On the same day that the Connecticut Supreme Court announced an important unfair trade practice decision, read my comments about that decision here in the Connecticut Law Tribune, it announced another decision that received less attention but is just as important. The Court held a small business owner personally liable under Connecticut’s Unfair Trade Practice Statute, or CUTPA. What’s personally liable? This means even though the owner was working through his business, he and his personal assets are subject to paying damages separate from the business. CUTPA is a statute modeled after a federal law, and most states have similar laws. These laws say that certain business acts or practices that are unfair or deceptive (complicated test actually) can result in an award of punitive damages and attorney’s fees.
Before this decision, it was not clear whether an individual owner of a business that has violated CUTPA can be personally liable. Well, now it certainly is. And for most small, single owner corporations or limited liability companies, this test should make you consider “doing onto others as you would want done unto you” in the business world. If a plaintiff (could be a consumer or another business) sues your company and you under CUTPA, and proves (1) the company violated CUTPA and (2) you either individually participated in the conducts or could control the conduct, then you are personally liable, not just the company.
The case involved a common residential construction transaction, the sale and construction of a new home, carriage house and property lot for about 2 million dollars. There was a written contract, and then later verbal agreements about the contract. You guessed it. Things went wrong and everyone sued. The buyers, a couple, sued the contracting company and its owner and won under CUTPA. The owner of the contracting company did some bad things the Court said were individual wrongs, like cutting-off the buyers access to a sewer pipe to force payment, and blaming the buyers for his inability to secure financing for the project – which was not true. The owner was held responsible separate from his business and without the plaintiffs piercing the corporate veil – which means proving a type of fraud.
Small business owners need to be made aware of this decision when deciding whether to sue, or when they have been sued. It could be a game-changer. And lesson learned: treat your customers well, even if you disagree with them.