Pennington v. D'Ippolito

Background

Dale Pennington owned 25% of Sisemen, LLC, whose sole asset was a long-term leasehold on commercial property in Norwalk, Connecticut. Kurt Wittek owned the other 75%. Piero D’Ippolito and Cicinelli & D’Ippolito, CPA’s, P.C., provided accounting services to Sisemen from at least 2007 through 2015.

In about 2007, Wittek caused Sisemen to take out a $9.4 million loan from 365 Cherry, LLC, for a purpose unrelated to Sisemen, and pledged the Sisemen property as security. After Wittek defaulted, 365 Cherry foreclosed on the property in 2011, leaving Sisemen without assets. The parties disputed when D’Ippolito learned that the loan involved Sisemen and when he learned that Sisemen no longer owned the property.

Pennington later arbitrated claims against Wittek. The arbitrator ruled for Pennington and awarded him a judgment of more than $1.1 million. Pennington was unable to collect that award and then sued the defendants. His amended complaint asserted professional negligence, negligence, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, fraud, aiding and abetting fraud, claims under the Connecticut Unfair Trade Practices Act, and a claim under New York General Business Law § 349.

Summary-judgment standard

Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment as a matter of law. The court must view the evidence favorably to the party opposing the motion, but that party must identify evidence from which a reasonable jury could rule in its favor.

Professional negligence and negligence

The defendants argued that the ordinary negligence claim duplicated the professional-negligence claim. The court agreed that claims based on the same allegations and seeking the same relief cannot both proceed, and it dismissed the negligence claim.

For the professional-negligence claim, Pennington had to show that the defendants departed from accepted accounting practices and that the departure proximately caused his injuries. The court found that Pennington’s expert provided sufficient evidence about the proper accounting treatment of the Cherry Loan and the alleged departures from accepted practices. Those issues could have been decided by a jury.

The court nevertheless held that Pennington failed to show proximate cause. He did not identify conduct in which he relied on the defendants’ tax returns, quarterly statements, or Schedule K-1 forms, and he did not show that correct accounting would have allowed him to avoid or reduce his losses. The court reasoned that the damage had occurred before the defendants’ alleged accounting failures could have alerted Pennington: by the time the first loan drawdown would have appeared in a quarterly report, nearly $5 million had been drawn, and Pennington had not shown how he could have undone the loan or recovered his investment. The court therefore granted summary judgment to the defendants on the professional-negligence claim.

Fiduciary-duty, fraud, and aiding claims

The defendants argued that the breach-of-fiduciary-duty and fraud claims duplicated the professional-negligence claim. Pennington did not address that argument in his opposition. The court held that all of these claims arose from the same alleged concealment of the loan and sought the same damages. It dismissed the breach-of-fiduciary-duty and fraud claims. Because aiding-and-abetting claims require an underlying violation, the court also dismissed the aiding-and-abetting claims.

State-law consumer-protection claims

The court granted summary judgment on Pennington’s Connecticut Unfair Trade Practices Act claims. It held that the dispute was private and did not affect the general consuming public. It also applied the rule that professional malpractice does not create a claim under that statute.

The court dismissed Pennington’s claim under New York General Business Law § 349. That statute requires deceptive conduct directed toward consumers generally, but the court found that this dispute was private and had no effect on the public at large. Pennington had not presented facts or argument showing otherwise.

Disposition

Judge Cathy Seibel granted the defendants’ motion for summary judgment. The Clerk was directed to enter judgment for the defendants, terminate the pending motion and pre-motion letter, and close the case.