Starr Intern. Co. v. American Intern. Group, Inc.

• Decision Date: 31 August 2009
• Docket Number: No. 05 Civ. 6283(JSR).,05 Civ. 6283(JSR).
• Citation: 648 F.Supp.2d 546
• Parties: STARR INTERNATIONAL CO., INC., Plaintiff and Counterclaim-Defendant, v. AMERICAN INTERNATIONAL GROUP, INC., Defendant and Counterclaim-Plaintiff.
• Court: U.S. District Court — Southern District of New York

648 F.Supp.2d 546

STARR INTERNATIONAL CO., INC., Plaintiff and Counterclaim-Defendant, v. AMERICAN INTERNATIONAL GROUP, INC., Defendant and Counterclaim-Plaintiff.

No. 05 Civ. 6283(JSR).

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

August 31, 2009.

COPYRIGHT MATERIAL OMITTED

George Abraham Zimmerman, Lauren Emily Aguiar, Skadden, Arps, Slate, Meagher & Flom LLP (N.Y.C), Nicholas A. Gravante, Jr., Christopher Emmanuel Duffy, Dawn Louise Smalls, Steven Ian Froot, Boies, Schiller & Flexner, LLP(N.Y.C), New York, NY, Steven J. Kolleeny, Skadden, Arps, Slate, Meagher & Flom LLP (DC), Washington, DC, for Plaintiff.

Martin Flumenbaum, Eric Alan Stone, Robert A. Atkins, Roberta Ann Kaplan, Paul, Weiss, Rifkind, Wharton & Garrison LLP (N.Y.), New York, NY, for Defendant.

David A. Schulz, Nicole Armenta Auerbach, Levine, Sullivan, Koch & Schulz, LLP(N.Y.C.), New York, NY, for Movant.

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND FINAL JUDGMENT

JED S. RAKOFF, District Judge.

"Put it in writing" is the law's way of saying "get serious." In many circumstances, oral commitments are just too slippery to be enforced, a fact of human nature that the English Parliament recognized as early as 1677 when, declaring that certain contracts were unenforceable if not reduced to writing, it enacted what was tellingly called "An Act for the Prevention of Frauds and Perjuries," 29 Car. 2, ch. 3, now known to every lawyer as the Statute of Frauds. Here, in the central claim of this case, defendant and counterclaim-plaintiff American International Group, Inc. ("AIG") seeks to impress upon plaintiff and counterclaim-defendant Starr International Company, Inc. ("SICO") a multi-billion dollar oral trust in AIG's favor; but the law will not recognize such an oral trust unless the evidence of its creation is unequivocal. As detailed below, this is a burden that AIG has not come close to shouldering.

By way of brief background, this lawsuit originated in July of 2005 when Maurice R. ("Hank") Greenberg, who had previously functioned as the prime mover of both AIG and SICO, was forced to step down as Chief Executive Officer ("CEO") and Chairman of AIG. SICO, which remained under Greenberg's domination, then brought this action to recover from AIG certain artwork and other property that was said to belong to SICO. Those claims were eventually settled, but in the meantime AIG filed no fewer than seven counterclaims, alleging, among other things, that certain AIG stock held by SICO was held in trust for AIG's benefit. SICO, for its part, filed its own counterclaim seeking a declaratory judgment that AIG is not a "controlling person" or "affiliate" of SICO under the federal securities law (an issue that bears on SICO's ability to dispose of its AIG stock).

The case was originally assigned to the Honorable Barbara S. Jones, U.S.D.J., who, following extensive discovery and motion practice, issued a learned opinion in June, 2008, dismissing four of AIG's counterclaims —two for breach of contract, one for unjust enrichment, and one for constructive trust. See Order dated June 23, 2008. Then, after the case was reassigned to the undersigned in February 2009, the parties settled SICO's original claims by stipulating that SICO was the owner of the artwork and other property at issue, see Stipulation of Judgment dated March 20, 2009. The Court then set a firm trial date of June 15, 2009 and, on the first day of trial, dismissed as moot AIG's declaratory judgment counterclaim and severed SICO's declaratory judgment counterclaim. See Trial Transcript ("Tr.") 5-6.

Accordingly, the two claims that remained for trial were, first, AIG's breach-of-trust counterclaim, which alleged that SICO held certain AIG stock subject to an express trust for the benefit of AIG and that SICO had breached this trust,¹ and, second, AIG's conversion counterclaim, which principally alleged that SICO had converted to its own use and benefit the AIG stock SICO supposedly held in trust. Although the first of these two claims was to be determined by the Court and the second by the jury, the two were closely intertwined—indeed, the primary theory on which the conversion claim rested presupposed the existence of the alleged trust, from which funds were then allegedly converted —and consequently the Court ruled that a jury, in addition to deciding the second claim, would be asked to render an advisory verdict on the first claim, pursuant to Fed.R.Civ.P. 39(c). See Memorandum Order dated June 4, 2009.

The trial itself took three weeks. The presentations by both sides were models of good lawyering, and the very intelligent jury was plainly able to follow the case without difficulty. In the end, it appears that the case was not, in the jury's eyes, a close one, for the jury, after less than a day of deliberations, returned a verdict finding SICO not liable on either the breach-of-trust claim or the conversion claim. Tr. 3046-47. But while the verdict on the conversion claim is binding on this Court, the Court, though taking account of the jury's advisory verdict, must render its own verdict on the breach-of-trust claim. See DeFelice v. American Int'l Life Assur., 112 F.3d 61, 65 (2d Cir.1997). To this end, the Court hereby makes the following findings of fact and conclusions of law. See Fed.R.Civ.P. 52(a)(1).²

FINDINGS OF FACT

The Court makes these findings of fact based on its assessment of the evidence of record,³ reasonable inferences drawn therefrom, assessment of credibility, and resolution of conflicts in the evidence. No attempt is made to give transcript or exhibit citations for each and every finding, and where such references are occasionally made, they are intended to indicate some but not necessarily all of the direct evidence pertaining to a given finding. Certain additional findings of fact are made, where appropriate, in the subsequent section on Conclusions of Law.

An added word on the issue of credibility is called for. Credibility determinations are among the most subtle a fact-finder is called upon to make, since they involve complex assessments of demeanor, bias, motive, consistency, probability, memory, and a host of other factors. Rare is the witness whose memory is so perfect and whose powers of observation are so acute that his testimony is a perfect reflection of what actually occurred. Self-interest, moreover, creates such a powerful incentive to shade the truth that it is unusual for an interested witness to be totally candid.

Here, in seeking to carry its burden, AIG relied heavily on adverse inferences it asked judge and jury to draw from what it argued was Hank Greenberg's false testimony, suggesting that Greenberg lied to cover up the express trust AIG claimed had been created. It was the Court's distinct impression, based on the jurors' "body language," that the jury did not credit certain portions of Greenberg's testimony; but the jury found in SICO's favor nonetheless. Similarly, the Court, having made its independent assessment of Greenberg's credibility, concludes that his testimony and the truth did not always converge; but the inaccuracies were not as material as AIG argued nor warranted the sweeping adverse inferences AIG hypothesized. As set forth in more detail later in these findings, the inaccuracy of parts of Greenberg's testimony sometimes simply evidenced confusion on his part. At other times it was the product of prevarication, but not to the point of making a material difference in the Court's overall assessment of the evidence. And, at still other times, his testimony was, in the Court's view, entirely truthful. In the end, however, it was the other evidence, and not Greenberg's testimony, that this Court found persuasive in reaching its verdict.

Turning, then, to the findings of fact:

AIG and SICO have a shared history that goes back to 1919, when Cornelius Vander Starr founded an insurance company in Shanghai. The business expanded rapidly, and, following Mr. Starr's death in 1968, his successor, Hank Greenberg, developed the business to the point where AIG became, by some measures, the world's largest insurance company. The instant dispute, however, ultimately derives from a reorganization that occurred in 1970, early in Greenberg's tenure. Prior to this reorganization, SICO—which was at the time called American International Underwriters Overseas, Inc.⁴ and which was then and remains now a private company—owned a number of insurance agencies located outside the United States. See Tr. 670-71. AIG, which had been founded in 1967 and which had gone public in 1969, owned several insurance companies that operated in the United States and abroad. AIG Trial Exhibit ("ATX") 29 at 16; Joint Statement of Agreed Upon Facts and Other Matters ("Joint Statement of Facts") ¶¶ 5, 18-19. The majority of AIG stock was owned by another public company called American International Reinsurance Company, Inc. ("AIRCO"), and both AIRCO and SICO were in turn controlled by a private company called C.V. Starr & Co, Inc. ("C. V. Starr"). ATX 29 at 5.

In the course of the 1970 reorganization, substantially all of SICO's assets, including all of its insurance operations, were transferred, first, to a SICO subsidiary, then to AIRCO, and then to AIG. Id. AIG, in turn, transferred 1,700,000 shares of its common stock to AIRCO, and AIRCO in turn transferred approximately 1 million shares of its stock to SICO. Id. This latter group of shares was termed the "Acquired Stock," and, when AIRCO and AIG subsequently merged in 1978, the AIRCO shares were exchanged for AIG shares, so that the Acquired Stock thereafter consisted of AIG shares. Tr. 682. At the time of the 1970 transaction, the Acquired Stock was worth approximately $105-$130 million. Id. at 2053.

All of the companies involved in the 1970 reorganization had substantially overlapping, though not identical, management. The nine directors of C.V. Starr in May 1970, when the reorganization was...