H.P.S. Mgt. Co. v St. Paul Surplus Lines Ins. Co.

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H.P.S. Mgt. Co. v St. Paul Surplus Lines Ins. Co. 2011 NY Slip Op 32900(U) October 26, 2011 Sup Ct, Nassau County Docket Number: 019847-10 Judge: Timothy S. Driscoll 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] SUPREME COURT- STATE OF NEW YORK SHORT FORM ORDER Present: HON. TIMOTHY S. DRISCOLL Justice Supreme Court -------------------------------------------------------------------Jr S. MANAGEMENT COMPANY, Inc., and HENRY GRUBEL Plaintiffs -against- TRIAL/IAS PART: 20 NASSAU COUNTY IndeJr No: 019847Motion Seq. No. Submission Date: 9/13/11 ST. PAUL SURPLUS LINES INSURANCE COMPANY; SEABURY & SMITH, Inc., MASH & McLENNAN COMPANIES, Inc. ; MASH AFFINITY GROUP SERVICES; WILTON REASSURANCE LIFE COMPANY OF NEW YORK; THE TRAVELERS COMPANES, Inc. ; BABCHIK & YOUNG, LLP; JACK BABCHIK, individually, and as a principal of BABCIDK & YOUNG LLP, Defendants. --------------------------------------------------------------------Jr The following papers having been read on this motion: Notice of Motion, Affirmation in Support and EJrhibits........................... Second Volume of Exhibits................................................................................ Exhibit W (Second Amended Complaint)........................................................ Memorandum of Law in Support..................................................................... Affidavit in Opposition and Exhibits............................. ... Memorandum of Law in Opposition................................................................ Reply Affirmation in Further Support............................................................. This matter is before the Cour for decision on the motion fied by Defendants Babchik Young, LLP and Jack Babchik , individually, and as a principal of Babchik & Young, LLP B&Y" ) on July 22 2011 and submitted on September 13, 2011. For the reasons set forth below, the Cour denies the motion. [* 2] A. Relief Sought 3211(a)(1), (2) and (7) The B&Y Defendants move for an Order , pursuant to CPLR dismissing the Second Amended Complaint against B&Y , including the Seventh Cause of Action. B. The Paries ' History This action was the subject of a prior decision of the Cour dated May 12 2011 (" Prior Decision ) (Ex. V to Weldon Aff. in Supp. ) I The Cour outlined the nature of the action in detal in the Prior Decision , and incorporates the Prior Decision herein by reference. In the Prior Decision, the Cour inter alia granted the motion by the B& Y Defendants to the extent that the Cour dismissed the fourh and fifth causes of action in the Amended Complaint against these Defendants , and granted leave to replead the fifth cause of action to the extent that Plaintiffs can allege that the damages were directly caused by these Defendants. The Cour fuher directed that , if Plaintiffs elected to replead , they were to fie and serve their second amended complaint within twenty (20) days. Plaintiffs subsequently fied Supp. ). In the the Second Amended Complaint (Ex. W to Weldon Aff. seventh cause of action , asserted against the B& Y Defendants , Plaintiff alleges that the B&Y Defendants breached their fiduciar duty by, inter alia 1) making misrepresentations of facts regarding their conflicts of interest in representing Plaintiffs; 2) making false representations concerning the Errors and Omissions Insurance Policy ("E&O Policy ), Reservation of Rights Letter and dealings with the New York State Insurance Deparment ("NYSID"); 3) failing to advise Plaintiffs that they had the right to hire their own counsel at the cost and expense of Defendants Travelers and/or St. Paul; 4) falsely advising the NYSID that Plaintiffs had obtained new counsel; and 5) unilaterally abandoning their defense of Plaintiffs without proper notice or permission of Plaintiffs or the cour. Plaintiffs fuher Am. CompI. at allege that , 170), Plaintiffs as a "direct and proximate result" of these breaches (Second inter alia 1) were denied proper legal representation; 2) were unaware that they were entitled to retain counsel at the expense of Travelers; 3) were unaware of the existing conflct of interest , and ofB&Y' s knowledge of that confict of interest; 4) spent I The notice of motion refers to an Affrmation in Support of Robert J. Grande. Although the names of Mr. Grande and Mr. Weldon both appear under the signatue line of the Affmnation in Support, Mr. Weldon is its affiant. [* 3] over $10 000 for substitute counsel; and 5) were threatened by the NYSID with loss of their insurance licenses if they failed to obtain substitute counsel immediately. Plaintiffs also allege that they have incured additional legal expenses , and their sales of anuities "have essentially (id.). stopped" Plaintiffs allege fuher that: But for their breaches of the fiduciar duties by the B& Y Lawyers , Plaintiffs upon information and belief, would have had the " complaint" in the (NY SID) dismissed; in addition to the foregoing, Plaintiffs were directly damaged and injured as follows: Plaintiffs would have had the availabilty of $1 milion in legal fees under the subject E&O Policy; Plaintiffs would not have been compelled to reveal the names , addresses , account values , and social securty numbers of the customers , which release of information , ifit becomes public , may damage Plaintiffs(' customers who then may bring action against Plaintiffs for the injuries they sustained by the disclosure; Plaintiffs incured over $10 000 in legal fees; Plaintiffs would not have had to discontinue their defense of the NYSID proceeding; Plaintiffs would have had the use of the $10 000 in legal fees that were paid to the B& Y Lawyers. Second Am. Compl. at' 171. In his Affidavit in Opposition , Plaintiff Henr M. Grbel (" Grbel" ) affirms that it was not until July 20 2011 that Plaintiffs leared that their new counsel had received a letter from NYSID reflecting the fact that the matters with NYSID had been " closed" (Grubel Aff. in Opp. at , 51). Grubel avers that the matters were closed without any admission or finding of guilt and , therefore , under the express terms of the E&O policy Plaintiffs are entitled to reimbursement of their legal fees , as well as costs and expenses. He affirms , fuher , that it was not until July 25 , 2011 that Plaintiffs were able to demand from Travelers the sum of $24 052. which represented their out of pocket payments for legal fees plus outstanding unpaid legal fees incured in their defense of the NYSID matter. He avers , fuer, that the demand for those fees is now outstanding and unpaid. C. The Paries ' Positions The B& Y Defendants submit that 1) Plaintiffs have failed to set forth a claim for breach of fiduciar duty in sufficient detail , pursuant to CPLR 3016(b) and the Prior Decision; 2) the damages claims contained in the Second Amended Complaint are similar to those rejected by the Cour in the Prior Decision , and remain inadequate; and 3) the claim against the B&Y Defendants is not ripe for adjudication , and wil not be ripe until Plaintiffs submit their claim for payment on the fees incured by substitute counsel and Travelers responds to that submission. [* 4] Plaintiffs oppose the motion , submitting that the Second Amended Complaint properly alleges the elements of a cause of action for breach of fiduciar duty by the B& Y Defendants and the documentation provided by the B& Y Defendants does not refute those allegations. RULING OF THE COURT Standards of Dismissal 3211 (a)(7), which seeks to dismiss a complaint A motion interposed pursuant to CPLR for failure to state a cause of action , must be denied if the factual allegations contained in the 232 268 (1977); 511 w: v. Guggenheimer complaint constitute a cause of action cognizable at law. v. Owners Corp. Jennifer Realty Co. 43 N. Ginzburg, 98 N. Y.2d 144 (2002). When entertaining such an application , the Cour must liberally constre the pleading. In so doing, the Cour must accept the facts alleged as tre Leon which may be drawn therefrom. v. and accord to the plaintiff every favorable inference Martinez 84 N. Y.2d 83 (1994). On such a motion however, the Cour wil not presume as true bare legal conclusions and factual claims which are Palazzolo flatly contradicted by the evidence. v. Herrick, Feinstein 298 A. 2d 372 (2d Dept. 2002). A complaint may be dismissed based upon documenta evidence pursuant to CPLR 3211(a)(1) only if the factual allegations contained therein are definitively contradicted Yew Prospect, by the evidence submitted or a defense is conclusively established thereby. v. Szulman 305 AD. 2d 588 (2d Dept. 2003); Sta-Bright Services, Inc. v. LLC Sutton 17 AD. 3d 570 (2d Dept. 2005). 3211(a)(2), a par may move for dismissal onthe grounds that the Pursuant to CPLR cour does not have jurisdiction of the subject matter of the cause of action. The question of subject matter jurisdiction is a question of judicial power: whether the court has the power conferred by the Constitution or statute , to entertn the case before it. of Tarrytown 89 N. Y.2d 714 , 718 (1997), citing Hunt v. Matter of Fry v. Vilage Hunt 72 N. Y. 217 , 230 (1878). In the New York State cour system , Supreme Cour is a cour of original , unlimited and unqualified jurisdiction. Ar. VI any time. Id. quoting Kagen v. Kagen 21 N. Y.2d 7. Ripeness is a matter pertaining Matter of Agoglia v. 532 , 537 (1968), and citing N. Y. to subject matter Benepe 84 A.D. 3d Const. jursdiction which may be raised at 1072 , 1076 (2d Dept. 2011). [* 5] B. Application of these Principles to the Instat Action B&Y is correct in observing that many of the allegations regarding B&Y' s breaches of fiduciar duty in the Amended Complaint and Second Amended Complaint are identical , but the Court concludes that those similarities are to be expected. The Cour previously granted Plaintiffs leave to replead to the extent that Plaintiffs can allege that the damages were directly caused by these Defendants. The Cour concludes that the Second Amended Complaint complies with that direction , and is now suffcient , and accordingly denies the motion. As pleaded in paragraph 170 of the Second Amended Complaint , the Plaintiffs allege nine consequences that occured " as a direct and proximate result of' the breaches of fiduciar duties by the B& Y Defendants. In fiduciar duty by the paragraph 171 , Plaintiffs allege that " but for" the breaches of B& Y Defendants , Plaintiffs would have had the NYSID complaint dismissed , and also allege other specific damages incured. In light of Grubel' s affirmation that Plaintiffs leared in 2011 that the two NYSID matters were closed , the Cour interprets paragraph 171 of the Second Amended Complaint as alleging that , but for the breaches of fiduciar duty by the B& Y Defendants , the NYSID matters would have been closed at an earlier time. The Court set forth the elements of a claim for breach of fiduciar duty in its Prior Decision. In granting leave to replead , the Cour focused on the absence of allegations that Plaintiffs ' damages were directly caused by the conduct of the B&Y Defendants. Viewing the Second Amended Complaint in the light most favorable to Plaintiffs , the Cour concludes that Plaintiffs have now satisfied that missing element, and have adequately alleged a cause of action for breaches of fiduciar duty. The Cour also denies the motion to dismiss for lack of subject matter jursdiction. Plaintiffs have alleged the existence of an actual dispute between themselves and the B& Defendants. To the extent that St. Paul and Travelers reimburse Plaintiffs ' legal fees , Plaintiffs damages wil be reduced accordingly. Finally, the documenta evidence conclusively dispose of plaintiffs ' claim. In light of the foregoing, the Cour denies the motion. presented does not [* 6] All matters not decided herein are hereby denied. This constitutes the decision and order of the Cour. The Cour reminds counsel of their required appearance before the Cour for a Preliminar Conference on November 16 2011 at 9:30 a. ENTER DATED: Mineola, NY October 26 , 2011 ENTERED OCT 28 2011 NA88AU COUNTY COUN CLIM" OFfiCE

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