Alexbay LLC v. QBE Ins. Corp.
| Decision Date | 11 September 2020 |
| Docket Number | No. 3:18-cv-00423 (VAB),3:18-cv-00423 (VAB) |
| Citation | 486 F.Supp.3d 511 |
| Parties | ALEXBAY LLC, Plaintiff, v. QBE INSURANCE CORPORATION, Defendant. |
| Court | U.S. District Court — District of Connecticut |
Thomas G. Parisot, Connor McNamara, Secor, Cassidy & McPartland, PC, Waterbury, CT, for Plaintiff.
Michael F. Lettiero, Gerber Ciano Kelly Brady LLP, Rocky Hill, CT, for Defendant.
RULING AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
Alexbay LLC ("Alexbay" or "Plaintiff") has sued QBE Insurance Corporation ("QBE" or "Defendant") for QBE's refusal to provide insurance coverage for a lawsuit filed against Alexbay, Kleeberg, et al. v. Eber, et al. , C.A. 1:16-cv-09517-LAK ("2016 Kleeberg Lawsuit"). QBE claims that the 2016 Kleeberg Lawsuit fell within exclusion provisions of the relevant insurance policy.
Both Alexbay and QBE have filed motions of summary judgment. Mot. for Summ. J., ECF No. 40, 45 (Oct. 11, 2019) ("Pl.’s Mot. Summ. J."); Mot. for Summ. J., ECF No. 43. (Oct. 15, 2019) ("Def.’s Mot. Summ. J.").
For the following reasons, Alexbay's motion for summary judgment is DENIED and QBE's motion for summary judgment is GRANTED .
Around March 31, 2016, Alexbay purchased an insurance policy from QBE, covering "Directors & Officer and Entity Liability, Employment Liability and Fiduciary Liability" ("Insurance Policy"). Pl.’s Local Rule 56(a)(1) Statement of Facts ¶ 1, ECF No. 41 (Oct. 11, 2019) ("Pl.’s SMF"); Def.’s Local Rule 56(a)(2) Statement of Facts ¶ 1, ECF No. 44 ("Def.’s Opp'n SMF") (objecting to Plaintiff's statement that Alexbay "purchased" the policy, asserting that "there are no facts in the record establish[ing] the actual date of purchase.") The coverage period for the Insurance Policy was March 31, 2016 to March 31, 2017. Pl.’s SMF ¶ 2; Def.’s Local Rule 56(a)(1) Statement of Undisputed Facts ¶ 65, ECF No. 43-2 (Oct. 15, 2019) ("Def.’s SMF").
The liability coverage of the Insurance Policy "applies only to claims first made against the Insureds during the policy period." Def.’s SMF ¶ 66. The Insurance Policy also stated:
With respect to any Claim under any Liability Coverage Part , the Insurer shall have the right and duty to defend any Claim, unless otherwise specifically stated in a particular Liability Coverage Part . The Insurer shall have such right and duty to defend even if any of the allegations in such Claim are groundless, false or fraudulent.
Pl.’s SMF ¶ 3 (citing Pl.’s Ex. 1)(emphasis in original); Def.’s Opp'n SMF ¶ 3 (). The definition of claim in the Insurance Policy included "a civil proceeding evidenced by the service of a complaint." Pl.’s SMF ¶ 4.
Under the Insurance Policy provisions, related claims "shall be deemed a single Claim first made during the policy period in which the earliest of such Related Claims was either first made or deemed to have been first made." Pl.’s SMF ¶ 12 (citing Pl.’s Ex. 3); Def.’s Opp'n SMF ¶ 12 (). The Insurance Policy further defined a "related claim" as "all Claims based upon, arising out of or resulting from the same or related, or having a common nexus of, facts, circumstance or Wrongful Acts ." Pl.’s SMF ¶ 10 (citing Pl.’s Ex. 1) (emphasis in original). "Wrongful Acts" are defined in part as "any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed, attempted, or allegedly committed or attempted by: (a) an Insured Person in his capacity as such; or (b) by a Company ." Pl.’s SMF ¶ 11 (citing Pl.’s Ex. 1) (emphasis in original).
The Specific Litigation Exclusion clause of the Insurance Policy stated:
Pl.’s SMF ¶ 7 (citing Pl.’s Ex. 3) (emphasis in original). The AIG Loss Report Dated March 2, 2016 from the Specific Litigation Exclusion clause included two lawsuits filed by the law firm Harris Beach, PLLC. Pl.’s SMF ¶ 8; Def.’s SMF ¶ 67.
In order to determine whether either of the two relevant exclusions to the Insurance Policy apply, background on the various parties and lawsuits leading up to this lawsuit is necessary.
Allen Eber "created" Eber Bros. & Co. Def.’s SMF ¶ 1. Eber Bros. & Co. "owned all of the Eber Brother entities, including Eber Bros. Wine & Liquor Corp., which owned Eber Bros. Wine & Liquor Metro, Inc." Id. ¶ 2.
Allen Eber "created a trust to hold and manage the family business." Id. ¶ 3. Lester Eber "owned one third of the trust while the remainder was owned by his two sisters, who have since died and left their interests to their children." Id. ¶ 4.
"In December 2011, Lester Eber formed Alexbay." Id. ¶ 5. Lester Eber is its "sole member, officer, director and employee." Id.
On September 22, 2011, Harris Beach, PLLC ("Harris Beach") "filed suit against Eber Bros. Wine & Liquor Corp. in New York Supreme Court for Monroe County to collect unpaid fees, approximately $700,000, for Harris Beach's representation of Eber Bros. Wine & Liquor Corp. in a prior lawsuit." ("2011 Harris Beach Lawsuit"). Id. ¶ 6. Harris Beach "asserted [four] claims against Eber Bros. Wine & Liquor Corp.: (1) breach of contract, (2) account stated, (3) quantum meruit, and (4) unjust enrichment." Id. ¶ 7.
The court "entered a judgment against Eber Bros. [Wine & Liquor Corp.] and in favor of Harris Beach for more than [$1 million]." Pl.’s SMF ¶ 23. "In early 2014, Harris Beach obtained a judgment, which was later vacated." Def.’s SMF ¶ 8.
On February 21, 2012, Alexbay filed a lawsuit in New York State Court against Eber Bros. Wine & Liquor Corp., Southern Wine & Spirits of America, Inc., Eber Bros. Wine & Liquor Metro, Inc., and John Does 1-10 ("2012 Alexbay Lawsuit") to "protect Lester Eber's personal investments." Id. ¶ 9, 16; Pl.’s SMF ¶ 14 (citing Pl.’s Ex. 2).
Alexbay alleges that this lawsuit "arose from Alexbay's requested judicial determination of the commercial reasonableness of accepting collateral to satisfy unpaid debts." Pl.’s SMF ¶ 15 (citing Pl.’s Ex. 2, Ex. B ¶ 1). QBE denies that the 2012 Alexbay Lawsuit "arose from" Alexbay's requested judicial determination but admits that the 2012 Alexbay Lawsuit alleged that Alexbay was seeking a determination of commercial reasonableness regarding the accepting of certain collateral. Def.’s Opp'n SMF ¶ 15.
Eber Bros. Wine & Liquor Corp. became indebted to Lester Eber for more than "[$3.2 million]." Pl.’s SMF ¶ 16. The 2012 Alexbay Lawsuit alleged that "Lester Eber transferred his rights under the security agreement to Alexbay." Id. ¶ 18 (citing Pl.’s Ex. 2, Ex. B at ¶ 5). Alexbay alleged that Id. ¶ 17 (citing Pl.’s Ex. 2, Ex. B at ¶ 5); Def.’s SMF ¶ 10.
"The complaint alleged a series of financial transactions leading to Alexbay seeking a judicial declaration that Alexbay's assumption of certain collateral by Alexbay was commercially reasonable and in good faith." Def.’s SMF ¶ 11.
Alexbay "requested that the [New York State] [c]ourt determine that it was commercially reasonable for Alexbay to accept, as the secured creditor, Eber Bros. [Wine & Liquor Corp.’s] ownership interests in [Eber Bros. Wine & Liquor Metro, Inc.] in full satisfaction of its debt." Pl.’s SMF ¶ 19; Def.’s SMF ¶ 12. Alexbay "alleged that Eber Bros. Wine & Liquor Metro, Inc. had no assets other than its 79% interest in Eber-Connecticut, LLC and that the value of that interest was $3.6 million [ ] based on transactions involving Eber-Connecticut, LLC." Def's SMF ¶ 13. Alexbay "alleged that Polebridge Bowman, LLC's acquisition of 6% of Eber-Connecticut, LLC established that the value of one percent of Eber-Connecticut, LLC was worth $58,333.00, and that after accounting for a loss in value to Eber-Connecticut, LLC, Eber Bros. Wine & Liquor Metro, Inc.’s 79% ownership interest in Eber-Connecticut, LLC was worth approximately $3.6 million." Id. ¶ 14.
The court ruled that "the proposed transaction was commercially reasonable under the Uniform Commercial Code." Pl.’s SMF ¶ 20 (citing Pl.’s Ex. 4); Def.’s Opp'n SMF ¶ 20 (). "[I]n June 2013[,] Alexbay obtained the shares of Eber Bros. Wine & Liquor Metro, Inc., which included the controlling interest in Eber-Connecticut, LLC." Def's SMF ¶ 15.
On December 11, 2014, Harris Beach filed a lawsuit in New York State Court against Eber Bros. Wine & Liquor Corp., Alexbay, Eber Bros. Wine & Liquor Metro, Inc., and Eber-Connecticut, LLC ("2014 Harris Beach Lawsuit"). Id. ¶ 17; Pl.’s SMF ¶ 21. This lawsuit "[sought] legal fees allegedly owned by Eber Bros. [Wine & Liquor Corp.]" Pl.’s SMF ¶ 21 (citing Pl.’s Ex. 2, Ex. G at 1); Def.’s Opp'n SMF ¶ 21 ().
The complaint in the 2014 Harris Beach Lawsuit "alleged that Harris Beach represented Eber Bros. [Wine & Liquor Corp.], in a lawsuit, that...
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