Chugh v. Kalra
342 Conn. 815
| Conn. | 2022Background
- Chugh and Kalra agreed in 2004 to a 50/50 investment partnership and formed a network of companies (the "Trikona Group"), including Trikona Advisors Ltd. (TAL), a Cayman Islands corporation through which they managed funds.
- Their relationship broke down; in January 2012 TAL’s board removed Chugh as a director, leaving Kalra in control; Chugh-controlled entities petitioned the Cayman court in 2012 to wind up TAL.
- The Cayman court granted the winding-up petition, rejected Kalra’s allegations against Chugh as baseless, and criticized Kalra for improper self-dealing; TAL (substituted as plaintiff) later was collaterally estopped in U.S. federal litigation from relitigating those matters.
- In 2013 Kalra issued a press release accusing Chugh of stealing TAL assets and bribing Cayman liquidators; Chugh filed a Connecticut suit (2014) alleging breach of partnership agreement, breach of fiduciary duty, and libel per se based on that release.
- A jury found for Chugh on those counts, awarding $9.4 million compensatory and about $2.97 million punitive damages; Kalra appealed, arguing (inter alia) compulsory-counterclaim preclusion, that the partnership terminated on incorporation (Karanian), and that Chugh’s expert damages testimony for libel was unsupported.
- The Connecticut Supreme Court affirmed the partnership/fiduciary verdicts but reversed the libel and punitive damages awards: it held the expert lost‑profits testimony was inadmissible and the court’s damages instruction (requiring proof of lost profits for compensatory damages) was erroneous and not harmless; it remanded for a new trial and damages hearing on libel and punitive damages.
Issues
| Issue | Chugh's Argument | Kalra's Argument | Held |
|---|---|---|---|
| Whether Federal Rule 13(a)(1) barred Chugh’s state claims as compulsory counterclaims | Chugh: Rule 13(a) doesn’t apply because Kalra was not a party to the federal action and the federal claims were collaterally estopped | Kalra: Rule 13(a) should be read broadly (including parties in privity/control) and bars Chugh’s claims | Court: Rule 13(a) inapplicable here because prior federal litigation produced no merits decision on these claims (collateral‑estoppel disposition makes applying 13(a) unjust) |
| Whether the oral partnership ended as a matter of law when parties incorporated TAL (Karanian) | Chugh: No evidence they intended to replace the partnership by incorporation; partnership could operate through/around corporations | Kalra: Incorporation ended the partnership under Karanian; partners cease to be partners when adopting corporate form | Court: Karanian not controlling—partnership can survive via corporations if parties intended rights inter sese to continue; sufficient evidence for jury to find a partnership existed through at least 2013 |
| Admissibility/weight of expert lost‑profits testimony on libel damages | Chugh: Expert’s market analysis admissible; even if some testimony speculative, any error was harmless because libel per se presumes harm | Kalra: Expert assumed $250M AUM contrary to undisputed fact (no funds under management), so testimony was baseless and inadmissible | Court: Expert opinion had no factual basis and was improperly admitted; jury was misinstructed to require proof of lost profits for compensatory damages; error was harmful—libel damages and punitive award vacated and remanded |
Key Cases Cited
- Karanian v. Maulucci, 185 Conn. 320 (1981) (adoption of corporate form generally means parties cease to be partners as to each other unless intent to preserve partnership rights is shown)
- Trikona Advisers Ltd. v. Chugh, 846 F.3d 22 (2d Cir. 2017) (affirming district court’s grant of summary judgment based on collateral estoppel after Cayman winding‑up ruling)
- Southern Constr. Co. v. Pickard, 371 U.S. 57 (1962) (Rule 13(a) aims to prevent multiplicity of suits and resolve related disputes in one action)
- State v. Porter, 241 Conn. 57 (1997) (scientific/expert testimony must be demonstrably relevant to the facts of the particular case)
- Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 247 Conn. 48 (1998) (lost‑profits damages must be proved with reasonable certainty)
- Sagamore Corp. v. Diamond West Energy Corp., 806 F.2d 373 (2d Cir. 1986) (partnership/joint‑venture rights inter sese may survive formation of a corporation if parties intended to reserve those rights)