Globalnet Financial.Com v. Frank Crystal & Co.

• Decision Date: 05 May 2006
• Docket Number: Docket No. 04-6679-CV.
• Citation: 449 F.3d 377
• Parties: GLOBALNET FINANCIAL.COM, INC., Plaintiff-Appellant, v. FRANK CRYSTAL & CO., INC., Defendant-Appellee, A.I. Credit Corp., Defendant.
• Court: U.S. Court of Appeals — Second Circuit

449 F.3d 377

GLOBALNET FINANCIAL.COM, INC., Plaintiff-Appellant, v. FRANK CRYSTAL & CO., INC., Defendant-Appellee A.I. Credit Corp., Defendant.

Docket No. 04-6679-CV.

United States Court of Appeals, Second Circuit.

Argued: October 17, 2005.

Decided: May 5, 2006.

Richard D. Wilkinson (Robert D. Chesler, of counsel; Kristina D. Pasko, on the brief), Lowenstein Sandler, P.C., New York, NY, for Plaintiff-Appellant William C. Kelly (Randolph E. Sarnacki, on the brief), Lustig & Brown, L.L.P., New York, NY, for Defendants-Appellees

Before: KEARSE, MINER, and HALL, Circuit Judges.

MINER, Circuit Judge.

Plaintiff-appellant GlobalNet Financial.com, Inc. ("GlobalNet") appeals from a summary judgment entered in the United States District Court for the Southern District of New York (Sweet, J.) in favor of defendant-appellee Frank Crystal & Co., Inc. ("Crystal"). The action was brought against Crystal, an insurance broker, to recover damages arising from Crystal's failure to transmit insurance cancellation notices to GlobalNet. The District Court determined that (i) New York law should apply to GlobalNet's contract claims; (ii) New York law should apply to GlobalNet's tort claims; and (iii) having applied New York law, Crystal was entitled to judgment as a matter of law.

BACKGROUND

At all relevant times, GlobalNet was in the business of providing on-line news and financial information to private investors in Europe and the United States and to on-line trading facilities. GlobalNet is a Delaware company that had an office in Boca Raton, Florida, at the time that its business relationship with Crystal began. Crystal is a commercial insurance broker incorporated, licensed, and headquartered in New York. Crystal also has offices in various locations in the United States, including two in Florida. Crystal, as an insurance broker, arranged for GlobalNet to purchase directors and officers ("D & O") liability coverage for the period December 30, 1999, to December 30, 2001. The primary D & O policy was issued by National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union"), an excess D & O policy was issued by Lloyd's of London, and a second excess D & O policy was issued by Federal Insurance Company. The D & O policies insured GlobalNet for liability for "any wrongful acts" of its officers and directors and did not limit the insured risk to any particular site.

Crystal also arranged for the financing of the premium payments for GlobalNet's D & O coverage through A.I. Credit Corp. ("AICCO"), an affiliate and member of American International Group. Although Crystal never was a party to the premium financing agreement (the "Financing Agreement") between AICCO and GlobalNet, it warranted to AICCO that it had placed the at-issue D & O policies as broker on behalf of GlobalNet. On January 7, 2000, Crystal sent a letter to GlobalNet at its Florida address — 7284 W. Palmetto Park Road, Boca Raton, FL 33433 (the "Palmetto Park Road address") — enclosing the proposed premium Financing Agreement. The letter instructed GlobalNet to sign, date, and return the Financing Agreement to Crystal with a check in the amount of $57,231.00, representing the amount of the down payment. The letter also requested that the first installment payment in the amount of $25,052.73 (due January 30, 2000) be paid to AICCO. On or about January 12, 2000, GlobalNet entered into the Financing Agreement with AICCO for the financing of its premium payments for the D & O coverage. The premium payments on GlobalNet's D & O coverage were sent from the GlobalNet Florida office until sometime in "the summer of 200[1]." The payments were sent to AICCO's address in Dallas, Texas, as directed by the payment stub provided by AICCO.

In August 2001, AICCO sent a September 2001 premium Finance Statement (the "Statement"), dated August 1, 2001, to GlobalNet at its Palmetto Park Road address. GlobalNet had closed and vacated its office at that address in late June or early July 2001.¹ As a result of GlobalNet's absence from the Palmetto Park Road location, the Statement could not be delivered and was returned to AICCO. The returned envelope bore a legend notifying AICCO of a new address for GlobalNet — 225 N.E. Mizner Boulevard, Boca Raton, Florida (the "Mizner address"). AICCO corrected its records to account for GlobalNet's new address and re-sent the September Statement to the Mizner address. According to AICCO, Crystal would not have been advised of the address change by either AICCO or GlobalNet.

On or about October 10, 2001, AICCO sent an Intent to Cancel Notice to GlobalNet, indicating that GlobalNet's D & O coverage would be cancelled, effective October 21, 2001, due to the non-payment of premiums, unless a premium of $25,052.73 and a late fee of $1,252.64 were paid. On or about October 22, 2001, AICCO mailed a Cancellation Notice to GlobalNet, informing it that its D & O policies were cancelled for GlobalNet's failure to pay its premiums. Both the Intent to Cancel Notice and the Cancellation Notice were mailed to the Mizner address.

The Mizner address was occupied by a company called International Capital Growth ("ICG"), which was a company spun-off from GlobalNet in July or August of 2001, before GlobalNet was acquired by NewMedia SPARK. Peter Wallis ("Wallis"), the associate general counsel for GlobalNet, had instructed the Boca Raton Post Office to forward all mail addressed to GlobalNet at the Palmetto address to the Mizner address. Wallis stated that he filed the change of address with the post office because, "otherwise, [the mail] would have just collected outside the front door ..., and I still for whatever reason felt a fiduciary responsibility to make sure the mail got through .... You know, I mean, I was paid to be outside counsel."

According to GlobalNet, "[m]ail intended for Global[N]et was generally supposed to be forwarded to London." Further, it was the "custom and practice" of someone at the Mizner address to forward mail addressed to GlobalNet to someone in London. However, the Intent to Cancel Notice and the Cancellation Notice, which were sent to the Mizner address, were never received by GlobalNet's London office. Consequently, GlobalNet did not become aware of the missed premium payment, the Notice of Cancellation, or the resulting cancellation of the D & O coverage until late February 2002.

Crystal received both the Notice of Intent to Cancel and the Cancellation Notice in October 2001 at its office in New York City. AICCO also contacted Crystal by telephone concerning the cancellation of GlobalNet's D & O coverage on numerous occasions. Previously, Crystal had received an e-mail from Ron Goldie of GlobalNet, stating that "[w]ith the pending close of the Tender Offer from NewMedia [SPARK] the GLBN.co.uk mailboxes will be closing soon." After the D & O policies were cancelled on October 22, 2001, in accordance with the cancellation notice, they could be reinstated only by the various D & O insurance carriers, including National Union.

GlobalNet claims that it was detrimentally affected by the termination of the D & O policies when, on May 22, 2002, National Union disclaimed coverage for three separate claims made against GlobalNet on the grounds that the policies were cancelled for nonpayment of premium. Moreover, National Union informed GlobalNet that it was not interested in reinstating the D & O policies due to "activity on the account."

On January 31, 2003, GlobalNet commenced the diversity action giving rise to this appeal by filing its Complaint. GlobalNet alleged that Crystal breached its contractual and fiduciary duties as its insurance broker and was negligent in the performance of its services. These claims stemmed from Crystal's failure to notify GlobalNet that its D & O insurance policies were to be cancelled for failure to make timely premium payments. GlobalNet also named AICCO as a defendant in this action, asserting claims for breach of contract; however, AICCO is no longer a party to the action.²

On February 4, 2004, after the completion of discovery, Crystal moved for summary judgment. GlobalNet cross-moved for partial summary judgment on March 4, 2004. Both motions were heard and marked fully submitted on March 24, 2004. On July 23, 2004, the District Court issued an Opinion and Order granting Crystal's motion for summary judgment and denying GlobalNet's cross-motion for partial summary judgment. The District Court applied the choice-of-law rules of New York, which was the forum state. The District Court first determined, under a grouping-of-contacts test for determining choice of law, that GlobalNet's contract claims against Crystal were governed by New York law because the insurance policies were executed, issued, and brokered in New York State. Next, the District Court found that GlobalNet's tort claims against Crystal were governed by New York law under an interest-analysis test. Under that test, the District Court determined that GlobalNet's tort claims were based on a failure to act — a tort of omission implicating the regulation of a broker's conduct — in New York, Crystal's principal business location. Applying New York law, the District Court determined that Crystal was entitled to judgment as a matter of law, assuming without deciding that an insurance broker owes a duty to the insured to notify it of an imminent or recent cancellation, because the broker's liability does not extend to circumstances in which the insured knew or should have known of the cancelled coverage.

GlobalNet filed a timely notice of appeal on December 21, 2004. This Court has jurisdiction pursuant to 28 U.S.C. § 1291.

ANALYSIS

I. Standard of Review

A district court's grant of summary judgment is reviewed de novo. Cellular Tel. Co. v. Town of Oyster Bay, 166 F.3d 490, 492 (2d Cir.1999). This Court "utilizes the same standard as the district court: summary judgment is appropriate where there exists no...