Jolen, Inc. v. Brodie & Stone, PLC

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JOLEN, INC. v. BRODIE AND STONE,
PLC, ET AL.
(AC 40725)
Lavine, Keller and Bishop, Js.
Syllabus
The plaintiff sought to recover damages from the defendant B Co. for, inter
alia, breach of fiduciary duty. The plaintiff and B Co. had entered into
a distribution agreement in which B Co. agreed to be the plaintiff’s
distributing agent. After that agreement terminated, the plaintiff brought
the present action alleging multiple claims arising out of the parties’
business relationship, including that B Co. had breached certain fiduciary
duties that it owed to the plaintiff. Thereafter, the trial court granted B
Co.’s motion for summary judgment on the ground that no fiduciary
relationship existed between the parties. From the judgment rendered
thereon, the plaintiff appealed to this court, claiming that, in light of
the trial court’s unchallenged determination that an agency relationship
existed between the parties, its subsequent failure to conclude that such
relationship was per se fiduciary in nature was incorrect as a matter of
law. Held that the trial court improperly rendered summary judgment
in favor of B Co. on the plaintiff’s breach of fiduciary duty claim; in
light of agency law, which makes clear that an agent is, by definition,
a fiduciary, and given the trial court’s conclusion, which B Co. did
not challenge, that the operative terms of the distribution agreement
established, as a matter of law, the existence of a principal-agent relation-
ship between the parties, it necessarily followed that B Co. had been
the plaintiff’s fiduciary with respect to matters within the scope of its
agency, and the court’s contrary determination, therefore, was
erroneous.
Argued October 17—officially released December 11, 2018
Procedural History
Action to recover damages for, inter alia, breach of
fiduciary duties, and for other relief, brought to the
Superior Court in the judicial district of Fairfield; there-
after, the court, Krumeich, J., granted the defendants’
motion for summary judgment and rendered judgment
thereon, from which the plaintiff appealed to this court.
Reversed; further proceedings.
Frank J. Silvestri, Jr., with whom was Kristen G.
Rossetti, for the appellant (plaintiff).
Edward R. Scofield, with whom, on the brief, was
Carolyn A. Trotta, for the appellees (defendants).
Opinion
BISHOP, J. The plaintiff, Jolen, Inc., appeals from the
summary judgment rendered by the trial court in favor
of the defendant, Brodie & Stone, PLC, and Brodie &
Stone International, PLC,1 on the plaintiff’s claim of
breach of fiduciary duty. The plaintiff claims on appeal
that, in view of the court’s unchallenged determination
that an agency relationship existed between the parties,
its subsequent failure to conclude that such relationship
was per se fiduciary in nature was incorrect as a matter
of law.2 We agree and, accordingly, reverse the judg-
ment of the trial court.
The following undisputed facts and procedural his-
tory are relevant to this appeal. The plaintiff is a United
States based manufacturer of various products for the
removal or lightening of unwanted body hair, including
a bleach product that it produces in Connecticut.3 The
defendant is a United Kingdom based manufacturer,
distributor, and seller of personal care products. By
written agreement (distribution agreement) executed
by the parties in 1995, the defendant agreed to act as
the plaintiff’s ‘‘sole and exclusive [d]istributing [a]gent’’
for the purposes of selling and distributing the plaintiff’s
bleach product4 in the United Kingdom and the Republic
of Ireland, in exchange for a 20 percent sales com-
mission.
Under the distribution agreement, the plaintiff had its
product shipped to the defendant in the United Kingdom
and thereafter relied on the defendant to, inter alia, clear
the plaintiff’s product through customs; warehouse the
product in the United Kingdom; advertise the product;
promptly inform the plaintiff of any factors likely to be
relevant to the distribution of the product; sell, ship,
and invoice the product to customers; and account to
the plaintiff for monies received and remit the funds
to the plaintiff via a designated bank account. The
defendant also was responsible for covering the costs
associated with clearing the product through customs
and delivering it to customers, albeit the plaintiff was
required to reimburse the defendant for these expenses.
While vesting the defendant with these broad responsi-
bilities, the agreement concurrently constrained the
defendant’s conduct in carrying out its duties by requir-
ing the defendant to, among other things, ‘‘at all times
give proper consideration and weight to the interests
of the [plaintiff] in all dealings and . . . abide by any
rules and carry out any instructions from the [plaintiff]
as to the sale, storage, pricing, distribution and advertis-
ing of the [p]roduct, and other related matters.’’
The parties continually renewed the distribution
agreement until the plaintiff notified the defendant in
October, 2014, that it would not be renewing the
agreement upon its termination.5 Thereafter, in Octo-
ber, 2015, the plaintiff commenced the present action
against the defendant alleging multiple claims arising
out of the parties’ business relationship. In count two
of the operative complaint,6 the only count at issue in
this appeal,7 the plaintiff alleged, in essence, that by
virtue of the distribution agreement, the parties had
a principal-agent relationship pursuant to which the
defendant owed the plaintiff certain fiduciary duties
and that the defendant breached these duties in various
respects, thereby causing the plaintiff to suffer
damages.
On May 5, 2017, the defendant moved for summary
judgment on the plaintiff’s breach of fiduciary duty
claim on the ground that no fiduciary relationship
existed between the parties.8 The plaintiff argued in
opposition to the motion that, under the operative terms
of the distribution agreement, the parties’ relationship
constituted an agency relationship as a matter of law
and that the defendant was therefore a per se fiduciary
of the plaintiff. At oral argument on the motion on
June 13, 2017, the defendant responded that, even if
the parties had a principal-agent relationship, the court
nevertheless needed to make an independent determi-
nation as to whether this relationship was fiduciary
in nature.
The following day, the court issued a memorandum of
decision granting the defendant’s motion for summary
judgment. The court first addressed the issue of
whether a principal-agent relationship existed between
the parties. The court began by setting forth the well-
established elements required to show the existence of
such relationship under Connecticut law: (1) a manifes-
tation by the principal that the agent will act for him,
(2) acceptance by the agent of the undertaking, and (3)
an understanding between the parties that the principal
will be in control of the undertaking.9 See Beckenstein
v. Potter & Carrier, Inc., 191 Conn. 120, 133, 464 A.2d
6 (1983). Regarding the standard by which courts deter-
mine whether these elements have been met, the court
correctly noted that ‘‘the labels used by the parties in
referring to their relationship are not determinative’’
and that, therefore, ‘‘a court must look to the operative
terms of their agreement or understanding.’’ (Internal
quotation marks omitted.) Id., 133–34. The court then
concluded that its ‘‘[r]eview of the operative [distribu-
tion] agreement, ‘interpreted as a whole, with all rele-
vant provisions [considered] together’; [id., 134];
demonstrate[d] that [the defendant] was [the plaintiff’s]
agent for the distribution of [the plaintiff’s] products
to customers in the markets in which [the defendant
was] the exclusive distributer.’’10
The court further concluded, however, that ‘‘a con-
tractual duty to act as [a] distributer of a manufacturer’s
product does not necessarily impose fiduciary duties
on a distributer to the manufacturer’’ and that ‘‘[m]erely
because the parties use the term agent does not deter-
mine whether the parties’ relationship is [fiduciary in
nature, i.e.,] characterized by a unique degree of trust
and confidence between the parties, one of whom has
superior knowledge, skill or expertise . . . .’’ (Internal
quotation marks omitted.) Consequently, notwithstand-
ing its determination that an agency relationship existed
between the parties, the court proceeded to consider
whether such relationship was fiduciary in nature and
ultimately concluded that it was not. The court there-
fore rendered summary judgment in favor of the defen-
dant on the plaintiff’s breach of fiduciary duty claim.11
This appeal followed.
The plaintiff claims on appeal that the court’s conclu-
sion that the defendant was its agent, but not its fidu-
ciary, constitutes reversible error. The plaintiff argues
that, given the numerous decisions from this court and
our Supreme Court indicating that agents are per se
fiduciaries, the trial court, after determining that the
defendant was an agent of the plaintiff, was constrained
to conclude that the defendant was therefore also a
fiduciary. We agree.
Preliminarily, we set forth the applicable standard of
review. ‘‘Practice Book [§ 17-49] provides that summary
judgment shall be rendered forthwith if the pleadings,
affidavits and any other proof submitted show that there
is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law.
. . . In deciding a motion for summary judgment, the
trial court must view the evidence in the light most
favorable to the nonmoving party. . . . [T]he scope of
our review of the trial court’s decision to grant the
[defendant’s] motion for summary judgment is plenary.’’
(Internal quotation marks omitted.) Iacurci v. Sax, 313
Conn. 786, 799, 99 A.3d 1145 (2014).
An examination of agency law generally makes clear
that an agent is, by definition, a fiduciary. ‘‘Agency is
defined as the fiduciary relationship that arises when
one person (a principal) manifests assent to another
person (an agent) that the agent shall act on the princi-
pal’s behalf and subject to the principal’s control, and
the agent manifests assent or otherwise consents so to
act. 1 Restatement (Third), Agency, § 1.01, p. 17 (2006).’’
(Emphasis added; internal quotation marks omitted.)
Pelletier Mechanical Services, LLC v. G & W Manage-
ment, Inc., 162 Conn. App. 294, 305, 131 A.3d 1189, cert.
denied, 320 Conn. 932, 134 A.3d 622 (2016). ‘‘The word
‘fiduciary’ appears in [this] definition to characterize or
classify the type of legal relationship that results if the
elements of the definition are present and to emphasize
that an agency relationship creates the agent’s fidu-
ciary obligation as a matter of law.’’ (Emphasis added.)
1 Restatement (Third), supra, § 1.01, comment (e), p.
23; see also Taylor v. Hamden Hall School, Inc., 149
Conn. 545, 552, 182 A.2d 615 (1962) (‘‘[a]n agent is a
fiduciary with respect to matters within the scope of
his agency’’). Thus, our Supreme Court has explicitly
recognized that agents, as well as certain other catego-
ries of actors, ‘‘are per se fiduciaries by nature of the
functions they perform.’’ Iacurci v. Sax, supra, 313
Conn. 800. Only where the relationship at issue falls
outside these per se categories must a court then pro-
ceed to determine on an ad hoc basis whether a fidu-
ciary duty inheres in that relationship. See id.
(‘‘[b]eyond these per se categories . . . a flexible
approach determines the existence of a fiduciary duty,
which allows the law to adapt to evolving situations
wherein recognizing a fiduciary duty might be appro-
priate’’).
In the present case, the court concluded that the
operative terms of the distribution agreement estab-
lished as a matter of law the existence of a principal-
agent relationship between the parties.12 The defendant
has not challenged this conclusion on appeal. Once
the court made this legal determination, it necessarily
followed that the defendant had been the plaintiff’s
fiduciary with respect to matters within the scope of
its agency. Taylor v. Hamden Hall School, Inc., supra,
149 Conn. 552. The court’s contrary determination was
therefore erroneous, and, consequently, the court erred
in rendering summary judgment in the defendant’s favor
on the plaintiff’s breach of fiduciary duty claim on that
ground. See Charter Oak Lending Group, LLC v.
August, 127 Conn. App. 428, 439–41, 14 A.3d 449 (trial
court improperly determined that defendants owed no
fiduciary duty to plaintiff where court had expressly
found that relationship between parties was that of
principal and agent; ‘‘the court’s determination that the
relationship was one of principal and agent is inconsis-
tent with its subsequent determination that the relation-
ship was not fiduciary in nature’’), cert. denied, 302
Conn. 901, 23 A.3d 1241 (2011).
The judgment is reversed and the case is remanded
for further proceedings according to law.
In this opinion the other judges concurred.
1
The undisputed evidence in the record reflects that Brodie & Stone, PLC,
has been dormant since Brodie & Stone International, PLC, was created,
and the parties have treated both defendants as a de facto single entity. For
the sake of simplicity, we likewise refer to the defendants collectively as
the defendant.
2
The plaintiff also claims that the court erred in concluding that no
fiduciary relationship existed between the parties under the undisputed
facts of the case. Because we agree with the plaintiff’s first claim, we need
not address this issue.
3
Up until 2012, the plaintiff also maintained a principal place of business
in Connecticut.
4
In or around 2000, the defendant also began both manufacturing and
distributing a facial wax product on behalf of the plaintiff. The original
1995 distribution agreement, which explicitly pertained only to the bleach
product, was not amended to include the new wax product. In the operative
complaint, however, the plaintiff alleged that, through the parties’ course
of conduct, the defendant’s responsibilities under the agreement were implic-
itly expanded to include the wax product and that the defendant was there-
fore the plaintiff’s fiduciary with respect to both products. In their respective
briefs on appeal, the parties note in passing their disagreement over whether
the distribution of the wax product fell within the parameters of their
contractual relationship. The trial court, however, had no occasion to
address the scope of the defendant’s alleged fiduciary duty, as the defen-
dant’s motion for summary judgment on the breach of fiduciary duty count
was based solely on the ground that the defendant did not owe the plaintiff
any fiduciary duty at all. Consequently, the issue on appeal is limited to
whether the court erred in granting the defendant’s motion on this ground;
the issue of the scope of the parties’ relationship is not presently before us.
Thus, although we conclude that the defendant was the plaintiff’s fiduciary
by virtue of the parties’ contractual relationship, we necessarily leave it to
the trial court to determine the scope of this relationship on remand.
5
The original term of the agreement was from May 1, 1995 through April
30, 1999. The agreement further provided, however, that unless notice of
termination were given six months prior to the expiration of the term, the
agreement would be deemed to have been renewed for another four years,
with the new four year term beginning on the expiration date of the prior
term.
6
The plaintiff’s second amended verified complaint, filed May 5, 2017, is
the operative complaint.
7
The plaintiff also alleged claims for breach of contract, an accounting, and
violation of the Connecticut Unfair Trade Practices Act (CUTPA), General
Statutes § 42-110a et seq. The defendant moved for summary judgment on
the CUTPA claim, which the court granted, but the plaintiff withdrew this
claim before judgment could be rendered on it. The plaintiff also withdrew
the claims for breach of contract and an accounting.
8
The defendant’s motion for summary judgment, as filed, was directed
toward the plaintiff’s first amended verified complaint. The parties subse-
quently stipulated, however, that the motion be applied to the operative,
second amended verified complaint.
9
On appeal, the parties do not challenge the trial court’s application of
Connecticut law to the plaintiff’s breach of fiduciary duty claim.
10
We note that, ‘‘[a]lthough the question of agency is a question of fact
when the evidence is conflicting or is susceptible of more than one reason-
able inference . . . agency becomes a question of law [that may properly
be resolved on a motion for summary judgment] when, as in the present
case, the facts are undisputed.’’ (Citation omitted.) Yale University v. Out
of the Box, LLC, 118 Conn. App. 800, 813, 990 A.2d 869 (2010) (Borden, J.,
dissenting), citing Russo v. McAviney, 96 Conn. 21, 24, 112 A. 657 (1921)
(‘‘Proof of agency is ordinarily a question of fact. . . . When the facts are
undisputed it may then become a question of law.’’ [Citations omitted.]);
see also 1 Restatement (Third), Agency, § 1.02, comment (a), p. 50 (2006)
(‘‘[w]hether a relationship is one of agency is a legal conclusion made after
an assessment of the facts of the relationship and the application of the
law of agency to those facts’’).
11
The plaintiff subsequently moved to reargue the defendant’s motion for
summary judgment, which the court denied.
12
The defendant originally contended in its appellate brief that the trial
court had never made any determination as to whether it was in fact an
agent of the plaintiff and that the court had merely identified the parties as
they labeled themselves in the distribution agreement. Upon the motion of
the plaintiff, this court subsequently took judicial notice of certain admis-
sions made by Michael Eggerton, the defendant’s sole shareholder, its chief
operating officer, and the chairman of its board of directors, in a related
federal court action. See Jolen, Inc. v. Eggerton, United States District Court,
Docket No. 3:18-CV-00548 (VLB) (D. Conn.). In his answer to the plaintiff’s
complaint in that action, Eggerton admitted that ‘‘[t]he Superior Court [in
the present action had] held that [the defendant] was [the plaintiff’s] agent
. . . .’’ In view of this admission, the defendant’s counsel conceded at oral
argument before this court that the trial court had clearly determined that
a principal-agent relationship existed between the parties as to the distribu-
tion of the plaintiff’s products.