Milone et al v. Fidelity National Insurance Company
OPINION and ORDER: SO ORDERED that plaintiffs' fraudulent misrepresentation and inducement cause of action is sua sponte dismissed with prejudice as meritless and all remaining claims by plaintiffs other than Milone are sua sponte severed pursua nt to Rule 21 of the Federal Rules of Civil Procedure and dismissed without prejudice to commencing separate actions for each insurance policy issued by defendant. The statute of limitations for any claim asserted herein is tolled for a period of thirty (30) days from the date, of this Order. Kenneth S. Saggese, David Wheelock, Pamela Wheelock, Brian Quinn and Cynthia E. Saggese terminated. Ordered by Judge Sandra J. Feuerstein on 12/3/2013. (Florio, Lisa)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
GREGORY E. MILONE, eta!.,
OPINION AND ORDER
13 CV 6331 (SJF)(ARL)
IN Cl.ERK"S OFFICE
US DISTRICT COURTED NY
FIDELITY NATIONAL INSURANCE
UlC 03 Z013
LONG ISLAND OFFICi
On November 13, 2013, six (6) plaintiffs commenced this action against defendant
Fidelity National Insurance Company ("defendant") pursuant to, inter alia, the National Flood
Insurance Act ("NFIA"), 42 U.S.C. §§ 4001, et seq., each seeking to recover:(!) his or her actual
damages resulting from defendant's purported breach of contract, i.e., its failure to pay the full
amount of each 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 alleged
fraudulent misrepresentation and inducement. For the reasons set forth below, plaintiffs'
fraudulent misrepresentation and inducement cause of action is sua sponte dismissed with
prejudice as meritless and the remaining claims of all plaintiffs except the first-named plaintiff,
Gregory E. Milone ("Milone"), are sua sponte severed from this action pursuant to Rule 21 of the
Federal Rules of Civil Procedure and dismissed without prejudice to commencing separate
actions for each insurance policy issued by defendant.
The complaint alleges, inter alia: (1) that defendant is a "Write Your Own" insurance
carrier participating in the National Flood Insurance Program pursuant to the NFIA, (Complaint
["Compl."], '1[3); (2) that defendant issued an insurance policy to each plaintiff covering losses to
his or her property and contents "against physical damage by or from flood," (Compl., '1['1[4, 9);
(3) that each plaintiff paid all of the premiums on his or her policy, (Compl., '1[10); (4) that as a
result of"a devastating storm" on October 29, 2012 ("the Storm"), each plaintiffs insured
property and contents were damaged "by and from flood," (Compl., '1['1[11, 12); (5) that each
plaintiff reported and properly submitted a claim under his or her policy to defendant, (Compl., 'If
13); (6) that defendant "wrongfully denied or unfairly limited payment on the Plaintiffs' claims,"
(Compl., '1[14); (7) that each plaintiff retained an independent expert to evaluate the damages to
his or her property and contents, (Compl., '1[15); and (8) that the independent expert of each
plaintiff determined that "the flood event critically damaged [that plaintiffs] covered propert[y],"
On November 13, 2013, six (6) plaintiffs commenced this action against defendant
pursuant to, inter alia, the NFIA and common law. The complaint asserts two (2) claims for
relief for: (1) breach of contract, with each plaintiff seeking to recover the actual damages he or
she sustained as a result of defendant's denial and/or limitation of his or her claims under his or
her respective insurance policy, (Compl., '1['1[16-21); and (2) fraudulent misrepresentation and
inducement, with each plaintiff seeking compensatory, consequential and punitive damages for
defendant's purported intentional misrepresentation of flood coverage and claims services "to
Plaintiffs and the public in order to induce Plaintiffs and others to purchase and pay premiums
under the Policies," (Compl.,
Fraudulent Misrepresentation and Inducement Claim
In their second claim for relief, plaintiffs allege, inter alia: (I) that "prior to issuing (each
plaintiff's] Polic[y], [defendant] fraudulently misrepresented coverage** *, (Compl., ~ 23); (2)
that "[a]s an inducement to purchase insurance, [defendant] misled the public and its insureds
that it would readily and willingly pay the full amount of claims," MJ; (3) that defendant
"fraudulently induced and misled each Plaintiff during the procurement process 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.,
"To state a claim for fraudulent misrepresentation under New York law 'a plaintiff must
show that (I) 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 Limited
v. Morgan Guaranty Trust Co. of New York, 375 F.3d 168, 186-87 (2d Cir. 2004) (quoting
Banque Arabe et Internationale D'Investissement v. Md. Nat'! B!!!l!s, 57 F.3d 146, !53 (2d Cir.
1995)); see also Manning v. Utilities Mutual Ins. Co .. Inc., 254 F.3d 387,400 (2d Cir. 2001)
("Under New York law, the essential elements of a fraud claim include representation of a
material existing fact, falsity, scienter, deception, and injury." (quotations, italics and citation
omitted)). False statements, even if intentionally made, merely indicating an intent to perform
under the parties' contract are "not sufficient to support a claim of fraud under New York law."
Bridgestone/Firestone, Inc. v. Recovery Credit Services. 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."); Wall v. CSX
Transportation. Inc., 471 F.3d 410, 416 (2d Cir. 2006) ("[G]eneral allegations that defendant
entered into a contract while lacking the intent to perform it are insufficient to support [a fraud]
claim." (quoting New York Univ. v. Cont'l Ins. Co., 87 N.Y.2d 308, 318, 639 N.Y.S.2d 283,662
N.E.2d 763 (N.Y. 1995)); Manning, 254 F.3d at 401 (holding that a mere "statement of intent to
perform under [a] contract cannot constitute fraud in New York.")
"To maintain a claim of [fraudulent inducement of a 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; ~also Wall, 471 F.3d at 416 ("New York law
specifically recognizes causes of action for fraud in the inducement when the misrepresentation
is collateral to the contract it induced."); TVT Records v. Island Def Jam Music Group, 412 F.3d
82, 91 (2d Cir. 2005) ("[I]n a situation where a defendant fails to disclose an intention not to
perform a promise in the future, one of the ways a plaintiff can maintain a fraud claim under New
York law is by also demonstrating a fraudulent misrepresentation collateral or extraneous to the
contract. • • • However, the non-disclosure of collateral aims
* * * do [sic] not constitute
actionable fraudulent misrepresentations collateral or extraneous to the contract. •
[A]llegations about defendants' states of minds [sic] used to support the contention that they
intended to breach the contract •
* * [are not distinct fraudulent misrepresentations]."
(quotations, brackets and citations omitted)); Manning, 254 F.3d at 400 (holding that an insured's
fraud claim against an insurer "can proceed if it sufficiently alleges that [the insurer] engaged in
fraud collateral or outside the contract, which was intended to defeat the contract." (quotations
and citations omitted)).
District courts have inherent authority to dismiss meritless claims sua sponte, even if the
plaintiffs have paid the filing fee. See Fitzgerald v. First East Seventh Street Tenants Com., 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.
Kosovskv. 471 Fed. Appx. 34, 37 (2d Cir. Mar. 27, 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."); Zapolski v. Federal Republic of
Germapy, 425 Fed. Appx. 5, 5 (2d Cir. Apr. 14, 2011) (accord).
The complaint does not allege that defendant owed plaintiffs a legal duty separate from its
duty to perform under the respective insurance policies; the only misrepresentation alleged
relates to defendant's future intent to perform under the parties' contract, i.e., to pay the full
amount of each plaintiff's claims under his or her insurance policy and, thus, it is not collateral or
extraneous to the contract; and plaintiffs do not seek special damages. Accordingly, plaintiffs'
fraudulent misrepresentation and inducement cause of action is sua sponte dismissed as
Permissive Joinder of Plaintiffs
Rule 20(a)(l) of the Federal Rules of Civil Procedure 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."
In determining whether claims relate to, or 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."' Kalie v. Bank of America Corn., -F.R.D.-, 2013 WL 4044951, at* 3 (S.D.N.Y.
Aug. 9, 2013) (quoting United States v. Aquavella, 615 F.2d 12,22 (2d Cir. 1979)); see also
Abraham v. American Home Mortgage Servicing. Inc.,- F. Supp. 2d - , 2013 WL 2285205, at
* 3 (E.D.N.Y. May 23, 2013) (Rule (20)(a)(l)); Peterson v. Regina, 935 F. Supp. 2d 628,638
(S.D.N.Y. 2013) (Rule 20(a)(2)); Deskovic v. Citv of Peekskill, 673 F. Supp. 2d 154, 166
(S.D.N.Y. 2009) (Rule 20(a)(2)); Barnhart v. Town of Parma, 252 F.R.D. 156, 160 (W.D.N.Y.
2008) (Rule 20(a)(l )). Plaintiffs bear the burden of demonstrating that joinder is proper under
Rule 20(a). Kalie, -F.R.D.-, 2013 WL 4044951, at *5; Deskovic, 673 F. Supp. 2d at 159.
Plaintiffs' claims in this case are not properly joined pursuant to RuJe 20(a)(1) of the
Federal Rules of Civil Procedure. Indeed, judicial economy and fairness dictate that plaintiffs'
claims under each distinct insurance policy issued by defendant be tried separately. In order for a
plaintiffs right to relief to relate to, or arise out of, a transaction or occurrence for purposes of
Rule 20(a), the "transaction" or "occurrence" must relate to the contract purportedly breached by
defendant, i.e., the insurance policy. The six (6) plaintiffs herein separately purchased, and were
issued, four (4) distinct insurance policies from defendant at different times; each of those four
(4) insurance policies relates to a separate and distinct property; each plaintiff separately
performed his or her own obligations under his or her respective insurance policy, e.g., paid the
premiums and submitted claims thereunder; and each plaintiff seeks to recover his or her actual
damages as a result of defendant's purported breach of his or her respective insurance policy, i.e.,
either defendant's outright denial of his or her claims or its failure to pay the entire amounts
claimed by him or her. The fact that plaintiffs' separate properties, for which they made distinct
claims under the separate insurance policies issued to them by defendant, all sustained damage as
a result of the same storm is immaterial for purposes of Rule 20(a) of the Federal Rules of Civil
Procedure, i.e., each plaintiffs right to relief under his or her respective insurance policy issued
by defendant is not affected by the fact that the flood which allegedly damaged his or her
property may have been occasioned by the Storm. Moreover, defendant will likely have different
justifications for denying and/or limiting each plaintiffs claims. Since the four (4) insurance
policies upon which plaintiffs claim a right to relief do not relate to, or arise out of, the "same
transaction, occurrence, or series of transaction or occurrences," plaintiffs are not properly joined
in this action pursuant to Rule 20(a) of the Federal Rules of Civil Procedure.
Rule 21 of the Federal Rules of Civil Procedure provides, in relevant part, that
"[m ]isjoinder of parties is not a ground for dismissing an action. On motion or on its own, the
court may at any time, on just terms, add or drop a party." Thus, "[i]f 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." Kalie,- F.R.D.-, 2013 WL 4044951, at* 3
(quoting Deskovic, 673 F.Supp.2d at 159-60); ~also Adams v. US Bank. NA, No. 12 CV
4640,2013 WL 5437060, at* 4 (E.D.N.Y. Sept. 27, 2013).
In determining whether to sever parties improperly joined under Ru1e 20(a), courts
generally consider, in addition to the factors set forth in Rule 20(a), "whether settlement of the
claims or judicial economy wou1d be facilitated;  whether prejudice would be avoided if
severance were granted; and  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 Corn., 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)); ~also In re Ski Train Fire in Kaprun. Austria. on
November II. 2004,224 F.R.D. 543, 546 (S.D.N.Y. 2004).
Joinder of the claims of six (6) plaintiffs involving four (4) separate insurance policies
does not serve the interest of judicial economy. There will be little, if any, overlapping discovery
and each plaintiffs breach of contract claim will require distinct witnesses and documentary
proof. "The interest in economy is affirmatively disserved by forcing these many parties to
attend a common trial at which these separate, unrelated claims * * * would be resolved." Kalie,
F.R.D.-, 2013 WL 4044951, at* 6. Furthermore, settlement of the claims is likely to be
facilitated if the claims relating to four (4) separate insurance policies are litigated separately.
See Adams, 2013 WL 5437060, at* 4. In addition, "[a] joint trial could lead to confusion of the
jury and thereby prejudice [the] defendant." Kalie,- F.R.D.-, 2013 WL 4044951, at* 6
(quotations and citation omitted). Accordingly, all of the remaining claims by plaintiffs other
than Milone are sua sponte severed pursuant to Rule 21 ofthe Federal Rules of Civil Procedure
and dismissed without prejudice to commencing separate actions for each insurance policy issued
by defendant. The statute of limitations for any claim asserted herein is tolled for a period of
thirty (30) days from the date of this Order.
For the reasons stated herein, plaintiffs' fraudulent misrepresentation and inducement
cause of action is sua sponte dismissed with prejudice as meritless and all remaining claims by
plaintiffs other than Milone are sua sponte severed pursuant to Rule 21 of the Federal Rules of
Civil Procedure and dismissed without prejudice to commencing separate actions for each
insurance policy issued by defendant. The statute of limitations for any claim asserted herein is
tolled for a period of thirty (30) days from the date, of this Order.
s/ Sandra J. Feuerstein
SANDRA J. FEUERSTEIN
United States District Judge
Dated: December 3, 2013
Central Islip, N.Y.
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