Gilman v. Marsh & McLennan Cos.

• Decision Date: 15 June 2012
• Docket Number: No. 10 Civ. 8158(JPO).,10 Civ. 8158(JPO).
• Citation: 868 F.Supp.2d 118
• Parties: William W. GILMAN & Edward J. McNenney, Jr., Plaintiffs, v. MARSH & McLENNAN COMPANIES, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

868 F.Supp.2d 118

William W. GILMAN & Edward J. McNenney, Jr., Plaintiffs,

v.MARSH & McLENNAN COMPANIES, INC., et al., Defendants.

No. 10 Civ. 8158(JPO).

United States District Court,

S.D. New York.

June 15, 2012.

Frey Lew Liddle, James William Halter, Jeffrey Lew Liddle, Liddle & Robinson, LLP, Keith Martin Fleischman, The Fleischman Law Firm, New York, NY, for Plaintiffs.

Jonathan D. Polkes, Nicholas James Pappas, Weil, Gotshal & Manges LLP, Andrew W. Stern, Cliff Fonstein, James Ormerod Heyworth, Sidley Austin LLP, New York, NY, for Defendants.

MEMORANDUM AND ORDER

J. PAUL OETKEN, District Judge:

Plaintiffs William W. Gilman and Edward J. McNenney, Jr. (together, “Plaintiffs”) brought this action on October 27, 2010. (Dkt. No. 1.) On October 11, 2011, they filed their second amended complaint. (Second Amended Complaint, Dkt. No. 23, (the “SAC”).) The SAC purports to state nine causes of action: (1) malicious prosecution; (2) abuse of process; (3) misconduct by an attorney under New York Judiciary Law § 487; (4) violations of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. § 1001 et seq.; (5) contractual breach of a severance payment agreement; (6) violations of New York Labor Law (“NYLL”) § 193; (7) contractual breach of a stock award plan; (8) unjust enrichment; and (9) quantum meruit. ( Id.)

On October 26, 2011, defendants Marsh & McLennan Companies, Inc. (“MMC”); Marsh Inc.; Marsh (USA) Inc.; and Marsh Global Broking Inc. (collectively, “Marsh”) and defendant Michael Cherkasky (together with Marsh, “Defendants”) filed the instant motion to dismiss the SAC. (Dkt. No. 26 (the “Motion”).) For the reasons discussed below, the Motion will be granted in part and denied in part.

I. Background¹A. Attorney General's Investigation of Marsh

In April 2004, New York Attorney General Eliot Spitzer initiated an investigation into Marsh's use of contingent commissions, which are fees paid by an insurer to an insurance broker, such as Marsh, that brings business to the insurer. The Attorney General alleged that these contingent commissions illegally suppressed competition and resulted in bid-rigging. Through a number of subpoenas, the Attorney General sought and received from Marsh thousands of pages of documents related to Marsh's contingent commissions practices.

Marsh also began its own internal investigation of its contingent commission practices. Marsh interviewed Gilman in June 2004 and McNenney in September 2004; both men submitted voluntarily to these interviews.

The SAC asserts that all of Plaintiffs' contingent commissions activities had been approved by Marsh's legal department and that Plaintiffs never violated any law in their work for Marsh. It further asserts that Marsh knew that Plaintiffs had done nothing improper or illegal.

Allegedly, Marsh and Cherkasky (who became MMC's CEO in 2004) “ultimately convinced the New York Attorney General to focus on specific individuals—with [Plaintiffs] being the primary targets—instead of Marsh itself.” (SAC ¶ 32.) The SAC goes on to assert that, “[s]pecifically, in return for offering up Messrs. Gilman and McNenney, the New York Attorney General agreed not to criminally prosecute Marsh itself, but instead, would target Messrs. Gilman and McNenney for prosecution.” ( Id. ¶ 39.)

The Attorney General did, however, bring a civil suit (the “Marsh Civil Suit”), announced on October 14, 2004, against MMC and Marsh, Inc. relating to their use of contingent commissions. The SAC alleges that Attorney General Spitzer insisted that he would not negotiate a settlement of the Marsh Civil Suit “so long as then-CEO, Jeff Greenberg, was part of Marsh's management,” but would instead negotiate with Defendant Cherkasky, “who, at the time, was transitioning from CEO of Kroll, Inc. to Marsh, Inc., both subsidiaries of [MMC].” (SAC ¶ 46.) The SAC alleges that Spitzer “used the negotiation of the Marsh settlement as an opportunity to install his close friend, Mr. Cherkasky, as the CEO of Marsh.” (SAC ¶ 44.) The board of Marsh & McLennan Companies, Inc. did appoint Cherkasky as CEO on October 25, 2004. The same day, the Attorney General issued a press release, stating:

The actions announced today by the Board of Directors of Marsh & McLennan Companies permit[ ] Marsh and [the New York Attorney General's] office to move forward toward a civil resolution of our lawsuit.

We are persuaded that the goals that would have been advanced by a criminal prosecution of the corporation—punishment, restitution, general deterrence, and industry reform—will be better accomplished by criminal prosecution of individuals....

(SAC ¶ 49 (quoting Press Release, New York Attorney General, Statement by Attorney General Eliot Spitzer Regarding the Marsh & McLennan Companies (Oct. 25, 2004)) (emphasis in SAC)).²

On or about October 28, 2004, Marsh informed Plaintiff McNenney that his employment was terminated. On or about November 1, 2004, Plaintiff Gilman informed Marsh that he was retiring and completed paperwork to do so. On or about November 2, 2004, a Marsh representative called Gilman's counsel and informedhim that Marsh would not accept Gilman's retirement and instead terminated his employment. Neither plaintiff was terminated for cause.

In a press interview the day after becoming CEO, Defendant Cherkasky asserted that “bid-rigging appears to have been confined to William Gilman, a managing director at Marsh Global Broking, and his group.” (SAC ¶ 62 (quoting David Plumb & Helen Stock, Marsh's New Chief Forms Compliance Unit; Shares Rise (Update 12), Bloomberg, Oct. 26, 2004).)

Marsh waived its attorney-client privilege and produced to the Attorney General at least twenty-three interview memoranda prepared by its counsel. On January 30, 2005, Marsh and the Attorney General entered into an agreement to resolve the Marsh Civil Suit (the “Settlement Agreement”), which required Marsh to pay $850 million into a fund to be disbursed to Marsh's policyholder clients. The Settlement Agreement also required Marsh to implement certain changes in its business practices and to “fully and promptly cooperate with the Attorney General with regard to his [i]nvestigation, and related proceedings and actions, of any other person, corporation or entity, including but not limited to Marsh's current and former employees, concerning the insurance industry.” (SAC ¶ 65.)

The SAC quotes a New York Times article stating that “Mr. Spitzer said that a written apology was included in the [Settlement] [A]greement, noting that ‘certain Marsh employees unlawfully deceived their customers' had been a ‘precondition for a settlement.’ ” [ Sic.] (SAC ¶ 67 (quoting Joseph B. Treaster, Insurance Broker Settles Spitzer Suit for $850 million, Feb. 1, 2005) (emphasis in SAC).) In a press release issued at the same time as announcement of the Settlement Agreement, Cherkasky stated, “[w]e deeply regret that certain of our people failed to live up to our history of dedicated client service. The acts of these employees were inconsistent with the integrity and ethics on which this company was founded....” (SAC ¶ 68 (quoting Press Release, Marsh & McLennan Companies, MMC Reaches Settlement Agreement with New York State Attorney General and Superintendent of new York State Insurance Department (Jan. 31, 2005)).)

B. Related Prosecutions of AIG Employees

On October 13, 2004, the New York Attorney General filed felony complaints against two employees of American International Group (“AIG”), Karen Radke (later Karen Radke Jacobson) and Jean–Baptist Tateossian, charging them with Scheme to Defraud in the First Degree, in violation of Penal Law § 190.65(1)(b). ( See Declaration of Jonathan D. Polkes in Support of Defendants' Motion to Dismiss the Second Amended Complaint (“Polkes Dec.”), Dkt. No. 28, Ex. A, People of the State of New York v. Karen Radke, Felony Complaint, dated October 13, 2004 (“Radke Complaint”); Ex. B, People of the State of New York v. Jean–Baptist Tateossian, Felony Complaint, dated October 13, 2004 (“Tateossian Complaint”).) ³ These complaintsidentified Gilman and McNenney by name as Radke's and Tateossian's coconspirators in the alleged fraud. (Radke Complaint at 2 (“During this time period, Bill Gilman, Ed McNenny [ sic ], and others at Marsh periodically instructed Radke and others at AIG to submit specific quotes for insurance coverage that were less favorable than those of the incumbent carriers, and were designed to ensure that the incumbent carriers would retain [the] client's business.”); Tateossian Complaint at 2 (same, substituting “Tateossian” for “Radke”).)

The only sources of information supporting the allegations in the complaints were “records provided to the [Attorney General's office] by attorneys representing American International Group, Inc.” and interviews by an investigator in the Attorney General's office of Ms. Radke and Mr. Tateossian. (Radke Complaint at 1–2; Tateossian Complaint at 1–2.) The felony complaints identify neither Marsh nor any employee or agent of Marsh as the source of any of the complaints' allegations.

Also on October 13, 2004, Radke and Tateossian each pleaded guilty to the charge against them. (Polkes Dec., Ex. C, Dkt. No. 28–3.) Under oath during her plea allocution, Radke answered in the affirmative that she and others received and complied with instructions from “Bill Gilman, Ed McKenny [ sic ], and others at Marsh ... to submit specific quotes for insurance rates that [she] believed were higher than those of the incumbent carriers, were designed to ensure that the incumbent carriers would win certain business, and resulted in clients being tricked and deceived by a deceptive bidding process.” ( Id. at 6:8–21.)

C. Investigation, Prosecution, and Conviction of Gilman and McNenney

The Attorney General's office conducted an investigation into the activities of Gilman and McNenney, though the dates of the investigation are not entirely clear...