POSCO DAEWOO AMERICA CORP. v. TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA et al

Filing 43

OPINION. Signed by Judge John Michael Vazquez on 11/19/2018. (dam, )

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

POSCO DAEWOO AMERICA CORP.,
Plaintiff
Civil Action No. 17-483
V.

OPINION
ALLNEX USA, [NC. and TRAVELERS
CASUALTY AND SURETY COMPANY OF
AMERICA,
Defendants.

John Michael Vazguez., U.S.D.J.
The current matter, which concerns insurance coverage, comes before the Court on
Defendant Travelers Casualty and Surety Company of America’s (“Travelers”) motion to dismiss
the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). D.E. 32. Plaintiff
Posco Daewoo America Corp. (“Plaintiff’ or “Daewoo”) opposed Travelers’ motion (D.E. 35),
and Travelers filed a brief in reply (D.E. 39); Defendant Allnex USA, Inc. (“Allnex”) also filed a
letter brief(D.E. 36).1 The Court reviewed all the submissions in support and in opposition, and
considered the motion without oral argument pursuant to Fed. R. Civ. P. 78(b) and L. Civ. R.
78.1(b). For the reasons stated below, Travelers’ motion is GRANTED.

In this Opinion, Travelers’ motion to dismiss (D.E. 32) will be referred to as “Travelers MTD.”
Allnex’s letter brief in opposition (D.E. 36) will be referred to as “Allnex Opp.” and Daewoo’s
brief in opposition (D.E. 35) will be referred to as “Daewoo Opp.” Travelers’ reply brief (D.E.
39) will be referred to as “Travelers Rep.”

I.

FACTUAL AND PROCEDURAL BACKGROUND2
The underlying matter between Daewoo and Alinex concerns who bears the risk of loss for

stolen funds. As to Daewoo and Travelers, the issue is whether there is potential insurance
coverage for the loss. Because this is Travelers’ second motion to dismiss and the parties are
familiar with the facts and insurance policy language at issue, the Court incorporates the factual
background from its first motion to dismiss opinion (the “MID Opinion,” D.E. 26), supplements
the background in light of the new allegations in the Amended Complaint (the “FAC,” D.E. 28),
and provides a brief overview of the parties and claims.
Plaintiff is a corporation that, among other things, imports and exports chemicals.
Defendant Alinex is in the business of supplying specialty chemicals. Plaintiff supplied Alinex
with products for which Ailnex owed payment. In early 2016, an impostor posing as an employee
of Plaintiffs accounts receivable department sent emails to an employee of Alinex. FAC

¶I 2, 4,

8. Specifically, Plaintiff alleges that the impostor “hacked Daewoo’s computer system to send
fraudulent emails to Alinex requesting wire payments to four separate [Wells Fargo] bank accounts
to satisfy outstanding receivables owed by Alinex to Daewoo.” Id.
bank at Wells Fargo. Id.

¶ 8.

¶J

8, 9. Daewoo does not

Allnex, without confirming the authenticity of the impostor’s email

or of the four Wells Fargo bank accounts, wired three separate payments to the Wells Fargo

The factual background is taken from Plaintiff Daewoo’s Amended Complaint (D.E. 28), as well
as from the Wrap and Crime Insurance Policy (the “Policy”), No. 106053220, (Travelers MTD,
Ex. A; D.E. 32-3). When reviewing a motion to dismiss, the Court accepts as true all well-pleaded
facts in the Amended Complaint. Fowler v. UPMC Shadvside, 578 F.3d 203, 210 (3d Cir. 2009).
In addition, the Court may consider any document integrat to or relied upon in the Amended
Complaint. Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (citing In re Burlington Coat
factoiy Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)). In this motion, the Policy is referenced
in the Amended Complaint, and all parties agree that it is authentic and critical to deciding the
current motion.
2

2

accounts on February 11, 2016, March 22, 2016, and April 1,2016. The wired payments totaled
$630,058. Id.

¶

10.

Afier the fraud was discovered, Alinex recovered $262,444 of the stolen $630,058. Id.

¶

13. The impostor apparently transferred the rest of the money, $367,613.46, from the Wells Fargo
accounts to accounts in Shanghai, China. Id. Daewoo alleges that Ailnex owes it the remaining
$367,613.46 to satisfy the original outstanding receivables. Allnex disagrees, contending that the
unrecovered wire payments to the impostor satisfy the balance it owed to Daewoo.3 Id.

¶ 14.

Plaintiff contends that Travelers should indemnify it for the losses caused by the impostor,
pursuant to Plaintiffs insurance policy with Travelers. Id.

¶ 25, 44; Travelers MTD, Ex. A at

1;

D.E. 3 2-3. The parties do contest the validity of the Policy during the relevant time period. Under
the Policy, Travelers insured Plaintiff for certain losses resulting from criminal activity. Relevant
here, the Policy provided Daewoo with coverage for loss incurred due to computer crime. The
Policy language at issue reads as follows:
F. Computer Crime
1. Computer Fraud
The Company will pay the Insured for the Insured’s direct
loss of, or direct loss from damage to, Money, Securities,
and Other Property directly caused by Computer Fraud.

Ailnex’s letter brief takes issue with Travelers’ statement that Daewoo has “legally enforceable
claims against Allnex,” which Travelers made in its brief in support of the instant motion. Allnex
Opp. at 2. To that end, Allnex contends that “Travelers’ motion to dismiss Daewoo’s coverage
claim is not the appropriate vehicle to determine whether [A]llnex has any liability to Daewoo.”
Id. at 4. Whether Allnex is liable to Daewoo is the critical issue between those two parties.
Accordingly, Travelers’ characterization of the matter in this motion to dismiss is not binding on
Alinex.

3

Travelers MTD, Ex. A at 3 (emphasis in original). All bolded terms are separately defined in the
Policy and “Other Property” means any tangible property other than Money and Securities that
had intrinsic value. Id. at 12 (emphasis in original).
Plaintiff alleges that “there is no legitimate question that ‘computer fraud,’ as defined by
the Policy, set into operation a chain of causation that resulted in a loss to Daewoo.” FAC

¶ 39.

Daewoo asserts that the impostor “used a computer to cause the fraudulent transfer of hundreds of
thousands of dollars belonging to Daewoo to other parties.” Id. To recover its claimed loss,
Plaintiff submitted an insurance claim to Travelers; Travelers denied coverage. Daewoo alleges
Travelers’ decision to deny coverage was improper. FAC ¶ 43-46.
On December 15, 2016, Daewoo filed a Complaint against Alinex and Travelers in the
Superior Court of New Jersey. D.E. 1. Travelers removed the case to federal court on January 24,
2017. Id. Travelers then moved to dismiss this action pursuant to Rule 12(b)(6). D.E. 6. On
October 31, 2017, this Court granted Travelers’ motion to dismiss. D.E. 26, 27.
In Travelers’ first motion to dismiss, the parties raised a number of arguments regarding
the interpretation of specific language in the Policy. Ultimately, the Court concluded that the
Policy’s “Ownership of Property; Interests Covered” provision was dispositive, and granted the
motion because Plaintiff failed to plausibly plead that it owned the wired payments. MTD Opinion
at 8-li. “Own” is not defined in the policy. Therefore, the Court was required to use the “plain,
ordinary meaning” of “own” when interpreting the Policy provision, and to “interpret the contract
to comport with the reasonable expectations of the insured.” Id. at 11-12 (quoting Zacarias v.
Allstate Ins. Co., 16$ N.J. 590, 595 (2001)). While Travelers and Daewoo each maintained that
different definitions of “own” were applicable, the Court did not find either parties’ argument
persuasive. Id. at 12 n.h.

Instead, the Court determined that Black’s Law Dictionary was

4

instructive. Using Black’s Law Dictionary, the Court defined “own” as “to rightfully have or
possess as property; to have legal title to.” Id. at 12. Because Daewoo failed to pled that it
rightfully had, possessed, or had legal title to the money at issue, the Court concluded that Daewoo
failed to state a claim as to Travelers. Id, at 12, 14. Accordingly, the Court granted Travelers’
motion to dismiss without prejudice and granted Plaintiff leave to file an amended complaint. D.E.
27.
Plaintiff filed the FAC on December 12, 2017. D.E. 31. In the FAC, Daewoo pleads that
it owned the funds at issue pursuant to the Merriam-Webster Dictionary’s definition of “own.”
FAC

¶ 40.

Plaintiff also pleads that once the money was placed into the “funds transfer system..

Daewoo would have had the right and ability to impose a constructive trust over the funds.” Id.

¶ 41.

In addition, the lost funds “represented an account receivable of Daewoo, which is ‘tangible

property’ of Daewoo within the meaning of the Policy.” Id.

¶ 42.

Daewoo also alleges that “Ailnex

is taking the position that Allnex’s unrecovered wire transfers satisfy the outstanding balance owed
to Daewoo, on the theory that Daewoo

‘owns’

such funds.” Id.

¶

14 (emphasis added). Finally,

the FAC includes a new allegation that the impostor hacked into Daewoo’s computer system in
order to send the fraudulent emails to Ailnex. Id.

¶ 8.

Travelers filed this motion in response, arguing that Plaintiff fails to sufficiently plead any
new facts demonstrating that it owned the funds at issue and, therefore, still does not satisfy the
ownership requirement in the Policy.
II.

LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) governs motions to dismiss for “failure to state a

claim upon which relief can be granted.” For a complaint to survive dismissal under the rule, it
must contain sufficient factual matter to state a claim that is plausible on its face. Ashcroft v. Iqbal,

5

556 U.S. 662, 678 (2009) (quoting Bell At!. Corp. v. Twombty, 550 U.S. 544, 570 (2007)). A claim
is facially plausible “when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although the
plausibility standard “does not impose a probability requirement, it does require a pleading to show
more than a sheer possibility that a defendant has acted unlawfully.” Connelly v. Lane Const.
Corp., $09 f.3d 780, 786 (3d Cir. 2016) (internal quotation marks and citations omitted). As a
result, a plaintiff must “allege sufficient facts to raise a reasonable expectation that discovery will
uncover proof of [his] claims.” Id. at 789.
In evaluating the sufficiency of a complaint, district courts must separate the factual and
legal elements. Fowlerv. UFMCShadyside, 578 F.3d 203, 210-211 (3d Cir. 2009). Restaternents
of the elements of a claim are legal conclusions, and therefore, not entitled to a presumption of
truth. Burtch v. Milberg factors, Inc., 662 f.3d 212, 224 (3d Cir. 2011). The Court, however,
“must accept all of the complaint’s well-pleaded facts as true.” Fowler, 57$ F.3d at 210. In
deciding a motion to dismiss, the Court may also consider any “document integral to or explicitly
relied upon in the complaint.” Schmidt v. Skolas, 770 f.3d 241, 249 (3d Cir. 2014) (citing In re
Burlington Coat Facton’ Sec. Litig., 114 f.3d at 1426 (quotation & emphasis omitted)). Even if
plausibly pled, however, a complaint will not withstand a motion to dismiss if the facts alleged do
not state “a legally cognizable cause of action.” Turner v. IF. Morgan Chase & Co., No. 14-7 148,
2015 WL 12826480, at *2 (D.N.J. Jan. 23, 2015).
III.

LEGAL ANALYSIS
As noted, in the MTD Opinion the Court used Black’s Law Dictionary to define “own,”

and granted Plaintiff leave to file an amended pleading to assert sufficient facts establishing that it
owned the funds at issue. The FAC, among other things, alleges that an arguably broader Merriam-

6

Webster Dictionary definition of “own” should actually apply. FAC
argument in opposition to Travelers’ motion to dismiss

-

¶ 28,

40. Thus, Daewoo’s

that the Court should use a different

definition of own is akin to a motion for reconsideration. Daewoo is, in effect, requesting that
-

the Court reconsider the definition of own.
Daewoo, however, did not make a motion for reconsideration pursuant to Local Civil Rule
7.1(1). A motion for reconsideration is viable when one of three scenarios is present: (1) an
intervening change in the controlling law, (2) the availability of new evidence not previously
available, or (3) the need to correct a clear error of law or prevent manifest injustice. Carmichael
v. Everson, No. 03-4787, 2004 WL 1527894, at *1 (D.N.J. May 21, 2004) (citations omitted). A
motion for reconsideration, however, does not entitle a party to a second bite at the apple.
Therefore, a motion for reconsideration is inappropriate when a party merely disagrees with a
court’s ruling or when a party simply wishes to re-argue or re-hash its original motion. Sch.
Specialty, Inc. v. Ferrentino, No. 14-4507. 2015 WL 4602995, at *23 (D.N.J. July 30, 2015); see
also Florham Park Chevron, Inc. v. Chevron US.A., 680 F. Supp. 159, 162 (D.N.J. 1988).

Granting a motion for reconsideration is an “extraordinary remedy,” to be granted “sparingly.” NL
Indus., Inc. v. Commercial Union Ins. Co., 935 F. Supp. 513, 516 (D.N.J. 1996) (citations omitted).
In this instance, there is no intervening change in the controlling law, and Plaintiff fails to include
any new relevant evidence in the FAC, argue that there was a clear error of law, or maintain that
the Court’s decision created manifest injustice. Thus, Plaintiffs argument that the Court should
have adopted a broader definition of “own” (Daewoo

Opp.

at 6-7) is an improper second bite at

the apple.

In addition, a motion for reconsideration cannot be used to raise a new argument that could
have been raised in the initial motion. Bowers v. NcAA, 130 F. Supp. 2d 610, 613 (D.N.J. 2001).

7

In the initial motion, both parties asserted definitions of “own” that the Court rejected. MTD
Opinion at 12 n.H. Daewoo could have clearly raised its current definition of own in the prior
motion but failed to do so.
Moreover, the Court’s definition of “own” is sound. New Jersey law4 states that “words
of an insurance policy are to be given their plain, ordinary meaning.” Zacarias, 168 N.J. at 595.
When interpretation is required, “courts interpret the contract to comport with the reasonable
expectations of the insured

.

.

.

.“

Id. In addition, courts may look to a dictionary definition to

determine the plain meaning of an undefined term. See Aleynikov v. Goldman Sachs Grp., Inc.,
765 F.3d 350, 360 (3d Cir. 2014) (finding that “dictionaries are the customary reference source
that a reasonable person in the position of a party to a contract would use to ascertain the ordinary
meaning of words not defined in the contract” (citing Lorillard Tobacco Co. v. Am. Legacy Found.,
903 A.2d 728, 738 (Del. 2006))). Plaintiff does not appear to disagree with the Court’s decision
to use a dictionary to define “own.” Instead, Plaintiff criticizes the specific dictionary that the
Court used to define the term. Daewoo Opp. at 6-7. But except for the fact that Plaintiff does not
like the particular definition applied by the Court, Plaintiff fails to provide the Court with any
explanation as to why the use of Black’s Law Dictionary was improper. In fact, courts frequently
use Black’s Law Dictionary to determine the plain and ordinary meaning of undefined terms in
insurance policies. See, e.g., Dougherty v. Allstate Prop. & Cas. Ins. Co., 681 F. App’x 112, 116

This matter is before the Court on diversity jurisdiction. As a result, the Court must interpret the
contract language in the Policy under the substantive law of the state whose laws govern the action.
Robertson v. Allied Signal, Inc., 914 F.2d 360, 378 (3d Cir. 1990) (citing Erie Railroad Co. v.
Tompkins, 304 U.S. 64 (1938)). The parties continue to assume that New Jersey substantive law
applies, so the Court will also continue to apply the same. See Manley Toys, Ltd. v. Toys R Us,
Inc., No. 12-3072, 2013 WL 244737, at *2 (D.N.J. Jan. 22, 2013) (“Because the parties have
argued the viability of the remaining claims as though New Jersey substantive law applies, the
Court will assume that to be the case.” (citing USA Mach. Corp. v. (‘SC’, Ltd., 184 F.3d 257, 263
(3d Cir. 1999)).
$

(3d Cir. 2017) (using Black’s Law Dictionary to provide meaning to an undefined term); Hussey
C’opper, Ltd. v. Arrowoodldem. C’o., 391 F. App’x 207, 209-10 (3d Cir. 2010) (same); Trademark

*5 (D.N.J. Mar. 31,
Plastics Corp. v. Hartford fire Ins. Co., No. 13-5039, 2015 WL 1472305, at
2015) (same). The Court does not see any error in the definition it employed.
Daewoo also argues that it nevertheless owned the stolen funds because Alinex is taking
the position that it does not owe Daewoo any additional money because Daewoo “owns” such
funds. FAC

¶ 14. Ailnex’s characterization of who owns the funds, however, has no impact on

whether the Policy actually covers the alleged loss here. Ailnex is not a party to the insurance
contract between Daewoo and Travelers. Moreover, it is not lost on the Court that Ailnex has
every reason to advocate that the losses in the case are covered by the Policy.
The FAC also alleges that Daewoo owned an account receivable, “which is ‘tangible
property’ of Daewoo within the meaning of the Policy.” FAC ¶ 42. Daewoo argues that an account
receivable is a “tangible asset” for “accounting purposes” so that it is also “tangible property”
under the Policy. Daewoo MTD at 10-16. Travelers argues that the FAC must be dismissed
because an account receivable is an intangible asset. Travelers MTD at 10-11.
The Policy only covers property that Alinex owned or leased, held for others, or for which
the Allnex was “legally liable.”5 Travelers MTD, Ex. A at 17. Under the Policy, “other property”
is “any tangible property other than Money and Securities that had intrinsic value.” Id. at 12

(emphasis omitted). Even if the Court were to conclude that Daewoo’s account receivable was
tangible property, the Policy still would not cover the alleged loss because Daewoo does not allege
that its account receivable was stolen or improperly taken.

The parties do not appear to dispute the Court’s prior conclusion that the leasing, held for others,
and legally liable categories were not applicable here. MTD Opinion at 11.
9

The

Court

also disagrees with Plaintiffs argument that its account receivable is tangible

property because such receivable is considered a tangible asset for accounting purposes. The
dispute concerns insurance coverage under the Policy; it is not an accounting matter. Moreover,
the Policy does not indicate that terms are to be given the same meaning as they would for
accounting purposes. Finally, none of the cases cited by Plaintiff address the interpretation of
“tangible property” in an insurance contract. For example, In re Armour ‘s Estate, 11 N.J. 257,
276 (1953), addressed testamentary intent and noted that the testator referred to accounts
receivable as part of “current assets.” Current assets, in turn, was part of “tangible assets.” Id. at
276. Armour addressed a testator’s definition, not legal or accounting definition. Moreover,
certain New Jersey courts have found that accounts receivable constitute intangible property. See,
e.g., .13. Williams Co. v. Glaser, 114 N.J. Super. 156, 161 (App. Div. 1971) (“It is well established
that accounts receivable and other intangible personal property may acquire a situs for purposes of
taxation at some place other than the technical domicile of the owner.”); M. Rtttkin flee. Supply
Co v. Burdette flee., Inc., 9$ N.J. Super 378, 383 (Ch. Div. 1968) (observing that an account
receivable “is an intangible” for Unifonii Commercial Code purposes).
Finally, the FAC states that once Allnex placed the funds into the funds transfer system
“Daewoo would have had the right and ability to impose a constructive trust over the funds.” FAC

¶ 41.

Daewoo indicates that this supports its claim to ownership over the funds. Daewoo Opp. at

19. Daewoo’s constructive trust argument is unavailing to establish that Daewoo has ever owned
the funds. Constructive trusts are an equitable remedy used to prevent unjust enrichrient or fraud.
A constructive trust can be imposed when “the holder of the legal title may not in good conscience
retain the beneficial interest” of the property. Carr v. Carr, 120 N.J. 336, 351 (1990); see also
Hi/tv. Warner, Berman & Spitz, F.A,, 197 N.J. Super. 152, 168 (App. Div. 1984) (“A constructive

10

trust is a relationship with respect to property subjecting the person whom the title to property is
held to an equitable duty to convey it to another on the ground that his acquisition or retention of
the property is wrongful and that he would be unjustly enriched if he were permitted to retain the
property.”). A constructive trust is an equitable remedy which courts may compel following
adjudication; the remedy does not mean that Daewoo owned the funds in the first instance.
In sum, the Court previously determined that Daewoo did not sufficiently plead that it
owned the funds at issue and the FAC is likewise inadequate. Consequently, Daewoo fails to
plausibly assert that Travelers must, pursuant to the Policy, cover Daewoo for loses attributable to
the impostor. Travelers’ motion to dismiss is therefore granted. In addition, when granting a
motion to dismiss, a court must decide whether to dismiss with or without prejudice, the latter of
which provides a plaintiff with opportunity to amend. Dismissal with prejudice is appropriate if
an amendment would be inequitable or futile. See Aiston v. Parker, 363 F.3d 229, 235-36 (3d Cir.
2004). Here, Travelers is dismissed as a Defendant with prejudice because any attempt to amend
would be futile.
IV.

CONCLUSION

For the reasons discussed above, the Court GRANTS Travelers’ motion to dismiss with
prejudice and Travelers is dismissed as a Defendant in this matter.

An appropriate Order

accompanies this opinion.
Dated: November 19, 2018

C\\

John Michael Vazqu, D.J.

‘i