115 F.R.D. 588 | S.D.N.Y. | 1987
Defendants American Motorists Insurance Company (“AMICO”) and Kemper Corporation (“Kemper”) move: 1) to dismiss Counts One through Five of the complaint of. plaintiff Avnet, Inc. (“Avnet”), alleging civil RICO violations, and Counts Eight through Ten, alleging common law fraud, fraud on the public, and criminal indifference to civil liability, for failure to plead fraud with particularity as required by Fed.R.Civ.P. 9(b), or for a more definite statement as to those counts under Fed.R. Civ.P. 12(e); and 2) to strike from the complaint Counts Nine and Ten on the ground that they are redundant and do not state independent claims for relief. Plaintiff cross-moves for a default judgment on Count Six, alleging breach of the liability policy, and Count Seven, alleging bad faith breach of the liability policy, on the ground that defendants have not moved or answered with respect to those counts within the time allowed. Defendants also move pursuant to Fed.R.Civ.P. 26(c) for a protective order staying what it contends are burdensome, overbroad and oppressive discovery requests.
Plaintiff is the assured under various policies of insurance issued by defendant AMICO, a wholly-owned subsidiary of defendant Kemper. Plaintiff filed claims with defendants for coverage on three separate occasions. In the first instance, Av-net was sued by a third party, Scope Industries and some of its officers (“Scope”), who charged that Avnet had maliciously instituted a prior action against Scope. The Scope plaintiffs sought compensatory and punitive damages against Avnet. Av-net requested that AMICO both indemnify and defend against the Scope action, asserting that such was required under the Comprehensive Liability policy issued to it by AMICO. AMICO questioned that tfie policy covered compensatory damages and denied it covered punitive damages. Avnet defended the Scope action, which eventually was settled. Avnet then sought legal fees of $538,380.63 incurred by it in defending the action, calculated at the hourly rate of $225.00 for the highest billing partner. AMICO disputes the reasonableness of these rates and has paid Avnet $72,938.63, calculated at the maximum hourly rate of $95.00, which is what it pays its own attorneys. Avnet now seeks the difference.
The second and third disputed claims center about fidelity bonds that plaintiff was issued by AMICO. In one instance, Avnet suffered a loss of almost one million dollars because of a kickback scheme engaged in by two officers of Carol Cable Company, a division of Avnet. Although AMICO eventually paid this claim, Avnet alleges that AMICO acted in bad faith by delaying payment for two years. Avnet has also submitted another claim under the fidelity bonds wherein it asserts that it suffered losses at the hands of another of its employees involved in a kickback scheme. AMICO has not paid out this claim, which is the subject of a separate lawsuit brought by plaintiff against AMICO in California Superior Court.
Based on the foregoing, plaintiff has asserted five separate causes of action for violations of the civil provisions of the Racketeer Influenced Corrupt Organizations Act (“RICO”),
A. Fed.R. Civ.P. 9(b)
The purposes of Fed.R.Civ.P. 9(b) are to assure that a defendant accused of
The complaint, instead of succinctly outlining the alleged fraud, gives a rambling account of defendants’ refusal on three occasions to promptly compensate plaintiff for losses it asserts were covered by the insurance policies. Plaintiff does not provide the text of the insurance policies, nor quote from any document or writing alleged to have been sent in furtherance of their fraudulent scheme. More revealing of the insufficiency of the complaint is the failure of plaintiff, who alleges that defendants intentionally filed false documents with public agencies, to specify what those documents are or how they are false. The failure to comply with Rule 9(b) is even more egregious in the case of defendant Kemper Corporation, which did not issue the policies but is named as a defendant upon allegations that it is the parent corporation of defendant AMICO.
In sum, it cannot be gleaned from the complaint the nature of the representations alleged to be fraudulent, let alone any inference of fraud fairly attributable to those statements. Rather, the pleading upon its face with its charges of racketeering violations based on the three asserted claims of coverage under the policies, which AMICO disputed, appears designed to force insurance companies who dispute coverage to forthwith pay such disputed claims. Without particularity as to the alleged fraudulent representations made, these allegations cannot stand. The motion to dismiss the RICO and fraud claims for failure to comply with Fed.R.Civ.P. 9(b) is granted, with leave to serve an amended complaint.
B. Counts Nine and Ten
Defendants also move to dismiss or strike Count Nine, which seeks punitive damages based on defendants’ alleged fraud on the public, and Count Ten, which seeks both punitive and compensatory damages and alleges criminal indifference to civil liability, on the grounds that: 1) New York does not recognize a separate cause of action for punitive damages; and 2) the claims are almost identical to those raised in Count Eight, alleging common law fraud.
At oral argument, attorneys for plaintiff conceded that Count Nine, alleging fraud on the public, was redundant given Count Eight. Count Nine is therefore stricken. However, plaintiff contends that Count Ten should be allowed as a separate cause of action because that count requests both compensatory and punitive damages.
Under New York law, a plaintiff may be awarded punitive damages if it proves that: 1) defendant’s actions are directed at the public generally, or 2) the availability of such an award is essential to induce a potential plaintiff to go to court to right a wrong that otherwise would go
However, if a plaintiff chooses to include legal theories in its complaint, those theories should, for the sake of clarity, be included in a single claim for relief.
C. Cross-Motion for Default Judgment
Defendants have moved to dismiss eight of the ten counts in the complaint, but have neither moved nor answered with respect to Count Six, which alleges breach of the liability policy, and Count Seven, which alleges bad faith breach of the liability policy. Plaintiff therefore moves that a default judgment should be entered on those counts.
It is evident that defendants’ failure to plead as to Counts Six and Seven was inadvertent. Granting a default judgment is a drastic sanction within the discretion of the court.
D. Protective Order
Defendants move to stay discovery pending the filing of satisfactory allegations of fraud so that plaintiff will not be able to undertake a “fishing expedition” in an effort to state its claims properly.
The discovery rules are not a hunting license to conjure up a claim that does not exist.
In conclusion, Counts One, Two, Three, Four, Five, Eight, Nine and Ten of the
So ordered.
. 18 U.S.C. § 1964.
. See Crystal v. Foy, 562 F.Supp. 422, 424 (S.D.N.Y.1983); see also Decker v. Massey-Furgeson, Ltd., 681 F.2d 111, 114 (2d Cir.1982); Denny v. Barber, 576 F.2d 465, 468-69 (2d Cir.1978); Segal v. Gordon, 467 F.2d 602, 606-07 (2d Cir.1972).
. Crystal v. Foy, 562 F.Supp. at 425.
. Devaney v. Chester, 813 F.2d 566, 568 (2d Cir.1987); Connecticut National Bank v. Fluor Corp., 808 F.2d 957, 962 (2d Cir.1987); Goldman v. Belden, 754 F.2d 1059, 1069-70 (2d Cir.1985); Nevitsky v. Manufacturers Hanover Brokerage Services, 654 F.Supp. 116, 120 (S.D.N.Y.1987).
. Pepsico, Inc. v. Continental Casualty Co., 640 F.Supp. 656, 665 (S.D.N.Y.1986); Walker v. Sheldon, 10 N.Y.2d 401, 405, 179 N.E.2d 497, 223 N.Y.S.2d 488 (1961).
. Fed.R.Civ.P. 8(a); Newman v. Silver, 713 F.2d 14, 15 n. 1 (2d Cir.1983).
. Gins v. Mauser Plumbing Supply Co., 148 F.2d 974, 976 (2d Cir.1945).
. See Liberty Mutual Insurance Co. v. Wetzel, 424 U.S. 737, 743 n. 4, 96 S.Ct. 1202, 1206 n. 4, 47 L.Ed.2d 435 (1976) ("a complaint asserting only one legal right, even if it seeking multiple remedies for violation of that right, states a single claim for relief.’’)
. Luis C. Forteza & Hijos, Inc. v. Mills, 534 F.2d 415, 419 (1st Cir.1976).
. See Decker v. Massey-Furgeson, Ltd., 681 F.2d 111, 116 (2d Cir.1982).
. See Rich v. Touche, Ross & Co., 68 F.R.D. 243, 247 (S.D.N.Y.1975).
. Samuels v. Eleonora Beheer, B.V., 500 F.Supp. 1357, 1362 (S.D.N.Y.1980), aff’d without opinion, 661 F.2d 907, 910 (2d Cir.1981); accord Singer v. Bell, 613 F.Supp. 198, 205 (S.D.N.Y.1985).
. Howard v. Galesi, 107 F.R.D. 348, 350 (S.D.N.Y.1985).