Meadowbrook-Richman v. Associated Nfinancial

• Decision Date: 27 March 2003
• Docket Number: No. 98 CIV. 5300(JGK).,98 CIV. 5300(JGK).
• Parties: MEADOWBROOK-RICHMAN, INC., Plaintiff, v. ASSOCIATED FINANCIAL CORP., Wilshire Investment Corp., United Housing Preservation Corporation, Westport Housing Corporation, A. Bruce Rozet and Deane Earl Ross, Defendants/Third-Party Plaintiffs v. Benjamin RICHMAN and Polar International Brokerage Corp. Third Party Defendants
• Court: U.S. District Court — Southern District of New York

Page 666

253 F.Supp.2d 666

MEADOWBROOK-RICHMAN, INC., Plaintiff, v. ASSOCIATED FINANCIAL CORP., Wilshire Investment Corp., United Housing Preservation Corporation, Westport Housing Corporation, A. Bruce Rozet and Deane Earl Ross, Defendants/Third-Party Plaintiffs v. Benjamin RICHMAN and Polar International Brokerage Corp. Third Party Defendants

No. 98 CIV. 5300(JGK).

United States District Court, S.D. New York.

March 27, 2003.

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OPINION AND ORDER

KOELTL, District Judge.

This is a breach of contract action arising under New York law brought by the plaintiff Meadowbrook-Richman, Inc. ("MRI") against various entities including Associated Financial Corp. ("AFC"), Wilshire Investment Corp. ("Wilshire"), United Housing Preservation Corporation ("United Housing"), Westport Housing Corporation ("Westport Housing"), and against two individual defendants, A. Bruce Rozet ("Rozet") and Deane Earl Ross ("Ross"), (collectively "the defendants") to recover damages for the failure to pay for various insurance related services provided by MRI. Jurisdiction is based on diversity of citizenship, pursuant to 28 U.S.C. § 1332(a)(1). MRI's allegations arise out of the defendants' failure to pay for services provided pursuant to a retainer agreement (the "1995-96 Retainer Agreement") for the year 1995-96 and a second agreement dated July 21, 1991 (the "Claims Adjustment Agreement").

The plaintiff alleges five causes of action in its Second Amended Complaint: (1) a claim for breach of contract based on the 1995-96 Retainer Agreement (Count 1); (2) a claim for breach of contract arising out the Claims Adjustment Agreement (Count 2); (3) a claim for indemnification for the legal fees incurred by MRI in defending against lawsuits resulting from the services MRI provided pursuant to the Claims Adjustment Agreement (Count 3); (4) a claim for account stated (Count 4); and (5) a claim for quantum meruit (Count 5). The defendants have now moved for summary judgment arguing, among other things, that the two contracts are unenforceable because they do not appropriately designate the parties to be charged under the contracts, and do not provide any specifics with respect to the compensation that is to be provided to the plaintiff. In addition, they allege that the contracts are unenforceable because of the criminal conduct of the plaintiff in connection with the provision of the insurance adjustment services at issue in this case. The two individual defendants, Rozet and Ross, have moved for summary judgment on the basis of personal jurisdiction, arguing that they have insufficient contacts with New York.¹

The defendants, AFC, Wilshire, United Housing, Westport Housing, Rozet, and Ross (alternatively "third-party plaintiffs"), brought a third-party complaint against Benjamin Richman ("Richman") and Polar International Brokerage Corporation ("Polar") for damages arising out of services provided by Richman, who is now president of MRI and former chairman of Polar, and Polar. The third party complaint alleges fifteen causes of action: (1) violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(b), by MRI; (2) violations of RICO, 18 U.S.C. § 1962(c), by MRI; (3) violations of RICO, 18 U.S.C. § 1962(a), by MRI; (4) violations of RICO, 18 U.S.C. § 1962(c) by Richman; (5) RICO violations by Richman and MRI in violation of 18 U.S.C. §§ 1962(a), (b), (d); (6) unfair trade practices by MRI, Richman, and Polar; (7) conversion or theft of insurance claim funds; (8) fraud, misrepresentation, and deceit; (9) breach of contract; (10) negligence and professional malpractice; (11) breach of fiduciary duty; (12) misrepresentation;² (13) spoilation and tampering with evidence; (14) indemnity and contribution; (15) negligence.³ Polar has moved for summary judgment on all of the claims raised by the third-party plaintiffs, arguing, among other things, that Polar cannot be held liable for damages for services provided by Richman, because when those services were being provided by Richman, he was acting on behalf of MRI, not Polar, and any services provided were part of a fraudulent and illegal kickback scheme engaged in between the third-party plaintiffs and Richman, and were not legitimate insurance-related services. In addition, Polar argues that it cannot be held liable for actions of Richman, because any actions taken by Richman were adverse to Polar's interest. For purposes of convenience, the disposition of Polar's motion for summary judgment with respect to the claims by the third-party plaintiffs is discussed after the defendants' motion for summary judgment which seeks dismissal of MRI's complaint.

I.

The standard for granting summary judgment is well established. Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Gallo v. Prudential Residential Servs. Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir.1994). "The trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution." Gallo, 22 F.3d at 1224. The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The substantive law governing the case will identify those facts that are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 411 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); see also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir.1994). If the moving party meets its burden, the burden shifts to the nonmoving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed. R.Civ.P. 56(e). The nonmoving party must produce evidence in the record and "may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible." Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir.1993); see also Scotto v. Almenas, 143 F.3d 105, 114-15 (2d Cir. 1998) (collecting cases).

II.

Unless otherwise noted, there is no dispute as to the following facts.

Benjamin S. Richman ("Richman") is the president of MRI. (Aff. of Benjamin S. Richman ("Richman Aff.") sworn to March 13, 2002 at ¶ 1; Dep. of Benjamin Richman dated June 28, 2001 ("Richman Dep.") attached as Exh. 2 to Decl. of Mitchell Rotbert ("Rotbert Decl.") dated April 3, 2002 at 44.) Richman also served as the sole shareholder and director of MRI. (Defs.' Rule 56.1 Stmt. ¶ 2; Richman Dep. attached as Exh. 2 to Rotbert Decl. at 44.) Prior to his affiliation with MRI, Richman was the Chairman of the Board of Polar International Brokerage Corp. ("Polar"). (Richman Aff ¶ I.) MRI was a licensed insurance broker in New York. (Defs.' Rule 56.1 Stmt. ¶ 3.) Polar and MRI, through a April 28, 1989 agreement, commenced a joint venture through which the two companies agreed to share profits and losses associated with the administration of insurance programs, including programs of partial self-insurance for the insureds that were successfully solicited by either of them. (Defs.' Rule 56.1 Stmt. ¶ 8; Letter dated April 28, 1989 attached as Exh. 8 to Rotbert Decl.)

AFC, along with Wilshire, Wesport Housing, and United Housing were entities under the control of Ross and Rozet. (Richman Aff. ¶ 11.) AFC, Wilshire, Wesport Housing, United Housing, and Ross and Rozet, controlled hundreds of partnership properties that were established under the auspices of the United States Department of Housing and Urban Development ("HUD"). (Richman Aff. ¶¶ 10-11.) Ross and Rozet entered into an agreement in approximately June 1990 with Lawrence Penn ("Penn") of PL Acquisition, Inc. ("PLA") whereby Penn and PLA were given the right to create and administer the insurance programs for these various HUD partnership properties, which had a combined insured value in excess of $ 1 Billion. (Id.; Dep. of Stanley Kleckner dated July 27, 2001 attached as Exh. 9 to Rotbert Decl. at 37.) Thus, PLA became designated agent for AFC and the other defendants. (Defs.' Rule 56.1 Stmt. ¶ 14; Richman Aff. ¶ 2.)

Thereafter, PLA and Richman entered into an agreement whereby Richman was asked to arrange an insurance program to insure the AFC properties. (Id.) Pursuant to a March 5, 1991 Agreement (the "Retainer Agreement") entered into by Richman and PLA, Richman agreed to retain Polar to provide the insurance for the AFC properties and to retain MRI to provide the claims services that would arise from the existence of that coverage. (Richman Aff. ¶ 13; Letter dated March 5, 1991 attached as Exh. A to Richman Aff.) Pursuant to the Retainer Agreement, Richman...