Opinion
Civil Action Number 99-0586, (Ref: All Cases), Section "L" (5)
February 22, 2002
ORDER REASONS
Before the Court is the motion of the third-party defendant, the Dorfman Organization, for summary judgment. For the following reasons, the motion is DENIED.
I. BACKGROUND
This third-party claim arises out of an automobile accident that occurred on December 31, 1998 on Interstate 10 in St. Charles Parish, Louisiana. A 1990 Plymouth Acclaim owned by Rhonda Beasley and operated by plaintiff Robert Allen, Jr. was in the emergency stopping lane of eastbound I-10 with a flat tire, when a Ryder truck, operated by defendant Danni Naor, and owned by defendant Ryder, struck the car. At the time of the accident, the truck's driver, Danni Naor, was employed by one of several moving companies owned by defendant, Eric Grinboum. The car operated by Allen burst into flames, killing his mother, Ora Tolliver, and Rhonda Beasley's two children, Cedrica Daniels and Michael Beasley, who also occupied the car. Allen was severely burned and paralyzed; Rhonda Beasley was injured less seriously.
Plaintiffs originally filed suit against several parties, including the third-party plaintiffs, American Transfer Moving Systems, Inc., Piazza Van Lines, Inc., All-American Moving Systems, Inc., A-One Trucking, Inc., and American Classic Moving Systems, Inc., ("third-party plaintiffs"). In March of 2001, these "Grinboum companies" filed a third-party complaint against the Dorfman Organization, Ltd., the commercial insurance broker who allegedly procured liability insurance for Grinboum's moving companies. The third-party plaintiffs maintain that Dorfman breached both contractual and fiduciary duties by failing to counsel third-party plaintiffs "on the appropriate levels and limits of liability, excess, and umbrella policies available on the market," failing to "procure sufficient levels of primary coverage," by breaching "the standards of the industry" and through "other acts of negligence . . . which may be discovered." See Third-Party Complaint, Rec. Doc. No. 407, at 3.
In October of 2001, the Plaintiffs reached a settlement agreement with many of the original named defendants in this consolidated case, including Grinboum and his moving companies. The Court then severed the pending third-party claim of Grinboum against Dorfman and Plaintiffs proceeded to trial on a products liability theory against the only remaining defendant, DaimlerChrysler. After a two-week trial, the jury returned a verdict in favor of DaimlerChrysler. Accordingly, Grinboum's third-party claim against Dorfman is the only issue that remains to be tried.
II. Dorfman's Motion for Summary Judgment
Dorfman initially moved for summary judgment in September of 2001, arguing simply that "Louisiana law of prescription is applicable to third party plaintiffs' suit against Dorfman," and, under Louisiana law, "their right or cause of action against Dorfman prescribed a year before they filed suit." See Third Party Defendant's Motion for Summary Judgment, Rec. Doc. No. 531, at 5-7. In support of this argument, Dorfman cites title 9, section 5606 of the Louisiana Revised Statutes, which provides that "no action for damages against any insurance agent, broker, solicitor, or other similar licensee . . . shall be brought unless filed . . . within one year from the date of the alleged act, omission or neglect, or within one year from the date the alleged act . . . was discovered or should have been discovered." See La. Rev. Stat. Ann.§ 9:5606(a) (West. Supp. 2002). According to Dorfman, this "prescriptive" period was triggered by any one of several dates: the filing of Plaintiffs' original suit, on January 14, 1999, Grinboum's receipt of a certified letter, dated February 4, 1999, in which a claims examiner explained that claims from the Tolliver accident had been received and exceeded his policy limits of $1,000,000.00, or the filing of subsequent lawsuits in August and December of 1999. See Third Party Defendant's Motion for Summary Judgment, at 3. Without mention of Louisiana's choice. of law provisions, Dorfman asserts that, because third-party plaintiffs filed this suit on March 8, 2001, more than one year after the latest of these "triggering" dates, the suit is prescribed and summary judgment is appropriate.
In a supplement memorandum, filed over one month after its original motion for summary judgment, Dorfman adopts a different theory in support of dismissal. According to Dorfman, the complicated choice of law and prescription issues in this case are irrelevant and "academic" because "mover will cite Louisiana and New York cases which hold that an insurance agent has no duty to recommend liability limits." See Third Party Defendant's Supplemental Memorandum in Support of Summary Judgment, Rec. Doc. No. 531, at 3. According to Dorfman, both New York and Louisiana courts have held that, absent a "special relationship," an insurance agent bears no duty to advise a customer to obtain additional coverage or recommend higher limits. See id. at 3-4. Dorfman further avers that even if "Dorfman had an obligation to recommend coverages, Dorfman satisfied that obligation." See id. at 5. In support of this contention, Dorfman cites the deposition testimony of agent Steven Dorfman, who allegedly recounted that he recommended umbrella coverage to Grinboum "on more than one occasion." See id. at 5. Dorfman also cites, and attaches as exhibits, two "memoranda to the file" which purportedly indicate that umbrella coverage was recommended, but Grinboum and/or his associate refused additional coverage. See id.
In opposition, third-party plaintiffs first argue that, under Louisiana law, the claims against Dorfman are not prescribed or perempted. The third-party plaintiffs vigorously dispute that the dates cited by Dorfman trigger the one-year prescriptive period for claims against insurance agents. According to Grinboum, "[w]hat information gives rise to a duty to further investigate is certainly subject to. interpretation, and creates questions of fact which cannot be resolved by summary judgment." See Memorandum in Opposition to Motion for Summary Judgment, Rec. Doc. No. 566, at 6. Grinboum further argues that because of the complexity of this particular case, and the joinder of numerous parties and claims, "there was no reason for either Grinboum, individually, or any of his companies, to have the belief there was liability in excess of their . . . policy . . . until much of the discovery in this case was conducted, and the legal issues were identified and resolved." See id. at 7.
Grinboum also attempts to minimize the significance of the February 4, 1999 certified letter advising Grinboum that the demands stemming from the Tolliver accident would exceed his company's policy limits. According to Grinboum, this letter "is more significant for what it does not state," and "does not give him enough information where he knew, or should have known, at that time, in a vacuum, that he had a claim against Mr. Dorfman." See id. at 8-9. Grinboum maintains that because "the Court cannot resolve the factual questions to pinpoint when Mr. Grinboum knew or should have known of his claims against Dorfman, on the record presented, this motion cannot prevail on the basis that the claims have perempted." See id. at 9.
Grinboum next offers a thorough analysis of the complex choice of laws issues presented in this case, ultimately concluding that while Louisiana's choice of law provisions apply initially, New York law applies to the underlying substantive claims. Grinboum first asserts that the substantive law of New York applies to this claim, because of its contractual nature and because the case involves two New York corporations, both with their principal places of business in New York. See id. at 12. Grinboum next explains that because Louisiana is the "forum state," its choice of law provisions will apply, and, therefore, Louisiana Civil Code article 3549 governs the prescription and peremption issues in this case. According to Grinboum, under article 3549, an action that would be barred under the law of Louisiana, "shall be dismissed unless it would not be barred in the state whose law would be applicable to the merits and maintenance of the action in this state is warranted by compelling considerations of remedial justice." See La. Civ. Code Ann. art. 3549 (West 1994). Since this action would not be barred under the law of New York, Grinboum argues it should be maintained by this Court.
Turning to the merits of the underlying claim, Grinboum maintains that summary judgment is not appropriate because, under New York law, Dorfman and Grinboum had a "special relationship" such that Dorfman assumed — and eventually breached — additional duties and responsibilities beyond those of mere agent and consumer. See id. (citing Murphy v. Kuhn, 682 N.E.2d 972 (N.Y. 1997)). According to Grinboum, evidence submitted by Dorfman, including internal memoranda which allegedly document the offer and subsequent rejection of umbrella coverage, actually prove the "special relationship" existed, by reflecting Dorfman's awareness that the insurance policies at issue did not provide sufficient coverage. See id. at 16-17.
In sum, Grinboum argues that, as a threshold matter, this third-party claim is not time-barred under Louisiana law. In the alterative, if the Court finds the claim would be barred under Louisiana law, dismissal is not appropriate because the claim would not be barred under New York's statute of limitations, and maintenance of the action in this state is warranted by "compelling considerations of remedial justice." Finally, Grinboum argues that many "material facts," relative to the nature of the relationship between the parties remain and, as a result, Dorfman is not entitled to summary judgment at this time.
III. Law and Analysis
A. Summary Judgment Standard
Summary judgment will be granted only if the pleadings, depositions, answers to interrogatories, and admissions, together with affidavits show that there is no genuine issue as to any material fact and that the defendant is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. If the party moving for summary judgment demonstrates the absence of a genuine issue of material fact "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Willis v. Roche Biomedical Labs., Inc., 61 F.3d 313, 315 (5th Cir. 1995). "[A] dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. If the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, no genuine issue exists for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 588 (1986). Therefore, "the mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56 requires that the fact dispute be genuine and material." Willis, 61 F.3d at 315.
The burden of demonstrating the existence of a genuine issue is not met by "metaphysical doubt" or "unsubstantiated assertions." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (quoting Matsushita, 475 U.S. at 588). The Court must "resolve factual controversies in favor of the nonmoving party, but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Id. The Court does not, "in the absence of proof, assume that the nonmoving party could or would prove the necessary facts." Id. If the evidence leads to only one reasonable conclusion, summary judgment is proper. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
B. Choice of Law
"A federal court considering a diversity case that implicates choice of laws must determine which state's law applies by following the choice of law rules of the forum state." See Marchesani v. Pellerin-Milnor Corp., 269 F.3d 481, 485 (5th Cir. 2001). Accordingly, Louisiana's choice of law rules dictate whether the substantive law of Louisiana or New York applies to the Grinboum claims.
Grinboum's claims against Dorfman involve allegations of breach of contract as well as breach of fiduciary duties. Although Louisiana choice of law provisions distinguish between contractual claims and those classified as delictual or quasi-delictual, Louisiana courts use the same analysis to determine the appropriate substantive law. Both articles require that courts assess which state's "policies would be most seriously impaired if its laws were not applied to that issue" and both articles direct courts to evaluate the "strength and pertimence of the relevant [state] policies in the light of . . . the pertinent contacts of each state to the parties." See La. Civ. Code art. 3542 (governing delictual actions); La. Civ. Code art. 3537 (governing conventional obligations).
Louisiana Civil Code article 3537 sets forth the general choice of law approach for conventional obligations, or contracts. According to the article:
[A]n issue of conventional obligations is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.
That state is determined by evaluating the strength and pertinence of the relevant policies of the involved state in light of: (1) the pertinent contacts of each state to the parties and the transaction, including the place of negotiation, formation, and performance of the contract, the location of the object of the contract, and the place of domicile, habitual residence, or business of the parties; (2) the nature, type, and purpose of the contract; and (3) the policies referred to in article 3515, as well as the policies of facilitating the orderly planning of transactions, of promoting multistate commercial intercourse, and of protecting one party from undue imposition by the other.
Louisiana Civil Code article 3542 sets forth the general choice of law approach for delictual, or tort, actions. According to the article:
[A]n issue of delictual or quasi-delictual obligations is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue. That state is determined by evaluating the strength and pertinence of the relevant policies of the involved states in light of: (1) the pertinent contacts of each state to the parties and the events giving rise to the dispute, including the place of conduct and injury, the domicile, habitual residence, or place of business of the parties, and the state in which the relationship, if any, between the parties was centered; and (2) the policies referred to in article 3515, as well as the policies of deterring wrongful conduct and of repairing the consequences of injurious acts.
Applying those principles to the facts of this case, it is clear that New York's policies would "be most seriously impaired if its law were not applied to this case." Grinboum asserts, and Dorfman does not dispute, that both parties are New York corporations registered and licensed to do business in the state of New York. See Memorandum in Opposition, at 12. The contract at issue was negotiated, formed, and performed in the state of New York. See id. To the extent that these claims involve breach of a fiduciary duty, or any other tort, "the place of conduct and injury," if any, was New York, and the "relationship between the parties" was "centered" in New York. More importantly, although the motor vehicle accident that gave rise to the underlying case occurred in Louisiana, the parties to this third-party demand appear to have no "pertinent contacts" to the state of Louisiana. Accordingly, the Court agrees that New York law applies to the merits of this action.
The conclusion that New York's substantive law applies to the merits of this case, however, does not, in itself, determine which state's peremptive period, or statute of limitations, will apply to this case. To answer this question, the Court again must turn to the choice of law provisions of the forum state, Louisiana. Louisiana Civil Code article 3549 governs choice of law issues of liberative prescription and peremption. Article 3549 provides generally that when, as in this case, "the substantive law of another state would be applicable to the merits of an action brought in this state, the prescription and peremption law of [Louisiana] applies." See La. Civ. Code Ann. art. 3549.
Louisiana law provides specific peremption periods for actions against "any insurance agent, broker, solicitor," whether the action is "based upon tort or breach of contract." See La. Rev. Stat. Ann § 9:5606(A). Under this statute, "no action for damages" against an insurance agent or broker, "shall be brought unless filed . . . within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission or neglect is discovered or should have been discovered." See id. The statute further provides that in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect." See id.
Under Louisiana law three dates potentially trigger this one-year peremptive period for actions against insurance agents: the date of the alleged act, the date the alleged act is discovered, or the date the alleged act "should have been discovered." In this case, neither party disputes that the action was filed more than one year after the date of the alleged act, presumably the procurement of an allegedly inadequate insurance policy. Dorfman maintains, however, that as a result of a lawsuit filed in January of 1999, and a letter dated February 1999, Grinboum "became aware of their insurance agent's alleged error" and "it was then that the omission was 'discovered or should have been discovered."' See Memorandum in Support of Motion for Summary Judgment, at 6. Dorfman argues, in the alternative, that the alleged act or omission "certainly [should have been discovered] in August or December of 1999 when they were sued for tens of millions of dollars." See id. Grinboum denies that he knew or should have known of his vulnerability to liability in excess of coverage "until much of the discovery of this case was conducted and the legal issues were identified and resolved." See Memorandum in Opposition, at 7.
In a third memoradum in support of summary judgment filed some six weeks after its initial motion, Dorfman argues, for the first time, that the date of this alleged "act or omission" was in fact some time in 1996, when Grinboum and Dorfman first entered a business relationship. See Third Party Defendant's Reply Memorandum in Support of Summary Judgment, Rec. Doc. No. 575, at 4. Under this theory, the coverage placed in December of 1998 was actually a renewal of coverage placed in 1996, thus, the date of "discovery" is irrelevant because the action is barred by the three-year outer limit for the filing of such actions. See La. Rev. Stat. Ann. § 9:5606(A) (providing that "in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect"). This "new" argument itself reflects the confusion surrounding many important legal and factual issues which are best resolved at a trial on the merits.
Grinboum maintains that "the Court cannot resolve the factual questions to pinpoint when Mr. Grinboum knew or should have known of his claims against Dorfman, on the record presented." See Memorandum in Opposition, at 9. The Court agrees. When Grinboum actually knew of his potential claim against Dorfman and when he should have known, are fact-specific questions, involving factors such as Grinboum's relevant knowledge, background, business acumen, and past experience. Sweeping generalizations such as "[o]ne does not have to be an experienced trial attorney, or even a sophisticated business man, as Grinboum is, to know exposure from such an accident . . . might result in damages in excess of [one] million dollars" are not sufficient to establish conclusively when Grinboum discovered or "should have discovered" this alleged act or omission. See Third Party Defendant's Reply Memorandum in Support of Summary Judgment, at 3. Accordingly, the date Grinboum actually discovered or should have discovered the alleged act or omission is a question of fact appropriately reserved for trial. Any ruling on whether the pending claim is perempted under Louisiana law is premature at this time.
Because the Court concludes that a ruling on whether this claim is perempted under Louisiana law is premature, it does not reach the two important exceptions set forth in Civil Code article 3549. The exceptions, however, will likely become relevant if the Court ultimately finds that this claim is perempted under Louisiana law. In particular, if the Court finds that this action is barred under the law of Louisiana, it "shall be dismissed" unless it is not barred under the law of New York, and "maintenance of the action in this state is warranted by compelling considerations of remedial justice." See La. Civ. Code Ann. art. 3549 (emphasis added). Both courts and commentators, however, have recognized the "exceptional character" of the "compelling considerations" provision. See id. revision comment (f); see also Brown v. Slenker, 220 F.3d 411, 420 (5th Cir. 2000) (noting that only one Louisiana court has found such "compelling considerations" and explaining that "[i]n cases where plaintiffs have litigated their claims in Louisiana by choice, not by necessity, claims of "compelling considerations' warranting maintenance of the suit in Louisiana have been consistently rejected").
C. Dorfman's Remaining Arguments in Support of Summary Judgment
Dorfman argues, in a supplemental memorandum, that summary judgment is appropriate for two additional reasons. First, according to Dorfman, under both New York and Louisiana law, "an insurance agent has no duty to recommend liability limits." See Supplemental Memorandum in Support of Motion for Summary Judgment, at 3. Second, Dorfman asserts that even "[i]f the court rules that Dorfman had an obligation to recommend coverages, Dorfman satisfied that obligation." See id. at 5.
Neither of these arguments merits summary judgment at this time. Dorfman correctly points out that the New York Court of Appeals has held that insurance agents generally "have no continuing duty to advise, guide or direct a client to obtain additional coverage." See Murphy v. Kuhn, 682 N.E.2d 972, 974 (N.Y. 1997). However, the Murphy court also noted that "this record does not rise to the high level required to recognize the special relationship threshold that might superimpose on defendants the initiatory advisement duty beyond the ordinary placement of requested insurance responsibilities." See id. at 975. While third-party plaintiffs' burden is undoubtedly a heavy one, as "no New York court has applied the special relationship analysis to add such continuing advisement duties to the agent-insured relationship," courts have left the door open to such a claim. See M E Mfg. Co. v. Frank H. Reis, Inc., 692 N.Y.2d 191, 194 (N.Y.App.Div. 1999). Whether these parties' relationship was sufficiently "special" to give rise to additional duties under New York law is a question pregnant with facts and is not ripe for summary judgment at this time.
Dorfman's final argument, that summary judgment is appropriate because Dorfman "satisfied his obligation" by recommending umbrella coverage to Grinboum, is equally unpersuasive. The evidence in support of this contention, the deposition testimony of the defendant, Steven Dorfman, and "memoranda to the file" purporting to reflect the offer and rejection of umbrella coverage, is contradicted by conflicting deposition testimony of Grinboum employee Ori Milchiker. In addition, Grinboum raises important questions about the authenticity of these documents, pointing out that "[t]here is nothing on either of those internal memos . . . to authenticate the documents . . . not even an affidavit." See Memorandum in Opposition, at 18. In light of the "evidence of contradictory facts," on this issue, summary judgment is not warranted.
This third-party claim presents complex issues of choice of law, peremption, and New York insurance law. Although the relevant facts may become apparent at a later date, on this record the Court cannot conclude that this third-party claim is perempted under Louisiana law. Nor can the Court conclude on the briefs and evidence presented that the parties did — or did not — have a "special relationship" sufficient to give rise to a duty under New York law. Finally, whether or not Dorfman actually recommended additional coverage to Grinboum, a fiercely contested factual question at the heart of this claim, is also not ripe for summary judgment at this time. Accordingly, third-party defendant's motion for summary judgment is DENIED.
III. Conclusion
For the foregoing reasons, third-party defendant's motion for summary judgment is DENIED.