World Wide Specialty Programs, Inc v Lexington Ins. Co.

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World Wide Specialty Programs, Inc v Lexington Ins. Co. 2012 NY Slip Op 30638(U) March 13, 2012 Sup Ct, Suffolk County Docket Number: 11-38148 Judge: Thomas F. Whelan Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] $IIQI{TFORMORDER INDEX No. 11-38148 SUPREME COURT - STATE OF NEW YORK IAS. PART 45 - SUFFOLK COUNTY PRESENT: Hon. THOMAS F. WHELAN Justice of the Supreme Court MOTION DATE 1/4112 AD!. DATES 2/10/12 Mot. Seq. # 001 - MD PC Cant: 5/4/12 CDtSP Y__ N",lL ---------------------------------------------------------------X WORLD WIDE SPECIALTY PROGRAMS, INC., : Plaintiff, LAZER, APTHEKER, ROSELLA Attys. For Plaintiff 225 Old Country Rd. Melville, NY 11747 -agamstLEXINGTON INSURANCE COMPANY, CHARTIS, INC., NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, NEW HAMPSHIRE INSURANCE COMPANY, GRANITE STATE INSURANCE COMPANY, AMERlCAN HOME ASSURANCE COMPANY, ILLINOIS NATIONAL INSURANCE: COMPANY, THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, ALL RISKS, LTD. and BRADLEY & PARKER, INC., Defendants MEYER, SUOZZI, ENGLISH & KLEIN Attys. For DefBradley & Parker PO Box 9194 Garden City, NY 11530 CAHILL, GORDON & REINDEL, LLP Attys. For Oef Chartis 89 Pine St. New York, NY 10005 COLLAZO, FLORENTINO & KElL, LLP Attvs. for Ocf All Risks Ltd. 747 Third Ave. New York, NY 10017 ---------------------------------------------------------------X Upon the following papers numbered 1 to 28 read on this motion for preliminary injunctive relief _~ ; Notice of Motion/Order to Show Cause and supporting papers..l...:..l...-; Notice of Cross Motion and supporting papers ~_; Answering Affidavits and supporting papers 4-6 ; Replying Affidavits and supporting papers 7 ; Sur-Reply Affidavits and supporting papers 8-9: 10-11 : Affidavits 12 (Hennessev): 13 (yasan): 14 (Krugman): 26 (Marcotte) ; Olher 15: 16 (memoranda): 17-18 (mcmorandum)19-20 (memorandum); 21-22 (memorandum);2) -24(memorandum):25-26 (transcript): 28 (summons & complaint) ; (and ItAt! heal iug eOi:lil~e1 ~i:lppoI1Md oppo~ed to the llloliOll)il ;" is, ORDERED that this motion (#00 I) by the plaintiff for preliminary injunctive relief is considered under CPLR Article 63 and is denied; and it is further ORDERED that a preliminary conference is scheduled for May 4, 2012 at 9:30 am in Part 45 at the courthouse located at 1 Court Street - Annex, Riverhead, New York, 11901. [* 2] World Wide Specialty Programs, Inc. v Lexington Ins. Co., ct als Index No. 11-38148 Page 2 This action arises out of a series of events which led to the termination of a long standing business relationship between the plaimiff and defendant Chartis Inc., and certain of its subsidiaries and/or member companies which unde",vTite ·'program" insurance policies that alford coverage to particular types of businesses. The plaintiff seeks the recovery of money damages from all of the defendants under tort theories and money damages from defendants, Chartis Inc. and Lexington Insurance Company. for breach of a Program Administration Agreement. The plaintiflwas named probTfruTI administrator under the terms anhe Program Admimstration Agrecment (hereinafter "PAN") it last entered into with defendant, National Union Fire Insurance Company of Pittsburgh, Pa. and the other insurance companies listed in the caption, all of whom arc membcrs of the Chart is group of insurers. These defendants write the Staffing Services Program that is the subject of the plaintiffs PAA Defendant Chartis, Inc. (hereinafter "Chartis'') is the parent company of those defendants, bm Chartis has no contractual relationship with the plaintiff. Neither docs defendant, I.exington Insurance Company [hereinaller "Lexington''1, as it is a member insurancc company of Chart is US, Inc, but not a signatory to the PAA. Instead, Lexington manages and/or oversees most of the Staffing Serviccs Program business for the Chartis group. As program administrator for Chartis' temporary staffing insurance program, the plaintiff advertised, sold, renewed and otherwise managed, directly and/or with the aid of third-party brokers and agents, the staffing program policies underwritten by Chartis group members. Under the terms of~ 24 of the PAA, either the "Company" (the insurer signatories thereto) or the plaintin~ as "Program Administrator" had the right to terminate the PAA provided that notice of not less than 90 days issued to the other side in accordance with the notice provisions set forth in '125, TnNovember of2011, the plaintilfterminated the PAA, effective as of May ] 1,2012. On November 28,2011, the Chartis group of insurance companies entcred into a PAA with defendant All Risks Ltd .. to fill the void left by the plaintiff's impending departure, It also notified the plaintiff that it was terminating the PAA with the plaintitl on the earlier date of February 26, 2012 By the complaint filed in this action, the plaintiff charges defendants Chartis and Lexington with bre:lching those portions of the PAA which provide that upon termination of the PAA and the rlaintiff's payment of sums due the insurer companies, the plaintiff remains the owner of the "cxpirations on business" (see ~ 24(h). Expirations are known in the insurance industry as information reoardino insurance policy types·, names of insureds· , coverage amounts' , ]Jrcmiums·, risk to loss ratios e eo , and policy expiration dates. Expirations are thus a valuable part of the policy renewal processes, by which insurers, administrators and third-party brokers maintain their clientele. Thc plainti fr claims that the expirations arising fi·om its PAJ\ with the Chartis defendants arc trade sccrets. The plaintiff further claims tha1 all of the defendants arc liable to the plaintiff in tort due to their misappropriation of the coveted expirations and thc defendants· engagement in other unfair business practices, unfair competition and interference with plamtiff's contracts and contractual relations with cxisting clients. By the instant motion (#001), the plaintiff seeks preliminary injunctive reliefrestmining and enjoining the defendants from the following: I) utilizing and/or disseminating the plaintiffs trade secrets including its ·'expirations·': 2) collccting profits. commissions or other revenue from insured/policy holders solicited and procured by the defendants' use of plaintiffs '·cxpirations'·; 3) renewing policies so obtained; 4) corresponding ,\lith insured/policy holders so obtained and serviced [* 3] World Wide Specialty Programs, Inc. v Lexington Ins. Co., et als Index No. 11-38148 Page 3 by the plaintitT. The plaintiff also seeks a mandata!)' injunction compelling the delCndants to specifically perform the Program Administration Agreement between plaintiff and defendant Lexington Insurance Company and the other defendant insurance companies listed in the caption that write the program insurance at issue herein. For the reasons stated below, the plaintiffs motion Jor such preliminary injunctive relief is denied. [t is well established that to prevail on a motion lar a preliminary injunction, the movant must demonstrate a likelihood of success on the merits, the prospect or irreparabk harm or injury il"the relief is withheld and that a balance of the equities favors the movant's position (see Aetna IllS. Co. v CaIHISSO, 5 NY2d 860, 862, 552 NYS2d 918 [1990; WheatonlTMW Fourth Ave., LPv New York 7 City Dept. (~f Bldgs., 65 AD3d 1051, 886 N YS2d 4] 12d Oept 2009]; Pear/green Corp. v rail Chi Chll. 81\D3d 460,778 NYS2d 5] 6 [2d Ocpt 20041). The decision to grant a preliminary injunction IScommitted to the sound discretion of the court (see Tatum v Newell Funding, LLC, 63 AD3d 91], &&0 NYS2d 542 [2d Dept2009J; Bergelt-Fille v Oil fleatillst., iIlC., 280 AD2d 504, 720 NYS2d 37& [2d Dept 2001]). Because this provisional remedy is considered to be a drastic one (see Doe v Axelrod. 73 NY2d 748, 536 NYS2d 44 [1988]), a clear legal right to relief which is plain from undisputed facts must thus be established (see W!leatoJlIT~IW Fourtlt Ave., LP v New York City Dept. ofBldgs' 65 AD3d 1051, supra; Gagnon Blls Co., Illc. V Vallo Transp., Ltd., ]3 AD3d 334, 786 NYS2d 107 [2d Dept 2004]; Blueberries Gourmet v Avis Realty, 255 AD2d 348, 680 NYS2d 557 [2d Dept 1998]). The burden of showing such an undisputed right rests with the movant (see Omaakaze Sushi Rest., Illc. v Ngall Kam Lee, 57 A03d 497,868 NYS2d 726 [2d Dept 2008]; Doe v Poe. 1&9AD2d 132.595 NYS2d 503 [2d Dep' 19931). J Factors militating against thc grantIng of prelimina!)' injunctive rclief includc: 1) that the movant can be fully recompensed by a monetary award or other adequate remedy at law (see 306 Rill/edge, LLC v CitV ofNe ¢ ¢ York. 90 AD3d 1026,935 NYS2d 619 [2d Dept 2011J; DiFobia v Omllipoillt Comnlllllicatioll.5, IIIC., 66 AD3d 635, 636-637, 887 NYS2d 16812d Dept 2009]; Mar v Liquid Mgt. Partllers, LLC, 621\D3d 762, 880 NYS2d 647 [2d Oept 2009]); 2) that the grantIng oCthe requested injunctive rclicfwould confer upon the plaintiff the ultimate relief requested in the action (see WlteatolllTMW }-lmrt!l Ave., LPv New York City Dept. ofBldgs. 65 J\D3d 1051, supra; SflS Baisley, LLC v Re.'· LOlld, iIlC., 1&AD3d 727, 795 NYS2d 690 [2d Dcpt 2005]); or 3) that an alteration rather than a prescrvation ofthc status quo of the parties or the res at issue would result from a granting of the injunction (see Automated Waste Disposal, Inc. v Mid-Hudsoll Waste, fIlC., 50 AD3d 1072,857 NYS2d 648 [2d Dept 2008]; Alatter of 35 New York City Police Officers I' City of New York, 34A D3392, 826 NYS2d 22 [1sl Dept 2006 J). Moreover, a preliminary injunction will not issue in cases wherein the irreparable harm claimed is remote or speculative or where it is economic in nature (see Row/alldv Dushiu, 82 AD3d 738, 917 NYS2d 702 [2d Dept 20111; Family-Friendly ft1edia, Inc. v Recorder Televisioll Network, 741\D3d 738, 903NYS2d 80 12d Dept 2010]; Quick 11 Quick. 69 AD3d 827. 892 NYS2d 769 [2d Dcpt 201 OJ: EdCia Corp. v McCormack. 44 AD3d 991. 845 NYS2d 104 L2d Ocpt 2007]). Finally. mandatory injunctive relief is not available absent ··cxtraordinary circumstances" as such relief generally confers upon the movant the ultimate relicflo which he or she would be entitled if successful on the merits of the case or disturbs the status quo (see Board of JWgrs. of Wlullfside Condominium v Nehricll, 73 AD3d 822, 900 NYS2d 747 [2d Dcpt 20 I0 L SHS Blli.\ley, LLC P. Re.\ LOl1d,!l1c., 1&l\D2d 727, 728, 795 NYS2d 690 [2d Dcpt 2005]; St. Paul Fire & Mar. IllS. Co. v York C/ail1u Sen 308 AD2d 347, 349, 765 NYS2d 573 [1_'1 ept D 20031)· l ¢ ¢ [* 4] World Wide Specialty Programs, Inc. v Lexington Ins. Co., et uls Index No. ] 1~38148 Page 4 Here, the moving papers faIled to establish the plaintiffs entitlement to the injunctive relief demandcd_ The plainti Irs demand for mandatory injunctive reliefin the form of an order compelling one or morc ohhe defendants to specifically perform the PAA is unfounded in as much as such relief is not supported by a pleaded claim therefor (see B5I, LLC v Toscano, 70 I\D3d 741,896 NYS2d l0212J Dept 20]0): 5eebau;:!l v Borruso, 220 j\D3d 573, 632 NYS2d 800 12d Dept 19951). Nor is it supported by the existence of "cxtraordinary circumstances" which would warrant the granting of such mandatory injunclive relief, provisionally. The plaintiJrs claims for prohibitive preliminary injunctive relief arc also unavailing. The plaintiff's breach of contract claim is asserted against Chartis and Lexington, neither of whom are signatOries to the PAA. A likelihood of success on the merits of such claim is thus lacking. In any event, a stand alone breach of contract elaim, being one at law for the recovery of money damages, will not support preliminary injunctive relief due to the adequacy of such moncy damages (see M{lr v Liquid Mgt. Partners, LLC, 62 AD3d 762, surpa). Also apparent from the record is the absence of any showing of a likelihood of success on the merits of the plaintiffs tort claims against the defendants. No actionable conduct constituting thc defendants' misappropriation of any confidential and proprietary information or trade secrets of the plaintiff nor acts of unfair competition or of interference with contracts on the part of the defendants are apparent from undisputed facts. While preliminary injunctive reliefis an available remedy 10 halt the misappropriation and wrongful utilization of confidential information to contact and solicit customers ascertained from an book of expirations belonging to the plaintiff, an independent agent, (see Clarion Associate.", Illc. v D.J. Colby Co., IIlC., 276 AD2d 461, 714 NYS2d 99[2d Dept 2000]), the record here is devoid or clear proof of the defendants' engagement in such conduct. It is well set.t1cdlaw that absent a covenant not to compete, an employee is free to compete with his or her former employer unless trade secrets arc involved or fraudulent methods employed, and that remembered information as to specific needs and business habits of particular customers is not confidential (see Reed, Roberts Assoc. v StrmlflWll, 40 NY2d 303, 386 NYS2d 677 [19761; Pear/green Corp. v You Chi Chu, 8 J\D3d 460,778 NYS2d 516 [2d Dep! 2(041). Knowledge of the intricacies or a business operation does not necessarily constitute a trade secret and absent any wrongdoing, it cannot be said that a fonner employee ;'should be prohibited from utilizing his knowledge and talents in this area" (id. at 40 NY2d p.309). Trade secret protection will not attach to customer lists or other proprietary infonnation where such customers and information are readily ascertainable trom sources outside the former employer's business unless the cmployee has engaged in an act such as stealing or memorizing his employer's customer lists (see Walter Karl, Inc. v Wood, 137 AD2d 22. 528 NYS2d 94 [2d Dcpt 1988]). The plaintilrs torI claims against the dcfcndant All Risks rest principally upon the migration of three of its of lormer underwriters to All Risks. and their apparent interface with third-party broker/agents seeking to sccure new business for thcmselves through All Risks. Each of these three underwriters have averred that they were never asked to take trade secrets, confidential or proprietary information with them upon leaving the plaintiff. Thesc new hires further avcr that they have not been asked to divulge any confidential, proprietary or trade secret information of the plaintiff on or aftcr their departure from thc plaintiff nor have they used or disclosed such information to All Risk employees or others during their tenure with All Risks. While A1l Risks admits that it issued "e-mail [* 5] World Wide Specialty Index No. 11-38148 Page 5 Programs, Inc. v Lexington Ins. Co., ct <lIs blasts" advertising its new business with Chartis to thousands of insurance industry contacts, the record is devoid any evidence that All Risks targeted specific insureds through the use or expirations or other confidential information. Instead, the record includes evidence th<lt the reclpient e-mail insurance industry contacts were compiled by All Risks from publically available sources and its purchase of lists of mdependent agents from third-party vendors. All Risks has also established that the expirations belong, in the absence ofa contractual provision to the contrary, to the independent retail brokers (see ,'111tterofCorning, 108 AD2d 96, 488 NYS2d 477 r3d Dept 1975). \Vhile there is a contract bet\Neen the Chartis' insurers and the plainti n~ namely the PAA, which provides that the expirations belong to the plainti fl~ upon its termination and plaintiffs payment of amounts owing to the insurers, there is no contract between the plaintiff and All Risks or the independent retal! agents who act as liaison between it as program administrator and the insureds. Since the absence of any such contract renders the efficacy ofthe plaintiffs claims ofo\',!J1crship ufthe expiration, viz u viz All Risks and the independent agents, doubtful, the record lacks a suflicient showing of the plaintiff's likelihood of success on its claims against defendant All Risks sounding in good will impairment, unfair competition or misappropriation of trade secrets or confidential or proprietary information. To support its tort claims against Chartis, the plaintiff relies heavily upon the disclosure of expiration type information in an e-mail exchange between a Lexington executive to the three new hues at All Risk, which issued to facilitate their new business relationship f()llowing the termination ufthe plaintiff's PAA . The record rellects, however that the infonnation so imparted was garnered from in-house sources available to Lexington and that the disclosure, which was limited to fewer than twenty insureds, was inadvertent and immediately remedied by retraction. Moreover, the expirations became the property urthe plaintiff vi.=- if vi.=- the PAA signatory insurers under the terms of the PAA only if the agreement is tenninated and World Wide has paid all amount owing the insurers (see P AA ~ 24(h». Since thc conduct about which the plaintil'fcomplains predated the termination date of the PAA under either the plaintiff's May 26, 2012 termination date or the Chartis's earlier termination date of February 26, 2012, questions exist regarding \/'ihether the plaintiff may succeed on its claim of immediate owncrsbJp ofthc expirations under the terms of the PAA. These circumstances cast considerable doubt upon the plaintiffs claims that Chm-tis' conduct constitutes a wrongful utilization of confidential or proprietary information or trade secrets or an actionable impairment orthe pluintiffs good will or unfair competition. The plaintiff also failed to establish a likelihood ofsucecss on the merits of its claims against defendant Bradley & Parker, Inc. by virtue of the acts of its agent/representative, Jonathan Carroll, who last worked for the plaintiff in July 01'2004. There is ample evidence in the record tending to negate the plainti rfs claim that Carroll '5 contacts with clients of tile plaintiff foJlowmg the plaintiJT s term Illation of its PAA with the Chartis insurers included the improper solicitation of tile plaintifCs client base, about which, Carroll was aware only by reason of his misappropriation of plaintiffs expirations or by virtue ol'the improper disclosure or other dissemination of such expirations by the defendants' agents or employees. The record is replete with clear refutations by Carroll and others of The facts underlying the plaintiffs tort claims. The plaintiff thus htilcd to meet its burden of showing, ("rom undisputed facts, a likelihood of success on the merits of allY ofils claims sounding Il1 unl~lir competition, good will impairment and misappropriation of trade secrets or proprictaJY information against defendant, Bradley & Parker, Inc. [* 6] World Wide Specialty Programs. Inc. v Lexington Ins. Co .. et als Index No. 11-38148 Page 6 The plaintiffs final tort claim against all defendants sounds in tortious interference with contract. [t rests upon allegations that the plaintiff's insureds have been advised oCthe termination orthe plainLires relationship wiLhChartis and that some insurcds, uncr solicitation by the ddcnoants, are renewing program policies with CharLis insurers through All Risks and it independent agents instead of insuring with the plaintiffs new program underwritten by Zurich. As the defendants aptly pamt out, however, the plaintiff has no contract with its insureds. Its only contract is the PAA which it tenninated after the plaintiff secured a new PAA with Zurich. These circumstances, coupled with the absence of any pleaded claim that the purported wrongful conduct constitutes an interference with prospective business relations, renders the claim as pleaded, dubious at best, and it militates against a finding. of a likelihood of success on the merits (see Smitll v Meridian Teell., Inc., 86 AD 3d 557. 559-560,927 NYS2d 141 12d Dcpt 2011]). Nor do the plaintiff's new allegations of Chartis' alleged wrongdoing, asserted for the first time in plaintiffs reply papers, establish the plaintiffs entitlement to the preliminary injunction demanded. These new claims are premised upon allegations that Chartis members intentionally issued defective non-renewal notices to the plaintiJrs insureds so that the policies of such insureds would necessarily be rcnewed by the Chartis group by virtue of state insurance law requirements. However, these claims are highly speculative as they rest upon vaguc and unsubstantiated allegations of intentional wrongdoing which have been flatly rcfuted by the evidentiary sur-reply submissions orthe Chartis defendants. Since the plaintiffs new claims rest upon facts which eithcr do not exist or arc not actionable under any of the tort theories advanced by thc plaintiff in its complaint, including interfcrence with existing contracts, said claims do not provide sufficient support for the plaintiff's demands for preliminary injunctive relief. The plaintiff thus failed to meet the likelihood of success element ofa claim for preliminary injunctive relief(see Peal'!greell Corp. v Yall elli C!tll, 8 AD3d 460, supra). Such a failure renders a discussion orthe rcmaining clcments imposed upon a litigant seeking preliminary injunctive reliel~ academic. In view oCthe foregoing, the instant motion (#001) by the plaintifffor preliminary injunctive reliefis denied. Counsel are reminded that their appearances at the preliminary conferencc scheduled above arc required. flATED ;jh/.J;d.

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