At issue in Jolen, Inc. v. Brodie & Stone, PLC was whether misrepresentations of costs were sufficient to allege violation under the Connecticut Unfair Trade Practices Act.
The Defendants were the exclusive distributors of the Plaintiff’s products in the United Kingdom and Ireland. Per their arrangement, the Plaintiff would ship products to the Defendants, and receive in return the net revenues from Defendants’ sales, minus expenses and commission. However, after the Plaintiff noticed that the warehousing and shipping costs claimed by the Defendants had increased over a two-year period, the parties agreed to set up separate accounts for those expenses. It was then the Plaintiff observed the costs suddenly reverted back to levels consistent with past charges. After the Plaintiff decided not to renew the parties’ contract, the Defendants allegedly refused to return the remaining inventory or to pay the Plaintiff revenue received from sales of the product. The Plaintiff filed an action against the Defendants alleging that the Defendants were surreptitiously charging the Plaintiff for storage and shipping costs associated with the Defendants’ own products in breach of the parties’ contract and in violation of the Connecticut Unfair Trade Practices Act (“CUTPA”). The Defendants filed a motion to strike the CUTPA claim on the ground that the facts alleged by the Plaintiff amounted to a mere breach of contract claim. The Plaintiff responded that the false representations the Defendants were alleged to have made regarding the storage and shipping costs were adequate to state a claim under the CUTPA. The court agreed.
In denying the Defendants’ motion to strike, the court held the Plaintiff’s pleading satisfied the minimum threshold for a sufficiently pleaded CUTPA claim against the Defendants, however the court cautioned that “admittedly this case presents a close call.” The court found that the Defendants misrepresented the amount of warehousing and shipping costs properly assessable to the Plaintiff during the two years at issue, that until the Plaintiff discovered the Defendants’ misrepresentations, the Plaintiff reasonably accepted and paid the Defendants’ charges for two years, and that the Defendants’ misrepresentations were material in that they were likely to cause the Plaintiff to accept them on the basis of their long-standing relationship to the Plaintiff’s detriment. The court made special note of the relationship between the parties, which had lasted since the 1960s.
While not binding outside of matters involving Connecticut law, other jurisdictions may look to this ruling in guidance if there is no other precedent to follow. A successful claim under unfair trade practice regulation may lead to awards of punitive damages even when the existence of actual damages flowing from the violation is not shown. This will be an area of law for businesses to watch as courts provide more clarity on what types of conduct constitutes unfair acts or practices. Unfair trade practice claims can cover acts that may not be considered unlawful under other statutes or common law and allow a successful plaintiff to recover attorneys’ fees and expenses, punitive damages, and injunctive relief, in addition to actual damages.