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Connecticut Supreme Court holds builder personally liable under CUTPA

October 21, 2015

mark GrecoIt started as an unfortunate tale of a builder who wronged his client, which unfortunately happens too frequently in the construction business. Some customers can certainly be difficult, but we always counsel our construction clients to take the high road and resist any urge toward shenanigans. A recent Connecticut Supreme Court ruling really drives home why every builder, even if they are operating under the shelter of an LLC, needs to be aware of the personal liability they have.

Doing business under the aegis of an LLC or corporation provides substantial protection against personal liability, but it’s definitely not a license to willfully engage in unfair business practices and it does not shield individuals who do so, as the ruling in a recent Connecticut Supreme Court125px-CT_Judicial_Branch case involving a home builder demonstrates.

The Supreme Court’s July decision in Joseph General Contracting Inc. v. John Couto et. al. was a mixed ruling, with the Court finding that JGC owner Anthony Silvestri could not be held personally liable for breach of contract claims against his company.

However, the court found that under the Connecticut Unfair Trade Practices Act (CUTPA), Silvestri could be found personally liable for highly questionable tactics used with a customer.

In the case in question, the state Appellate Court found: “Silvestri and his companies [engaged in actions that] were indeed unscrupulous, oppressive, unfair and deceptive,” and upheld a $125,000 verdict against the company but also against him personally.

The Connecticut Supreme Court agreed. Citing the text of CUTPA, which reads in part: “No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce,” the Court considered the question of “whether liability under CUTPA may be extended to an individual who engages in unfair or unscrupulous conduct on behalf of a business entity…In order for any individual liability to attach under CUTPA, someone must knowingly or recklessly engage in unfair or unscrupulous acts…in the conduct of a trade or business.”

The Court went on to say an individual may be held liable for CUTPA violations if the individual “either participated directly in the entity’s deceptive or unfair acts or practices, or that he or she had the authority to control them…[a]n individual’s status as controlling shareholder or officer in a closely held corporation creates a presumption of the ability to control.”

The moral of the story is that builders who play fast and loose with customers run the risk of not only alienating clientele and earning a bad reputation, but also could find themselves personally on the hook regardless of LLC or corporate status.

Besides avoiding willfully malicious behavior, well-intentioned builders must be extremely cautious, particularly at the contract stage, to avoid unwittingly subjecting themselves to personal liability. Careful customer relations need to be front and center of any builder’s risk management strategy.

Mark Greco
Commercial Account Executive
mgreco@foundersgrp.com

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