Walter J. Lewis, Jr. v. Chelsea G.C.A. Realty Partnership, L.P.

The plaintiff, Walter J. Lewis, Jr.,
appeals from the judgment of the trial court rendered
after it granted the motion for summary judgment filed
by the defendant, Chelsea G.C.A. Realty Partnership,
L.P. The plaintiff claims that the court (1) incorrectly
determined that it lacked subject matter jurisdiction
over counts two and three of his complaint, and (2)
improperly applied the Noerr-Pennington1 doctrine to
count one of his complaint. We reverse the judgment
of the trial court rendered following the granting of the
motion for summary judgment and remand the case
with direction to dismiss the action.

This case is one of a series arising out of the defendant's
development of an outlet mall, Clinton Crossing
Factory Stores (Clinton Crossing), in Clinton. The parties
first came into conflict in August, 1994, when the
plaintiff, a real estate developer and resident of Clinton,
joined the Clinton Organization for Responsible Development
(citizen group), a citizen group concerned by
the defendant's development plans. Although not himself
a party, the plaintiff provided funding for the citizen
group to appeal, in March, 1995, after the Clinton planning
and zoning commission's approval to build Clinton
Crossing and, in May, 1995, after the commission's grant
of a variance to erect a sign and to permit parking in
the surrounding residential areas (zoning appeals). The
plaintiff also recommended to the citizen group an attorney,
Paul R. Kraus, who had worked for him in the past,
to handle the appeals. The Superior Court dismissed
both zoning appeals, finding that the plaintiffs named
in the appeals lacked standing because none of them
owned land that abutted or was within 100 feet of the
development. This court granted certification to appeal
in both cases. The appeals were subsequently
withdrawn.

Concerned by the plaintiff's interference with the
development of Clinton Crossing, the defendant sought
legal advice in October, 1995, to determine whether the
plaintiff's actions violated federal or state law. Once
counsel discovered that the plaintiff had filed a bankruptcy
petition in the United States Bankruptcy Court
for the District of Connecticut in September, 1995, counsel
recommended that the defendant file a claim therein,
alleging violations of the Connecticut Unfair Trade
Practices Act (CUTPA), General Statutes § 42-110a et
seq. In January, 1996, the defendant filed an adversary
proceeding under § 523 (a) (6) of the Bankruptcy Code,
objecting to the bankruptcy discharge of the debt allegedly
owed by the plaintiff to the defendant as a result
of the plaintiff's CUTPA violations (adversary proceeding).
While the adversary proceeding was pending, the
plaintiff filed this action in July, 1996. The plaintiff
alleged violations of CUTPA in that the defendant's
adversary proceeding in the Bankruptcy Court and
other activities deprived him of his counsel, Kraus,
impaired his ability to work as a developer in Clinton,
and prevented him from exercising his rights as a resident
of Clinton to ensure that the zoning regulations
and wetlands laws were followed (count one). During
the pendency of this case, the defendant withdrew its
adversary proceeding with prejudice.2 The plaintiff
amended his complaint in November, 1998, adding a
second count alleging a vexatious litigation claim under
General Statutes § 52-568 and a third count alleging a
violation of CUTPA, both based on the adversary proceeding.

At the close of pleadings, the defendant filed a motion
for summary judgment on the grounds that the activities
alleged in all three counts of the complaint were protected
by the Noerr-Pennington doctrine, that the
defendant had established an advice of counsel defense
to counts two and three, and that counts two and three
were preempted by bankruptcy law. The court granted
the defendant's motion, concluding that the Noerr-Pennington
doctrine barred count one and that bankruptcy
law preempted counts two and three. This appeal
followed.

On appeal, the plaintiff claims that the court improperly
granted the defendant's motion for summary judgment
as to counts two and three on federal preemption
grounds because the relevant provisions of the Bankruptcy
Code and the Federal Rules of Bankruptcy Procedure
are directed at disciplining attorneys who bring
frivolous actions, but not at compensating the victims
of such actions. The plaintiff also claims that the court
improperly applied the Noerr-Pennington doctrine in
rendering summary judgment as to count one because
the activities of the plaintiff, himself, related to the
zoning appeals were protected by the doctrine. As alternative
grounds for affirmance, the defendant argues
that the Noerr-Pennington doctrine bars all three
claims, and that counts two and three are barred
because it filed the adversary proceeding in reliance
on counsel.

As a preliminary matter, we set forth the standard
of review. ‘‘Our review of a trial court's decision to
grant [a] motion for summary judgment is plenary. . . .
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.'' (Citation
omitted; internal quotation marks omitted.) Ryan
Transportation, Inc. v. M & G Associates, 266 Conn.
520, 525, 832 A.2d 1180 (2003).

I

The plaintiff first claims that the court improperly
determined that counts two and three of his complaint,
which alleged vexatious litigation and violation of
CUTPA, were preempted by bankruptcy law. Federal
preemption implicates the court's jurisdiction. See Cox
Cable Advisory Council v. Dept. of Public Utility Control,
259 Conn. 56, 62, 788 A.2d 29, cert. denied, 537
U.S. 819, 123 S. Ct. 95, 154 L. Ed. 2d 25 (2002). ‘‘The
question of preemption is one of federal law, arising
under the supremacy clause of the United States constitution.
. . . Determining whether Congress has exercised
its power to preempt state law is a question of
legislative intent. . . . [A]bsent an explicit statement
that Congress intends to preempt state law, courts
should infer such intent where Congress has legislated
comprehensively to occupy an entire field of regulation,
leaving no room for the States to supplement federal
law . . . or where the state law at issue conflicts with
federal law, either because it is impossible to comply
with both . . . or because the state law stands as an
obstacle to the accomplishment and execution of congressional
objectives . . . .'' (Internal quotation marks
omitted.) Barbieri v. United Technologies Corp., 255
Conn. 708, 717, 771 A.2d 915 (2001).

The United States constitution grants to Congress
the power to establish ‘‘uniform Laws on the subject
of Bankruptcies throughout the United States . . . .''
U.S. Const., art. I, § 8. Congress has given the United
States district courts original and exclusive jurisdiction
over bankruptcy matters arising under title 11 of the
United States Code. 28 U.S.C. § 1334 (a). Through the
United States Bankruptcy Code, 11 U.S.C. § 101 et. seq.,
Congress has provided ‘‘a comprehensive federal system
of penalties and protection to govern the orderly
conduct of debtors' affairs and creditors' rights.'' Eastern
Equipment & Services Corp. v. Factory Point
National Bank, 236 F.3d 117, 120 (2d Cir. 2001). The
code ‘‘contains remedies for the misuse of the [bankruptcy]
process more generally . . . .'' (Internal quotation
marks omitted.) Astor Holdings, Inc. v. Roski, 325
F. Sup. 2d 251, 262 (S.D.N.Y. 2003); see 11 U.S.C. § 303
(i) (2) (creditors who file involuntary bankruptcy petition
in bad faith are liable for damages); 11 U.S.C. § 362
(h) (persons who wilfully violate bankruptcy stay are
liable for damages).

Significantly for the plaintiff's claim before this court,
the Federal Rules of Bankruptcy Procedure, promulgated
under 28 U.S.C. § 2075, provide a remedy for the
bad faith filing of an adversary proceeding. Rule 9011
provides that every filing with the Bankruptcy Court
shall be signed by either an attorney or unrepresented
party, and that such signature certifies that the filing is
made in good faith and not for the purpose of needlessly
increasing the cost of litigation.3 Sanctions for violations
of the rule ‘‘shall [be] impose[d] on the person
who signed [the submission], the represented party, or
both [and] may include an order to pay to the other
party or parties the amount of the reasonable expenses
incurred because of the filing of the document, including
a reasonable attorney's fee.'' Fed. R. Bankr. P. 9011
(a) (1994). The plaintiff argues that the purpose of rule
9011 is to punish attorneys who bring frivolous lawsuits,
not to compensate victims injured by such bad behavior.
It may be true that the rule is punitive in nature,
but the language of the rule as it existed at the time of
the adversary proceeding makes it clear that the plaintiff
could have sought in Bankruptcy Court, based on
the defendant's alleged bad faith filing of the adversary
proceeding, to impose sanctions on the defendant
directing payment of expenses and attorney's fees. In
addition, the plaintiff could have sought damages under
28 U.S.C. § 1927, which provides that any attorney who
‘‘so multiplies the proceedings in any case unreasonably
and vexatiously may be required by the court to satisfy
personally the excess costs, expenses, and attorneys'
fees reasonably incurred because of such conduct.'' The
plaintiff, thus, was not without a remedy in Bankruptcy
Court.

Although it is true that the federal remedies provided
for in the bankruptcy context do not offer the substantial
damages available under Connecticut's vexatious
litigation statute and CUTPA, that is an insufficient
basis on which to preclude preemption. The threat of
such tort actions and the potential for a large recovery
may itself deter individuals from exercising their rights
in bankruptcy, thereby frustrating the purpose of the
bankruptcy process. See MSR Exploration, Ltd. v.
Meridian Oil, Inc., 74 F.3d 910, 916 (9th Cir. 1996). It
is, thus, ‘‘for Congress and the federal courts, not the
state courts, to decide what . . . penalties are appropriate
for use in connection with the bankruptcy process
and when those . . . penalties shall be
utilized.'' Id.

Wenote that a majority of courts that have considered
the preemptive nature of bankruptcy law in the context
of state tort claims alleging violations of the bankruptcy
process have found such claims to be preempted. See,
e.g., Eastern Equipment & Services Corp. v. Factory
Point National Bank, supra, 236 F.3d 121 (District
Court lacked jurisdiction to hear state law tort claims
alleging violations of automatic stay); MSR Exploration,
Ltd. v. Meridian Oil, Inc., supra, 74 F.3d 916
(malicious prosecution action in District Court for bad
faith filing of creditor's claim in bankruptcy proceeding
preempted by Bankruptcy Code); Astor Holdings, Inc.
v. Roski, supra, 325 F. Sup. 2d 263 (claims sounding
in state law that defendant filed bankruptcy petition,
certain papers with Bankruptcy Court in bad faith cannot
be brought in federal District Court due to preemption
by Bankruptcy Code); Idell v. Goodman, 224 Cal.
App. 3d 262, 270–71, 273 Cal. Rptr. 605 (1990) (claim
brought in state court alleging malicious prosecution for
bad faith filing of adversary proceeding in Bankruptcy
Court preempted by rule 9011 of Federal Rules of Bankruptcy
Procedure, 28 U.S.C. § 1927).4

The exclusivity of federal jurisdiction over bankruptcy
proceedings, the complexity and comprehensiveness
of Congress' regulation in the area of
bankruptcy law and the existence of federal sanctions
for the filing of frivolous and malicious pleadings in
bankruptcy must be read as Congress' implicit rejection
of alternative remedies such as those the plaintiff seeks.
Accordingly, we determine that the court lacked subject
matter jurisdiction over counts two and three of the
complaint.

II

The plaintiff also claims that the court improperly
determined that count one of his complaint was barred
under the Noerr-Pennington doctrine. We do not reach
the issue of Noerr-Pennington because we determine
that count one is preempted by bankruptcy law as well.
The issue of whether bankruptcy law preempted the
court's jurisdiction over count one was not raised
before either the trial court or this court on appeal.
Count one, like counts two and three, appears to be
premised entirely on the adversary proceeding brought
by the defendant in the Bankruptcy Court. In light of
the apparent similarity between the three counts, we
raised the issue sua sponte. ‘‘[T]he question of subject
matter jurisdiction, because it addresses the basic competency
of the court, can be raised by any of the parties,
or by the court sua sponte, at any time.'' (Internal quotation
marks omitted.) Beneduci v. Valadares, 73 Conn.
App. 795, 805, 812 A.2d 41 (2002). Federal preemption
implicates the court's subject matter jurisdiction. See
Cox Cable Advisory Council v. Dept. of Public Utility
Control, supra, 259 Conn. 62. Following oral argument,
we directed the parties to file supplemental briefs simultaneously,
addressing whether count one of the
amended complaint was barred by federal preemption.

In count one, the plaintiff first alleged that the defendant
brought the adversary proceeding in order to
harass the plaintiff and his attorney, Kraus, and that,
as a result, the plaintiff incurred expenses and attorney's
fees. The complaint also alleged in relevant part
that ‘‘[a]s a result of the Defendant's activities, statements,
conversations with town officials, commentaries,
correspondence, and other activities, the Plaintiff's
ability to function in the Town of Clinton as a builder
and developer has been severely impaired and damaged
. . . [and he] has incurred and will continue to incur
loss of business, reputation, and good will . . . .'' Other
than making those general allegations in the complaint,
however, the plaintiff did not allege facts as to the
defendant's ‘‘activities'' or otherwise treat count one as
founded on anything other than the adversary proceeding.
The court's understanding, as made evident in its
memorandum of decision, was that count one was in
fact premised only on the adversary proceeding.5 In his
supplemental brief, the plaintiff failed to provide this
court with any reason why count one raised a claim in
any way distinct from counts two and three. Count one,
in all relevant respects, is, thus, identical to those claims
brought in counts two and three, which the court determined
were precluded by federal law. We hold, therefore,
that count one of the plaintiff's complaint alleging
CUTPA violations is preempted by bankruptcy law for
the same reasons we discussed in part I. Accordingly,
we determine that the court lacked subject matter jurisdiction
over count one.