American Diamond Exchange, Inc. v. Alpert
920 A.2d 357, 2007 Conn. App. LEXIS 182, 101 Conn. App. 83 (2007)
Rule of Law:
A defendant can be held liable for tortious interference with a business expectancy and civil conspiracy if they knowingly and actively participate in a scheme to divert business, but damages must be measured by the plaintiff's actual pecuniary loss, not the defendant's gains, and limited to the period of proven involvement.
Facts:
- Jurgita Karobkaite came to the United States in 1996 and married Scott Alpert in September 1997.
- Approximately one month after their marriage, Scott Alpert was hired as a retail sales clerk for American Diamond Exchange, Inc. (the plaintiff), a corporation that buys and sells diamonds and other jewelry in New Haven.
- Within his first few months of employment, Scott Alpert became an estate buyer for American Diamond Exchange, Inc.
- Scott Alpert began diverting American Diamond Exchange, Inc.'s customers by telling them the plaintiff was not interested in their jewelry or that consignment items were not selling, and then offering to buy the items personally for Jurgita Karobkaite.
- Scott Alpert would typically set up off-premises meetings to complete these transactions and then resell the jewelry at a wholesale level, often for a 45-50% profit.
- Jurgita Karobkaite was aware of Scott Alpert's diversion scheme from its inception and actively participated by maintaining a joint checking account used for purchases and deposits of resale profits, accompanying Alpert to transactions, signing and endorsing checks, and depositing large sums into her savings account.
- By the year 2000, approximately $195,000 was deposited into Jurgita Karobkaite and Scott Alpert's joint account, and $136,000 into her savings account, despite their combined reported income not exceeding $96,000 per year and no additional income listed on their joint tax returns.
- Around spring 2001, Scott Alpert was confronted by David Schnee, the president of American Diamond Exchange, Inc., about his diversions and promised not to conduct business outside the store; Scott Alpert also admitted his crack cocaine addiction to Jurgita Karobkaite and moved out of their shared condominium, but the joint account activity continued.
Procedural Posture:
- American Diamond Exchange, Inc. brought a six-count tort action against Jurgita Karobkaite and Scott Alpert in the trial court.
- The complaint alleged tortious interference with a business relationship or expectancy, violations of the Connecticut Unfair Trade Practices Act (CUTPA), and civil conspiracy against both defendants, plus conversion and breach of contract and fiduciary duty against Scott Alpert only.
- A judgment of default was entered against Scott Alpert on all counts after he did not contest the pleadings.
- The trial court found Jurgita Karobkaite liable for tortious interference with a business relationship or expectancy and civil conspiracy, but found that she had not violated CUTPA.
- The trial court awarded American Diamond Exchange, Inc. $118,000 in damages.
- Jurgita Karobkaite appealed the trial court's judgment to the Connecticut Appellate Court, where she is the appellant and American Diamond Exchange, Inc. is the appellee.
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Issue:
1. Does the evidence support the trial court's finding that Jurgita Karobkaite was liable for tortious interference with American Diamond Exchange, Inc.'s business expectancy, specifically regarding improper conduct, knowledge of the business relationship, and actual loss? 2. Does the evidence support the trial court's finding that Jurgita Karobkaite was liable for civil conspiracy with Scott Alpert to engage in unlawful conduct? 3. Did the trial court apply the correct legal standard and calculation method for awarding damages in a tortious interference and civil conspiracy case? 4. Did the trial court err by applying a preponderance of the evidence standard of proof rather than a clear and convincing evidence standard for claims involving fraud?
Opinions:
Majority - DiPENTIMA, J.
1. Yes, the evidence supports the trial court's finding of liability for tortious interference. The court found ample evidence of Jurgita Karobkaite's improper motive and means, as she was a knowing and willing participant in Scott Alpert's schemes, which were advanced for their financial betterment at the plaintiff's expense. Her actions, such as managing the joint checking account, accompanying Alpert to transactions, and signing/endorsing checks, constituted active participation, not mere encouragement, distinguishing this case from situations like Robert S. Weiss & Associates, Inc. v. Wiederlight. The court explicitly found she was aware of Alpert's scheme to divert customers by spring 2001, meaning she knew of the business relationship. The plaintiff also demonstrated a reasonable probability of actual loss, as Alpert's actions prevented customers, many of whom had signed contracts or intended to sell to the plaintiff, from doing business with American Diamond Exchange, Inc. Her continuous involvement in the scheme proximately caused the plaintiff's ongoing loss, rejecting the defendant's attempt to isolate her actions from the overarching plan. 2. Yes, the evidence supports the trial court's finding of liability for civil conspiracy. A combination to do an unlawful act can be inferred from circumstantial evidence, as recognized in cases like State v. Patterson. The trial court's finding that Scott Alpert informed Jurgita Karobkaite of his diversion scheme by spring 2001, and her subsequent continued activity in their joint account, provided substantial evidence to conclude she combined with Alpert to divert customers. The court was well within its discretion to make credibility determinations, rejecting Karobkaite's self-portrayal as an innocent victim and inferring her knowledge and participation from her actions. 3. No, the trial court's award of $118,000 in damages was legally improper and not supported by the evidence. The proper measure of damages for tortious interference is the plaintiff's pecuniary loss of the benefits of the prospective business relation, as established in Conrad v. Erickson, not the defendant's profits. Furthermore, the trial court improperly included transactions prior to spring 2001, the date it determined Jurgita Karobkaite became involved in the illegal conduct. The case is reversed as to damages and remanded for recalculation based on the plaintiff's lost profits, limited to the period from April 2001, using the existing record, and considering the potential difference in profit margins between Alpert and the plaintiff. 4. No, the trial court correctly applied the preponderance of the evidence standard. The defendant mistakenly asserted that because fraud was a component of the misconduct, a heightened clear and convincing evidence standard was required. However, the plaintiff's claims for tortious interference and civil conspiracy were not based specifically and exclusively on the defendant's fraud. These claims require proof of intentional interference without justification or a combination to do an unlawful act, for which the preponderance of the evidence is the appropriate burden of proof, as supported by cases like Hi-Ho Tower, Inc. v. Com-Tronics, Inc.
Analysis:
This case clarifies the elements of tortious interference with business expectancy and civil conspiracy in Connecticut, particularly regarding the standard for establishing a defendant's knowing participation and the appropriate measure of damages. It reinforces that active involvement and a shared improper motive, even if not the sole instigator, can lead to liability, rejecting attempts to compartmentalize actions within an ongoing scheme. Crucially, it distinguishes between a defendant's profits and a plaintiff's losses for damages calculation in tortious interference claims, requiring a direct assessment of the plaintiff's actual pecuniary harm and limiting the scope of damages to the period of proven wrongdoing. This limits potential over-recovery by plaintiffs and ensures that damage awards are directly linked to the harm suffered due to the tortious conduct.
