RANDALL WEISS et al. v. MICHAEL D. SMULDERS et al., SC 19151/19158

Judicial District of Hartford

 

     Promissory Estoppel; Whether Plaintiffs Lacked Standing to Assert Promissory Estoppel Claim Because the Claim was Property of Bankruptcy Estate; Whether Contract Precluded Promissory Estoppel Claim; Whether Plaintiffs Failed to Prove Damages.  Plaintiff Gourmet and Specialty Food Works, LLC (GSFW) and defendant Garden of Light Natural Food Markets, Inc. (GOL), entered into a distribution agreement, whereby GSFW agreed to distribute granola produced by GOL for a three year period.  The agreement was signed by plaintiff Randall Weiss, as president, on behalf of GSFW, and on behalf of GOL by its president, defendant Michael Smulders.  Subsequently, Weiss filed for bankruptcy protection and was discharged from his debts.  A few years later, the plaintiffs brought this action, alleging a claim of promissory estoppel against Smulders.  That claim was premised on allegations that Smulders reneged on his promises that GOL’s bakery operation and GSFW would merge into a third company, referred to as NEWCO.  The defendants filed a motion to dismiss.  They contended that, because the promissory estoppel claim at least partially arose prior to Weiss’ bankruptcy filing, it should have been included in his bankruptcy estate.  Since that claim was not included therein, the defendants maintained that it could not have been released to Weiss by the bankruptcy trustee and, thus, the trustee, rather than Weiss, had exclusive standing to pursue it.  The trial court denied the motion to dismiss.  It explained that, because the promissory estoppel claim had not fully accrued at the time the bankruptcy petition was filed, Weiss was not required to report the claim to the bankruptcy court.  Thereafter, the court rendered judgment in favor of the plaintiffs, finding that Smulders made promises to Weiss about the merger of the companies, and that Smulders, in reliance on those promises, acted to his detriment, including abandoning his previous business venture.  As damages, the court awarded the plaintiffs $7000, which was half the amount they expended in promoting NEWCO.  It also determined that the plaintiffs were entitled to a fifty percent share of what NEWCO’s value would have been had the merger taken place.  The court declined, however, to award such damages because the plaintiffs failed to establish NEWCO’s value.  The court explained that the evidence that the plaintiffs presented regarding GOL’s value could not be used to ascertain NEWCO’s value, noting, among other things, that NEWCO would have only included GOL’s bakery operation and not its two grocery stores.  Both the plaintiffs and the defendants appeal.  The defendants challenge the denial of their motion to dismiss.  They also claim that the trial court improperly rejected their argument that the promissory estoppel claim was precluded by the distribution agreement, which, they claim, provided that the parties would not be bound to form a business together unless there was a final written agreement.  The plaintiffs claim that the trial court improperly concluded that they failed to prove their damages with reasonable certainty because the value of NEWCO could not be ascertained.