Schanker & Hochberg, P.C. v. Berkley Assurance Co.
Decision Date | 04 March 2022 |
Docket Number | 2:20-cv-5361 (DRH)(ARL) |
Court | U.S. District Court — Eastern District of New York |
Parties | SCHANKER & HOCHBERG, P.C., STEVEN SCHANKER, ESQ., and R. MARK HOCHBERG, ESQ., Plaintiffs, v. BERKLEY ASSURANCE COMPANY, Defendant. |
HAMBURGER, MAXSON, YAFFE & McNALLY, LLP Attorneys for Plaintiffs By: Richard Hamburger, Esq. David N. Yaffe, Esq.
COUGHLIN DUFFY LLP Attorneys for Defendant By: Gabriel E Darwick, Esq.
Plaintiff Schanker & Hochberg, P.C., Steven Schanker, Esq., and R Mark Hochberg, Esq. (collectively “S&H”) brought this insurance coverage action against Defendant Berkley Assurance Company (“Berkley”) seeking a declaratory judgment that Berkley must defend and indemnify S&H in an underlying state court litigation, a mandatory injunction requiring Berkley to do so, reimbursement of their defense costs and fees to date in the underlying action, and an award of costs and fees incurred in pursuing this action. Presently before the Court are (i) Berkley's motion to dismiss S&H's fourth cause of action for attorney's fees and costs pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6) and (ii) S&H's motion for partial summary judgment as to Berkley's duty to defend pursuant to Rule 56. For the reasons below, Berkley's motion is granted in part and denied in part, and S&H's motion is granted in part and deferred in part.
The following facts are taken from the Complaint, the documents incorporated by reference, and the undisputed facts in the parties' Rule 56.1 statements. [DEs 1, 15-1, 15-16].
Schanker & Hochberg, P.C., is a professional corporation incorporated in New York State with a New York principal place of business. (Compl. ¶ 2 [DE 1]). Steven Schanker, Esq. and R. Mark Hochberg, Esq. are New York citizens practicing law at Schanker & Hochberg, P.C. (Id. ¶¶ 3-4). Berkley is an insurance corporation incorporated in Iowa with an Arizona principal place of business. (Id. ¶ 5).
On September 23, 2019, a second amended complaint in a New York State Supreme Court, New York County action named S&H as defendants, bringing four causes of action against S&H for violations of the New York False Claims Act (“NYFCA”). . The Merns Complaint alleges S&H “knowingly aided and abetted” certain schemes to defraud New York State via the “[i] tax returns and records of . . . the Estate [of Sy Syms] and Marcy Syms, [ii] filings with the Securities and Exchange Commission (“SEC”), [iii] records and tax returns of [the] Syms Corporation, and [iv] records of the Sy Syms Foundation.” (Compl. ¶¶ 22-29; Merns Compl. ¶¶ 2-4). Specifically, S&H “supervised” transactions, “consulted on SEC reporting requirements, ” and “prepared” tax returns. . S&H allegedly “billed a quarter of a million dollars for its services.” (Id. ¶ 5). The Merns plaintiffs seek the NYFCA statutory award of civil penalties and treble damages. (Id. Wherefore Clauses).
S&H tendered its defense in the Merns Action to Berkley on October 24, 2019. (Compl. ¶ 32; Ex. F [DE 15-7] to Yaffe Decl.). Berkley denied coverage on November 18, 2019. (Compl. ¶ 33; Ex. E [DE 14-7] to Darwick Decl.). Following correspondence in which the parties refused to change their positions, S&H commenced this action on November 22, 2020. S&H seeks: (1) a declaration that Berkley must defend and indemnify S&H in the Merns Action, (2) a mandatory injunction requiring Berkley to defend and indemnify S&H in the Merns Action, (3) damages for S&H's defense costs in the Merns Action, and (4) attorney's fees in this action.
On December 18, 2020, Berkley requested a premotion conference regarding leave to move to dismiss. [DE 9] In response, and although Berkley had not yet answered the Complaint, S&H requested a premotion conference regarding leave to move for summary judgment. [DE 10]. In granting both parties leave to file their motions, the Court noted that Rule 56(b) permits “a party” to move for summary judgment “at any time until 30 days after the close of discovery” and the absence of an overlap between the issues in the proposed motions. (Order dated Jan. 8, 2022). On April 23, 2021, both motions were submitted.
The Court begins with (I) Berkley's motion to dismiss before turning to (II) S&H's motion for partial summary judgment on the duty to defend.
To decide Berkley's motion to dismiss, the Court proceeds in the following order: (A) the legal standard on a Rule 12(b)(6) motion and (B) whether S&H's fourth cause of action for attorney's fees and costs should be dismissed.
In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court should “draw all reasonable inferences in Plaintiff['s] favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief.” Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks omitted). The plausibility standard is guided by two principles. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)); accord Harris v. Mills, 572 F.3d 66, 71-72 (2d Cir. 2009).
First, the principle that a court must accept all allegations as true is inapplicable to legal conclusions. Thus, “threadbare recitals of the elements of a cause of action supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. Although “legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. at 679. A plaintiff must provide facts sufficient to allow each named defendant to have a fair understanding of what the plaintiff is complaining about and to know whether there is a legal basis for recovery. See Twombly, 550 U.S. at 555.
Second, only complaints that state a “plausible claim for relief” can survive a motion to dismiss. Iqbal, 556 U.S. at 679. Id. at 678 (quoting Twombly, 550 U.S. at 556-57) (internal citations omitted); see In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007). Determining whether a complaint plausibly states a claim for relief is “a context specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679; accord Harris, 572 F.3d at 72.
Berkley moves to dismiss S&H's fourth cause of action for attorney's fees and costs-arising from an alleged breach of the implied covenant of good faith and fair dealing-as duplicative of the third cause of action-breach of contract. Compare Compl. ¶¶ 47-51 (breach of contract), with Id. ¶¶ 52-61 (implied covenant). Berkley contends the two arise from the same set of facts, namely Berkley's alleged refusal to honor its obligations under the Policy. Berkley MTD Opening at 11 [DE 14-1]. In S&H's view, Berkley breached the Policy by forcing S&H to “find and retain counsel” for and to “shoulder the entire significant financial burden” of its defense in the Merns Action....
To continue reading
Request your trial