nationwide's request for remittitur is

denied. See Broadnax v. City of New Haven, 2004 WL

491069 (D.Conn., Mar.2, 2004) (“The Court concurs with

plaintiffs counsel that the issue of remittitur is not

briefed, save for the heading, and the Court will not

address this issue except to concur with the plaintiff that

the sums returned by the jury are reasonabie and

consistent with the evidence, and reflect calm deliberation

by the jury”), aff'd on other grounds, Broadnax, 415 F.3d at

265.19

- Even if it were properly briefed and presented, however,

the Court finds that the amount awarded by the jury had a

proper factual basis and was not excessive as a matter of

law. “It is well settled that calculation of damages is the

province of the jury.” Lee, 39 F.Supp.2d at 172 (quoting

Ismail, 899 F.2d at 186). The jury heard the following

evidence concerning Charts' alleged damages: testimony

from Mr. Charts as to his prior in ome stream from his

Nationwide franchise; testimony from Kosowsky as to how

that income could be projected out into the future; and

testimony from Gainey and Kapatoes as to how much

income they had earned from Nationwide. Moreover, the

jury heard counsel for Nationwide conduct thorough cross-

examinations on the issue of damages, and, more

particularly, on the issue of Charts' mitigation of his

19 See also Broadnax v. City of New Haven, 2005 WL 1691545 (2d Cir.,

Jul 20, 2005) (summary order analyzing several other issues raised on

appeal that presented no novel questions of Second Circuit law)

45

damages. Nationwide, however, did not present its own

damages expert. Given this testimony, the Court finds that

that jury's decision to award Charts $2,300,000 in

damages is adequately supported in the record, and that

the amount awarded is not excessive as a matter of law.

Schneider, 987 F.2d at 136 (“A jury verdict is excessive if it

is so high as to shock judicial conscience”); see also, Holt,

2004 _ WL 178604 (defendant challenged, inter alia, the

jury's “rejection of their argument on mitigation of

damages”; the court found that “[eJach of these decisions

required findings of fact. The jury's findings in favor of the

plaintiff may make their award seem generous in the eyes

of [the defendant], but the award is not excessive as a

matter of law, and must therefore be preserved”).

*379 IIT Conclusion

Nationwide's motion for judgment as a matter of law or, in

the alternative, motion for a new trial [Doc. # 254] is

DENIED in part and GRANTED in part.

CHARTS' MOTION FOR ATTORNEY'S FEES

Charts has moved for attorney's fees based on the

provisions for such fees set forth in the Franchise Act and

CUTPA. More specifically, Charts seeks attorney's fees in

the amount of $1,283.013.55 for work performed through

December 31, 2004 and in the amount of $98,204 for

subsequent work performed on the post-trial motions.

Finally, Charts requests that the Court increase the award

by doubling it due the nature and complexity of this case.

In response, Nationwide sontends that Charts' attorneys

should be limited to the amount of attorney's fees

established by the contingency fee agreement they entered

into with Charts, and that no additional fees are

warranted. In the event that the Court decides that Charts

46

is not limited to the contingency fee amount, Nationwide

argues that the fees submitted by Charts’ attorneys are

excessive.

1) Statutory Fee Provisions

Connecticut follows the American Rule for attorney's fees,

awarding fees only where explicitly permitted by the terms

of a contract or a statute. See, e.g., Doe v. State, 216 Conn.

85, 106, 579 A.2d 37 (1990); Marsh, D Calhoun uv.

Solomon, 204 Conn. 639, 653, 529 A.2d 702 (1987);

Lorenzetti v. Jolles, 120 F.Supp.2d 181, 189 (D.Conn.2000).

Both parties agree that an award of attorney's fees in this

matter is permitted by both the Franchise Act and

CUTPA. The parties dispute, however, the extent to which

those statutes permit such an award. Moreover, the

parties dispute whether attorney's fees should be awarded

to Charts pursuant to the Franchise Act, CUTPA or both.

2) The Franchise Act

A franchisee bringing an action under the Franchise Act,

“if successful, shall be entitled to costs, including, but not

limited to, reasonable attorneys’ fees.” Nationwide

concedes that, if its post-trial Rule 50 motion is denied,

Charts is entitled to attorney's fees under the Franchise

Act. See, e.g., Virzi Subaru, Inc. vu. Subaru of New

England, Inc., 742 F.2d 677 (1st Cir.1984) (“The

Connecticut [Franchise Act] provides that a franchisee

who brings an action for substantive violations is entitled

to reasonable attorney's fees ‘if successful’ ”) (emphasis

added) Nationwide argues, however, that such an award is

limited to the amount established by the contingency fee

agreement Alex Charts entered into with counsel. In

response, Charts contends that a contingency fee

agreement is only a floor, and not a ceiling, to a reasonable

award of attorney's fees pursuant to the Franchise Act.

47

In Sorrentino v. All Seasons Services, Inc., 245 Conn. 756,

717 _ A.2d 150 (1998), the plaintiff entered into a

contingency fee agreement that called for his counsel to

receive one-third of any recovery. Based on the jury's

award, therefore, the appropriate award would have been

$48,643.57. Id. at 773-74. 717 A.2d 150. The trial court

reduced the award of attorney's fees to $30,000, however,

based on its finding that the higher (one-third) amount

was not justified by the billing records submitted by

plaintiffs counsel. On appeal, the ~onnecticut Supreme

Court reversed, holding that “a trial court should not

depart from a reasonable fee agreement in the absence of a

persuasive demonstration that enforcing the agreement

would result in substantial unfairness to the defendant.”

Id. at 776, 717 A.2d 150.

*380 In Schoonmaker v. Lawrence Brunoli, Inc., 265 Conn.

210, 828 A.2d 64 (2003), the Connecticut Supreme Court

expanded on its decision in Sorrentino, concluding that:

[Wlihen a contingency fee agreement exists, a two step

analysis is required to determine whether a trial court

permissibly may depart from it in awarding a reasonable

fee pursuant to statute or contract. The trial court first

must analyze the terms of the agreement itself ... If the

agreement is, by its terms, reasonable, the trial court may

depart from its terms only when necessary to prevent

“substantial unfairness” to the party, typically a

defendant, who bears the u!timate responsibility for

payment of the fee ... By contrast, if the trial court

concludes that the agreement is, by its terms,

unreasonable, it may exercise its discretion and award a

reasonable fee in accordance with the factors enumerated

in rule 1.5(a) of the Rules of Professional Conduct.

48

Id. at 270-72, 828 A.2d 64 (citations omitted).

Consequently, the Court reversed the judgment of the trial

court, which had made an award of attorney's fees greater

than called for by the terms of the contingency fee

agreement, concluding that the trial court “violated both

the spirit and the letter of Sorrentino by not giving the

existing contingency fee agreement its due regard.” Jd at

272, 828 A.2d 64.

Therefore, pursuant to the teachings of Schoonmaker and

Sorrentino, Nationwide argues that an award of attorney's

fecs to Charts under the Franchise Act is capped by the

amount established by the contingency fee agreement.

This argument was rejected previously by a judge in this

District, however, in Fabri v. United Techs, International,

Inc., 193 F.Supp.2d 480, 484-85 (D.Conn.2002). In Fabri,

the Court first distinguished the holding of Sorrentino on

the ground that CUTPA, the statute at issue in Fabri, has

important differences from § 31-290a, the statute at issue

in Sorrentino. Id. at 484. Moreover, the Court found that,

“(elven construing Sorrentino to apply to all state fee

statutes, it holds at best that contingent fee agreements

are a floor to a reasonable award.” Id. at 484. After

reviewing the policy behind Sorrentino's holding, the

Court then noted that “!t}here is no parallel need to make

contingent fee agreements into a ceiling to protect a

plaintiffs jury award. As such, Sorrentino need not be

extended beyond its facts as Defendants would do.” Jd. at

485. In Schoonmaker, the Connecticut Supreme Court

explicitly noted that it “agree{d) with the recent

characterization of Sorrentino by the United States

District Court for the District of Connecticut” in Fabri, and

quoted that Court's finding that, “[e]ven construing

Sorrentino to apply to all state fee statutes, it holds at best

that contingent fee agreements are a floor to a reasonable

award.” Schoonmaker, 265 Conn. at 271, 828 A.2d 64.

49

Consequently, the Court finds that the Connecticut

Supreme Court's decisions in Sorrentino and Schoonmaker

mean that a contingency fee agreement only limits the

floor for an award of “reasonable” attorney's fees under

statutes suc as the Franchise Act, and do not limit the

top range for such an award.

Accordingly, the bottom range of the award the Court

“shall” make to Charts pursuant to the Franchise Act is

the amount established by the contingency fee agreement

Alex Charts entered into with his attorneys, which

provides that his attorney's fee “will be one quarter (25%)

of any recovery obtained in the case, after deduction of

expenses, either by way of settlement, trial or appeal.” At a

minimum, this provisions requires an award of $575,000

($2,300,000 x.25) pursuant to the *381 Franchise Act.?°

The question becomes, therefore, whether the Court

should depart upwards from that agreement and award

the full amount requested by Charts: $1,381,217.55, which

was derived through Charts invoking the “lodestar”

method of multiplying the reasonable hours worked by a

reasonable hourly rate. See, e.g., Hensley v. Eckerhart, 461

U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983).

As recounted in the introductory portion of this ruling, this

case has a long and protracted history. Charts successfully

challenged an adverse summary judgment ruling before

the Second Circuit, obtained a favorable ruling on a second

20 Nationwide has not argued that, pursuant to Schoonmaker, the

Court should award /ess than that amount in order to prevent it from

suffering “substantial unfairness.” For example, Nationwide has not

argued that, because this was a three count complaint, an award of the

full contingency fee under the Franchise Act fee provision would

include fees for time that was not spent on the Franchise Act count,

but rather was spent on either the CUTPA or the implied covenant of

good faith and fair dealing count.

50

motion for summary judgment in this Court and obtained

a favorable jury verdict at a trial conducted eight years

after the case was initially filed. Given these factors, the

Court finds that Charts is entitled to an attorney's fee

award that is greater than the one provided for by the

contingency fee agreement. In determining what amount is

warranted, the Court has considered the twelve factors

generally relevant to an award of reasonable attorney's

fees that were first set forth in Johnson vu. Georgia

Highway Express, Inc., 488 F.2d 714, 717-19 (5th

Cir.1974):

(1) the time and labor required;

(2) the novelty and difficulty of the questions;

(3) the skill requisite to perform the legal service properly;

(4) the preclusion of other employment by the attorney due

to acceptance of the case;

(5) the customary fee for similar work in the community;

(6) whether the fee is’ fixed or _ contingent;

(7) time limitations imposed by the client or the

circumstances;

(8) the amount involved and the results obtained;

(9) the experience, reputation and ability of the attorneys;

(10) the “undesirability” of the case;

51

(11) the nature and length of the professional relationship

with the client; and

(12) awards in similar cases.

See Hernandez _v. Monterey Village Associates Ltd.

Partnership, 24 Conn.App. 514, 517 n. 3, 589 A.2d 888

re. (adopting the Johnson factors); see also Steiger v.

uilders, Inc., 3 663 A.2d 432

1905) (applying the Johnson factors in CUTPA context);

Sabir v. Jowett, 214 F.Supp.2d 226, 249 (D.Conn.2002))

(applying Johnson factors after favorable jury verdict on

28 U.S.C. § 1983 claim and intentional infliction of

emotional distress claim); Here, after consideration of

those twelve factors, the Court awards Charts $750,000 in

attorney's fees. This amount, although substantially

higher that called for by the contingency fee agreement,

also is substantially less than requested by Charts. The

following factors were among those contributing to the

Court's decision concerning the size of the award: Charts'

request was based on current rates, rather than the rates

billed at the time the work was conducted-which is some

instances was ten years' prior.2! Moreover, many of *382

the entries in the billing record appeared to be duplicative,

2) Nationwide's argument that the current fees submitted by Charts

are excessive, however, is rejected, The current hourly fee charged by

Attorney Garcia, Charts' lead attorney, is $375.00. Given the

qualifications set forth in Attorney Garcia's affidavit, as well as this

Court's observation as to the caliber of representation provided by him

in this matter, this fee is not excessive. See, e.g., Kaplan v. Gruder,

2000 WL 767679 (Conn. Super., May 25, 2000) (finding that a

requested fee of $450 and $480 per hour, which were “the rates

prevailing in New York City,” are “are considerably different. fram the

rates here in Connecticut,” and, therefore, the attorney was only

entitled to $350 per hour), Moreover, as Charts notes, this fee, as well

as the others charged by Charts' attorneys, appears to be comparable

to, or even less then, the fees charged attorneys at the firm

representing Nationwide jn this matter.

52

excessive or unrelated to this case. Charts' attorneys also

set their recovery percentage at twenty-five percent in the

contingency fee agreement, and this factor must be

considered along with the remaining eleven Johnson

factors. Nevertheless, the novelty and difficulty of the

questions presented by this case, the skill required to

perform the legal service properly, the amount involved

and the results obtained and the experience, reputation

and ability of the attorneys all counsel heavily in favor of

an award above the contingency fee amount.

As the Court noted in Fabri, “!a] fee award is an obligation

of a defendant to a plaintiff. A contingent fee agreement is

an agreement between a plaintiff and his or her counsel,

an agreement to which a defendant is not a party, and

which should not be permitted to alter the purpose of the

statutory award.” The Franchise Act is a remedial statute,

and courts read it accordingly. See, e.g., Hartford Electric

Supply Co., 250 Conn. at 345, 736 A.2d 824 (the

“(F]ranchise [AlJct's remedial purpose, to prevent a

franchisor from unfairly exerting economic leverage over a

franchisee, indicates that the statute should be read

broadly in favor of the plaintiff’). The Franchise Act

provides that a_ successful plaintiff is entitled to

“reasonable attorney's fees,” and, given the procedural

history of this case, as well as all of the Johnson factors,

an award of $750,000 represents “reasonable attorney's

fees.”

2) CUTPA

Charts also has moved for attorney's fees under CUTPA,

which provides: “In any action brought by a person under

this section, the court may award, to the plaintiff, in

addition to the relief provided in this section, costs and

reasonable attorneys’ fees based on the work reasonabiy

performed by an attorney and not on the amount of

’

.

53

recovery.” Conn. Gen.Stat. § 42-110g(d). As both parties

recognize, an award of attorney's fees under CUTPA is

discretionary. See, e.g.,; Riggio v. Orkin Exterminating Co.,

Inc., 58 Conn.App. 309, 317, 753 A.2d 423 (2000) (“[t)he

trial court has discretion whether to award attorney's fees

unter CUTPA”) (emphasis added). Exercising its

discretion, the Court finds that the same award of

$750,000 also is appropriate under § 42-110g(d).

CUTPA explicitly provides that an award of attorney's fees

must not be based on “the amount of recovery.” § 42-

110g(d). Thus, a contingency fee agreement does not limit

the amount a court may award to a successful CUTPA

plaintiff. See, e.g., Fabri, 193 F.Supp.2d at 484-85. Instead,

the Court must look to the work “reasonably performed” by

an attorney on the CUTPA claim. and claims related to the

prosecution of the CUTPA claim, in order to determine a

fee award. Jacques All Trades Corp. vu. Brown, 57

Conn.App. 189, 200, 752 A.2d 1098 (2000). Turning the to

the work performed by Charts’ attorneys *383 in this case,

the Court first notes that the factual basis for the CUTPA

count and the Franchise Act count were inextricably

intertwined, as evidenced by the Court's ruling on

Nationwide's motion for judgment as a matter of law on

the CUTPA count. More generally, this Court previously

has stated: “Where a particular case involves several legal

theories relating to a common core of underlying facts, a

court need not analyze fees on a claim-by-claim basis, but

instead ‘should focus on the significance of the overall

relief obtained by the plaintiff in relation to the hours

reasonably expended on the litigation.’ ”" Sabir, 214

F.Supp.2d at 249 (quoting Hensley, 461 U.S. at 435, 103

S.Ct. 1933), Thus, although Nationwide argues that

Charts has not identified the work which was related

solely to the CUTPA claim, the facts of this case made

such a task very difficult. Consequently, the Court may

54

look to the total amount of effort expended by Charts’

attorneys when determining what fee is appropriate under

CUTPA.

In the section of this ruling addressing attorney's fees

under the Franchise Act, the Court determined that an

award of $750,000 accurately reflects the reasonable hours

worked by Charts’ attorney, and is based on a reasonable

billing rate that is adjusted for present value, as well as

affected by the other factors. Such an award limits billings

submitted for duplicative, excessive or unrelated work,

while at the same time recognizes that the complex and

novel legal issues presented by this case required a

significant amount of effort and billings. In sum, the Court

finds that an award of $750,000 provides compensation for

work “reasonably performed by [Charts'| attorneyls|” on

this case.

C) Multiplier

Charts’ counsel also vequests that the award of attorney's

fees be adjusted upwards by a multiplier of 2.0 due to the

“extreme risk” they undertook in this case, the “superior”

representation they provided and the “exceptional” results

they achieved through the “unprecedented” jury verdict.

See Hensley, 461 U.S. at 434, 103 S.Ct. 1933 (“other

‘onsiderations ... may lead the district court to adjust the

fee upward or downward, including the important factor of

the ‘results obtained’ ”). Although the Court agrees that

Charts' attorneys provided able representation, the Court

nevertheless declines to double the attorney's fee award.

All of the factors cited by Charts were considered by the

Court in determining the “lodestar” amount to award, and

they do not justify an additional enhancement. “The party

asking the court to depart from the lodestar amount bears

the burden of proving that such a departure is necessary to

the calculation of a reasonable fee.” Evans vu. State of

50

Connecticut, 967 F.Supp. 673, 692 (D.Conn.1997). Charts

has not met that burden here.

D) Conclusion on Attorney's Fees

In sum, whether made pursuant to the provision in the

Franchise Act for attorney's fees, to the provision in

CUTPA for attorney's fees or pursuant to both provisions,

the Court finds that an award of $750,000 in attorney's

fees to Charts is reasonable and _ appropriate.

E) Costs

Charts also has requested $30,341.41 in expenses incurred

in the prosecution of this action, covering expenses such as

copying costs, messenger fees and expert witness fees.

Nationwide objects to the amount of expenses claimed by

Charts, maintaining that there is no statutory basis for

particular expenses submitted by Charts. As_ the

Connecticut Supreme Court has explained: “It is a *384

settled principle of our common law that parties are

required to bear their own litigation expenses, except as

otherwise provided by statute ... Furthermore, because

costs are the creature of statute ... unless the statute

clearly provides for them courts cannot tax them.” M.

DeMatteo Construction Co. v. New London, 236 Conn. 710,

674 A.2d 845 (1996) (citations and quotations omitted).

Both the Franchise Act and CUTPA allow the Court to

award Charts “costs,” with the only difference being that

the Court “shall” make such an award under the Franchise

Act, and “may” make such an award under CUTPA. Of the

$30,341.41 requested, $26,618.63 related to expenses

incurred for items such as messenger services, copies,

travel and court’ reporter services. Reviewing those

expenses, the Court finds that they should be reduced by

one third to el’minate’§ duplicative, unrelated or

56

unnecessary expenses.** Therefore, the Court awards

Charts $17,745.75 in costs pursuant to the Franchise Act

and CUTPA. See Gerner _v. Applied Industrial Materials

Corp., 2005 WL 1805670 at *10 (Conn.Super.Ct., June 30,

2005)(awarding forty percent of claimed costs for “readily

understandable costs of litigation such as copying charges,

delivery expenses and transcript costs”); Bristol

Technology, Inc. v. Microsoft, 127 F.Supp.2d 64, 84

(D.Conn.2000) (awarding as “costs” pursuant to § 42-

110g(d) for “disbursements for delivery services” and “{c]

for travel, deposition transcripts, and expert witness fees”).

The Court will not award Charts the requested $1,579.78

fee for Kitty Koenig, a “trial analyst” employed by the law

firm representing Charts. The remaining portion of the

requested amount, $2,143, was a fee paid to Kosowsky for

his expert witness testimony. There is some dispute about

whether fees paid to an expert accountant are recoverable

under statutes such as the Franchise Act and CUTPA, as

both of those statutes fail to define what “costs” are

recoverable. More specifically, there is a dispute over

whether any expert fee may be awarded under such

statutes, or only fees paid to an expert listed in

Connecticut's general fee provision statutes, Conn.

Gen.Stat. §§$ 52-257 and 52-260.23 The Connecticut

22 For example, there are numerous entries for “Westlaw research,”

however there is no indication as to what this research was related to,

which count it was related to or for what motion or stage of the

litigation it related.

2* Generally, Connecticut courts interpret “cost” provisions narrowly.

See M. DeMatteo Construction Co. v. New London, 236 Conn. 710, 674

A.2d 845 (1996) (concluding that Conn. Gen.Stat. § 12-117a did not

mention appraisal costs, and, therefore, such costs only allowable if

provided by the general fee statutes $$ 52-527 and 52-560). In the

context of fees for expert witnesses, the Connecticut Appellate Court

has applied the teachings of M. DeMatteo Construction Co. and found

that experts not listed in § 52-260 may not have their fees taxed as

o7

Appellate*385 Court has held that such experts' fees are

not within the “costs” provided by the CUTPA statute.

Miller _v. Guimaraes, 78 Conn.App. 760, 829 A.2d 422

(2003) (finding that the trial court improperly awarded

taxable costs for the fees paid to an attorney serving as an

expert on the legal fees that should be awarded to the

plaintiff). This Court assumes that Connecticut courts

would find the same as to permitted costs under the

Franchise Act. Thus, no experts’ fees will be awarded by

virtue of the “costs” references in CUTPA and the

Franchise Act.

In sum, the Court awards Charts $750,000 in attorney's

fees and $17,745.75 in costs.

CHARTS' MOTION FOR PREJUDGMENT

INTEREST

costs. Arnone _v. Town of Enfield, 79 Conn.App. 501, 831 A.2d 260

(2003) (reversing award of $6,479 in costs for payment of expert

witness fees on the ground that, because § 31-51m does not expressly

provide for expert witmess fees, such fees may only be awarded if

provided for in § 52-260(f), the Connecticut statute addressing fees for

witnesses, and that an economist is not a listed expert witness whose

cost may be reimbursed under § 52-260(f)); Miller v. Guimaraes, 78

Conn.App. 760, 829 A.2d 422 (2003) (concluding that the trial court

improperly awarded a successful CUTPA plaintiff $1,000 as a taxable

cost for an expert who was an attorney, as that type of expert was not

covered by the provision for payment of expert witness fees in § 52-

260). Those decisions, however, have been subject to criticism. See,

e.g., Gerner v. Applied Industrial Materials Corp., 2005 WL 1805670

(Conn.Super.Ct., June 30, 2005) (citing cases, distinguishing Miller,

and finding that the plaintiff was entitled expert fees as a “cost”

pursuant § 42-110g(d), without regard to § 52-260); see also Duerr v.

Dicesare, 37 Conn. L. Rptr. 909, 2004 WL 2361833 (Conn Super., Oct

1, 2004) (disagreeing with Miller, yet “follow |ing! the rule set forth

therein”); Bristol Technology, Inc., 127 ¥. Supp.2d at 82 (“In state

court, Conn. Gen Stat. Sec. 52-257(b) provides for taxable costs

CUTPA, however, authorizes the award of costs over and above these

taxable cost provisions”).

Charts also has moved for prejudgment interest on the

jury's award of $2.3 million in damages. It is well settled

that “[w]hen the court's jurisdiction is based upon

diversity, an award of prejudgment interest is governed by

state law.” Brandewiede v. Emery Worldwide, 890 F.Supp.

79, 82 (D.Conn.1994). The relevant Connecticut statute

provides: “Except as provided in sections 37-3b, 37-3e and

52-192a, interest at the rate of ten percent a year, and no

more, may be recovered and allowed in civil actions ... as

damages for the detention of money after it becomes

payable.” Conn. Gen.Stat. § 37-3a.24 However, this Court

previously has found that, “[als such interest is an element

of [the plaintiff's] damages, ‘the determination of whether

interest pursuant to § 37-3a should be awarded is a

question for the trier of fact.’” Neptune Group, Inc. v. MKT,

Inc., 205 F.R.D. 81, (D.Conn.2002) (emphasis added)

(quoting Foley v. Huntington Co., 42 Conn.App. 712, 682

A.2d 1026 (1996)). Similarly, in Retepromaca

Representaciones Tecnicas Proyectos Y Sistemas, C.A. v.

The Ensign-Bickford Co., 2004 WL 722231 at *8 (D. Conn.,

Mar 30, 2004), Judge Underhill concluded, “after a

thorough review of relevant state and federal cases .. that

the question of whether to award prejudgment interest

pursuant to section 37-3a must be decided by the trier of

24 Charts also moved for prejudgment interest pursuant to 28 U.S.C. §

196\(a). As Nationwide notes in its memorandum in opposition,

however, § 1961 only provides for postjudgment interest. See § 1961(a)

(providing that “interest shall be calculated from the date of the entry

of the judgment”); Mobil Exploration & Producing North America, Inc.

vu. Graham Royalty Ltd.,_910 F.2d 504 (8th Cir.1990) (in a diversity

case, concluding that “28 U.S.C. § 1961 must be applied to calculate

the rate of post-judgment interest” (emphasis added). Charts failed to

respond to Nationwide's memorandum in cwposition, and has not

requested that this Court award postjudgmeri interest pursuant to §

1961. Consequently, the Court declines to construe Charts’ motion as

one seeking both pre and postjudgment interest.

o9

fact-in this case the jury.” Consequently, because the issue

of prejudgment interest was not raised until after

judgment had entered, and, therefore, was not charged to

the jury, Judge Underhill rejected the plaintiffs argument

that he had discretion to award such interest. Charts'

attempt to distinguish those two cases, and the clearly

established law that they rely on, is unpersuasive.

Although Charts did request prejudgment interest

pursuant to § 37-3a in the amended*386 complaint, the

issue was not submitted to the jury for consideration.

Indeed, Charts failed to raise that issue during trial, the

charging conference or in a motion before the jury was

discharged. Consequently, the Court is without the ability

to award such damages, and the motion for prejudgment

interest |Doc. # 260] is DENIED.*5

CONCLUSION

1) Nationwide's motion for judgment as a matter of law or,

in the alternative, motion for a new trial [Doc. # 254] is

DENIED in part and GRANTED in part.

2) Charts' motion for attorney's fees |[Doc. # 262] is

GRANTED, and Charts is awarded $750,000 in attorney's

fees and $17,745.75 in costs.

3) Charts' motion for prejudgment interest [Doc. # 260] is

DENIED.

25 Nationwide also argues that prejudgment interest is not appropriate

in this case because the jury's award of damages was not an award of

“damages for the detention of money after it be[came] payable ....” §

37-3a. Rather, Nationwide claims it was an award for lost profits, as

argued by Charts, and, therefore, it cannot support an award of

preyudgyment interest pursuant to § 37-3a. Because the Court has

found that the question of prejudgment interest was not properly

submitted to the jury, and such an award is therefore inappropriate,

this argument need not be addressed.

SO ORDERED.

61

Charts v. Nationwide Mut. Ins. Co., 300 B.R. 552 (D.

Conn. 2003) (“Charts IT’)

United States District Court,

D. Connecticut.

Alex CHARTS, et al., Plaintiffs,

V.

NATIONWIDE MUTUAL INSURANCE CoO., et al.,

Defendants.

No. CIV.A.3:97CV1621(CFD).

Sept. 30, 2003.

Former Chapter 7 debtor asserted claims against

insurance companies for breach of implied covenant of

good faith and fair dealing, violation of the Connecticut

Franchise Act, and violation of the Connecticut Unfair

Trade Practices Act (CUTPA). The United States District

Court for the District of Connecticut, Droney, J., adopting

the recommendation of Garfinkel, United States

Magistrate Judge, granted defendants’ motion for

summary judgment based on former debtor's alleged lack

of standing to pursue these claims, and former debtor

appealed. The Court of Appeals, 16 Fed. Appx. 44, vacated

and remanded, with jimstructions to join bankruptcy

trustee as indispensable party. On remand, the District

Court, Droney, J., held that claims that accrued

postpetition, when corporation that had entered into

postpetition corporate agency agreement with Chapter 7

debtor allegedly breached that agreement while

bankruptcy case was pending, was not sufficiently rooted

in debtor's prebankruptcy past to be included in “property

of the estate,” though provision in corporate agency

agreement purported to make agreement retroactive to

date before bankruptcy petition was filed.

Motion denied.

62

RULING ON DEFENDANTS' MOTION FOR

SUMMARY JUDGMENT

DRONEY, District Judge.

Pursuant to Fed.R.Civ.P. 56, the defendants, Nationwide

Mutual Insurance Company, Nationwide Mutual Fire

Insurance Company, Nationwide Life Insurance Company,

Nationwide Property and Casualty Insurance Company,

Nationwide Variable Life Insurance Company, and

Colonial Insurance Company of California (collectively

“Nationwide’) filed a Motion for Summary Judgment

and/or For Order Limiting the Issues to be Tried [Doc. #

127]. For the following reasons the defendants' motion is

DENIED.

I. Background!

Plaintiff Alex Charts first entered into an insurance

agent's agreement with Nationwide on February 1, 1979.

Charts operated his insurance agency as a corporation

named “Alex Charts Agency, Inc.” In late 1992 or early

1993, around the time that Charts and his wife filed for

personal bankruptcy, Charts formed “the Charts

Insurance Agency, Inc.” (“CIAI”).2 CIAI, which is also a

plaintiff in this action, entered into a Corporate Agency

Agreement with Nationwide on May 10, 1993. That

agreement identified Charts as the principal of CIAI. The

agreement also provided that it could be terminated by

either party upon written notice, without cause.

' The facts are taken from the parties Local Rule 9(c) statements and

motion papers. (The Local Rules have been renumbered since the

parties filed their papers. The new Local Rule number is 56). Disputed

facts are indicated

2 The parties dispute the precise date on which this entity was formed,

but agree that the Certificate of Organization and the First Biennial

Report were filed with the Connecticut Secretary of State's Office on

January 20, 1993.

63

On December 14, 1992, Alex Charts and his wife Helena

filed their voluntary petition under Chapter 7 of the

Bankruptcy Code with the United States Bankruptcy

Court for the District of Connecticut. On February 13,

1996, the Bankruptcy Court issued an Order of Discharge

of Debtor, and the bankruptcy case was closed on March 1,

1996. The plaintiffs concede that the bankruptcy petition

did not include any references to CIAI and that its

existence was never raised in the bankruptcy proceedings,

but they maintain that because CIAI was formed after the

petition was filed, it need not have been disclosed. Charts

did disclose his ownership of the shares of Alex Charts

Agency, Inc. in his bankruptcy schedules.

By letter dated January 11, 1996, Nationwide cancelled

the Corporate Agency Agreement with CIAI. After Charts

requested an internal review of that decision, Nationwide's

review board endorsed the termination. Charts and CIAI

filed this action on August 11, 1997. The amended

complaint |[Doc. # 62] asserts three counts.? Count one

alleges that in terminating*554 the Corporate Agency

Agreement with CIAI, Nationwide breached its implied

covenant of good faith and fair dealing. Count two asserts

that the termination of the agreement was in violation of

the Connecticut Franchise Act. Count three asserts that

the termination resulted in a violation of the Connecticut

Unfair Trade Practices Act (“CUTPA”), Conn. Gen.Stat. §§

42-110b, et seg. Nationwide's summary judgment motion

addresses all three counts.

Before reaching the merits of the summary judgment

motion filed by Nationwide, the Court will recount more of

3 This Court has jurisdiction over this case pursuant to 28 U.S.C. §

1332, as there is complete diversity of citizenship between the

opposing parties

64

the procedural history of this case, particularly its

intersection with the Charts' bankruptcy petition and

discharge.

II. Additional Procedural History of this C*se

On December 6, 1999, Nationwide filed its first motion for

summary judgment [Doc. # 85] claiming that because

Charts did not disclose the existence of CIAI in his

bankruptcy proceedings, he did not have standing to

pursue this lawsuit and should be judicially estopped from

pursuing any undisclosed claim. On August 8, 2000,

Magistrate Judge William 1. Garfinkel issued a

recommended ruling [Doc. # 97] granting the summary

judgment motion and concluding that Charts’ claims

against Nationwide were part of the Charts’ bankruptcy

estate and as such could not be asserted here by Charts.

On September 29, 2000, this Court approved, in part, the

recommended ruling [Doc. # 102], over the plaintiffs’

objection, and judgment entered for Nationwide [Doc. #

103].4

The plaintiffs appealed the ruling and judgment and on

July 11, 2001, the Second Circuit issued a Summary Order

remanding the case to this Court [Doc. # 110]. While not

commenting on the merits of this Court's conclusion that

the plaintiffs’ claims were property of the bankruptcy

estate, the Second Circuit held that the bankruptcy trustee

was a necessary party in making such a determination.

The mandate directed this Court “to vacate the judgment”

and “reopen|[ | t»« proceeding and join[ | the [bankruptcy]

estate as a party.” :t further stated that “withdrawal of the

reference would seem to be the most practical and

expeditious way of handling the matter.”

4 The Court did not approve that part of the decision which concluded

that Charts was also precluded by the doctrine of judicial estoppel.

65

In accordance with the mandate, on July 12, 2002, this

Court entered an Order [Doc. # 126] vacating its ruling on

the motion for summary judgment. The Order also

directed the Clerk of the Bankruptcy Court for the District

of Connecticut to withdraw the reference in the Charts

Bankruptcy case. Further, it directed the Clerk of this

Court to add the bankruptcy estate as a plaintiff in this

case, and directed the trustee of the estate to file an

appearance.

On July 26, 2002, the defendants filed this motion for

summary judgment [Doc. # 127], which closely mirrors

their original motion. A hearing on the defendants’ motion

was held following tne formal consolidation of this action

with the bankruptcy action.

til. Summary Judgment Motion

In its new Motion for Summary Judgment [Doc. # 127],

Nationwide asserts the same standing and _ judicial

estoppel arguments that were the basis of the

recommended*555 ruling on the first motion for summary

judgment-that is, that Charts does not have standing to

assert these claims, or that he is judicially estopped from

asserting them, because he had not disclosed the existence

of CIAI during the bankruptcy proceedings.

Nationwide also claims that, even if Charts has standing

and is not judicially estopped from asserting these claims,

it is entitled to summary judgment on the merits of the

first, second, and third counts of the amended complaint

Regarding count one, Nationwide argues that its

termination of CLAI cannot violate the implied covenant of

good faith and fair dealing because the Corporate Agency

Agreement expressly provides that it was terminable at

66

will by Nationwide. Regarding the Connecticut Franchise

Act claims in count two, Nationwide asserts that, based on

the undisputed facts, the Corporate Agency Agreement did

not create a “franchise” and therefore that the plaintiffs do

not fall within the Act. Finally, Nationwide asserts two

independent bases for summary judgment on the plaintiffs’

CUTPA claims in count three: 1) to the extent that it

incorporates the earlier counts, it must fail “as they do”

and 2) that the additional CUTPA violation aileged-

involving a “computer crime”-is time-barred.

IV. Standard

In a summary judgment motion, the burden is on the

moving party to establish that there are no genuine issues

of material fact in dispute and that it is entitled to

judgment as a matter of law. See Fed.R.Civ.P. 56(c);

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106

S.Ct. 2505, 91 L.Ed.2d 202 (1986). A court must grant

summary judgment “ ‘if the pleadings, depositions,

answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact.’ ” Miner v. City of

Glens Falls, 999 F.2d 655, 661 (2d Cir.1993) (citation

omitted). A dispute sceneaiie a material fact is genuine “

‘if the evidence is such that a reasonable jury could return

a verdict for the nonmoving party.’ ” Aldrich_v. Randolph

Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir.1992) (quoting

Anderson, 477 U.S. at 248, 106 S.Ct. 2505). After

discovery, if the nonmoving party “has failed to make a

sufficient showing on an essential element of [its] case

with respect to which [it] has the burden of proof,” then

summary judgment is appropriate. Celotex Corp. v. Catrett,

477 U.S. 317, 323, 106 8.Ct. 2548, 91 _L.kd.2d 265 (1986).

67

The Court resolves “all ambiguities and drawls] all

inferences in favor of the nonmoving party in order to

determine how a reasonable jury would decide.” Aldrich

963 F.2d at 523. Thus, “{o]nly when reasonable minds

could not differ as to the import of the evidence is

summary judgment proper.” Bryant v. Maffucci, 923 F.2d

979, 982 (2d Cir.1991); see also Suburban Propane uv.

Proctor Gas, Inc., 953 F.2d 780, 788 (2d Cir.1992).

V. Discussion

A. Property of the Estate

As noted above, the recommended ruling on_ the

defendants’ original motion for summary judgment,

approved by this Court, found that the claims asserted by

the plaintiffs here belonged to the bankruptcy estate of

Alex Charts and his wife. Therefore, the Court held, the

Charts’ failure to disclose CIAI's existence and to list their

claims on the schedule of assets in the bankruptcy

proceeding deprived them of standing to pursue these

claims here. The Second Circuit's Summary Order |Doc. #

110] remanding this case did not address the merits of this

Court's determination that the claims were property of the

*556 bankruptcy estate, but held that “the district court

erred in adjudicating the property rights and claims at

issue without joining the debtor's estate as a party.”

Summary Order, at 2.5 After considering the parties’

5 At the hearing held after the estate was joined as a party, the

estate's trustee, Attorney Richard Belford, indicated that he believed

the claims raised by the Charts relating to CIAI were not properiy part

of the bankruptcy estate. Moreover, Belford indicated that if the Court

were to again hold that these \ iaims were part of the estate, he would

seek to abandon them. If the claims had been abandoned by the estate,

this issue would have been moot, because debtors are free to pursue

claims *.at have been abandoned by the estate. See Hutchins _v.

Internal Revenue Serv., 67 F.3d 40, 45 (3d Cir.1995) (holding that

68

arguments and the comments of the trustee, the Court will

again consider the question of whether the claims asserted

by the plaintiff were part of the bankruptcy estate.

1. Waiver of Standing Claim

The plaintiffs argue that by failing to raise issues of lack of

standing, bankruptcy, and judicial estoppel in their first

responsive pleading, Nationwide has _ waived those

affirmative defenses, pursuant to Fed.R.CivP. 8(c).

However, standing is an essential element of jurisdiction.

See In re Bennett Funding Group, Inc., 336 F.3d 94, 102

(2d Cir.2003) (“[S]tanding is an aspect of subject matter

jurisdiction”); Abortion Rights Mobilization, Inc. v. Baker,

885 F.2d 1020, 1023 (2d Cir.1989) (“[Wjhen a plaintiff

lacks standing to bring suit, a court has no subject matter

jurisdiction over the case.”). Furthermore, it is well-settled

that issues going to this court's subject matter jurisdiction

can never be waived. See The Herrick Co. v. SCS

Communications, Inc., 251 F.3d 315, 333 (2d Cir.2001)

(“Under these circumstances, the fundamental principle

that the limits on federal subject matter jurisdiction

cannot be waived, and may be challenged at any time,

governs.”). Therefore, the Court holds that Nationwide has

not waived it. wbjection based on standing by failing to

raise it in its first responsive pleading. With regard to

whether the defense of bankruptcy has been waived, the

Court finds that the Charts' bankruptcy proceedings are

not asserted as an affirmative defense. Rather, those

proceedings are merely the _ factual predicate to

debtor had standing to assert potential tax refund claim after the

court granted the trustee's motion to abandon the claim). However, the

estate did not abandon the claims, but instead sold any interest it had

in the claims to Nationwide. Thus, if the Court were to hold that these

claims were property of the estate, the Charts would not have

standing to assert them because any claim owned by the estate is now

held by Nationwide.

69

Nationwide's standing argument, which, as has just been

noted, cannot be waived.

2. Plaintiffs' Standing®

“When a debtor files for bankruptcy protection, a

bankruptcy estate is *557 created.” Polvay v. B.O.

Acquisitions, Inc., No. 96 Civ. 3576(PKL), 1997 WL

188127, at *2 (April 17, 1997, S.D.N.Y.). The scope of the

estate is defined at 11 U.S.C. § 541(3), which lists the

property interests of the debtor that comprise the estate,

and § 541(b), which provides for certain exclusions. It is

undisputed that the Corporate Agency Agreement with

CIAI was entered into in May of 1993-after the Charts'

bankruptcy petition was filed-and that the alleged breach

of that agreement by Nationwide occurred in January

1996-before the bankruptcy case was closed in March of

1996. Thus, the question for this Court is whether Chart's

and CIAI's claims, which accrued after the petition was

6 Although the parties have not raised the issue, the Court notes that

‘t has already decided, by adopting Judge Garfinkel's recommended

ruling, that the plaintiffs’ claims were property of the Charts'

bankruptcy estate. While the Second Circuit's Summary Order [Doc. #

110] did not expressly overrule that determination, the Court retains

the power to reconsider that decision, and will do so now. See May

Dep't Stores Co. v. International Leasing Corp., No. 88Civ.4300(CSH),

1995 WL 656986, at *2 (Nov. 8, 1995 S.D.N.Y.) (Under law of the case

rules, “district courts retain discretion to reconsider, on remand, any

issues that the Circuit Court did not ‘expressly or implicitly decide.’ ”)

(quoting United States v. Stanley, 54 F.3d 103, 107 (2d Cir.1995)). See

also Westerbeke Corp. v. Daihatsu Motor Co., 304 F.3d 200, 219 (2d

Cir.2002) (law of the case a discretionary doctrine); United States v.

Uccio, 940 F.2d 753 (2d Cir.1991) (under law of the case doctrine

courts should adhere to prior decisions in same case, but while the rule

“informs the court's discretion it does not limit the tribunal's power” to

reconsider prior ruling). Moreover, the Second Circuit's mandate

seems to contemplate a de novo review of the standing issue by this

Court after hearing from the bankruptcy trustee.

70

filed, but before the case was closed and the Charts were

discharged, constitute property of the estate under § 541.

Section 541(a) provides, in relevant part, that

Such estate is comprised of all the following property,

wherever located and by whomever held:

(1) Except as provided in subsections (b) and (c)(2) of this

section, all legal or equitable interests of the debtor in

property as of the commencement of the case....

(7) Any interest in property that the estate acquires after

the commencement of the case.

11 U.S.C. § 541(a).

In the recommended ruling on the original motion for

summary judgment, the Court relied on Correll v. Equifax

Check Servs., Inc., 234 B.R. 8 (D.Conn.1997), in which the

Court held that, pursuant to § 541(a)(7), a Fair Debt

Collection Act cause of action arising out of dunning letters

received by the debtor after the bankruptcy petition was

filed constituted property of the estate. See Correll, 234

B.R. at 10. Other courts have reached similar conclusions

based on § 541(a)(7). See Polvay, 1997 WL 188127, at *2

(“Causes of action arising after the debtor files for

bankruptcy generally become part of the estate.”); Stanley

v. Sherwin-Williams Co., 156 B.R. 25 (W.1D.Va.1993)

(debtor did not have standing to maintain cause of action

for interference of contractual relations which arose prior

to the discharge of his estate); Jn_re Griseuk, 165 B.R. 956,

957-59 (Bankr.M.D.F1.1994) (holding that personal injury

action arising during the pendency of the bankruptcy

proceedings was property of the estate); DeLarco v. DeWitt,

136 A.D.2d 406, 408, 527 N.Y.S.2d 615 (N.Y.App. Div.1988)

(“Upon the filing of a voluntary bankruptcy petition, all

71

property which a debtor owns or subsequently acquires,

including a cause of action, vests in the bankruptcy

estate.”). However, other courts have held that post-

petition, pre-discharge causes of action under similar

circumstances are property of the debtor. See Jn re Durrett,

187 B.R. 413, 417-19 (Bankr.D.N.H.1995) (personal injury

action arising post-petition did not become part of the

bankruptcy estate); In re Doemling, 127 B.R. 954, 955-56

(W.D.Pa.1991) (tort claim arising out of post-petition

automobile accident was property of the debtor, rather

than the estate).

Taken together, these cases indicate that there may be no

bright-line test for whether a cause of action that accrues

post-petition will be included as part of the bankruptcy

estate. Rather, in making such a determination, the Court

should consider whether the cause of action “is sufficiently

rooted in the pre-bankruptcy *558 past and _ so little

entangled with the bankrupt's ability to make an

unencumbered fresh start.” Doemling, 127 B.R. at 957

(citing Segal v. Rochelle, 382 U.S. 375, 86 S.Ct. 511, 15

L.Ed.2d 428 (1966) and noting that it is still controlling,

despite the revision of the bankruptcy code in 1978)

(internal quotations omitted).

the Third Circuit considered the relation of a post-petition

legal malpractice claim to the debtor's pre-bankruptcy

past:

[Debtor's] primary contention is that, since’ the

[malpractice] Action is a post-petition tort claim, it can

belong only to the debtor. She relies on caselaw in which

courts have found that a debtor's post-petition cause of

action did not constitute property of the estate [string cite

omitted]. However, none of these cases involved claims

72

that could be traced directly to pre-petition conduct in the

way |this claim] can be ... While we acknowledge that the

conduct giving rise to the malpractice claim occurred post-

petition, we find it conceptually impossible to sever [that

action] from ... {debtor's} pre-bankruptcy dealings with

[her attorney].

Id. at 203-04.

Here, in contrast to O'Dowd, the post-petition claims at

issue did not involve matters that could be traced to the

plaintiffs’ pre-petition conduct. The gravamen for all the

counts in the amended complaint is the alleged breach of

the Corporate Agency Agreement on January 11, 1996.’

The agreement was entered into on May 10, 1993 after the

formation of the new insurance agency, and is not “rooted

in the debtor's pre-bankruptcy past” (which ended with the

filing of the petition in December 1992).8 Even though

7 Although the First Amended Complaint refers also to the “Agency

Agreement” of 1979 and an “Agent Corporation Agreement” of 1991, it

appears that the plaintiffs are relying only on breaches of the

Corporate Agency Agreement of 1993. To the extent that the plaintifts

are making any claims that predate the formation of CIAI or that do

not relate to the 1993 agreement, those claims may very well be

barred by the Charts’ bankruptcy. That distinction 1s best left to the

time of trial, however, in light of the plaintiffs’ apparent reliance on

post-petition causes of action

8 Moreover, Charts was free to enter into contracts in his individual

capacity after the filing of the petition. Section 541(a)(7) explicitly

refers to property acquired by the estate, as distinct from the debtor.

As the court noted in Doemiling.

Obviously, after the commencement of the case, the estate has an

existence that 1s completely separate from that of the debtor. Section

54 1(a)(7) covers only property that the estate itself acquires after the

commencement of the proceeding. Hence, there is absolutely no

support for the ... claim that all the debtor's property, whether

obtained pre- or post-petition, is property of the estate unless

specifically excluded

there is a provision in the Corporate Agency Agreement

purporting to make the agreement retroactive to 1980, it is

not the performance of the contract that is the subject of

the plaintiffs’ claims, but the breach of that agreement-an

event that the parties do not dispute occurred, if at all,

post-petition.

Therefore, the Court holds that the claims asserted by the

plaintiffs are not property of the bankruptcy estate and the

plaintiffs have standing to assert these claims.

B. Merits of the Summary Judgment Claim

The Court finds that there are genuine issues of material

>

fact, including whether the relationship between the

parties constituted a franchise, that preclude summary

judgment on the plaintiffs’ claims.

*559 VI. Conclusion

For the preceding reasons, the defendants’ Motion for

Summary Judgment and/or For Order Limiting the Issues

to be Tried [Doc. # 127] is DENIED.

Doemling, 127 B.R. at 956

74

Charts v. Nationwide Mut. Ins. Co, 16 Fed. Appx. 44,

2001 WL 682459 (2d Cir. 2001) (“Charts I’)

United States Court of Appeals,

Second Circuit.

ALEX CHARTS AND CHAR'I'S INSURANCE

ASSOCIATES, INC., Plaintiffs-Appellants,

Vv.

NATIONWIDE MUTUAL INSURANCE COMPANY,

Nationwide Variable Life Insurance Company, Colonial

Insurance Company of California, Nationwide Mutual Fire

Insurance Company, Nationwide Life Insurance Company,

and Nationwide Property & Casualty Company,

Defendants-Appellees.

No. 00-9397

June 15, 2001.

Present STRAUB, POOLER, Circuit Judges, and

KORMAN, District Judge. !

SUMMARY ORDER

heal AFTER ARGUMENT AND UPON DUE

CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED AND DECREED that the order of the

District Court is hereby VACATED and the case is

REMANDED.

Plaintiffs-Appellants Alex Charts and Charts Insurance

Associates, Inc. (collectively “Charts”) appeal from a

judgment of the United States District Court for the

District of Connecticut (Christopher F. Droney, Judge )

1 Honorable Edward R. Korman, Chief Judge of the United States

District Court for the Eastern District of New York, sitting by

designation

75

granting summary judgment to Defendants Appellees

Nationwide Mutual Insurance Co., Nationwide Variable

Life Insurance Co., Colonial Insurance Company of

California, Nationwide Mutual Fire Insurance Co.,

Nationwide Life Insurance Co., and Nationwide Property

& Casualty Co. (collectively “Nationwide”). The District

Court adopted the recommendation of a United States

Magistrate Judge (William I. Garfinkel, U.S. Mag. Judge )

who recommended that the action be dismissed because,

inter alia, the claims at issue were property of the

bankruptcy estate of Mr. Charts.

We vacate the judgment without reaching the merits

because the district court erred in adjudicating the

property *46 rights and claims at issue without joining the

debtor's estate as a party. Fed.R.Civ.P. 19 provides in

relevant part that a person “should be joined as a party in

the action” if “{he] claims an interest relating to the

subject of the action and is so situated that the disposition

of the action in [his} absence may (i) as a practical matter

impair or impede the person's ability to protect that

interest or (ii) leave any of the persons already parties

subject to a substantial risk of incurring double, multiple,

or otherwise inconsistent obligations by reason of the

claimed interest....” Because of the compelling due process

considerations that underlie Fed.R.Civ.P. 19, Wright,

Miller, & Kane, Federal Practice and Procedure § 1602, pp

21-23, “[alny party may bring the issue to the court's

attention, and both the trial court and the appellate court

may take note of the nonjoinder of an indispensable party

sua sponte.” /d. § 1609 at pp. 138-39, and cases cited;

Manning v. Energy Conversion Devices, Inc., 13 F.3d 606,

609 (2d Cir.1994).

We raise this issue sua sponte, because the considerations

of policy underlying Fed.R.Civ.P. 19 are implicated by

76

proceeding without the debtor's estate as a_ party.

Nationwide argues that the very point of its effort to

challenge Charts ownership of the cause of action was to

avoid the possibility that it would be subject to multiple

judgments-one by Charts in this action and one by the

debtor's estate in a subsequent action. Post Argument

Letter dated May 16, 2001, at p. 4. The possibility of

multiple judgments arises from the fact “that a judgment

is not res judicata as to, or legally enforceable against, a

nonparty.” Provident Tradesmens Bank & Trust Co. v.

Patterson, 390 U.S. 102, 110, 88 S.Ct. 733, 19 L.Ed.2d 936

(1968). Joining the debtor's estate as a party avoids the

possibility of multiple judgments.

On the other hand, because the debtor's estate is closed, a

ruling that it is the owner of the cause of action may be of

little practical consequence unless the _ bankruptcy

proceeding is reopened and the estate is revived. Indeed,

rather than protecting Nationwide against multiple

judgments, the ruling that Charts does not own the cause

of action could provide Nationwide with the windfall of

protection against any judgment. Joining the debtor's

estate as a party also avoids this incongruous result.

**2 Under these circumstances, the appropriate course 1s

to vacate the judgment and remand the case to the district

court with directions to withdraw the reference from the

Bankruptcy Court for the purpose of reopening the

proceeding and joining the estate as a party. Since the

proceeding in the Bankruptcy Court is otherwise dormant,

withdrawal of the reference would seem to be the most

practical and expeditious way of handling the matter. We

again emphasize that we express no view as to the proper

owner of the cause of action or otherwise reach the merits

of this dispute.

he judgment of the district court is vacated and the case s

remanded for further proceeding consistent with this

order

78

Charts v. Nationwide Mut. Ins. Co., Order and

Judgment Approving Recommended Ruling of the

Magistrate Judge, (D. Conn. Sept. 29, 2000)

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

ALEX CHARTS, ET AL.,

Plaintiffs.

Vv. Civil No. 3:97cev1621(CFD)

NATIONWIDE MUTUAL INSURANCE

COMPANY, ET AL.

Defendants.

ORDER

Upon review and pursuant to 28 U.S.C. §636(b)(1) and

Rule 2 of the Local Rules for United States Mayistrate

Judges (D.Conn.) and following a de novo review of the

portions objected to by the plaintiffs, the U.S. Magistrate

William I. Garfinkel’ss Recommended Ruling granting

Defendants’ Motion for Summary Judgment [Document

#97| is ACCEPTED in its entirety except for that portion

of the opinion which concludes that the plaintiffs’ claims

are barred by the doctrine of judicial estoppel.!

Accordingly, the Clerk is ordered to close this case.

! See Recommended Ruling at page 5. This aspect of the recommended

ruling need not be decided in order to dispose of the Defendants’

Motion for Summary Judgment. The Court expresses no opinion as to

this argument in support of summary judgment, or the plaintiffs’

arguments in opposition to summary judgment on this basis, or the

plaintiff's objection to the recommended ruling alternatively granting

summary judgment on this basis.

79

It is so ordered

Dated at Hartford, Connecticut, this 29th day of

September, 2000

/s/

Christopher F.. Droney

United States District Judge

80

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

ALEX CHARTS, ET AL..,

CHARTS INSURANCE ASSOC., INC.

Vv. Civil NQ.

3:97cev1621(CFD)

MATIONWIDE MUTUAL INSURANCE

CO., NATIONWIDE FIRE INSURANCE,

NATIONWIDE LIFE INSURANCE,

NATIONWIDE PROPERTY,

NATIONWIDE VARIABLE and

COLONIA INSURANCE CO.

JUDGMENT

The action |iilegible] for consideration of the

defendant’s Motion for Summary Judgment before the

Honorable William I. Garfinkel, United States Magistrate

Judge and the Honorable Christopher F. Droney, United

States District Judge and,

The Honorable William 1. Garfinkel having considered

the full record of the case including applicable principles of

law and having granted the Motion for Summary

Judgment, and,

The court on September 29, 2000, filed an Order

adopting and approving the Magistrate Judge's

Recommended Ruling in its entirety, except for that

portion of the opinion which concludes that the plaintiffs’

claims are barred by the doctrine of judicial estoppel; it is

therefore

8]

ORDERED, ADJUDGED and DECREED that

judgment be and is hereby entered in favor of the

defendants.

Dated at Hartford, Connecticut, this 29th day of

September.

KEVIN F. ROWE, Clerk

By_ /s/

Oevorah Johnson

Depute Clerk

HOD 9/29/00

82

Charts v. Nationwide Mut. Ins. Co., Recommended

Ruling on Motion for Summary Judgment, (D. Conn.

Aug. 8, 2000)

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

ALEX CHARTS and CHARTS

INSURANCE ASSOCIATES, INC., CIVIL ACTION NO.

3:97-cv-1621 (CFD)

Plaintiffs,

-against-

NATIONWIDE MUTUAL

INSURANCE COMPANY, et al.,

Defendants.

RECOMMENDED RULING GRANTING

DEFENDANTS'

MOTION FOR SUMMARY JUDGMENT

Pursuant to Rule 56, Fed. R. Civ. P., defendants

Nationwide Mutual Insurance Company, Nationwide

Mutual Fire Jnsurance Company, Nationwide Life

Insurance Company, Nationwide Property and Casualty

Insurance Company, Nationwide Variable Life Insurance

Company, and Colonial Insurance Company of California

(collectively, “Nationwtle") have moved for summary

judgment and/or for an order limiting the issues to be

tried. For the following reasons, defendants' motion for

summary judgment (Doc. #85-1) is GRANTED and

defendants’ motion for an order limiting the issues to be

tried (Doc. #85-2) is DENIED WITHOUT PREJUDICE.

83

BACKGROUND

A. The Parties’ Relationship

Alex Charts entered into an insurance agent's agreement

with Nationwide in 1979. Under the agreement, Mr.

Charts was an independent contractor, and Nationwide

reserved the right to cancel the agreement upon written

notice. Until some time in 1993, Mr. Charts operated I's

insurance agency under the trade name Alex Charts

Agency, T . In October 1992, Mr. Charts formed

Charts Insurance Associates, Inc. ("CIAI") as the successor

to Alex Charts Agency, Inc. and filed formal incorporation

papers for CIAI in January 1993. Mr. Charts then began

conducting his insurance agency's business through CIAI.

In May 1993, CIAI entered into a corporate agency

agreement with Nationwide with a retroactive date of

January 1, 1980. The agreement identified Mr. Charts as

CIAI's principal and bound him to the agreement's terms.

CIAi, like its predecessor, was an independent

contractor subject to termination upon written

notice, with or without cause. Nationwide canceled the

agreement in January 1996; and after a review requested

by Mr. Charts, the company's review board endorsed the

termination.

Later in 1997, Mr. Charts and CIAI brought this action

alleging contractual violations and violations of the state

franchise and unfair trade practice statutes. The

Nationwide defendants have moved for summary

judgment. Nationwide maintains that because plaintiffs

failed to disclose in their Chapter 7 bankruptcy action the

existence of CIAI and the claims plaintiffs assert here,

plaintiffs lack standing to pursue this lawsuit and are

judicially estopped from pursuing previously undisclosed

claims.

B. Plaintiffs' Bankruptcy

Mr. Charts filed a voluntary Chapter 7 petition in the

District on December 14, 1992. This was after CIAI's

formation and shortly before its formal incorporation. The

petition identified Alex Charts Agency, Inc. as another

name used by the debtor. The Bankruptcy Court issued an

Order of Discharge in the name of “Alex Charts. . .dba Alex

Charts Agency, Inc." See Freeman Aff. of 12/6/99,

Ex. 7 (Doc. #88). A final decree entered on

March 1, 1996 discharging the Trustee of the

bankruptcy estate and closing the case. See id. Ex. 8.

In their bankruptcy case, plaintiffs represented that they

had no franchises. See Sasso Aff. of 1/14/00, Ex. B, Chapter

7 Bankruptcy Petition (Doc. #93); see also id Ex. \,

Charts Aff. of 1/14/00, J 3. More significantly, they

failed to disclose CIAI's existence, CIAI's status as the

Successor corporation, and the existence of the claims

asserted in the instant case.

DISCUSSION

The summary judgment standard is well-known. A court

may grant summary judgment only if it determines that

there is no genuine issue of material] fact based on a

review of the _ pleadings, depositions, answers to

interrogatories, admissions on file, and affidavits. Fed.

R. Civ. P. 56(c). The moving party bears the burden

of demonstrating the absence of a genuine issue of

material fact. Adickes v. S. H. Kress & Co., 398 U.S.

144, 157 (1970). If there is no genuine issue of

material fact, the moving party is entitled to summary

judgment as a matter of law. Celotex Corp. v. Catrett,

477 U.S. 317, 323 (1986). A court must also construe

the facts in a light most favorable to the nonmoving party

85

and resolve all ambiguities and draw all reasonable

inferences against the moving party. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 255 (1986); Matsushita Elec.

Indus. Co. v. Zenith Radic Corp., 475 U.S. 574, 587 (1986).

The issue of standing may properly be resolved by

summary judgment. See, e.g., Correll v. Equifax Check

Servs., Inc., 234 B.R. 8, 11-12 (D. Conn. 1997).

The claims asserted by plaintiffs in this action arose after

the filing of the bankruptcy petition and during the

vendency of the bankruptcy case. However, plaintiffs, as

roted above, failed to disclose CIAT's existence and failed to

list the claims on the schedule of assets. Under similar

facts, this Court has held that plaintiffs-debtors

are without standing to pursue undisclosed claims

which belonged to the bankruptcy estate. See id. As Judge

Arterton explained in Correll, the unscheduled claim,

even though it arose after the filing of the petition, was

property of the bankruptcy estate under the Bankruptcy

Code. See 234 B.R. at 10-11; see also 11 U.S.C. § 541(a)(7).

The claims at issue vested in the bankruptcy estate, and

absent abandonment, only the trustee could prosecute the

claims as the real party in interest. See Correll, 234 B.R. at

10-11; see also Tuttle v. Equifax Check Servs., Inc., 1997

WL 835055, No. 3:96-cv-948, at *2 (D. Conn. June 17,

1997) (Eginton, J.). As Nationwide , correctly notes, the

fact that plaintiffs’ agreements with Nationwide were

property of the bankruptcy estate distinguishes this matter

from cases involving claims belonging to the debtors alone.

Moreover, plaintiffs’ claims for damages stemming from

Nationwide's termination of the agreements clearly fall

outside any exemption for personal services. Plaintiffs’

claims, in sum, fail for lack of standing.

In addition, plaintiffs' claims are barred by the doctrine of

judicial estoppel. Judicial estoppel is “intended to protect

86

against a litigant playing fast and loose with the courts."

Insurance Co. of North America v. Della Indus., Inc.,

998 F. Supp. 159, 162 n.1 (D. Conn. 1998) (citations

omitted). The plaintiffs' failure to disclose in the

bankruptcy case the existence of CIAI and their claims

against Nationwide were clearly not inadvertent. In

light of plaintiffs' affirmative duty to disclose these matters

and the critical importance of such disclosure in

bankruptcy actions, justice demands that plaintiffs be

barred from pursuing the claims in this action. For

such reasons, Judge Eginton found judicial

estoppel appropriate in Tuttle. See 1997 WL 835055, at

**2-3; see also Browning Mfg. v. Mims (In re Coastal

Plains, Inc.), 179 F.3d 197 (5th Cir. 1999), cert. denied, 120

S. Ct. 936 (2000); Donaldson v. Bernstein, 104 F.3d 547,

556 (3d Cir. 1997) ("a bankruptcy disclosure statement. . .is

at least a representation which in _ appropriate

circumstances can serve as the basis for judicial estoppel").

CONCLUSION

For the foregoing reasons, the Nationwide defendants are

entitle to judgment as a matter of law. Moreover, though

the Court need not reach the issue, the defendants appear

to be correct with respect to the unfair trade practices

claim being time-barred. Consequently, defendants’ motion

for summary judgment (Doc. #85-1) is GRANTED. As the

Court need not decide the motion to limit claims (Doc. #85-

2), itis DENIED WITHOUT PREJUDICE.

This is a recommended ruling. Any objections to this

recommended ruling must be filed with the Clerk of the

Court within ten (10) days of the receipt of this order.

Failure to object within ten (10) days may preclude

appellace review. See 28 U.S.C. § 636(b) (1); Fed. R. Civ. P.

87

72; D. Conn. L. Civ. R. 2 for Magistrate Judges; FDIC uv.

Hillcrest Assocs., 66 F.3d 566, 569 (2d Cir. 1995).

So ordered this 8th day of August 2000, at Bridgeport,

Connecticut.

me:

William I. Garfinkel

United States Magistrate Judge

88

Chartschlaa v. Nationwide Mut. Ins. Co., Order

Denying Rehearing, (2d Cir. Oct 15, 2008)

UNITED STATES COURT OF APPEALS FOR THE

SECOND CIRCUIT

THURGOOD MARSHALL U.S. COURT HOUSE

40 FOLEY SQUARE, NEW YORK, N.Y. 10007

Dennis Jacobs Catherine O’Hagan Wolfe

CHIEF JUDGE CLERK OF COURT

At a stated term of the United States Court of Appeals for

the Second Circuit, held at the Daniel Patrick Moynihan

United States Courthouse, 500 Pear! Street, in the City of

New York, on the 15th day of October two thousand and

eight,

Peter Chartschlaa and Angela Sawicki

King as personal representatives of Alex

Charts, deceased, doing business as Alex

Charts Agency Inc. and Charts Insurance

Associates, Inc.,

Plaintiffs-Appellees-Cross-Appellants,

V,

ORDER

Nationwide Mutual Insurance No. 05-5988-cv(L)

Company, Nationwide Mutual 05-6603-cv(xap)

Fire Insurance Company,

Nationwide Life Insurance Co.,

Nationwide Property and Casualty

Company, Nationwide Variable Life

Insurance Company and Colonial

Insurance Company of California,

Defendants-Appellants-Cross-Appellees,

89

Helena Charts and Christopher L. Garcia,

Plaintiffs.

Appellee-Cross-Appellant, Peter Chartschlaa and Angela

Sawicki King as personal representatives of Alex Charts,

deceased, doing business as Alex Charts Agency Inc. and

Charts Insurance Associates, Inc. having filed a petition

for panel rehearing, or, in the alternative, for rehearing en

banc, and the panel that determined the appeal having

considered the request for panel rehearing, and the active

members of the Court having considered the request for

rehearing en banc,

IT IS HEREBY ORDERED that the petition in denied.

For the Court:

Catherine O’Hagan Wolfe, Clerk

By: /s/

Frank Perez, Deputy Clerk

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

FILED

OCT 15, 2008

Catherine O’Hagan Wolfe, Clerk

90

11 U.S.C. § 541(a)(1), Property of the estate

(a) The commencement of a case under section 301, 302, or

303 of this title creates an estate. Such estate is comprised

of all the following property, wherever located and by

whomever held:

(1) Except as provided in subsections (b) and (c)(2) of this

section, all legal or equitable interests of the debtor in

property as of the commencement of the case.

91

11 U.S.C. § 541 (a)(6). Property of the estate

(a) The commencement of a case under section 301, 302, or

303 of this title creates an estate. Such estate is comprised

of all the following property, wherever located and by

whomever held:

(6) Proceeds, product, offspring, rents, or profits of or from

property of the estate, except such as are earnings from

services performed by an individual debtor after the

commencement of the case.

92

11 U.S.C. § 554(a). Abandonment of property of the

estate

(a) After notice and a hearing, the trustee may abandon

any property of the estate that is burdensome to the estate

or that is of inconsequential value and benefit to the

estate.

93

Connecticut General Statutes § 33-637.

Incorporation

(a) The corporate existence begins when the certificate of

incorporation is filed.

(b) The Secretary of the State's filing of the certificate of

incorporation is conclusive proof that the incorporators

satisfied all conditions precedent to incorporation except in

a proceeding by the state to cancel or revoke the

incorporation or involuntarily dissolve the corporation.

94

Connecticut General Statutes § 42-110a. Definitions

As used in this chapter:

(1) “Commissioner” means the Commissioner of Consumer

Protection;

(2) “Documentary material” means the original or a copy of

a book, record, report, memorandum, paper,

communication, tabulation, map, chart, photograph,

mechanical transcription, or other tangible document or

recording, wherever situate;

(3) “Person” means a natural person, corporation, limited

liability company, trust, partnership, incorporated or

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unincorporated association, and any other legal entity;

(4) “Trade” and “commerce” means the advertising, the

sale or rent or lease, the offering for sale or rent or lease,

or the distribution of any services and any property,

tangible or intangible, real, personal or mixed, and any

other article, commodity, or thing of value in this state.

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Connecticut General Statutes § 42-110b. Unfair

trade practices prohibited. Legislative intent

(a) No person shall engage in unfair methods of

competition and unfair or deceptive acts or practices in the

conduct of any trade or commerce.

(b) It is the intent of the legislature that in construing

subsection (a) of this section, the commissioner and the

courts of this state shall be guided by interpretations given

by the Federal Trade Commission and the federal courts to

Section 5(a)(1) of the Federal Trade Commission Act (15

USC 45(a)(1)), as from time to time amended.

(c) The commissioner may, in accordance with chapter 54,

establish by regulation acts, practices or methods which

shall be deemed to be unfair or deceptive in violation of

subsection (a) of this section. Such regulations shall not be

inconsistent with the rules, regulations and decisions of

the federal trade commission and the federal courts in

interpreting the provisions of the Federal Trade

Commission Act.

(d) It is the intention of the legislature that this chapter be

remedial and be so construed.

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Connecticut General Statutes § 42-110g. Action for

damages. Class actions. Costs and fees. Equitable

relief. Jury trial

(a) Any person who suffers any ascertainable loss of

money or property, real or personal, as a result. of the use

or employment of a method, act or practice prohibited by

section 42-110b, may bring an action in the judicial district

in which the plaintiff or defendant resides or has his

principal place of business or is doing business, to recover

actual damages. Proof of public interest or public injury

shall not be required in any action brought under this

section. The court may, in its discretion, award punitive

damages and may provide such equitable relief as it deems

necessary or proper.

(b) Persons entitled to bring an action under subsection (a)

of this section may, pursuant to rules estabiished by the

judges of the Superior Court, bring a class action on behalf

of themselves and other persons similarly situated who are

residents of this state or injured in this state to recover

damages.

(c) Upon commencement of any action brought under

subsection (a) of this section, the plaintiff shall mail a copy

of the complaint to the Attorney General and the

Commissioner of Consumer Protection and, upon entry of

any judgment or decree in the action, shall mail a copy of

such judgment or decree to the Attorney General and the

Commissioner of Consumer Protection.

(d) In any action brought by a person under this section,

the court may award, to the plaintiff, in addition to the

relief provided in this section, costs and reasonable

attorneys’ fees based on the work reasonably performed by

an attorney and not on the amount of recovery. In a class

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action in which there is no monetary recovery, but other

relief is granted on behalf of a class, the court may award,

to the plaintiff, in addition to other relief provided in this

section, costs and reasonable attorneys’ fees. In any action

brought under this section, the court may, in its discretion,

order, in addition to damages or in lieu of damages.

injunctive or other equitable relief.

(e) Any final order issued by the Department of Consumer

Protection and any permanent injunction, final judgment

or final order of the court made under section 42-110d, 42-

110m, 42-1100 or 42-110p shall be prima facie evidence in

an action brought under this section that the respondent

or defendant used or employed a method, act or practice

prohibited by section 42-110b, provided this section shall

not apply to consent orders or judgments entered before

any testimony has been taken.

(f) An action under this section may not be brought more

than three years after the occurrence of a violation of this

chapter.

(g) In any action brought by a person under this section

there shall be a right to a jury trial except with respect to

the award of punitive damages under subsection (a) of this

section or the award of costs, reasonable attorneys’ fees

and injunctive or other equitable relief under subsection

(d) of this section.

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Connecticut General Statutes § 42-133e. Franchises:

Definitions

As used in sections 42-133e to 42-133g, inclusive:

(a) “Person” means a natural person, corporation, limited

liability company, partnership or other entity and, in case

of an entity, includes any other entity which has a

majority interest in such entity or effectively controls such

other entity as well as the individual officers, directors and

other persons in active control of the activities of such

entity;

(b) “Franchise” means an oral or written agreement or

arrangement in which (1) a franchisee is granted the right

to engage in the business of offering, selling or distributing

goods or services under a marketing plan or system

prescribed in substantial part by a franchisor, provided

nothing contained herein shall be deemed to create a

franchisor-franchisee relationship between the grantor

and grantee of a lease, license or concession to sell goods or

services upon or appurtenant to the premises of the

grantor, which premises are occupied by the grantor

primarily for its own independent merchandising

activities; and (2) the operation of the franchisee's business

pursuant to such plan or system is substantially associated

with the franchisor's trademark, service mark, trade

name, logotype, advertising or other commercial symbol

designating the franchisor or its affiliate, and includes any

agreement between a manufacturer, refiner or producer

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and a distributor, wholesaler or jobber, between a

manufacturer, refiner or producer and a retailer, or

between a distributor, wholesaler or jobber and a retailer;

(c) “Franchisor” means a person who grants a franchise to

another person, including a manufacturer, refiner or

producer or a distributor, wholesaler or jobber who grants

to a distributor, wholesaler or jobber or retailer, as the

case may be, the authority to use a trademark, tradename,

service mark or other identifying symbol or name under a

franchise;

(d) “Franchisee” means a person to whom a franchise is

granted, including a di

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