Kelly et al v. Harleysville Worcester Insurance Company
Filing
6
MEMORANDUM & ORDER. Plaintiffs' second cause of action is sua sponte DISMISSED and the remaining claims by Plaintiffs other than CATHERINE KELLY are sua sponte SEVERED and are DISMISSED WITHOUT PREJUDICE. Any plaintiff wishing to commence a sepa rate action must do so within 30 days of the date of this Order. Additionally, the statute(s) of limitations for any claim asserted herein is tolled for a period of 30 days from the date of this Order. Parties Jeffery Marlin, Roseann Buro and Jacob Marlin are TERMINATED from this action. Ordered by Judge Joanna Seybert on 12/13/2013. (Nohs, Bonnie)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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CATHERINE KELLY, ROSEANN BURO,
JACOB MARLIN, JEFFERY MARLIN,
Plaintiffs,
MEMORANDUM & ORDER
13-CV-6275(JS)(AKT)
- againstHARLEYSVILLE WORCESTER INSURANCE
COMPANY,
Defendant.
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APPEARANCES
For Plaintiffs:
Sean Greenwood, Esq.
Gauthier Houghtaling & Williams
52 Duane Street, 7th Floor
New York, NY 10007
For Defendant:
No appearances.
SEYBERT, District Judge:
On November 12, 2013, four plaintiffs (collectively,
“Plaintiffs”) commenced this action against defendant Harleysville
Worcester Insurance Company (“Defendant”), each seeking to recover:
(1) his or her actual damages resulting from Defendant’s purported
breach of contract, i.e., its failure to pay the full amount of each
of Plaintiff’s respective claims under an insurance policy issued to
him or her by Defendant; and (2) compensatory, consequential, and
punitive
damages
for
Defendant’s
misrepresentation and inducement.
purported
fraudulent
For the reasons set forth below,
the fraudulent misrepresentation and inducement claim is sua sponte
DISMISSED and the remaining claims of all Plaintiffs except the
first-named Plaintiff, Catherine Kelly (“Kelly”), are sua sponte
SEVERED from this action pursuant to Rules 20 and 21 of the Federal
Rules of Civil Procedure and are DISMISSED WITHOUT PREJUDICE to
commencing separate actions for each insurance policy issued by
Defendant.
BACKGROUND1
Plaintiffs separately own real property in this judicial
district and separately purchased from Defendant a flood insurance
policy to cover their respective properties.
(Compl. ¶¶ 1, 4, 9.)
Defendant is a “Write Your Own” insurance carrier participating in
the National Flood Insurance Program pursuant to the National Flood
Insurance Act.
(Compl. ¶¶ 3-4.)
Plaintiffs allege damage to their properties due to
flooding caused by Superstorm Sandy, which struck the New York
metropolitan
area
on
October
29,
2012.
(Compl.
¶ 11-12.)
Plaintiffs claim that they submitted valid insurance claims to
Defendants but that Defendants “wrongfully denied or unfairly limited
payment
on
the
Plaintiffs’
claims.”
(Compl.
¶ 13-14.)
Accordingly, Plaintiffs separately assert a breach of contract and
a claim for fraudulent misrepresentation and inducement against
Defendant.
(Compl. ¶¶ 16-27.)
Based on the allegations of the Complaint, Plaintiffs’
claims share very little in common.
Plaintiffs do allege that
Defendant issued Plaintiffs “Standard Flood Insurance Policies” but
Plaintiffs do not state whether the policies are identical or if they
The following facts are drawn from the Complaint and are presumed
to be true for the purposes of this Memorandum and Order.
1
even contain similar terms.
(Compl. ¶ 3.)
Plaintiffs do generally
allege that Superstorm Sandy “severely damag[ed]” their properties
but Plaintiffs do not explain the nature and extent of the damage to
these distinct properties.
(Compl. ¶ 11.)
Plaintiffs do not allege
that the properties are in the same location.
Moreover, Plaintiffs
do not explain why Defendant denied and/or unfairly limited payment
for their claims, or even whether Defendant did so for the same
reasons.2
DISCUSSION
Plaintiffs
commenced
this
action
against
Defendant
asserting two causes of action against Defendant for: (1) breach of
contract, with each Plaintiff seeking to recover the actual damages
he or she sustained as a result of Defendant’s failure to pay the full
amount of his or her claim under his or her respective insurance policy
(Compl.
¶¶
inducement,
16-21);
with
and
each
(2)
fraudulent
Plaintiff
misrepresentation
seeking
compensatory
and
and
consequential damages and costs, and punitive damages against
Defendant’s
alleged
fraudulent
inducement
because
Defendant
allegedly fraudulently induced and misled Plaintiffs and knowingly
misrepresented
property
coverage
and
claims
services
(Compl.
¶¶ 22-27).
I. Fraudulent Misrepresentation and Inducement
In their second claim for relief, Plaintiffs allege, inter
Besides identifying the locations of the properties, the Complaint
actually does not include a single factual allegation linked
specifically to either Plaintiff.
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alia: (1) that “prior to issuing [each Plaintiff’s] Polic[y],
[Defendant] fraudulently misrepresented coverage . . . (Compl. ¶ 23);
(2) that Defendant “misled the public and its insureds that it would
readily and willingly pay the full amount of claims . . . [when] its
intention and practice was and is to unjustifiably avoid paying any
or all of the proceeds due” (Compl. ¶ 23); (3) that Defendant
“fraudulently induced and misled each Plaintiff . . . by promising
to pay claims in good faith and according to the Policies’ terms and
conditions when it had no intention to do so” in order to “further
its own economic interests” (Compl. ¶ 24); and (4) that Defendant
“knowingly misrepresented flood coverage and claims services”
(Compl. ¶ 25).
To state a claim for fraudulent inducement under New York
law, a plaintiff must allege that “‘(1) the defendant made a material
false representation, (2) the defendant intended to defraud the
plaintiff thereby, (3) the plaintiff reasonably relied upon the
representation, and (4) the plaintiff suffered damage as a result of
such reliance.’”
Eternity Global Master Fund Ltd. v. Morgan Guar.
Trust Co. of N.Y., 375 F.3d 168, 186-87 (2d Cir. 2004) (quoting Banque
Arabe et Internationale D’Investissement v. Md. Nat’l Bank, 57 F.3d
146, 153 (2d Cir. 1995)).
However, false statements, even if
intentionally made, merely indicating an intent to perform under a
contract are “not sufficient to support a claim of fraud under New
York law.”
Bridgestone/Firestone, Inc. v. Recovery Credit Servs.,
Inc., 98 F.3d 13, 19-20 (2d Cir. 1996); see also Merrill Lynch & Co.,
Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 184 (2d Cir. 2007) (“New
York distinguishes between a promissory statement of what will be done
in the future that gives rise only to a breach of contract cause of
action and a misrepresentation of a present fact that gives rise to
a separate cause of action for fraudulent inducement.”).
Thus, to state a claim for fraudulent inducement in a case
that arises from a breach of contract, “a plaintiff must either: (i)
demonstrate a legal duty separate from the duty to perform under the
contract;
or
(ii)
demonstrate
a
fraudulent
misrepresentation
collateral or extraneous to the contract; or (iii) seek special
damages that are caused by the misrepresentation and unrecoverable
as contract damages.”
Bridgestone/Firestone, 98 F.3d at 20; see also
Wall v. CSX Transp., Inc., 471 F.3d 410, 416 (2d Cir. 2006) (“New York
law specifically recognizes causes of action for fraud in the
inducement when the misrepresentation is collateral to the contract
it induced.”).
District
courts
have
inherent
authority
to
dismiss
meritless claims sua sponte, even if the plaintiffs have paid the
filing fee.
See Fitzgerald v. First E. Seventh St. Tenants Corp.,
221 F.3d 362, 363-64 (2d Cir. 2000) (holding that the district court
has the power to dismiss a frivolous complaint sua sponte even if the
plaintiff has paid the filing fee); see also Zahl v. Kosovsky, 471
F. App’x 34, 37 (2d Cir. 2012), cert. denied, 133 S. Ct. 1460, 185
L. Ed. 2d 363 (2013) (“A district court has inherent authority to
dismiss meritless claims sua sponte, even where a plaintiff has paid
the filing fee.”).
The
Complaint
does
not
allege
that
Defendant
owed
Plaintiffs a legal duty separate from its duty to perform under the
respective insurance policies, and the only misrepresentation
alleged relates to Defendant’s future obligations under the policies.
Thus, Plaintiffs’ fraud claims are not collateral or extraneous to
the
contract,
Accordingly,
and
Plaintiffs
Plaintiffs’
do
not
fraudulent
seek
special
damages.
misrepresentation
and
inducement claims are sua sponte DISMISSED as meritless.
II. Permissive Joinder of Plaintiffs
Rule 20(a)(1) permits the joinder of multiple plaintiffs
in an action if: “(A) they assert any right to relief jointly,
severally, or in the alternative with respect to or arising out of
the same transaction, occurrence, or series of transactions or
occurrences; and (B) any question of law or fact common to all
plaintiffs will arise in the action.”
FED. R. CIV. P. 20(a)(1).
These elements are preconditions and both must be met for joinder to
be proper.
Deskovic v. City of Peekskill, 673 F. Supp. 2d 154, 159
(S.D.N.Y. 2009) (“As is clear from the plain language of [the Rule],
both criteria must be met for joinder to be proper.”).
While “[t]he
requirements of Fed. R. Civ. P. 20(a) are to be interpreted liberally
to enable the court to promote judicial economy by permitting all
reasonably related claims for relief by or against different parties
to be tried in a single proceeding, the requirements of the rule still
must be met and constrain the Court’s discretion.”
Kalie v. Bank of
Am. Corp., --- F.R.D. ----, 2013 WL 4044951, at *3 (S.D.N.Y. Aug. 9,
2013) (internal quotation marks and citation omitted).
“If a court
concludes that [parties] have been improperly joined under Rule 20,
it has broad discretion under Rule 21 to sever [those] parties . .
. from the action.”
Id.
In determining whether claims arise out of the same
“transaction” or “occurrence” under Rule 20(a), “courts are to look
to the logical relationship between the claims and determine ‘whether
the essential facts of the various claims are so logically connected
that considerations of judicial economy and fairness dictate that all
the issues be resolved in one lawsuit.’”
Id. (quoting United States
v. Aquavella, 615 F.2d 12, 22 (2d Cir. 1979)).
Plaintiffs bear the
burden of demonstrating that joinder is proper under Rule 20(a).
Deskovic, 673 F. Supp. 2d at 159.
Here, Plaintiffs’ claims do not arise out of the same
transaction or occurrence.
Courts in this District have recently
applied the standards set forth above to almost identical lawsuits
seeking insurance coverage for property damage caused by Superstorm
Sandy and have summarily held that joinder is not appropriate.
See,
e.g., Dante v. Nat’l Flood Ins. Program, No. 13-CV-6207, 2013 WL
6157182, at *2 (E.D.N.Y. Nov. 22, 2013) (collecting similar cases from
the Eastern District of Louisiana and the Southern District of
Mississippi denying joinder of insurance claims related to property
damage caused by Hurricane Katrina); Baiardi v. The Standard Fire Ins.
Co., No. 13-CV-5912, 2013 WL 6157231, at *2-3 (E.D.N.Y. Nov. 21,
2013).
As these courts recognized, despite the fact that a single
natural disaster, Superstorm Sandy, caused the damage to Plaintiffs’
properties, Plaintiffs’ claims do not arise out of the same
transaction or occurrence because “[t]he claims involve entirely
different factual and legal issues, including each property’s
respective condition and location before the storm, the value of the
properties, and the extent of damage sustained.”
Dante, 2013 WL
6157182, at *2 (quoting Sucherman v. Metro. Prop. & Cas. Ins. Co.,
Nos. 06–CV-8765, 05–CV-6456, 2007 WL 1484067, at *2 (E.D. La. May 21,
2007)).
Thus, with respect to damages, Plaintiffs’ individual
claims undoubtedly will require different evidence relating to the
cause, and extent, of the loss.
Plaintiffs’ individual claims also
may require particularized evidence on the issue of whether the
policies actually provide coverage for Plaintiffs’ claims because
Plaintiffs purchased separate insurance policies and Defendants may
have different reasons for denying and/or limiting payment for
Plaintiffs’ individual claims.
As far as the Court can tell from the Complaint here, the
only material commonalities between Plaintiffs’ claims are that
Plaintiffs’ properties suffered damages caused by the same storm and
that Plaintiffs present similar legal theories against a common
defendant.
However, the mere presence of a common defendant and
“common questions of law or fact does not satisfy the same transaction
or occurrence requirement.”
Id. at *3 (holding that plaintiffs’
separate insurance claims for damages caused by Superstorm Sandy did
not arise out of the same transaction or occurrence because plaintiffs
“failed to explain why their individual claims should be joined other
than that they share two common facts––that they were brought about
by Hurricane Sandy and brought against [the same defendant]––and may
raise similar theories of law”) (quoting McNaughton v. Merck & Co.,
No. 04-CV-8297, 2004 WL 5180726, at *2 (S.D.N.Y. Dec. 17, 2004)); see
Abraham v. Am. Home Mortg. Servicing, Inc., --- F. Supp. 2d ----, 2013
WL 2285205, at *4 (E.D.N.Y. May 23, 2013) (holding that plaintiffs’
“separate mortgage transactions d[id] not constitute a single
transaction
or
occurrence”
and
stating
that
“even
claims
by
plaintiffs who engaged in separate loan transactions by the same
lender cannot be joined in a single action”).
With no common transaction or occurrence among Plaintiffs’
claims, the Court therefore finds that Plaintiffs’ claims are not
properly joined under Rule 20(a).
Accordingly, the remaining claims
of all Plaintiffs except the first-named Plaintiff Catherine Kelly
are sua sponte SEVERED from this action and are DISMISSED WITHOUT
PREJUDICE to commencing a separate action for claims related to his
or her insurance policy.
See Kalie, 2013 WL 4044951, at *6 (holding
that where there is “no common transaction or occurrence, severance
and dismissal of the misjoined claims is mandatory”).
III. Severance Under Rule 21
Finally, the Court notes that, even if the presence of
common defendants or a single natural disaster were sufficient to
satisfy Rule 20(a), the Court would reach the same result in
exercising its discretion under Rule 21 of the Federal Rules of Civil
Procedure.
Rule 21 provides, in relevant part, that “[o]n motion or
on its own, the court may at any time, on just terms, add or drop a
party . . . [and] sever any claim against any party.”
P. 21.
FED. R. CIV.
In deciding whether to sever a claim under Rule 21, courts
generally consider, in addition to the preconditions set forth in Rule
20(a), “[1] whether settlement of the claims or judicial economy
would be facilitated; [2] whether prejudice would be avoided if
severance were granted; and [3] whether different witnesses and
documentary proof are required for the separate claims.”
Crown Cork
& Seal Co., Inc. Master Retirement Trust v. Credit Suisse First Boston
Corp., 288 F.R.D. 331, 333 (S.D.N.Y. 2013) (quoting Erausquin v. Notz,
Stucki Mgmt. (Bermuda) Ltd., 806 F. Supp. 2d 712, 720 (S.D.N.Y.
2011)).
“A court should consider whether severance will ‘serve the
ends of justice and further the prompt and efficient disposition of
litigation.’”
Crown Cork, 288 F.R.D. at 332 (quoting T.S.I. 27, Inc.
v. Berman Enters., Inc., 115 F.R.D. 252, 254 (S.D.N.Y. 1987)); see
also In re Ski Train Fire in Kaprun, Austria, on November 11, 2004,
224 F.R.D. 543, 546 (S.D.N.Y. 2004).
Here, joinder of Plaintiffs’ claims involving separate
insurance policies does not serve the interest of judicial economy.
There will be little, if any, overlapping discovery and Plaintiffs’
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individual breach of contract claims will require distinct witnesses
and documentary proof.
See Boston Post Rd. Med. Imaging, P.C. v.
Allstate Ins. Co., No 03-CV-3923, 2004 WL 1586429, at *2 (S.D.N.Y.
July 15, 2004) (severing breach of insurance policy claims even though
policies were identical because joinder would not serve the interests
of judicial economy or efficiency).
Furthermore, settlement of the
claims is likely to be facilitated if the claims relating to separate
insurance policies are litigated separately.
See Adams v. U.S. Bank,
NA, No. 12-CV-4640, 2013 WL 5437060, at * 4 (E.D.N.Y. Sept. 27, 2013).
In addition, “[a] joint trial could lead to confusion of the jury and
thereby prejudice defendants.”
Kalie, 2013 WL 4044951, at * 6
(internal quotation marks and citation omitted).
Thus, for these
reasons, the Court also finds that the Rule 21 factors require
severance.
CONCLUSION
For the reasons stated herein, Plaintiffs’ second cause of
action is sua sponte DISMISSED and the remaining claims by Plaintiffs
other than Kelly are sua sponte SEVERED pursuant to Rules 20 and 21
of the Federal Rules of Civil Procedure and are DISMISSED WITHOUT
PREJUDICE to commencing separate actions for each insurance policy
issued by Defendant.
Any plaintiff wishing to commence a separate
action must do so within thirty (30) days of the date of this
Memorandum and Order.
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Additionally, the statute(s) of limitations for any claim
asserted herein is TOLLED for a period of thirty (30) days from the
date of this Memorandum and Order.
SO ORDERED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated: December
13 , 2013
Central Islip, N.Y.
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