Moskovitz et al v. LA SUISSE, SOCIETE D' ASSURANCES SUR LAVIE

Filing 120

ORDER adopting 104 Report and Recommendations, denying 30 Motion to Dismiss filed by Moses Kraus. For the reasons set forth above, this Court concurs with the Report and Recommendation of Magistrate Judge Yanthis, and adopts it as the Order of this Court. Accordingly, 1) Third-Party Defendant's motion to dismiss Defendant's claim is DENIED, and 2) Plaintiffs' motion to certify a class is DENIED. (Signed by Judge Richard Owen on 3/29/2012) (mro)

USDCSDNY

DOCUMENT
ELECTRONICALLY FILED

DOC":
.

DATE FILED: .j /30/ 1;)/

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MALKA REIZY MOSKOWITZ, SARAH

FEUERWERGER, BERL FRANKL, MOSHE

ECKSTEIN, YISRUEL GOLDSTEIN, ISRAEL

FRIED, JOSEPH MOSKOWITZ and VICTOR

FRANKL,

Plaintiffs,
v.

LA SUISSE, SOCIETE D'ASSURANCES SUR LA
VIE now known by Merger as SCHWEIZERISCHE
LEBENSVERSICHERUNGS-UND
RENTENANSTALT,

06 Civ. 4404 (RO)

Defendant and Third-Party Plaintiff,

v.
MOSES KRAUS AND CARUSO AG,
Third-Party Defendants.

ORDER
OWEN, District Judge:
Plaintiffs MaIka Reizy Moskowitz, Sarah Feuerwerger, Berl Frankl, Moshe Eckstein,
Yisruel Goldstein, Israel Fried, Joseph Moskowitz, and Victor Frankl ("Plaintiff' or
"Policyholders") bring this action against Defendant and Third-Party Plaintiff, La Suisse, Societe
D' Assurances sur la Vie, now known by merger as Schweizerische Lebensversicherungs-Und
Rentenanstalt ("Defendant" or "Third-Party Plaintiff' or "Swiss Life"), asserting breach of
contract claims involving "mixed life," or endowment, policies and loans issued by Swiss Life.
Swiss Life brings an action against third-party defendants Moses Kraus ("Kraus") and Caruso
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AG ("Caruso") ("Third-Party Defendants") claiming violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") under 18 U.S.c. § 1962(a) and (c), and claiming a breach of
fiduciary duty.
Before the Court are Kraus' motion to dismiss the third-party claim brought against him
on the basis that this Court lacks personal jurisdiction over him under Federal Rule of Civil
Procedure 12(b)(2), and Plaintiffs' motion to certify a class under Federal Rule of Civil
Procedure 23. For the reasons below, Kraus' motion to dismiss is denied and Plaintiffs' motion
to certify a class is denied.

BACKGROUND
Familiarity with the factual and procedural history underlying this action is presumed,
and will not be repeated here. On March 31, 2010, Magistrate Judge George A. Yanthis issued a
Report and Recommendation, in which he recommended that Third-Party Defendant Moses
Kraus' motion to dismiss be denied and Plaintiffs motion for class certification be denied
(Docket Entry No. 104.)
On April 23, 2010, Plaintiff filed objections to the Report. (Docket Entry No. 107.) On
Apri130, 2010, Third-Party Defendant Moses Kraus filed objections to the Report. (Docket
Entry No. 109.) On May 28, 2010, Defendant filed a Memorandum of Law in Opposition to
Plaintiffs Objections to the Report and Memorandum of Law in Opposition to the Third-Party
Defendant Kraus' Objections to the Report. (Docket Entry Nos. 111-113)
This case was thereafter re-assigned to this Court. (Docket Entry No. 116.)

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STANDARD OF REVIEW

United States Magistrate Judges hear dispositive motions and make proposed findings of
fact and recommendations, generally in the form of a Report and Recommendation. In
reviewing a Report and Recommendation, a district court "may accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.c. §
636(b)(l)(C). Where no timely objection has been made by either party, a district court need
only find that "there is no clear error on the face of the record" in order to accept the Report and
Recommendation. Nelson v. Smith, 618 F. Supp. 1186, 1189 (S.D.N.Y. 1985) (citations
omitted).
A party may file "specific written objections," Fed R. Civ. P. 72(b), to a Magistrate
Judge's proposed findings and recommendations, and in that case, the district court has an
obligation to make a de novo determination as to those portions of the Report and
Recommendation to which objections were made. 28 U.S.c. § 636(b)( 1); First Union Mortgage

Corp., v. Smith, 229 F.3d 992, 995 (10th Cir. 2000). A district court judge, in making a de novo
determination, has discretion in the weight placed on proposed findings and recommendations
and may afford a degree of deference to the Report and Recommendation. See United States v.

Raddatz, 447 U.S. 667, 676 (1980). Objections to a Report and Recommendation are to be
"specific and are to address only those portions ofthe proposed findings to which the party
objects." Camardo v. General Motors Hourly-Rate Employees Pension Plan, 806 F. Supp. 380,
381-82 (W.D.N.Y. 1992). Objections that are "merely perfunctory responses argued in an
attempt to engage the district court in a rehashing of the same arguments set forth in the original
[papers] will not suffice to invoke de novo review." See Vega v. Artuz, No. 97 Civ. 3775,2002
WL 31174466, at * 1,2002 U.S. Dist. LEXIS 18270 (S.D.N.Y. Sept. 30, 2002). In the event a

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party's objections are conclusory or general, or simply reiterate original arguments, the district
court reviews the Report and Recommendation for clear error.

DISCUSSION
The Court has reviewed Magistrate Judge Yanthis' Report and Recommendation, the
objections submitted by Plaintiff and Third-Party Defendant, Defendant's filings in support of
the Report and Recommendation, and has conducted a de novo review of those aspects of the
Report and Recommendation to which the parties object. Having done so, the Court concludes
that the Report is supported by the record and the law. See Pizarro v. Bartlett, 776 F.Supp. 815,
817 (S.D.N.Y. 1991). As discussed below, the objections of Plaintiff and Third-Party Defendant
do not provide a basis for departing from the Report's conclusions and recommendations.

Third-Party Defendant's Motion to Dismiss
Kraus argues that New York's general jurisdiction statute (CPLR §301) and long-arm
jurisdiction statute (CPLR §302) do not extend personal jurisdiction to him, and alternatively,
that the action against him should be dismissed onlorum non conveniens grounds. Kraus makes
several arguments in support of his claim that dismissal is proper: that for the purposes of
CPLR, he did not conduct business in New York; that any contacts with individuals in New York
are too remote temporally; that there is no connection between sales of the Marriage Policies and
Defendant's RICO claims and that New York is neither the situs of Defendant's alleged injuries
not the location of the activity of which Defendant complain; and Kraus' lack of contacts with
New York preclude jurisdiction over him on the basis of due process.
The Report finds that CPLR §302, New York's long-arm statute, confers personal
jurisdiction upon Kraus because he was substantially and personally involved with New York

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through the selling of the Marriage Policies there, earning substantial commissions, travelling
repeatedly to New York, advertising the Marriage Policies in New York newspapers, and finding
counsel for the present action in New York. Judge Yanthis concluded that these activities
demonstrated a substantial, continuous, and purposeful activity in New York for the purposes of
the statute. This Court agrees.
To demonstrate the "minimum contacts" necessary to justify jurisdiction, plaintiff must
show that the claim arises out of or relates to defendant's contacts with the forum state.

Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,414, 104 S.Ct. 1868, 80
L.Ed.2d 404 (1984). "The [plaintiff] must also show that [the defendant] "purposefully availed"
[himself] of the privilege of doing business in [the forum state] and that [the defendant] could
foresee being "haled into court" there." Kernan, 175 F.3d 236, 242-43; See World-Wide

Volkswagen Corp. v. Woodson, 444 U.S. 286, 297,100 S.Ct. 559,62 L.Ed.2d 490 (1980). The
court then "'also considers whether the assertion ofjurisdiction "comports with 'traditional
notions of fair play and substantial justice' -that is, whether it is reasonable under the
circumstances of a particular case.'" Id. (citing Metropolitan Life, 84 F.3d at 568; International

Shoe, 326 U.S. at 316,66 S.Ct. 154».
Courts are to consider five factors in evaluating reasonableness: "(1) the burden that the
exercise ofjurisdiction will impose on the defendant; (2) the interests of the forum state in
adjudicating the case; (3) the plaintiffs interest in obtaining convenient and effective relief; (4)
the interstate judicial system's interest in obtaining the most efficient resolution of the
controversy; and (5) the shared interest of the states in furthering substantive social policies."

Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 129 (2d Cir. 2002).

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(citing Asahi MetalIndus. Co. v. Superior Court, 480 U.S. 102, 113-14, 107 S.Ct. 1026, 94
L.Ed.2d 92 (1987).
In the totality of the circumstances as shown by the record, Kraus had sufficient contacts
with New York that support a finding that the exercise ofjurisdiction over him is consistent with
New York's long-arm jurisdictional statute, and does not violate due process. The basis for
Defendant's third-party claim against Kraus is the long-term scheme by which Kraus agreed with
Defendant to sell Marriage Policies in New York, sold Marriage Policies in New York, collected
on the Marriage Policies, and thereafter initiated litigation in New York against Defendant. As
such, Kraus availed himself of the privilege of doing business in New York to the extent that he
could have forseen being haled into court there. There is a substantial nexus between the
transaction of business in New York and the conduct that serves as the basis for Defendant's
RICO claims. Furthermore, New York has an interest in the RICO action being heard here,
because it involves New York residents allegedly being used in unlawful activity. Where an
individual has directed activity and invoked the protections of the law to the extent Kraus has in
New York, the exercise of personal jurisdiction over the individual is both authorized by CPLR
§302 and consistent with due process.
For these reasons, the exercise of personal jurisdiction over Kraus is proper.
Consideration ofthe "minimum contacts" and "reasonableness" tests shows that Plaintiff
purposefully availed himself of the privilege of doing business in New York, and could
reasonably forsee being haled into court in New York. Kernan v. Kurz-Hastings, Inc., 175 F.3d
236, 242-43 (2d Cir. 1999).
Kraus also argues that Defendant's claim should be dismissed on/arum non conveniens
grounds. The party arguing for dismissal on this basis of/arum non conveniens bears a heavy

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burden, and courts considering dismissal must assess multiple public and private factors. The
private factors to be considered include the "relative ease of access to sources of proof;
availability of compulsory process for attendance of unwilling, and the cost of obtaining
attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to
the action; and all other practical problems that make trial of a case easy, expeditious and
inexpensive." Piper Aircraft Co. v. Reyno, 454 U.S. 235,241 n.6, 102 S.Ct. 252 (1981) (citing
Gulf Oil Corp. v. Gilbert, 330 u.s. 501,67 S.Ct. 839,91 L.Ed. 1055 (1947). The public factors
include "administrative difficulties flowing from court congestion; the "local interest in having
localized controversies decided at home"; the interest in having the trial of a diversity case in a
forum that is at home with the law that must govern the action; the avoidance of unnecessary
problems in conflict oflaws, or in the application of foreign law; and the unfairness of burdening
citizens in an unrelated forum with jury duty." !d. (citing Gulf Oil, 330 U.S. at 509)
The Report finds, and this Court agrees, that Kraus has not met his burden of
demonstrating that it is more convenient to litigate this claim in Switzerland than New York.
There is a substantial connection between the claims raised in Plaintiffs' proposed class action
and the claims Defendant pursues against Kraus. As such, transferring this case to Switzerland
would have the potential to result in duplicate litigation. Given that the policyholders are
residents of New York, not only would it be inconvenient to require them to travel out of New
York to testify as witnesses, but New York has an interest in this proceeding.
As such, this Court agrees with Magistrate Judge Yanthis' finding that New York is the
proper forum to litigate the third-party claims.

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Plaintiffs' Motion to Certify a Class
Plaintiffs seek to certify a class action as such: All United States residents who are
policyholders or assignees of endowment insurance policies with marriage-event clauses issued
by Defendant La Suisse, Societe D'Assurances, Sur La Vie, a/k/a La Suisse, Lebens­
Versicherungs-Gesell-Schaft, Lausanna a/k/a La Suisse Life Insurance Company, Lausanne ("La
Suisse") from 1989 through 1995, inclusive (the "Class").
Plaintiffs further divide the putative Class into the following five subclasses:
policyholders who suffered an "Age Reduction"; policyholders who allegedly "received
contractually promised policy-loans from the defendant and suffered improper loan handling
fees, exorbitant interest rates and backdating of loan contracts and suffered a wrongfully inflated
deduction for settlement of the loan; policyholders "who suffered payouts-deductions for
unowed premiums"; policyholders "who were not paid annual interest" on the dividend account;
and policyholders "whose policies matured within the final 2 years of the full policy term and are
still not paid their contractually promised bonus."
The proposed class representatives

MaIka Moskovitz, Sarah Feuerwerger, Bed Frankl,

Israel Fried, Joseph Moskowitz, Moshe Ekstein, and Victor Franklare - are residents of New
York who purchased the marriage policies between 1989 and 1995. Plaintiffs claim that these
proposed class representatives have been harmed in the same way as all other members of the
Class and proposed sub-classes. Plaintiffs' claims for breach of contract arising from the
Marriage Policies and loan agreements based on the policies are the following: 1) Age
Reduction; 2) Pro-rata Refund; 3) Uno wed Premium Deductions; 4) Interest on Dividend
Accounts; 5) Terminal Bonuses; 6) improperly calculated late interest in premiums and twice­
charged late interest; and 7) wrongfully demanded documents to prove marriage.

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A putative class must be certified under the criteria of Federal Rules of Civil Procedure
23(a) and 23(b), and Plaintiffs bear the burden of establishing that they meet these requirements.
FED. R. CIv. PRO. 23(a)-(b). The requirements of 23(a) are referred to as: 1) numerosity; 2)
commonality; 3) typicality; and 4) adequate representation. See Moore v. Paine Webber, Inc.,
306 F.3d 1247, 1252-53 (2d Cir. 2002). If these are met, "the court must decide whether
plaintiffs meet the predominance requirement, and whether a class action is superior to other
available methods for the fair and efficient adjudication of the controversy. Fed.R.Civ.P.
23(b)(3); Presbyterian Church ofSudan v. Talisman Energy, Inc., 226 F.R.D. 456, 468-69
(S.D.N.¥. 2005).
A plaintiff attempting to demonstrate predominance must show that the issues that are
subject to generalized proof, and are thus applicable to the class as a whole, predominate over
those issues subject to individualized proof. Amchem Products, Inc. v. Windsor, 521 U.S. 591,
623, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). The predominance factor assesses "whether
proposed classes are sufficiently cohesive to warrant adjudication by representation" and is a
more demanding analysis than the commonality requirement. Moore at 1252-53 (citing Amchem
Prods., Inc. v. Windsor, 521 U.S. 591,623,117 S.Ct. 2231, 138 L.Ed.2d 689 (1997); Maneely v.
City ofNewburgh, 208 F.R.D. 69, 76 (S.D.N.¥. 2002). Accordingly, where the resolution of
individual claims for relief would require individualized inquiries, this requirement is not met.
In order to demonstrate breach of contract by Defendant, Plaintiffs must show that they
complied with their obligations under the policies, they must show how Defendant breached its
obligations, and they must be able to demonstrate the extent of their damages. The Report found
that in this action, the individualized questions predominate the questions that are subject to
generalized proof, making class action improper. This Court agrees. Plaintiffs' contract claims

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are supported by oral representations made by brokers and sub-brokers, and the record shows
that these representations were not unifonn. The record also shows that Plaintiffs relied on these
oral representations. Similarly, Defendant could assert distinct defenses for different plaintiffs,
including non-compliance on the part of a plaintiff or a procedural defense such as whether a
plaintiff s claim is barred by the statute of limitations.
These individualized inquiries required to assess the claims makes them inappropriate for
treatment as a class. The fact that the tenns of the Marriage Policies are essentially identical, and
that Plaintiffs have a common overarching complaint, is insufficient because of facts related to
the other elements that are not common. Plaintiffs assertion that the critical question in this case
is whether Defendant engaged in a pattern and practice of breaching the Marriage Policies
oversimplifies the factual and legal issues in this case. Similarly, Plaintiff is incorrect in
claiming that because the "central issue" is whether Defendant unlawfully failed to pay full
insurance benefits, the fact that there may have been differences in how Defendant allegedly
breached its contracts is immateriaL The significance of the fact that such individualized
inquiries are necessary is not abrogated by the fact that all Plaintiffs have a common complaint.

See Talisman Energy, 226 F.R.D. at 468 CITE (stating that "without commonality of violation
and hann, a common course of conduct alone is insufficient to establish defendant's liability to
any particular plaintiff")
Because Plaintiff has not shown that common questions of law and fact predominate over
questions subject to individualized proof, this Court concludes that Plaintiffs' claims are not
suitable for class certification.
Judge Yanthis further finds that the putative class representatives are inadequate to
protect the interests of the class because they have little knowledge of this action and little

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involvement. The Court concurs. The conclusory statements Plaintiffs provide in opposition to
the Report fail to overcome the conclusion borne out by a review of the record. This Court is
unconvinced that the named Plaintiffs have a minimum threshold of knowledge about the case to
make reasonable decisions throughout the litigation in the best interests of the class.

CONCLUSION
For the reasons set forth above, this Court concurs with the Report and Recommendation
of Magistrate Judge Yanthis, and adopts it as the Order of this Court. Accordingly,

1) Third-Party Defendant's motion to dismiss Defendant's claim is DENIED, and
2) Plaintiffs' motion to certify a class is DENIED.

SO ORDERED.
March 7,4 "11\ 2012

RICHARD OWEN
UNITED STATES DISTRICT JUDGE

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