200 Conn.App. 356
Conn. App. Ct.2020Background
- In 2011 Manere and Collins formed BAHR, LLC to buy and operate Seagrape Cafe; Collins provided larger "priority member loans" and held a 60% interest, Manere held 40% and managed the cafe on-site.
- After Hurricane Sandy the parties orally agreed neither would take guaranteed payments for 52 weeks, but Manere continued to take cash salary and pay personal expenses from company funds.
- Collins reconstructed BAHR’s records and concluded Manere misappropriated roughly $190,000; Collins then amended the operating agreement, removed Manere as manager and liquor permittee, stopped payment on checks to Manere, changed locks, and terminated Manere’s son.
- Manere sued Collins and BAHR asserting breach of contract, fiduciary duty and oppression under Conn. Gen. Stat. § 34-267(a)(5) and sought dissolution; BAHR counterclaimed alleging, inter alia, breach of fiduciary duty and sought damages and an accounting.
- The trial court ruled for defendants on Manere’s claims and for BAHR on its counterclaim, awarding about $190,463. Manere appealed, raising (1) legal sufficiency of the counterclaim, (2) statute of limitations governing BAHR’s claim, and (3) the denial of dissolution for oppressive conduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BAHR’s counterclaim failed to state a claim (alleged only “misappropriation”) | Manere: counterclaim pleaded only a nonrecognized tort of “misappropriation,” so it fails to state a claim. | BAHR: pleaded facts showing fiduciary duty and breach (misuse of company funds), so claim is legally sufficient. | Court: Counterclaim adequately alleged breach of fiduciary duty; not defective simply because it used the word "misappropriation." |
| Which statute of limitations applies to BAHR’s counterclaim — 6 years for an accounting (§ 52-576) or 3 years for tort (§ 52-577) | Manere: Claim sounds in tort/breach of fiduciary duty and is governed by the 3‑year tort SOL. | BAHR: Requested an accounting (equitable claim) invoking six‑year SOL. | Court: BAHR did not plead demand/refusal or facts showing accounting was necessary; claim is breach of fiduciary duty governed by the 3‑year SOL. Trial judgment reversed on this ground and remanded for facts on timeliness. |
| Whether Collins’ conduct was “oppressive” under § 34-267(a)(5) justifying dissolution | Manere: Collins’ actions (removal, withholding records/distributions, stopping checks, etc.) defeated Manere’s reasonable expectations as a minority member and were directly harmful. | Collins/BAHR: Actions were lawful exercises of majority control in response to Manere’s misconduct (embezzlement); not oppressive. | Court: Trial court applied incorrect legal standard (focused on majority’s conduct rather than minority’s reasonable expectations). Appellate court adopts the "reasonable expectations" standard for oppression under the CULLCA, reverses as to dissolution claim (except employment termination) and remands for a new trial on oppression. |
Key Cases Cited
- Flannery v. Singer Asset Finance Co., LLC, 312 Conn. 286 (Conn. 2014) (breach of fiduciary duty sounds in tort and is governed by § 52-577 limitations).
- Zuch v. Connecticut Bank & Trust Co., 5 Conn. App. 457 (Conn. App. 1985) (demand and refusal generally prerequisite to equitable accounting).
- Murphy v. Wakelee, 247 Conn. 396 (Conn. 1999) (fiduciary duties and prohibition on using position for personal benefit).
- Papallo v. Lefebvre, 172 Conn. App. 746 (Conn. App. 2017) (describing alleged "misappropriation" of LLC funds as factual basis for breach of fiduciary duty).
- R.D. Clark & Sons, Inc. v. Clark, 194 Conn. App. 690 (Conn. App. 2019) (discussing oppression as lack of fair dealing and frustration of reasonable expectations).
- Brenner v. Berkowitz, 134 N.J. 488 (N.J. 1993) (adopting and explaining the "reasonable expectations" approach to minority-oppression claims).