TRUSTED TRANSPORTATION SOLUTIONS, LLC. v. GUARANTEE INSURANCE COMPANY et al
Filing
173
OPINION. Signed by Judge Noel L. Hillman on 5/4/2020. (rss, )
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UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
TRUSTED TRANSPORTATION
SOLUTIONS, LLC,
1:16-cv-7094-NLH-JS
OPINION
Plaintiff,
v.
GUARANTEE INSURANCE COMPANY,
et al.,
Defendants.
APPEARANCES:
WILLIAM B. IGOE
CASEY GENE WATKINS
WILLIAM J. DESANTIS
BALLARD SPAHR LLP
210 LAKE DRIVE EAST
SUITE 200
CHERRY HILL, NJ 08002
On behalf of Plaintiff
CHRISTINA M. RIEKER
LARRY C. GREEN, JR.
ANDREW N. JANOF
WINGET, SPADAFORA & SCHWARTZENBERG LLP
2500 PLAZA 5
HARBORSIDE FINANCIAL CENTER
JERSEY CITY, NEW JERSEY 07311
On behalf of Defendants
HILLMAN, District Judge,
This matter comes before the Court on the Motion for
Clarification [Docket No. 164] brought by Defendants Brown &
Brown of New Jersey (“Brown and Brown”) and John F. Corbett
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(“Corbett” and collectively “Defendants”) with respect to the
Court’s September 27, 2019 Opinion [Docket No. 158] and Order
[Docket No. 159] denying summary judgment to both Defendants and
Plaintiff Trusted Transportation Solutions (“Plaintiff”).
In
essence, Defendants are asking the Court to rule on whether
Plaintiff is precluded from seeking disgorgement and punitive
damages as a matter of law.
The Court will grant Defendants’
motion and, for the reasons expressed below, will hold that
Plaintiff is not precluded from seeking disgorgement and
punitive damages as a matter of law.
BACKGROUND
As this Opinion is written primarily for the parties, the
Court will not discuss in detail the facts of this case. 1
Briefly, Plaintiff alleges that Defendants misrepresented the
terms of a workers’ compensation insurance policy that Plaintiff
purchased through Defendants.
[See generally Docket No. 38. 2]
On September 27, 2019, the Court denied Defendants’ Motion for
1
A more complete version of the relevant facts can be found in
the September 29, 2019 Opinion. [Docket No. 158.]
2
The Court notes that there are two separate docket items that
appear to be the operative Amended Complaint. [See Docket Nos.
35, 38.] The Court further notes that those two Amended
Complaints appear to be identical. In the interest of clarity,
the Court will cite only to Docket No. 38 when referring to the
operative Amended Complaint.
2
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Summary Judgment and Plaintiff’s Cross-Motion for Summary
Judgment.
[Docket No. 159.]
In its Opinion, the Court did not
address the parties’ arguments about the viability of
Plaintiff’s assertions that it is entitled to disgorgement and
punitive damages.
[See Docket No. 158, at 23 n.6.]
The Court
now takes the opportunity to clarify that issue.
DISCUSSION
A.
Subject Matter Jurisdiction
The Court has jurisdiction over Plaintiff’s claims under 18
U.S.C. § 1332, as the requirements of diversity are met. 3
B.
Standard for Motion for Summary Judgment
Summary judgment is appropriate where the Court is
satisfied that “‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits if any,’ . . . demonstrate the absence of a genuine
issue of material fact” and that the moving party is entitled to
3
Plaintiff Trusted Transportation Solutions, LLC is a limited
liability company whose sole member is a citizen of New Jersey.
Defendant Guarantee Insurance Company is a corporation
incorporated in and with its principal place of business in
Florida. Defendant Patriot Underwriters, Inc., is a corporation
incorporated in Delaware with its principal place of business in
Florida. Defendant Douglas Cook is a citizen of Pennsylvania.
Defendant Brown & Brown of New Jersey, LLC is a limited
liability company whose sole member is a corporation
incorporated in and with its principal place of business in
Florida. Defendant John F. Corbett is a citizen of Delaware.
3
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judgment as a matter of law.
Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986) (quoting FED. R. CIV. P. 56).
An issue is “genuine” if it is supported by evidence such
that a reasonable jury could return a verdict in the nonmoving
party’s favor.
248 (1986).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
A fact is “material” if, under the governing
substantive law, a dispute about the fact might affect the
outcome of the suit.
Id.
“In considering a motion for summary
judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence;
instead, the non-moving party’s evidence ‘is to be believed and
all justifiable inferences are to be drawn in his favor.’”
Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004)
(quoting Anderson, 477 U.S. at 255).
Initially, the moving party bears the burden of
demonstrating the absence of a genuine issue of material fact.
Celotex, 477 U.S. at 323 (“[A] party seeking summary judgment
always bears the initial responsibility of informing the
district court of the basis for its motion, and identifying
those portions of ‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any,’ which it believes demonstrate the absence
of a genuine issue of material fact.”); see Singletary v. Pa.
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Dep’t of Corr., 266 F.3d 186, 192 n.2 (3d Cir. 2001) (“Although
the initial burden is on the summary judgment movant to show the
absence of a genuine issue of material fact, ‘the burden on the
moving party may be discharged by “showing” — that is, pointing
out to the district court — that there is an absence of evidence
to support the nonmoving party’s case’ when the nonmoving party
bears the ultimate burden of proof.” (quoting Celotex, 477 U.S.
at 325)).
Once the moving party has met this burden, the nonmoving
party must identify, by affidavits or otherwise, specific facts
showing that there is a genuine issue for trial.
U.S. at 324.
Celotex, 477
A “party opposing summary judgment ‘may not rest
upon the mere allegations or denials of the . . . pleading[s].’”
Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir. 2001).
For
“the non-moving party[] to prevail, [that party] must ‘make a
showing sufficient to establish the existence of [every] element
essential to that party’s case, and on which that party will
bear the burden of proof at trial.’”
Cooper v. Sniezek, 418 F.
App’x 56, 58 (3d Cir. 2011) (quoting Celotex, 477 U.S. at 322).
Thus, to withstand a properly supported motion for summary
judgment, the nonmoving party must identify specific facts and
affirmative evidence that contradict those offered by the moving
party.
Anderson, 477 U.S. at 257.
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C.
Disgorgement
Defendants first seek a ruling that Plaintiff is precluded
from recovering disgorgement as a form of damages in this case.
New Jersey Supreme Court precedent indicates that disgorgement
and unjust enrichment are two names for the same doctrine.
See
Cty. of Essex v. First Union Nat’l Bank, 891 A.2d 600 (N.J.
2006) (repeatedly using the phrase “unjust
enrichment/disgorgement”); see also Iliadis v. Wal-Mart Stores,
Inc., 922 A.2d 710, 723 (N.J. 2007) (using unjust enrichment
standard to analyze whether disgorgement would be appropriate).
A successful unjust enrichment/disgorgement claim requires that
the plaintiff “show both that defendant received a benefit and
that retention of that benefit without payment would be unjust.”
Iliadis, 922 A.2d at 723 (quoting VRG Corp. v. GKN Realty Corp.,
641 A.2d 519, 526 (N.J. 1994)).
The plaintiff must also “show
that it expected remuneration from the defendant at the time it
performed or conferred a benefit on defendant and that the
failure of remuneration enriched defendant beyond its
contractual rights.”
Id. (quoting VRG Corp., 641 A.2d at 526).
Here, it cannot be disputed that Defendants received a
benefit from Plaintiff in the form of $45,465.00 in commissions
paid to Defendants.
[Docket No. 158, at 20.]
The issue, then,
is whether it would be unjust for Defendants to retain that
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benefit.
Put another way, the issue is whether Plaintiff
expected but did not receive remuneration from Defendants such
that Defendants were enriched beyond their contractual rights.
Defendants argue that, as a matter of law in New Jersey, “a
plaintiff may not seek disgorgement where it received the
product or service at issue and reaped some value therefrom.”
[Docket No. 153, at 22.]
support this argument.
Defendants point to two cases to
The first case, In re Cheerios Marketing
and Sales Practices Litigation, involved Cheerios consumers who
were suing Cheerios for allegedly making false statements about
the health benefits of Cheerios.
Civil Action No. 09-cv-2413,
2012 WL 3952069, at *1 (D.N.J. Sept. 10, 2012).
In Cheerios, the plaintiffs could not satisfy the second
prong of the unjust enrichment/disgorgement test because they
could not show that they “received a product that failed to work
for its intended purpose or was worth objectively less.”
Id.
(quoting Koronthaly v. L’Oreal USA, Inc., 374 F. App’x 257, 259
(3d Cir. 2010)).
Rather, the Court noted that “[h]ealthy
ingredients, crunchiness, convenience and taste are value
components” that the plaintiffs received with the Cheerios that
they purchased.
Id.
In sum, the Court held that “[u]njust
enrichment is not a viable theory — and disgorgement is
therefore not available — in circumstances in which a consumer
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purchases specific goods and receives those same specific
goods.”
Id.
The second case that Defendants rely on is Hoffman v.
Cogent Solutions Group, LLC.
Civil Action No. 13-00079, 2013 WL
6623890 (D.N.J. Dec. 16, 2013).
In that case, the Court quoted
the standard set forth in Cheerios and held that, since the
plaintiff could “not articulate how” the product he purchased
and received “failed to function as advertised,” disgorgement
was not available.
Id. at *5.
Plaintiff responds to Defendants’ argument by asserting
that Cheerios and Hoffman are inapposite here because they
concern issues with consumer goods (Cheerios and a dietary
supplement, respectively), whereas this case is about alleged
professional malpractice.
[Docket No. 147-1, at 28-29.]
Plaintiff argues that the malpractice alleged here is analogous
to legal malpractice, about which the New Jersey Supreme Court
has noted: “Ordinarily, an attorney may not collect attorney
fees for services negligently performed.”
670 A.2d 527, 534 (N.J. 1996).
Saffer v. Willoughby,
Plaintiff also cites an
unpublished New Jersey case in which the Court held that, “if
malpractice could be proven, disgorgement would constitute an
appropriate basis for recovery.”
Geyer v. Pitney, Hardin, Kipp
& Szuch, Docket No. L-2680-03, 2008 WL 1721883, at *18 (N.J.
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Super. Ct. App. Div. Apr. 15, 2008).
The goods-services dichotomy, while an interesting take on
the issue before the Court, is not dispositive.
The parties,
perhaps optimistically, interpret the cases upon which they rely
to create hard and fast rules that support their respective
positions.
But whether disgorgement is available turns less on
whether a product or service is at issue and more on whether the
Iliades test outlined above has been met.
Given the facts of this case, a reasonable jury could find
that Defendants’ retention of the commission fees would be
unjust.
As discussed in the September 27, 2019 Opinion, if a
jury were to believe Plaintiff’s version of events, it could
find “that Defendants at best had inadequate knowledge about the
policy and at worst actively mischaracterized the policy to
Plaintiff.”
[Docket No. 158, at 14 (emphasis added).]
The jury
could then conclude that Plaintiff “received a product that
failed to work for its intended purpose or was worth objectively
less.”
See Koronthaly, 374 F. App’x at 259.
This would be
sufficient to satisfy the second prong of an unjust
enrichment/disgorgement claim, the first prong of which is
indisputably met here.
Therefore, because a reasonable jury
could find that Plaintiff is entitled to disgorgement, the Court
will hold that Plaintiff is not precluded at this stage from
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seeking disgorgement.
D.
Punitive Damages
Defendants also argue that Plaintiff is precluded from
seeking punitive damages here.
Under New Jersey law,
[p]unitive damages may be awarded to the plaintiff
only if the plaintiff proves, by clear and convincing
evidence, that the harm suffered was the result of the
defendant’s acts or omissions, and such acts or
omissions were actuated by actual malice or
accompanied by a wanton and willful disregard of
persons who foreseeably might be harmed by those acts
or omissions. This burden of proof may not be
satisfied by proof of any degree of negligence
including gross negligence.
N.J. STAT. ANN. § 2A:15-5.12(a).
“‘Actual malice’ means an
intentional wrongdoing in the sense of an evil-minded act.”
§ 2A:15-5.10.
Id.
“‘Wanton and willful disregard’ means a
deliberate act or omission with knowledge of a high degree of
probability of harm to another and reckless indifference to the
consequences of such act or omission.”
Id.
Defendants point out the language that the “burden of
proof” required for punitive damages “may not be satisfied by
proof of any degree of negligence including gross negligence.”
[Docket No. 164-1, at 3 (quoting N.J. STAT. ANN. § 2A:155.12(a)).]
They argue that the only way to accomplish this is
by proving an intentional tort, which is impossible here because
Plaintiff’s fraud claim has already been dismissed and only a
negligence claim remains.
[Id.]
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The Court recognizes the apparent incongruity of allowing
punitive damages in what appears to be largely a negligence
case, as punitive damages are a remedy and not a claim in and of
themselves.
Nevertheless, the Court will not grant Defendants’
motion for summary judgment on this issue for two reasons.
First, although Plaintiff imprecisely denominates its remaining
claim as “Negligence/Broker Malpractice,” the claim appears to
encompass more than mere ordinary negligence and has as an
element a breach of fiduciary duty.
19.]
[See Docket No. 158, at 12-
As a general rule, punitive damages may be awarded in
breach of fiduciary duty cases.
See St. James v. Future
Finance, 776 A.2d 849, 874 (N.J. Super. 2001) (upholding award
of punitive damages for breach of fiduciary duty claim).
Therefore, punitive damages could be warranted in this case if
Plaintiff can meet the high burden required to justify them.
Second, although the caselaw on this issue is surprisingly
sparse, there is nonbinding authority to support allowing
punitive damages even if only negligence claims exist in a case.
For instance, in Gillman v. Rakouskas, the plaintiffs’ complaint
“only state[d] a claim for gross negligence.”
LEXIS 10835, at ¶ 7 (D.N.J. Jan. 26, 2017).
2017 U.S. Dist.
While the late
Honorable Jerome B. Simandle did dismiss the prayer for punitive
damages, he did so not because punitive damages could never be
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available in such a case, but because the complaint was
“completely devoid of any facts that would allow the Court to
reasonably infer that Defendants acted in a manner that could be
classified as ‘actual malice’ or a ‘wanton or reckless
disregard’ for others.”
Id. ¶¶ 6-8.
In fact, Judge Simandle
permitted the plaintiffs to amend their complaint specifically
so that they could “articulat[e] specific facts supporting a
prayer for punitive damages.”
Id. ¶ 8.
In Brand Marketing Group LLC v. Intertek Testing Services,
N.A., the Third Circuit, applying Pennsylvania law, addressed
this issue more squarely by holding that “punitive damages may
be awarded in negligence cases if the plaintiff proves greater
culpability than ordinary negligence at trial.”
358 (3d Cir. 2015).
801 F.3d 347,
In support of this conclusion, the court
approvingly quoted a Pennsylvania Supreme Court case as saying
that
while a showing of ordinary negligence cannot support
a punitive damages award, “neither is there anything
in law or logic to prevent the plaintiff in a case
sounding in negligence from undertaking the additional
burden of attempting to prove . . . that the
defendant’s conduct was not only negligent but that
the conduct was also outrageous,” such that it
warrants punitive damages.
Id. (quoting Hutchinson ex rel. Hutchinson v. Luddy, 870 A.2d
766, 773 (Pa. 2005)).
The Court agrees with the logic implicit in Gillman and
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explicit in Brand Marketing and, importantly, finds no binding
precedent to contradict that logic.
It is true in this case
that Plaintiff is not required to prove actual malice or wanton
and willful disregard in order to succeed on the issue of
liability.
But that does not make it impossible for Plaintiff
to meet such a standard.
In other words, just because Plaintiff
failed to properly plead its fraud claim earlier on in this
litigation does not mean that it cannot present sufficient
evidence to show that Defendants acted with actual malice or
wanton and willful disregard in proving its negligence claim
that includes an element of breach of a fiduciary duty.
Therefore, Plaintiff will not be precluded from seeking punitive
damages on the basis that the only remaining claim is a
negligence claim.
Thus, the issue of punitive damages comes down to whether,
viewing the evidence in the light most favorable to Plaintiff
and making all reasonable inferences in its favor, a reasonable
jury could find that Defendants acted with actual malice or
wanton and willful disregard.
This “is a fact-specific inquiry
requiring examination of [Defendants’] intent and knowledge.”
Daloisio v. Liberty Mut. Fire Ins. Co., 754 F. Supp. 2d 707, 710
(D.N.J. 2010).
The New Jersey Punitive Damages Act establishes
a non-exhaustive list of four factors that the trier of fact
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shall consider in determining whether the defendant acted with
actual malice or wanton and willful disregard:
(1)
(2)
(3)
(4)
The likelihood, at the relevant time, that
serious harm would arise from the defendant’s
conduct;
The defendant’s awareness of reckless disregard
of the likelihood that the serious harm at issue
would arise from the defendant’s conduct;
The conduct of the defendant upon learning that
its initial conduct would likely cause harm; and
The duration of the conduct or any concealment of
it by the defendant.
N.J. STAT. ANN. § 2A:15-5.12(b).
Accepting Plaintiff’s version of events to be true and
making all reasonable inferences in Plaintiff’s favor, a
reasonable jury could find that Defendants acted with
actual malice or wanton and willful disregard in this case.
The key fact is whether Defendants actively
mischaracterized the policy to Plaintiff.
If they did so
with the goal of getting Plaintiff to agree to the policy,
in the context of an owed fiduciary duty, then each of the
four factors listed above would cut in favor of an award of
punitive damages.
Under Plaintiff’s version of events,
Defendants knew that they were misrepresenting the terms of
the policy, knew that such representation might induce
Plaintiff to agree to the policy, knew that such an
agreement would cause harm to Plaintiff in the form of
excess expenses, concealed accurate information about the
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policy, and disregarded the risks of all the above
allegations in order to get Plaintiff to agree to the
policy.
Determining whether the evidence presented will
actually lead a jury to make such a conclusion is not
within the province of the Court.
If the proffered proofs
fail, Defendant may renew its argument that punitive
damages should not be available on the facts of this case
at the appropriate time and under the appropriate rule
during the upcoming trial process.
Therefore, summary
judgment will not be granted on this issue at this time,
and Plaintiff will not be precluded as a matter of law from
seeking punitive damages on the current record.
CONCLUSION
For the reasons expressed above, the Court will grant
Defendants’ Motion for Clarification [Docket No. 164] and will
hold that Plaintiff is not precluded from seeking disgorgement
and punitive damages.
An accompanying Order will be entered.
May 4, 2020
DATE
s/Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
15
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