WILCZYNSKI et al v. REDLING et al

Filing 75

MEMORANDUM ORDER that Plaintiffs' motion for summary judgment (d.e. 58 ) and Defendants' cross-motion for partial summary judgment (d.e. 68 ) are both DENIED. Signed by Judge Michael A. Shipp on 9/30/2014. (mmh)

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

RONALD S. WILCZYNSKI, eta!.,
Plaintiffs,
Civil Action No. 12-4335 (MAS) (DEA)
v.
PETER M. REDLING, et al.,

MEMORANDUM ORDER

Defendants.

SHIPP. District Judge

Presently before the Court is Plaintiffs' motion for summary judgment pursuant to Federal
Rule of Civil Procedure ("Rule") 56. (Pls.' Mot., ECF No. 58.) Defendants filed opposition to the
motion and a cross-motion for summary judgment on Plaintiffs' breach of fiduciary duty claim.
(Defs.' Opp'n, ECF No. 68.) Plaintiffs filed a reply. (Pis.' Reply, ECF No. 69.) The Court has
carefully considered the parties' submissions and has decided the matter without oral argument
pursuant to Local Civil Rule 78.1.
I.

DISCUSSION

The underlying factual allegations are set forth in the pleadings and will not be repeated
herein. Summary judgment is appropriate if the record shows "that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P.
56(a). A district court considers the facts drawn from the "materials in the record, including
depositions, documents, electronically stored information, affidavits ... or other materials" and
must "view the inferences to be drawn from the underlying facts in the light most favorable to the
party opposing the motion." Fed. R. Civ. P. 56(c)(1)(A); Curley v. Klem, 298 F.3d 271, 276-77

(3d Cir. 2002) (internal quotations omitted). The Court must determine "whether the evidence
presents a sufficient disagreement to require submission to a [trier of fact] or whether it is so onesided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, 477 U.S. 242,
251-52 (1986).
A.

Plaintiffs' Securities Fraud Claim

Plaintiffs failed to demonstrate that they are entitled to summary judgment on their
securities fraud claim. In order to succeed on a claim arising under Section 1O(b) of the Securities
Exchange Act (15 U.S.C. § 78j), a plaintiff must demonstrate that: "(1) the defendant made a
materially false or misleading statement or omitted to state a material fact necessary to make a
statement not misleading; (2) the defendant acted with scienter; and (3) the plaintiffs reliance on
the defendant's misstatement caused him or her injury." In re Merck & Co. Sec. Litig., 432 F.3d
261,268 (3d Cir. 2005) (quoting Cal. Pub. Emps. Ret. Sys. v. Chubb Corp., 394 F.3d 126, 143 (3d
Cir. 2004)).
A plaintiff may establish scienter by demonstrating:
a mental state embracing intent to deceive, manipulate or defraud . . . or, at a
minimum, highly unreasonable (conduct), involving not merely simple, or even
inexcusable negligence, but an extreme departure from the standards of ordinary
care, ... which presents a danger of misleading buyers or sellers that is either known
to the defendant or is so obvious that the actor must have been aware of it.
In re Ikon Office Solutions, Inc., 277 F.3d 658,667 (3d Cir. 2002) (internal quotations and citations

omitted). Notably, "a determination of whether a party acted with scienter, intertwined as it may
be with an assessment of witness credibility, often cannot be undertaken appropriately on summary
judgment proceedings[.]" Id. at 668.
Here, Plaintiffs' moving brief mentions but does not specifically address the scienter
element. Although Plaintiffs' reply brief contains a scienter discussion, Plaintiffs' evidence is not

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so one-sided that they must prevail as a matter of law. Plaintiffs and Defendants both point to
different deposition testimony and the scienter issue is closely intertwined with witness credibility.
As such, the determination is best left to the trier of fact. After reviewing the parties' briefs, 56.1
statements, and construing the evidence in light most favorable to Defendants, the Court concludes
that a genuine dispute of material fact exists to preclude summary judgment on Plaintiffs' 1O(b)
claim. 1
B.

Plaintiffs' Breach of Fiduciary Duty Claim

Plaintiffs fare no better on their breach of fiduciary duty claim. Plaintiffs' moving brief
cites several basic legal propositions then argues that Defendants breached their fiduciary duty by
committing insurance fraud. In their reply brief, Plaintiffs note that the complaint was also filed as
a derivative claim by the shareholders. Plaintiffs assert that the second amended complaint
contains claims for Defendants' conduct in submitting a false group health insurance application
which exposed shareholders to potential liability of $5,000 per claim for each of the 183 claims
filed by Defendant Barrios's son. (Pis.' Reply 12-13.) However, Plaintiffs provided few case
citations and sparse analysis. As recognized by the Third Circuit, parties must provide "sufficiently
clear argument[s]." Lesende v. Borrero, 752 F.3d 324, 336 (3d Cir. 2014) (quoting United States

v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)). Otherwise, trial judges would be left "to do counsel's
work, creating the ossature for [a party's] argument, and putting flesh on its bones." !d. (alterations
omitted). After reviewing the parties' briefs, 56.1 statements, and construing the evidence in the
light most favorable to Defendants, the Court concludes that Plaintiffs failed to demonstrate an
entitlement to summary judgment on their breach of fiduciary duty claim.

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The Court need not reach the other arguments.
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The Court finds Defendants' arguments in support of their cross motion superficial and
equally unpersuasive. According to Defendants, Popsy permitted Barrios to take out insurance
under its name for her sick son as a "humanitarian gesture" because she could not procure
insurance individually for him. (Defs.' Opp'n 28.) Defendants argue that there was no intent to
defraud the insurance company because the insurance premiums were paid. (!d.) Defendants
further argue that no one was injured because Ms. Barrios paid the insurance premiums from her
personal funds. (Id.) Defendants also assert that Plaintiffs lack standing to sue for any purported
insurance fraud. (Id. at 29.) Defendants' alleged altruism aside, they failed to dispute that Ms.
Barrios's son did not work for Popsy. While Ms. Barrios may have paid the insurance premiums,
she nevertheless exposed the company to significant liability. Moreover, Defendants failed to
adequately address the alleged derivative nature of the complaint. Viewing the inferences in the
light most favorable to Plaintiffs, Defendants did not demonstrate their entitlement to summary
judgment on Plaintiffs' breach of fiduciary duty claim.
II.

ORDER
For the reasons set forth above, and other good cause shown,
IT IS on this 30th day of September 2014, ORDERED THAT:
Plaintiffs' motion for summary judgment (ECF No. 58) and Defendants' cross-motion for

partial summary judgment (ECF No. 68) are both denied.

s/ Michael A. Shipp
MICHAEL A. SmPP
UNITED STATES DISTRICT JUDGE

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