Management Activities Not Unfair Trade Practices

 A water leak in Pasquariello’s ceiling damaged his unit. He claimed that, as a member of the association, he was entitled to be covered for his loss under the association’s insurance policy. He sued the association, alleging that its control over the insurance settlement proceeds prevented him from repairing and occupying his unit. He also alleged that the association failed to adequately represent his interests during the insurance settlement process. Specifically, he alleged that, because the association did not name him as an “additional insured” under the policy as required in the bylaws, he was unable to negotiate the settlement of the claim without the association’s authorization. Lastly, he alleged that the association failed to inform him of the receipt and subsequent use of the insurance proceeds.

The association filed a motion to strike the fourth and sixth counts of Pasquariello’s complaint. For the fourth count, the association argued that “misappropriation of funds” was not a recognizable cause of action in Connecticut. As to the sixth count, the association argued that Pasquariello failed to allege conduct that involved “trade of commerce” within the meaning of the Connecticut Unfair Trade Practices Act.

The court concluded that the association contested the legal sufficiency of the fourth count on the basis of its label. It noted that the context and factual allegations of a motion to strike, not the label placed on the count, are dispositive. The court observed that the association failed to address the legal sufficiency of the allegations contained in the count. In addition to facts incorporated from prior counts, the allegations included the claim that the association fraudulently concealed its receipt and subsequent use of the insurance proceeds. The court concluded that the association’s failure to address the allegations of the fourth count was fatal to its motion.

The association next argued that the sixth count of the complaint should be stricken because Pasquariello failed to allege conduct that involved “trade or commerce” within the meaning of the act. Specifically, the association asserted that management of a condominium by an owners association does not rise to “trade or commerce.”

Pasquariello acknowledged that mismanagement of a condominium by an owners association generally does not fall within the scope of the act, but he claimed, nevertheless, that the association’s conduct in this case extended beyond “mere mismanagement.” Because the association failed to name him as an additional insured under its insurance policy, it was able to settle the claim without his input and approval and convert the settlement money to its own use.

The act provides a private cause of action to any person who suffers an ascertainable loss of money or property as a result of the use or employment of a prohibited method, act or practice. It was enacted to provide relief where conduct was actionable to remedy abuses that occur in commercial transactions. However, the Connecticut Supreme Court affirmed and expressly adopted a trial court’s conclusion that the management activities of a condominium unit owner’s association do not constitute “trade or commerce” within the meaning of the act. The court noted an exception, however, in a superior court decision where condominium unit owners sued the association for mismanagement and poor maintenance as tactics to effectuate a strategy to easily purchase other units in the condominium and the court allowed the claim.

In this instance, the court found that Pasquariello did not allege facts to support a conclusion that the association was engaged in “trade or commerce” and, therefore, granted the association’s motion to strike the sixth count of the complaint.