Frank Briscoe Co., Inc. v. Travelers Indem. Co.

• Decision Date: 13 September 1999
• Docket Number: No. Civ.A. 93-5222(JAG).,Civ.A. 93-5222(JAG).
• Citation: 65 F.Supp.2d 285
• Parties: FRANK BRISCOE COMPANY, INC., a New Jersey corporation, Plaintiff, v. THE TRAVELERS INDEMNITY COMPANY and The Travelers Companies, Connecticut corporations, Defendants, Gabriel R. Calafati, Additional Defendant on Counterclaim.
• Court: U.S. District Court — District of New Jersey

65 F.Supp.2d 285

FRANK BRISCOE COMPANY, INC., a New Jersey corporation, Plaintiff, v. THE TRAVELERS INDEMNITY COMPANY and The Travelers Companies, Connecticut corporations, Defendants, Gabriel R. Calafati, Additional Defendant on Counterclaim.

No. Civ.A. 93-5222(JAG).

United States District Court, D. New Jersey.

September 13, 1999.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Jonathan L. Goldstein, Matthew E. Moloshok, Hellring, Lindeman, Goldstein & Siegal, LLP, Newark, NJ, for plaintiff.

Frederic S. Kessler, Tompkins, McGuire & Wachenfeld, Newark, NJ, Arthur S. Friedman, Susan J. Schwartz, Robert A. Scher, Friedman, Wang & Bleiberg, P.C., New York City, for defendants.

AMENDED OPINION

GREENAWAY, District Judge.

INTRODUCTION

This matter concerns an on-going contractual dispute between Plaintiff, Frank Briscoe Company, Inc. ("Briscoe"), and Defendants, The Travelers Indemnity Company and The Travelers Companies (collectively "Travelers"). The Court previously has issued several Opinions and Orders in this matter, including Frank Briscoe Co., Inc. v. Travelers Indem. Co., 899 F.Supp. 1304 (D.N.J.1995) (hereinafter the "Agency Opinion"). The matter now comes before the Court on Travelers' four motions for partial summary judgment and Briscoe's motion for partial summary judgment. Travelers seeks summary judgment on Briscoe's entire Complaint and the award of various items of recovery on its counterclaims. Briscoe seeks summary judgment (1) on Travelers' counterclaims, (2) on certain defenses that Travelers asserts and (3) on various forms of relief requested in its Complaint. For the reasons set forth below, Travelers' motions are granted in part and denied in part. Likewise, Briscoe's motions are granted in part and denied in part.

BACKGROUND

The Agency Opinion sets forth a detailed account of the facts preceding the instant motions. However, for purposes of clarity, a brief overview of those events and the background facts shall be set forth.

Briscoe was a renowned construction company. Among its many major projects were two of the Gateway office buildings in Newark, New Jersey, and Giants Stadium and Meadowlands Race Track in East Rutherford, New Jersey. Since the early 1970s, Travelers provided Briscoe with payment and performance bonds for Briscoe's construction contracts. In late 1979, Briscoe encountered severe financial troubles. As a result, Briscoe became unable to meet its obligations. Travelers estimated that, if Briscoe should default on its various construction projects, its potential exposure based on the outstanding bonds would be approximately $100 million. To avoid this possibility, Travelers chose to assist Briscoe with a series of loans totaling approximately $24 million. In exchange for the loans, Travelers obtained a security interest in all of Briscoe's assets. The parties memorialized their agreement in the "Loan and Security Agreement" (as amended and supplemented).

The Loan and Security Agreement provided that Briscoe would make monthly interest payments on the loans. Briscoe eventually failed to make the scheduled monthly payments and defaulted. At the time of default, Briscoe owed Travelers $22 million in loan principal and $6 million in accrued interest. Travelers, as a secured creditor, chose to take possession of all of Briscoe's assets (the collateral for the loans) and to liquidate them. In an effort to avoid bankruptcy and the discontinuation of its business, Briscoe desired to participate in the disposal of its assets.

Travelers agreed to allow Briscoe to participate in the disposition of the collateral. Travelers believed Briscoe's argument that it (Briscoe) was in the best position to help Travelers successfully liquidate the various assets. Those assets included, among other things, payment for completion of construction projects and legal claims against land owners that had failed to pay Briscoe for construction work. The parties entered into the "Agreement for Disposition of Collateral" ("ADC") on August 2, 1982. The ADC set forth a procedure ("Program") for the disposition of Briscoe's assets and the deposit of liquidated funds with Travelers. The ADC provided, among other things, that Briscoe would receive a fee for its participation and also receive funding to complete the Program.¹ The parties also agreed that Briscoe would receive a 50% share of the net Program proceeds ("Entitlement"), minus certain set-offs, upon completion of the Program.² Furthermore, Travelers agreed to forebear on any deficiency that Briscoe might owe it upon the completion of the Program.³ The parties' ongoing dispute has centered around the interpretation of, and performance required of the parties by, the ADC.

Agency Opinion

After a two day trial, Judge Wolin issued the Agency Opinion. In that Opinion, he considered Briscoe's claim that it was entitled to accumulated interest on all of the funds deposited with Travelers pursuant to the ADC. Briscoe, 899 F.Supp. at 1307. Briscoe asserted that it and Travelers were partners in the ADC and, therefore, Travelers was required to accrue interest for Briscoe on the Program proceeds. Id. By 1995, Briscoe had collected and deposited over $84 million with Travelers. Briscoe claimed that it was entitled to $400 million in interest on those gross proceeds. Id.

To make a decision on Briscoe's claim, the Court first sought to determine whether the ADC was a clear, unambiguous, enforceable contract. Id. at 1308. The Court examined (1) the contract itself, (2) the parties' pre-execution conduct and (3) the parties' post-execution conduct. Id. at 1309. The Court noted that the negotiation of the ADC took well over a year, and that both sides were represented by counsel throughout the negotiations. Id.

Construing the express language of the ADC, the Court concluded that "Travelers owns the money deposited under the ADC as a secured creditor. Any interest earned on the money after it was deposited is the sole and exclusive property of Travelers." Id. at 1316. This conclusion did not end the Court's inquiry. Noting that the U.C.C. did not alter the Court's interpretation of the ADC, the Court next examined the parties' conduct. Id. at 1317. The Court found that the parties' pre-execution conduct evidenced that Travelers had rejected several attempts by Briscoe to include an interest component into the ADC. Id. at 1323. Further, the Court found that in late 1989, William F. Kelly distributed a Briscoe internal memorandum in which he proposed several ways to interpret the ADC that would allow Briscoe to increase its recovery. Id. That memorandum, coupled with Briscoe's silence with respect to interest until 1989, led the Court to conclude that Briscoe was making "an after-the-fact attempt ... to earn more money under the ADC." Id. The Court found that "the post-execution conduct of the parties demonstrates that after the Program dragged on far longer than anyone anticipated, Briscoe began to search for ways to maximize its share." Id. at 1325.

The Court also analyzed the trial testimony of the parties. Id. at 1325-1332. The Court found the testimony of Briscoe's two witnesses, Howard Loeffler, former Travelers employee, and Gabriel Calafati, Briscoe President, not credible. Id. at 1325-1330, In contrast, the Court found the testimony of Travelers' witness, Mark Larner, the ADC's scrivener, "highly convincing." Id. at 1332. Larner testified, among other things, that the ADC follows the U.C.C. and was designed to articulate Travelers' rights after Briscoe's default under the Loan and Security Agreement. Id. at 1330. The Court held that Briscoe could not imply terms into the ADC based on the unsupported contention that the driving force behind the ADC was Travelers' fear of third-party claimants.⁴ Id. at 1332.

The Court held that Travelers, as the exclusive owner of all money deposited under the ADC, had no duty to accrue interest on Briscoe's behalf. Id. at 1334. The Court based its holding on, among other things, the following factual and legal conclusions: (1) the ADC language and meaning was clear and unambiguous; (2) the ADC created an agency relationship whereby Briscoe was Travelers' agent; and (3) Travelers was the owner of all of the collateral under the ADC. Id.

Briscoe's Complaint

The Agency Opinion disposed of Briscoe's claim seeking interest on the Program proceeds deposited with Travelers. The Agency Opinion also set forth the Court's conclusions that the ADC was the clear and complete expression of the parties' agreement, and that the parties' relationship would be governed by the terms of the ADC. As such, this Court now sets forth Briscoe's claims that survived the Agency Opinion.

Briscoe's Complaint seeks the following relief:

(1) Count One — specific performance, forcing Travelers to (a) fund the Program, (b) support Briscoe's prosecution of its construction claims, (c) make a full accounting to Briscoe of Program proceeds deposited, (d) pay Briscoe its Entitlement under the Program and (e) indemnify and defend Briscoe against third-party claimants.

(2) Count Two — injunctive relief, awarding the relief requested in Count One, and further enjoining Travelers' wrongful acts, such as the interference with Briscoe's contract claims and the failure to provide Program funding.

(3) Count Three — tortious interference with prospective economic advantage, awarding compensatory damages, punitive damages and costs of suit.

(4) Count Four — accounting, ordering Travelers to make a full accounting to Briscoe because Travelers failed to make the accountings over the life of the Program as specified in the ADC.

(5) Count Five — breach of contract by improper application of receipts and failure to release Briscoe's money, ordering Travelers to make a full accounting and pay Briscoe its Entitlement along with the award of compensatory damages and costs of suit because Travelers (a) failed to repay non-program loans as funds...