Missigman v. Usi Northeast, Inc.

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: McMahon
• Citation: Missigman v. Usi Northeast, Inc., 131 F.Supp.2d 495 (S.D. N.Y. 2001)
• Decision Date: 07 February 2001
• Docket Number: No. 99 Civ. 4763(CM).,99 Civ. 4763(CM).
• Parties: Gary J. MISSIGMAN, Plaintiff, v. USI NORTHEAST, INC. and The Zurich American Insurance Company, Defendants.

131 F.Supp.2d 495

Gary J. MISSIGMAN, Plaintiff, v. USI NORTHEAST, INC. and The Zurich American Insurance Company, Defendants.

No. 99 Civ. 4763(CM).

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

February 7, 2001.

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James P. Donohue, Jr., Gilbride Tusa Last & Spellane LLC, New York City, for Plaintiff.

David G. Januszewski, Cahill Gordon & Reindel, New York City, Thomas R. DeRosa, Orlando, FL, for Defendants.

MEMORANDUM DECISION AND ORDER GRANTING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, GRANTING DEFENDANT USI NORTHEAST'S MOTION TO STRIKE, AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

McMAHON, District Judge.

Plaintiff Gary J. Missigman brings this action against defendant USI Northeast, Inc. ("USI") for breach of contract, breach of an implied contract, promissory estoppel and quantum meruit, against defendant The Zurich American Insurance Company ("Zurich") for intentional interference with business relations, and against both defendants for fraud and a joint venture to commit fraud. USI has asserted counterclaims against Missigman in this action for breach of contract and unjust enrichment, and has moved to strike plaintiff's claim for promissory estoppel against USI. Plaintiff has moved for summary judgment on USI's counterclaims, and both defendants have moved for summary judgment on all of the claims against them.

For the reasons stated below, USI's motion for summary judgment on the breach of contract, breach of implied contract, and fraud claims is granted, and USI's motion for summary judgment on the unjust enrichment claim is denied. USI's motion to strike Missigman's claim for promissory estoppel is granted. Zurich's motion for summary judgment on the tortious interference with business relations and fraud claims is granted, and Missigman's motion for summary judgment on USI's counterclaims of breach of contract and quantum meruit is denied.

FACTS PERTINENT TO THE MOTION

USI¹ offers insurance brokerage services for several lines of insurance, including environmental insurance. Missigman is a licensed insurance broker who developed a Homeowner's Environmental Loss Protection ("HELP") Program to insure homeowners against the costs of environmental damage caused by residential underground fuel oil tanks. In the states where it was adopted, the program allowed the fuel oil dealers to present the program to homeowners, and the fees collected by the fuel dealers were then forwarded on to the insurance broker. The HELP Program was offered in New York, New Jersey, Massachusetts, Connecticut, Pennsylvania and Delaware. New Jersey, which had the best-organized association of fuel oil dealers, the New Jersey Fuel Merchant's Association ("FMA"), had the most dealers enrolled in the HELP Program.

Missigman worked at Hagedorn & Company until late 1996, when Jeffrey Welsch, then President of New Business Development at USI, became interested in having Missigman set up a similar residential underground fuel oil tank program at USI. Missigman met with USI representatives in October 1996, and the parties discussed the possibility of Missigman's acquiring the HELP Program from Hagedorn, or setting up a similar program for USI. They also discussed giving Missigman an interest in any program that was set up and paying him for any costs associated with acquiring the program from Hagedorn, such as legal fees.

On October 23, 1996, Missigman learned that the underwriter for the HELP Program was going to withdraw on February 1, 1997, and he shared that information with USI. Welsch and Tom O'Neil, Chairman and Chief Executive Officer of the Northeast Region of USI Insurance Services Corp., the parent of USI, considered purchasing the HELP Program, but decided instead that USI should hire Missigman to start a similar program at USI. Missigman asked that USI put its proposal in writing.

1. Letters of Intent

On or about October 30, 1996, Welsch sent Missigman a "letter of intent." The letter contained the following key terms: Missigman would be employed as Vice President and Producer/Program Development for a term of one year at a salary of $104,000 plus employee benefits. USI would provide $30,000 in "development-related costs" and support the design and implementation of an insurance program. If the program were "successful," USI would endeavor to make the program a separate profit center to be managed by Missigman; at the end of 36 months, USI "would have the option to capitalize" Missigman's developmental efforts in the program at a price that would "be a reflection of the weighted pre-tax profit" for the three year period, less any long term debt. (Januszewski Aff. at Exh. 1.) The letter said that employment with USI was "contingent on execution of agreements normal to USI employment, including confidential non-solicitation agreements." (Id.)

Missigman had concerns with the October 30, 1996 letter. For example, he thought the "one-year" provision made little sense because the target date for implementation would be February 1, 1997, when the previous underwriter was to withdraw. So Welsch sent Missigman a revised "letter of intent" on November 1, 1996. (Id. at Exh. 2.) The November 1 letter had the same structure as the October 30 letter, but reduced Missigman's term of employment to 90 days; increased the salary to $12,000 per month; increased the commitment to development-related costs to $3,000/month; and provided that USI's "option to capitalize" the program would take place at "a mutually agreed period (estimated between 24 and 36 months)." The second paragraph of the letter noted that Missigman's employment was "subject to the execution of an employment agreement." (Id.) The last paragraph reiterated that "[a]ll of the above, of course, would be contingent on execution of agreements normal to USI employment, including confidential-non-solicitation agreements." (Id.) Missigman contends that O'Neil and Welsch represented those provisions as being a mere formality.

Both letters provided that for the project to be "successful," certain hurdles needed to be met. The November 1 letter provided that Missigman must: have a market (acceptable to USI Security Community guidelines) committed to underwrite and support the program, including an exclusive MGA agreement or equivalent, within 30 days of employment; have a formal endorsement, or agreement in principal, executed by more of the leading state associations that would have need for the program within 45 days; and demonstrate revenue "flowing and being booked relative to this new program" by the 75th day. (Id.)

Missigman began working for USI on November 1, 1996 in their Mount Kisco, New York Office, pursuant to the terms of the November 1 letter of intent. He did not receive or sign a "normal" employment agreement from USI prior to commencing work.

2. Performance and Continued Negotiations

Missigman contacted potential underwriters for the new Storage Tank Environmental Protection ("STEP") Program. The Zurich American Insurance Company ("Zurich") became the principal prospective underwriter. Zurich and Missigman discussed the rates to be charged for the STEP Program; caps on the cost of clean-up by clean-up contractors; and a mandatory provision for deductibles. Shortly thereafter, Zurich and USI entered into a "strategic alliance" in which Zurich became an equity holder in USI Holding Corporation, the parent corporation of USI. The STEP Program was part of the strategic alliance.

Missigman completed the tasks set forth in the November 1 letter, but not within the time frame set forth. The termination date of the underwriting for the HELP Program had been pushed back to March 13, 1997, and Missigman contends that USI no longer needed to have a program in place by the original date. In or about early February 1997, the STEP program was up and running. Missigman had confirmed Zurich as an underwriter, helped USI obtain an endorsement from the FMA, and a positive revenue stream resulted.

On or about February 2, 1997, Missigman was sent a sample USI employment agreement, which contained many of the provisions common to USI employment contracts, including a "non-solicitation" provision of the type noted in the November 1 letter. In an accompanying memorandum, "Re: Follow-up to Employment Contract," O'Neil wrote:

"As you are aware, we have been going slowly in terms of laying the ground work for a new contract awaiting some word on whether the `hurdles' outlined in the original memorandum were met. At this point we need only receive the endorsement of one of the principle [sic] associations to move ahead further.... We have clearly now reached the point where we must decide to move on with the development of the program and formalize the relationship with the contract previously discussed .... [w]e should be able to draft a bonafide Letter of Intent to be followed by a contract."

(Januszewski Aff. at Exh. 5.) At a meeting with Welsch and O'Neil on February 13, 1997, Missigman was told that he would have a draft contract tailored to his personal situation by mid-May.

After USI obtained the endorsement of the FMA, Hagedorn sought an injunction against USI and commenced an arbitration. USI and Missigman had anticipated legal action by Hagedorn, either to restrain Missigman from setting up a competing program or for damages arising from breach of contract. USI orally promised Missigman that it would pay an advance for his legal fees and/or costs related to an arbitration instituted against Missigman by Hagedorn. USI met that commitment, though it now contends that this was a loan to be deducted from the purchase price of any eventual sale of Missigman's interest in the STEP program, and to be returned in the event that contract negotiations fell through.

In May 1997, USI provided Missigman with a draft Asset Purchase Agreement, which...