207 Conn.App. 707
Conn. App. Ct.2021Background
- In Nov. 2004 Joseph Aferzon (inventor) signed a one‑page written agreement with Medical Device Solutions, LLC (MDS) providing MDS 50% of "total compensation" from sale/license of Aferzon’s spinal cage device, "versions" thereof, and associated IP; the writing expressly stated development/financial commitments would be in a later agreement. The parties orally agreed that MDS would prepare drawings and build a prototype.
- MDS designed and built prototypes in 2004–2005; Aferzon continued development with his son and filed a patent application (issued 2009, assigned to ISI) and ISI later licensed the patent to Alphatec, which paid ISI stock, royalties and reimbursements totaling about $3.27M (2010–2019).
- MDS learned in late 2017 that the device had been commercialized, sent pre‑suit letters (2017–2018), then sued in July 2018 for breach of contract and CUTPA violations alleging failure to share compensation per the 2004 agreement.
- Trial court found (1) the Nov. 4, 2004 instrument plus the contemporaneous oral agreement created an enforceable contract; (2) the patented Solus device was a "version" of the original device; (3) ISI was formed in bad faith to avoid MDS and ISI/ Aferzon are liable; (4) statute‑of‑limitations doctrines tolled so MDS could recover 50% of all Alphatec payments (except a $50,000 reimbursement); and (5) CUTPA liability merited attorney’s fees. Damages, prejudgment interest, CUTPA fees, and offer‑of‑compromise interest were awarded.
- On appeal the Connecticut Appellate Court: affirmed contract formation and scope, reversed and held the court erred in tolling the statute of limitations (fraudulent concealment and continuing course doctrines did not apply), held six‑year limitations (§52‑576) governs the breach claim, reduced recoverable contract damages to amounts received within six years before service, affirmed CUTPA liability but remanded to apportion fees to the timely portion of the CUTPA claim, and reversed the calculation of offer‑of‑compromise interest (§52‑192a) and remanded for recalculation.
Issues
| Issue | Plaintiff's Argument (MDS) | Defendant's Argument (Aferzon/ISI) | Held |
|---|---|---|---|
| Contract formation / parol evidence: whether the Nov. 4, 2004 writing plus oral contemporaneous promises created an enforceable contract | The writing was not integrated as to MDS’s development obligations; parol evidence of the contemporaneous oral promise (drawings/prototype) can be considered to form a definite contract | The one‑page writing was indefinite (an agreement to agree) and parol evidence should not supply essential terms | Affirmed: writing was not integrated; court permissibly considered contemporaneous oral evidence and reasonably found a binding contract on Nov. 4, 2004 |
| Scope: whether the patented device (and license receipts) fell within "device / versions / associated IP" in the 2004 agreement | The Solus patent is a version/related device derived from Aferzon’s initial sketches and MDS’s prototype, so MDS is entitled to 50% of compensation | The contract language should be narrowly read; determination requires patent‑claim‑scope analysis (federal law); patented invention not within the agreement | Affirmed: trial court properly interpreted the intentionally broad contract language and reasonably found the patented device to be a version/related device; federal claim‑construction not required for contract scope |
| Tolling / statutes of limitations: whether fraudulent concealment (§52‑595) or continuing course of conduct tolls limitations so MDS can recover royalties back to 2010 | Tolling applies because Aferzon intentionally concealed receipts, ignored inquiries, formed ISI to hide rights, and lied about project status | No tolling: many alleged concealment acts occurred before any actionable breach; mere nondisclosure of payments absent a fiduciary duty is insufficient; repeated royalty nonpayments are discrete breaches, not a single continuing wrong | Reversed: neither fraudulent concealment nor continuing‑course doctrines tolled limitations; six‑year statute (§52‑576) applies; recoverable contract damages limited to payments within six years prior to service (adjusted damages and prejudgment interest reduced) |
| CUTPA liability & fees / offer of compromise interest: whether bad‑faith breaches support CUTPA fees; and whether court correctly computed §52‑192a interest | CUTPA applies because breaches were in bad faith; MDS entitled to fees; offer‑of‑compromise interest should be calculated on full recovery at statutory rate | Defendants argued reliance on untimely conduct; dispute over interest calculation method | Mixed: affirmed CUTPA liability (bad faith) and award of fees but remanded to apportion fees to timely CUTPA claims; reversed court’s offer‑of‑compromise calculation and remanded to compute mandatory 8% interest on the full recovery (including prejudgment interest and CUTPA fees) per statute |
Key Cases Cited
- Bartone v. Robert L. Day Co., 232 Conn. 527 (Conn. 1995) (elements and exacting proof required for fraudulent concealment under §52‑595)
- Iacurci v. Sax, 313 Conn. 786 (Conn. 2014) (discussion of fiduciary nondisclosure and limits on treating nondisclosure as fraudulent concealment)
- Bouchard v. State Employees Retirement Commission, 328 Conn. 345 (Conn. 2018) (distinguishing continuing course of conduct from continuing violation doctrines)
- Flannery v. Singer Asset Finance Co., LLC, 312 Conn. 286 (Conn. 2014) (continuing course of conduct and tolling principles)
- Paine Webber Jackson & Curtis, Inc. v. Winters, 22 Conn. App. 640 (Conn. App. 1990) (offer‑of‑compromise interest under §52‑192a is mandatory and applies to amount recovered)
- Blakeslee Arpaia Chapman, Inc. v. EI Constructors, Inc., 239 Conn. 708 (Conn. 1997) (policy and purpose of §52‑192a to encourage settlements and mandatory nature of its interest award)