Cammeby's Management Company, LLC v. Affiliated FM Insurance Company

Filing 280

OPINION AND ORDER: re: 271 MOTION for Judgment as a Matter of Law or, in the Alternative. MOTION for New Trial filed by Alliant Insurance Services, Inc. For these reasons, the Court hereby grants Alliant's motion for a new trial of Cammeby's negligence claim and Alliant's ratification defense. Counsel representing Cammeby's and Alliant are directed to call Chambers jointly by 5 p.m. on Thursday, January 28, 2016 to set a new trial date. The Clerk of Court is directed to close docket number 271. (Signed by Judge Jed S. Rakoff on 1/26/2016) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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CAMMEBY'S MANAGEMENT, COMPANY, LLL,
1-10 BUSH TERMINAL OWNER LP,
as successor in interest to 1-10
INDUSTRY ASSOCIATES, LLC; 19-20 BUSH
TERMINAL OWNER LP, as successor in
interest to 19-20 INDUSTRY CITY
ASSOCIATES, LLC,

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13 Civ. 2814
Plaintiff,
OPINION AND ORDER
-vAFFILIATED FM INSURANCE COMPANY and
ALLIANT INSURANCE SERVICES, INC.,
Defendants.
-------------------------------------x
JED S. RAKOFF, U.S.D.J.
The resolution of the pending motion seeking judgment as a
matter of law or a new trial is long overdue, but in one respect
it presents a close call that has given the Court much
hesitation. Hamlet, however,

is not a good model for a judge

(or, perhaps, anyone else), and so the Court hereby rules, and
grants the motion in part -- though still not without
hesitation.
The underlying action pits plaintiff Cammeby's Management
Company ("Cammeby's")

against both its insurer, defendant

Affiliated FM Insurance Company ("Affiliated"), and its
insurance broker,

co-defendant Alliant Insurance Services, Inc.

("Alliant"). In its complaint, Cammeby's, which suffered more
1

than $30 million in losses as a result of Hurricane Sandy,
alleged that even though Affiliated had contracted to cover such
losses up to $30 million (the "Coverage Sublimit"), it only paid
$10 million.

In response, Affiliated disputed that the coverage

amount was $30 million and counterclaimed for reformation of
General Change Endorsement No.

3 to the insurance policy to

reflect what it alleged was a $10 million Coverage Sublimit
agreed to by the parties. In turn, Cammeby's asserted a
negligence claim against its broker, Alliant, arguing that if
the Coverage Sublimit were found to be only $10 million, then
Alliant's negligence caused the reduction in coverage. Alliant,
for its part, asserted the defense that Cammeby's ratified any
allegedly negligent actions of Alliant's.
After an eight-day jury trial,

the jury, on August 7, 2014,

rendered a verdict that was partly advisory (because Cammeby's
claim against Affiliated was ultimately a matter for the Court)
and partly binding (because Cammeby's negligence claim against
Alliant was reserved to the jury)

See Verdict,

Dkt. 266-10. In

the advisory part of its verdict, the jury found that, as a
result of a mutual mistake, the Coverage Sublimit was wrongly
stated as $30 million in Endorsement No.
million,

3 and was actually $10

so that Affiliated did not breach the insurance

contract. But in the binding part of its verdict, the jury found
2

that Alliant's negligence caused the reduction of the Coverage
Sublimit to $10 million, that Alliant had not proven its
affirmative defense of ratification, and that Alliant was
therefore liable to Cammeby's for the $20 million difference
(plus interest).
Following post-trial briefing, the Court, on September 14,
2014, issued Findings of Fact and Conclusions of Law on
Cammeby's breach of contract claim against Affiliated. See
Findings of Fact and Conclusions of Law ("FFCL"),

Dkt. 261.

Addressing the matter de novo, but as it happens fully agreeing
with the jury's advisory verdict, the Court granted Affiliated's
counterclaim for reformation of Endorsement No. 3 and,
accordingly, dismissed Cammeby's breach of contract claim
against Affiliated. See FFCL at 14. Pursuant to the jury's
binding verdict, however, Alliant was liable to Cammeby's for
the $20 million difference. See FFCL at 14. After receiving a
stipulation from the parties as to the amount of pre-judgment
interest, see Dkt. 263, the Court entered final judgment on
October 1, 2014,

finding Alliant liable to Cammeby's in the sum

of $20 million plus $3,205,479.45 in prejudgment interest, and
dismissing Cammeby's claims against Affiliated. See Final
Judgment,

Dkt. 262.

3

The rulings and judgment in favor of Affiliated remain in
place, and Affiliated is no part of the instant motion. But,
following the entry of the final judgment, Alliant moved for
judgment as a matter of law or,

in the alternative, a new trial.1

Cammeby's filed opposition papers, Alliant replied,

and there

the matter rested for some time. But the Court, having now
considered the motion at great length, hereby denies the prong
of Alliant's motion seeking judgment as a matter of law, but
grants the prong of Alliant's motion seeking a new trial of
Cammeby's negligence claim and Alliant's ratification defense.
The first prong of Alliant's motion
as the second prong)

2

(not nearly as thorny

seeks judgment as a matter of law against

Cammeby's pursuant to Fed. R. Civ.

P. SO(b) because, in

Alliant's view, no reasonable jury could fail to find that
Alliant proved its ratification defense. See Defendant Alliant
Insurance Services,

Inc.'s Memorandum in Support of Its Motion

for Judgment as a Matter of Law or,
Trial

in the Alternative, a New

("Def. Br."), Dkt. 272, at 14. The Second Circuit has

stated that "judgment as a matter of law should not be granted
unless

(1)

there is such a complete absence of evidence

Alliant also filed a notice of appeal on October 29, 2014, see Dkt. 274, but
the appeal proceedings have been stayed pending resolution of the post-trial
motion in this Court.
1

1

The new trial will thus involve only Cammeby's and Alliant, not Affiliated.

4

supporting the verdict that the jury's findings could only have
been the result of sheer surmise and conjecture, or

(2)

there is

such an overwhelming amount of evidence in favor of the movant
that reasonable and fair minded [persons]

could not arrive at a

verdict against [it]." Galdieri-Ambrosini v. Nat'l Realty & Dev.
Corp., 136 F.3d 276, 289

(2d Cir. 1998). Here, Alliant cites

several communications between personnel at Cammeby's and
personnel at Alliant that, according to Alliant, "show[] beyond
reasonable dispute that Cammeby's unequivocally knew that
Alliant had directed Affiliated to reduce the limits of flood
coverage from $30 million to $10 million." Def. Br. at 14.
However, Cammeby's presented ample evidence at trial, notably
the testimony of Cammeby's Vice President Eli Schron and
Cammeby's insurance consultant Stephen Gerber,

from which a jury

could reasonably conclude that an official with authority to
speak for Cammeby's did not have knowledge of the coverage
reduction. See, e.g., Plaintiffs' Memorandum of Law in
Opposition to Defendant Alliant Insurance Services,

Inc.'s

Motion for Judgment as a Matter of Law Pursuant to Fed. R. Civ.
P. SO(b) or, in the Alternative, a New Trial Pursuant to Fed. R.
Civ. P. 59(a)
Proceedings

("Pl. Opp. Br.") at 19-24; Transcript of Trial

("Tr.")

1723-24

(testimony of Eli Schron); 339

(testimony of Stephen Gerber).

In particular, many of the
5

communications cited by Alliant involved Mr. Schron's assistant
Sumita Ragbir, whose actual and apparent authority to speak for
Cammeby's was the subject of reasonable dispute. See, e.g.,

Pl.

Opp. Br. at 24-26; Tr. 347:21-348:3; 664-665; 1728:2-9. Alliant
has not presented evidence that would justify overturning the
jury's assessment of witness credibility and consideration of
the weight of the evidence. See Galdieri-Ambrosini, 136 F.3d at
289

(in deciding a motion for judgment as a matter of law,

"the

court must give deference to all credibility determinations and
reasonable inferences of the jury

and it may not itself

weigh the credibility of witnesses or consider the weight of the
evidence") . 3 Alliant's motion for judgment as a matter of law is
therefore denied.
The second, alternative prong of Alliant's motion,
a new trial pursuant to Fed. R. Civ.

P. 59(a),

complicated matter. One of Alliant's arguments

seeking

is a more
that a new

3Camrneby's also argues that Alliant's motion for judgment as a matter
of law is precluded by the "law of the case" doctrine, according to which
"when a court has ruled on an issue, that decision should generally be
adhered to by that court in subsequent stages in the same case." United
States v. Uccio, 940 F.2d 753, 758 (2d Cir. 1991); see Pl. Opp. Br. at 15-19.
The Court had held in its summary judgment decision that reasonable disputes
of material fact existed with respect to Alliant's ratification defense. See
Opinion dated May 28, 2014 at 17-19. The Court had also construed Alliant's
post-trial letter of August 25, 2014 "as a motion for a verdict in its favor
notwithstanding the jury's verdict" and denied that motion. See FFCL at 14-15
n.5. However, the law of the case doctrine is discretionary. See Corporacion
de Mercadeo Agricola v. Mellon Bank Int'l, 608 F.2d 43, 48 (2d Cir. 1979).
Even if the Court were to decline to apply this doctrine or were to construe
the instant motion as one for reconsideration of the Court's previous denial
of Alliant's motion for judgment as a matter of law, Alliant's motion fails
on its merits, for the reasons explained above.

6

trial should be granted because the verdict was against the
weight of the evidence, see Def. Br. at 24-25 -- must be
rejected, because, as just noted, a reasonable jury could have
weighed the evidence to find in favor of Cammeby's on the
negligence and ratification issues. But Alliant also moves for a
new trial on the basis that the Court erroneously responded to
the jury's questions about the elements of Alliant's
ratification defense,

see Def. Br. at 19-24 -- and there lies

the rub.
"A new trial is warranted if, taken as a whole, the jury
instructions gave a misleading impression or inadequate
understanding of the law." BAII Banking Corp. v. UPG,
F.2d 685,

696

Inc.,

985

(2d Cir. 1993). In determining whether a jury

instruction was erroneous,

the Court must ask "whether

considered as a whole, the instruction[] adequately communicated
the essential ideas to the jury." United States v. Schultz,
F.3d 393,

413-14

(2d Cir. 2003)

333

(internal modifications

omitted). "Analysis of a judge's answer to a jury question
follows the same reasoning utilized by a reviewing court to
consider jury instructions provided by the trial judge." Urena
v. Lape,

373 F. Supp. 2d 449,

458

7

(S.D.N.Y. 2005).

The Court's initial charge to the jury on Cammeby's
ratification of the reduction in the Coverage Sublimit stated,
in relevant part, as follows:
To establish its defense of ratification, Alliant must
prove, by a preponderance of the evidence, that even
if Alliant acted beyond the scope of its actual
authority from Cammeby' s and that, as a result, the
coverage was reduced to $10 million, Cammeby's had
full knowledge that Alliant had taken these actions
and clearly manifested its intent to approve these
actions.
See The Court's Instructions of Law to the Jury,

Dkt. 238, at

15. During jury deliberations on August 7, 2014, the jury sent
out two notes relevant to Alliant's motion. The first,
#5,

stated: "Your Honor,

can you more clearly define what

evidence constitutes 'full knowledge'
manifest'

Jury Note

in line 3 and 'clearly

in line 4 on p. 15 of your Instructions of Law?" See

Dkt. 266-5. The second, Jury Note #6, stated: "Judge Rakoff,
we'd like to confirm please. On Defense of Ratification do both
below conditions need to be determined as true in order for the
defense to hold? 1 - full knowledge of actions taken; 2 clearly manifested intent to approve actions." See Dkt. 266-6.
The Court then engaged in a discussion with counsel as to
how to respond to both notes. During this discussion, Alliant's
counsel stated his view that "[i]f the decisionmakers had
knowledge, and they didn't do anything,

I think that's

ratification." Tr. 1901:11-12. The Court, however, believing
8

that Alliant had neither previously argued nor adequately proved
any such theory, declined to adopt this view,

and instructed the

jury, over Alliant's objection, as follows:
In
answers
to
your
questions
regarding Alliant's
ratification defense as set forth on page 15 of my
instructions, "full knowledge" in this context means
that an employee or agent of Cammeby's who had actual
authority to approve a reduction in insurance coverage
knew
unequivocally
that
Alliant
had
directed
Affiliated to make the reduction to $10 million on
behalf of Cammeby' s; and "clearly manifested" in this
context
means
that
that
employee
or
agent
of
Cammeby' s, once obtaining this knowledge, made clear
by some writing or conversation or other conduct that
he or she intentionally approved of what Alliant had
done
in
obtaining
such
a
reduction.
Both
these
requirements must be met.
Tr. 1907:18-1908:5, 1909:7.
The jury found Alliant liable on Cammeby's negligence
claim, meaning that the jury did not credit Alliant's
ratification defense. See Verdict.
Alliant now raises two challenges to the Court's response
to the jury's notes.

First, Alliant argues that the Court erred

in its response to the jury regarding the requirements of "full
knowledge" on Cammeby's part. The Court stated that "'full
knowledge'

in this context means that an employee or agent of

Cammeby's who had actual authority to approve a reduction in
insurance coverage knew unequivocally that Alliant had directed
Affiliated to make the reduction to $10 million on behalf of
Cammeby's." But, according to Alliant,
9

"the correct inquiry as

to 'knowledge'

is whether Camrneby's was aware of the effect of

the transaction - that is, the reduced limit - not the specifics
of the how's and why's as to Alliant's direction to Affiliated."
Def. Br. at 22.
As an initial matter, Alliant may have waived this
objection by failing to object to this point in its original
objections to the jury instructions raised during the charging
conference on August 4, 2011, see Pl. Opp. Br. at 29 n.49; Tr.
1369-1432;

1902:14-1903:2. But assuming arguendo that Alliant

preserved this objection, the Court finds that the Court's
response to the jury's notes,

read in context, was not erroneous

in this respect. The jury would have reached the ratification
issue only if it had already determined that Alliant had been
negligent. See Tr. 1901:17-19. The jury instructions, "taken as
a whole," BAII Banking Corp.,

985 F.2d at 696, conveyed to the

jury the accurate instruction that the relevant issue was
whether Camrneby's had full knowledge that the Coverage Sublimit
was reduced to $10 million as a consequence of Alliant's
actions. Therefore, the Court's response to the jury as to the
requisite knowledge on Camrneby's part was not erroneous.
However, Alliant's second objection to the Court's response
to the jury, regarding the meaning of "clearly manifested," has
more merit. Specifically, Alliant argues that the Court's
10

response precluded the jury from finding that Cammeby's ratified
the Coverage Sublimit reduction by silence or acquiescence, even
though New York law permits a finding of ratification on such
bases. See Def. Br. at 22-24; Defendant Alliant Insurance
Services, Inc.'s Reply Brief in Support of Its Motion for
Judgment as a Matter of Law or,

in the Alternative, a New Trial

("Def. Reply Br.") at 16-19.
Under New York law, ratification "may be express or
implied, or may result from silence or inaction." In re Adelphia
Recovery Trust,

634 F. 3d 678,

692

negligence is not ratification [,]

(2d Cir. 2011). "Mere
[but] an act,

such as

an acceptance of benefits, may constitute a ratification, and
acquiescence may give rise to an implied ratification .
re Adelphia,

634 F.3d at 693

" In

(alterations in the original)

Furthermore, ratification
must be performed with full knowledge of the material
facts relating to the transaction, and the assent must
be clearly established and may not be inferred from
doubtful or equivocal acts of language
However,
the intent can be implied from knowledge of the
principal coupled with a failure to timely repudiate,
where the party seeking a finding of ratification has
in some way relied upon the principal' s silence or
where the effect of the contract depends upon future
events.
Chemical Bank v. Affiliated FM Ins. Co., 169 F.3d 121, 128
(1999), vacated on other grounds sub nom. Chase Manhattan Bank
v. Affiliated FM Ins. Co.,

343 F.3d 120 (2d Cir. 2003)
11

(internal

citations and quotation marks omitted)
Ins. Co. v. Salamon, No.

09 Civ. 5428, 2011 WL 976411, at *4

(E.D.N.Y. Mar. 16, 2011), aff'd,
2012)

See also Am. Gen. Life

483 Fed. App'x 609

(2d Cir.

("While plaintiff correctly states that [r]atification

must be performed with full knowledge of the material facts
relating to the transaction and the assent must be clearly
established and may not be inferred from doubtful or equivocal
acts or language, plaintiff fails to acknowledge that the
required intent may be implied from knowledge of the principal
coupled with a failure to timely repudiate.")

(internal

citations and quotation marks omitted).
Against this background, the Court's response to the jury,
that "clearly manifested" meant that a Cammeby's employee or
agent with the relevant knowledge "made clear by some writing or
conversation or other conduct that he or she intentionally
approved of what Alliant had done in obtaining such a
reduction," erroneously suggested that silence or acquiescence
would be insufficient for ratification, and that a more active
step was needed. To be sure, the Court also declined to charge
specifically that "clearly manifesting" intent did not include
silence or acquiescence,

see Tr. 1906:16-21, and agreed to use

"other conduct" in place of "other act," see Tr. 1909:6-8.
Further, "other conduct" could theoretically refer to inaction,
12

see, e.g., Black's Law Dictionary (8th ed. 2004). Nevertheless,
the most reasonable inference from the Court's answer to the
jury's question was that the ratification defense held only if
Cammeby's took an affirmative step to communicate its intent to
ratify, and this is not New York law.
It is true that the Court had earlier said it might
reconsider this matter if Cammeby's were able to marshal in
summation meaningful evidence of ratification by silence. See
Tr. 1423:1-4

("I'm not going to say before hearing your

summation that there is no way that silence in this situation
couldn't be a clear manifestation .

."). However, after

counsel, briefly but adequately, made such an argument on
summation,

see Tr. 1861: 16-17

("So, they knew the limit was $10

million. And they never asked Alliant to reinstate the $30
million."), the Court did not alter its charge.
The Court also declines to accept Cammeby's argument that
the error was harmless. See Pl. Opp. Br. at 33-35. Alliant had
presented evidence, even if it was disputed, that persons with
authority at Cammeby's knew about the Coverage Sublimit
reduction,

see, e.g.,

Forman Declaration, Exhibit 28, and that

Cammeby's accepted the benefits of this reduction in the form of
a lowered premium,

see Forman Declaration, Exhibits 34-41; Tr.

1654:1-4. The jury might have found that Cammeby's failure to
13

object to the lowered sublimit under these circumstances
constituted silence or acquiescence of a kind that could
validate Alliant's ratification defense. Although the jury was
certainly not compelled to find in Alliant's favor on this
point, one cannot reasonably infer that "it is clear that [the
erroneous instruction] did not influence the jury's verdict."
Boyce v. Soundview Tech. Grp.,

Inc.,

464 F.3d 376, 390

(2d Cir.

200 6) .
For these reasons, the Court hereby grants Alliant's motion
for a new trial of Cammeby's negligence claim and Alliant's
ratification defense. Counsel representing Cammeby's and Alliant
are directed to call Chambers jointly by 5 p.m. on Thursday,
January 28, 2016 to set a new trial date.
The Clerk of Court is directed to close docket number 271.

Dated:

JE:#~~.D.J.

New York, NY
January 26, 2016

14