KAH Ins. Brokerage v. McGowan
| Docket Number | 21-CV-5851 (JMA) (ARL) |
| Decision Date | 04 August 2023 |
| Parties | KAH INSURANCE BROKERAGE INC., Plaintiff, v. THOMAS B. MCGOWAN IV, MCGOWAN PROGRAM ADMINISTRATORS, INC., and JEFFREY GUKENBERGER, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
REPORT AND RECOMMENDATION
Plaintiff KAH Insurance Brokerage Inc., (“KAH” or “Plaintiff”) brings this action against defendants Thomas B. McGowan IV and McGowan Program Administrators, Inc. (the “McGowan Defendants”) and Jeffrey Gukenberger (“Gukenberger”, and together with the McGowan Defendants “Defendants”) asserting claims of breach of contract, promissory estoppel, tortious interference with existing contractual relationships, and tortious interference with prospective economic relations. Before the Court, on referral from District Judge Azrack, is the motion to dismiss for lack of personal jurisdiction pursuant to Federal Rules of Civil Procedure (“Rule”) 12(b)(2) filed by Gukenberger on October 6, 2022, ECF No. 22, along with a motion the dismiss pursuant to Rules 12(b)(2) and 12(b)(6) and to compel arbitration under the Federal Arbitration Act (“FAA”), filed by the McGowan Defendants on November 11, 2022. ECF No. 28. For the reasons stated below the Court respectfully reports and recommends that the motion to dismiss for lack of personal jurisdiction be granted.
The following facts are drawn from the Complaint, unless otherwise noted, and are accepted as true for purposes of the instant motion. Samuels v. Air Transp. Local 504, 992 F.2d 12, 15 (2d Cir. 1993). These facts, however, do not constitute findings of fact by the Court. See Colvin v. State Univ. College at Farmingdale, No. 13-CV-3595 (SJF)(ARL), 2014 U.S. Dist. LEXIS 85678, 2014 WL 2864224, at *1 n.1 (E.D.N.Y. June 19, 2014).
KAH is a New York corporation, and a retail insurance brokerage, which sold insurance products nationally, including within the State of New York. Compl. ¶ 15. Between 2005 and 2020, KAH sold a variety of insurance products to franchisees of McDonald's Corporation located throughout the United States ("U.S. Owner/Operators") as an "Approved Insurer" pursuant to an agreement with McDonald's USA LLC. Id. at ¶ 17. Those products included Property and Umbrella Insurance, Employment Practices Liability Insurance ("EPLI"), Cyber Liability Insurance ("Cyber") and Workers' Compensation Insurance. Id. at ¶ 16. According to Plaintiff, there are over 600 U.S. Owner/Operators locations with more than 40,000 employees located in New York. Henry Decl. ¶ 13.[1] Brendan C. Henry (“Henry”) is the President and owner of KAH. Declaration of Thomas B. McGowan IV (“McGowan Decl.”) ¶ 7.
Defendant McGowan Program Administrators, Inc. (“MPA”) is a division of McGowan & Company, Inc., an Ohio corporation, which is an insurance brokerage. McGowan Decl. ¶ 4. McGowan & Company, Inc, is a part of The McGowan Companies. Id. Defendant Thomas B. McGowan, IV is the President and Chief Executive Officer of The McGowan Companies. Id. at ¶¶ 4-5. According to Plaintiff, Compl. ¶ 2. The McGowan Defendants have provided a declaration from Thomas B. McGowan, IV, indicating that he is a resident of Ohio, works in the Ohio headquarters of MPA, does not regularly conduct, transact or solicit business in New York, and he did not visit New York to meet with Plaintiff to negotiate the proposed asset purchase. McGowan Decl. ¶¶ 3, 5, 7. He similarly testified that MPA does not have any offices in New York and that no employees, agents, or representatives of The McGowan Companies, including MPA, visited with Plaintiff in New York regarding the proposed transaction. Id. at ¶¶ 5, 7.
Defendant Gukenberger is an individual who resides in the State of Florida. Declaration of Jeffrey Gukenberger ("Gukenberger Decl.") ¶ 4. From January 2010 through July 2012, Gukenberger was employed by Plaintiff. Compl. ¶ 21. Currently, according to his declaration, Gukenberger is the President of non-party Owners Risk Insurance Services, Inc. ("Owners Risk"), a consulting company based in the State of Illinois. Gukenberger Decl. ¶¶1, 6. Owners Risk has a single and exclusive agreement with McDonald's National Owners Insurance Team ("NOIT"), an Illinois entity that exists for purposes of identifying cost-effective programs to satisfy the U.S. Owners/Operators' insurance needs. Id. at ¶¶ 8-9. Pursuant to its exclusive agreement, Owners Risk reports directly to NOIT and provides risk management services and confidential insurance guidance for U.S. Owners/Operators. Id. at ¶ 9. Defendant Gukenberger performs his services for Owners Risk remotely, from his home in Florida. Id. at ¶ 12. Plaintiff argues, however, that Gukenberger also operated a company known as Owners Risk Management Association ("ORMA"), which regularly sent Plaintiff invoices from ORMA to be forwarded to insurance companies for payment of annual fees generated based upon the number of McDonald's franchisees which ORMA serviced. Henry Decl. ¶¶ 3-4.
According to the Complaint, in 2012, Gukenberger, through ORMA, created a nationwide program for the provision of EPLI, Cyber and Workers' Compensation insurance to US Owner/Operators (the “National Program”). Compl. ¶ 23. The Complaint alleges that the National Program was required to include not less than one NOIT approved carrier for EPLI and Cyber carrier and a minimum of three NOIT approved workers' compensation carriers. Id. at ¶ 20. Plaintiff contends that the National Program was in direct competition with Plaintiff's EPLI and Cyber program carriers, which were brokered by Edgewater Holdings, Ltd. (“Edgewater”). Id. at ¶ 23. According to the Complaint, at some point after July 2012, Gukenberger induced Edgewater to stop working exclusively with Plaintiff and become the exclusive wholesale insurance broker for EPLI and Cyber policies, for ORMA and all U.S. Owner/Operators. Id. at ¶¶ 27-29. Plaintiff alleges that, in February 2019, The McGowan Companies purchased Edgewater, resulting in The McGowan Companies becoming the only “National provider of EPLI, Cyber and Workers' Compensation insurances to U.S. Owner/Operators.” Id. at ¶¶ 30-31.
In 2020, the National Program suffered from a shortage of Workers' Compensation carriers for the 2021-2022 policy period, which threatened the ongoing viability of the National Program. Id. at ¶ 32. Plaintiff alleges that to address this issue, Gukenberger approached AmTrust in an effort to enlist their Workers' Compensation insurance program for the McDonald's National Worker's Compensation program. At that time, Gukenberger was informed that Plaintiff had already signed a deal to be the McDonald's Workers' Compensation Managing General Agent for AmTrust. Id. at ¶ 34. According to the Complaint, between 2013 and 2020, Plaintiff was a broker for AmTrust. Id. at ¶ 33.
According to the Complaint, the McGowan Defendants first approached Plaintiff on March 3, 2020, offering, in an email to purchase Plaintiff. Id. at ¶ 36. Next, in August 2020, McGowan began communicating with Henry, in an effort to obtain the AmTrust business relationship in advance of the purported asset purchase. Id. at ¶ 38. Plaintiff alleges that, in September 2020, McGowan approached Plaintiff with an offer to purchase Plaintiff's assets, including its existing business with AmTrust, for $3,175,000, which was an increase from the $3,000,000 originally offered. Id. at ¶¶ 36, 40. During the course of the negotiations McGowan sent Plaintiff 54 text messages related to the potential deal. Id. at ¶ 41. The Complaint alleges that Plaintiff ultimately transferred its AmTrust Workers' Compensation Managing General Agent appointment to McGowan prior to receiving a written contract based upon, inter alia, McGowan's repeated assurances that he and Plaintiff had reached a "deal"; that the deal "would not change" because of AmTrust; and as a result of the pressure being exerted upon Plaintiff by Gukenberger. Id. at ¶ 44. The deal never closed and Plaintiff claims it has not been compensated despite Defendants receiving the benefit of Plaintiff's AmTrust Business. Id. at ¶ 45.
The Complaint alleges a contract and agreement with McGowan exists, based the terms of a non-binding letter of intent (“LOI”) between KAH and The McGowan Companies. Id. at ¶¶ 40, 53. On or about October 8, 2020, the Parties executed the LOI for the potential sale of certain of KAH's assets to The McGowan Companies, via an asset purchase agreement. McGowan Decl. ¶ 8, Ex. A. It is that potential sale and that valuation amount that KAH seeks in this action as damages. Compl. ¶¶ 40, 52. Plaintiff takes the position that “[i]rrespective of the text messages, a review of the Letter of Intent makes clear that it contained all the essential elements necessary to form a binding contract (price, payment terms, description of assets being purchased, etc.) despite the perfunctory language that it was non-binding.” Henry Decl. ¶ 18. For purposes of the motion to dismiss for lack of jurisdiction, the Court notes that the LOI provides that “[t]his LOI and the Asset Purchase Agreement shall be governed by and construed by the laws of the State of Delaware, without regard to principles of conflict of law.” McGowan Dec., Ex. A, p.7. The draft asset purchase agreement also provides that “[a]ll claims and controversies that arise shall be subject to the exclusive jurisdiction of the state and federal courts located in Cleveland, Ohio.” Id. at Ex. C, p. 44.
Plaintiff commenced this action by filing a complaint in New York Supreme...
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