958 F. Supp. 2d 507
S.D.N.Y.2013Background
- Greenlight and Verdant sue AUI and ISG for breach of guarantees tied to three Reinsurance Agreements (2008, 2010) and two Retrocession Agreements, plus related parental and 2009 guarantees.
- AUI acted as MGA for the Insurance Companies; the Reinsurance Agreements require remittance of ceded premiums, less commissions and losses, with provisional commissions and post-year adjustments.
- Retrocession Agreements with AppRe (AUI affiliate) require collateral posting; Greenlight claims substantial collateral remains outstanding ($12,062,902 under 2008 Retrocession; $17,549,760 under 2010 Retrocession).
- The 2009 Guaranty and Parental Guarantee obligate ISG and AUI to guarantee payment and fund solvency for the ISG group and related debts, including a Verdant loan to AIC Holdings; arbitration provisions exist in the underlying Reinsurance and Retrocession Agreements, while the Guarantees specify venue in New York.
- Plaintiffs seek declaratory relief, damages for breach of guaranties, covenants breaches under the 2009 Guaranty, and an accounting; Defendants move to dismiss under 12(b)(1) and 12(b)(6).
- Court procedurally addresses ripeness, arbitration interplay, and sufficiency of pleading for the accounting claim and Verdant’s claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Greenlight’s claims ripe and properly justiciable against guarantors? | Claims are ripe; guaranties create immediate liability regardless of underlying arbitral findings. | Claims rest on contingent disputes over underlying arbitrations and damages; ripeness and exhaustion require pending disputes to be resolved first. | Claims are ripe; arbitration exhaustion not required against guarantors; not stayed. |
| Do Greenlight’s breach claims against the guarantors survive (Counts Two and Three)? | Guarantees are payment guaranties; defendants failed to remit owed commissions and collateral. | Disputes over underlying amounts and arbitration may be controlling; ambiguities about covenants. | Counts Two and Three survive as to Greenlight (subject to further development on damages and specifics). |
| Does Greenlight’s accounting claim (Count Four) survive? | § 10(e) provides a contractual right to access books and records. | Plaintiff failed to plead denial of access with specificity. | Count Four dismissed with leave to replead. |
| Do Verdant’s claims survive given its status as a party to the 2009 Guaranty? | Verdant is a beneficiary and a potential claimant under the guaranties. | Verdant lacks damages pleadings and specificity; claims fail as to Verdant. | Verdant’s counts are dismissed with leave to replead. |
Key Cases Cited
- Sea Tow Servs. Int’l, Inc. v. Pontin, 472 F.Supp.2d 349 (E.D.N.Y. 2007) (ripeness and justiciability concerns in declaratory actions)
- Weidberg v. Barnett, 752 F.Supp.2d 301 (E.D.N.Y. 2010) (ripeness; reliance on contingent future events in guarantees discussed)
- ACE Capital Re Overseas Ltd. v. Cent. United Life Ins. Co., 307 F.3d 24 (2d Cir. 2002) (arbitration and contract interpretation principles; consent governs arbitration scope)
- In re S. Side House, LLC, 470 B.R. 659 (Bankr. E.D.N.Y. 2012) (accounting rights and fiduciary relationship considerations in bankruptcy context)