Warehouse Wines and Spirits v. Travelers Property Casualty Company of America
Filing
199
OPINION & ORDER AFTER TRIAL: For the reasons stated above, Warehouse Wines is entitled to damages. Judgment shall be entered in favor of Warehouse Wines in the pre-interest amount of $808,341. The Clerk of Court is respectfully directed to pre pare a form of judgment which reflects this amount plus any pre-judgment interest to which Warehouse Wines is properly entitled, and to close this matter. (As further set forth in this Order) (Signed by Judge Katherine B. Forrest on 7/14/2016) (lmb) Modified on 7/15/2016 (lmb).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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WAREHOUSE WINES & SPIRITS, INC., :
:
Plaintiff,
:
:
-v:
:
TRAVELERS PROPERTY CASUALTY
:
COMPANY OF AMERICA,
:
:
Defendant.
:
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KATHERINE B. FORREST, District Judge:
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: July 14, 2016
13 Civ. 5712 (KBF)
OPINION & ORDER
AFTER TRIAL
Plaintiff Warehouse Wines & Spirits, Inc. (“Warehouse Wines”) brought this
action against its insurer, defendant Travelers Property Casualty Company of
America (“Travelers”), to recover amounts payable under an insurance policy. After
the Court determined on summary judgment that Travelers was required to cover
Warehouse Wines’ loss, the parties went to trial on damages. The bench trial on
this sole remaining issue was held on April 27 and 28, 2016. As a result of the facts
proven at that trial, and for the reasons further discussed below, the Court hereby
grants judgment in favor of Warehouse Wines in the amount of $808,341 plus
applicable interest.
I.
BACKGROUND1
A.
Undisputed Background Information
Warehouse Wines operates a wine and spirits retail store in Manhattan.
Steven Goldstein is the company’s President, sole officer, and only stockholder.
1 Except where otherwise noted, the information contained in this section is derived from the
undisputed facts in the Court’s October 16, 2015 opinion granting summary judgment to Warehouse
Wines. (ECF No. 114.)
Warehouse Wines has more inventory than it can keep in its Manhattan retail
location, and it stores the excess inventory in outside warehouses.
Beginning in 2007, Warehouse Wines contracted with a company named
Bestway2 to provide trucking services between outside warehouses and the
Manhattan retail store. Bestway was run by a man named James Ceseretti. In
April 2008, Bestway began to offer warehousing services, and in September 2008
Warehouse Wines entered into an agreement to store some of its excess inventory
with Bestway.
In October 2008, an agent for Travelers sought to sell an insurance contract
to Warehouse Wines. Travelers employees evaluated the risks surrounding
Warehouse Wines, including the three third-party warehouses in which the
company stored its inventory. Warehouse Wines and Travelers then entered into a
series of one-year insurance policies that insured Warehouse Wines against certain
risks of direct physical loss of its property; the operative policy (the “Policy”) was
effective for the period from October 2011 to October 2012.
Under the terms of the Policy, wine and spirits stored at the Bestway
warehouse were the subject of $4,000,000 worth of “Property Floater Coverage.”
That coverage promised that Travelers would “pay for ‘loss’ to Covered Property
2 As discussed in the Court’s summary judgment opinion, Ceseretti controlled and did business in
the name of a number of different Bestway-related enterprises. (ECF No. 114 at 3-7.) In that
opinion, the Court concluded that for purposes of policy coverage, the various companies “were mere
instrumentalities and the alter egos of James Ceseretti.” (Id. at 26, quoting Travelers’ Memorandum
of Law in Support of its Motion for Summary Judgment.) Accordingly, in this opinion the Court will
refer to Bestway as a single entity.
2
from any of the Covered Causes of Loss,” which were further defined as “risks of
direct physical ‘loss,’” subject to certain exclusions which do not apply to this case.
Starting at least as early as February 2011, Ceseretti failed to deliver
Captain Morgan rum that Warehouse Wines had ordered from the warehouse and
which Warehouse Wines’ records indicated Ceseretti should have had in stock. By
December 2011 the shortages were more severe, as Ceseretti failed to deliver
Belvedere vodka, Jack Daniels whiskey, or Johnny Walker Black scotch, all of
which Warehouse Wines’ records indicated should have been on hand in the 100
Marcus Boulevard warehouse. After a December 26, 2011 order for 591 cases was
short 53 cases, Goldstein sent Ceseretti an email about the shortages.
The next day, December 27, 2011, Goldstein received a call from the
president of another company that stored wine and spirits with Bestway. Goldstein
learned that Bestway’s attorneys had sent the other company a letter stating that
Bestway could no longer deliver certain stored products, and that the president of
the other company had subsequently conducted an inventory at the warehouse that
revealed significant losses.
Goldstein called Ceseretti, and the two men spoke at Warehouse Wines’ retail
store on December 28, 2011. Ceseretti told Goldstein that several categories of
products, including Jack Daniels cases and Johnny Walker Black cases, were not at
Bestway’s warehouse.
On January 3, 2011, Goldstein visited the Bestway warehouse and conducted
a partial inventory. He discovered a shortage he calculated as approximately 4,000
3
cases. Later in January, Warehouse Wines removed all of its remaining inventory
out of the Bestway warehouse and into a warehouse known as Beehive; until that
final removal, Warehouse Wines continued to place orders with Bestway to have
some of its inventory delivered to the Manhattan retail location. (Trial Tr.
Goldstein3 264:11-12.)
On May 23, 2013, Ceseretti was arrested and charged with the theft of
property belonging to Warehouse Wines and the other company for whom he
provided warehousing services. Ceseretti and Bestway were subsequently indicted
for First Degree Grand Larceny. On January 9, 2015, Ceseretti pled guilty to
stealing more than one million dollars from Goldstein. As discussed further below
in the Court’s findings of fact, Ceseretti also agreed to a restitution judgment in
excess of one million dollars and has made some restitution payments to Warehouse
Wines.
B.
The Claim
On January 5, 2012, Warehouse Wines submitted a claim for its loss to
Travelers. Travelers began an investigation. On April 24, 2012, Warehouse Wines
filed a Proof of Loss for $1,177,788. Travelers requested that Warehouse Wines
make its books and records available to a forensic financial accountant it had hired
3 The notation “Trial Tr. [Witness Name]” refers to the transcript of the bench trial held on April 2728, 2016. The transcripts are available on the docket as ECF Nos. 193 (4/27/16, transcript pages 1215) and 195 (4/28/16, transcript pages 216-430).
4
named Kenneth Altman. Altman prepared a report dated March 13, 2012.
(Goldstein Am. Decl.4 ¶ 52.)
On August 6, 2013, Travelers issued a letter declining coverage. Travelers
asserted that the loss fell within several Policy exclusions, including the exclusion of
shortages found upon taking inventory and the dishonest acts exclusion. Travelers
also faulted Warehouse Wines’ valuation method, which Travelers described as
depending on January 2012 prices and overstating Warehouse Wines’ loss.
C.
Litigation History
On July 23, 2013, Warehouse Wines filed this action in the Supreme Court of
the State of New York. Travelers removed the action to this Court on August 15,
2013. Both parties moved for summary judgment.
On March 31, 2015, the Court issued its first summary judgment opinion,
granting judgment to Travelers on the basis that Warehouse Wines’ loss had fallen
within a coverage exclusion.
Warehouse Wines moved for reconsideration, and on May 11, 2015, the Court
granted that motion and thereby vacated its prior opinion and considered the
parties’ arguments on summary judgment anew, including through oral argument
on May 27, 2015.
4 The Amended Initial Written Declaration of Steven Goldstein is available as ECF No. 179, Exh. 10.
Travelers objected to certain statements in Goldstein’s trial declaration. (ECF No. 179, Exh. 9.) The
Court has considered Travelers’ objections both as a whole and to the statements cited in this
opinion. (Goldstein Am. Decl. ¶¶ 23-24, 44, 52, & 57.) The Court only considers the portions of these
statements as to which Goldstein was competent to testify based on personal knowledge, and deems
these statements admissible and relevant to the facts to be found in this matter.
5
On October 16, 2015, the Court issued its second summary judgment opinion,
granting judgment to Warehouse Wines on the basis that neither of the two
coverage exclusions Travelers had invoked actually applied. The Court further
determined that Travelers had failed to raise a material question about the
quantum of damages Warehouse Wines claimed, and therefore granted judgment in
its entirety.
Travelers moved for reconsideration as to damages, while reserving its
appeal rights regarding coverage. (ECF No. 115.) On January 12, 2016, the Court
granted the motion for reconsideration because it determined that the October 16,
2015 opinion “did not consider the proper application of the contract’s valuation
provision nor fully engage with the potential factual issues surrounding the burden
of proving the amount of damages to which plaintiff is entitled.” (ECF No. 129 at
2.) The Court thereafter scheduled a trial on damages for Wednesday, April 27,
2016. (ECF No. 137.)
The Court held a final pretrial conference (“FPTC”) on Friday, April 22, 2016.
(ECF No. 188.) The Court then held a two-day bench trial on damages on
Wednesday, April 27 and Thursday, April 28. (ECF Nos. 193 & 195.) Following the
close of evidence, the Court invited both parties to submit written proposed findings
of fact and conclusions of law, which they did. (ECF Nos. 190 & 191.) Finally, on
Tuesday, May 10, 2016, the parties presented closing statements based on the
evidence adduced at trial and in support of their proposed findings and conclusions.
(ECF No. 197.)
6
II.
FINDINGS OF FACT5
A.
Stolen Cases
Ceseretti stole 4,095 cases of inventory from Warehouse Wines.6 This figure
can be calculated and confirmed using four sources of evidence. First, comparing
Warehouse Wines’ perpetual inventory records (which detail what should have been
in Bestway) with the Beehive delivery records (which detail what was in fact
available to be removed from Bestway) gives us this number. Second, Ceseretti’s
guilty plea and restitution judgment order is consistent with this figure. Third,
Altman testified that he evaluated this cases number, including by comparing it to
Bestway’s records, and deemed it accurate.7 And fourth, the number is consistent
with a partial physical inventory Goldstein performed on January 3, 2012.
1.
Perpetual Inventory Record
Warehouse Wines employed an inventory system known as Peachtree.
(Goldstein Am. Decl. ¶ 13.) Goldstein oversaw this system and personally used it to
account for every transaction between Warehouse Wines, its suppliers, and its
warehouses. (Id. ¶¶ 13-14, 20.) Goldstein was the primary fact witness at trial, and
the Court found him to be highly credible; he is a serious and experienced
businessman who has heavy hands-on involvement with his company, intelligently
and carefully keeps his books, and displayed good faith in pursuing this claim.
The Court makes all findings of fact under a preponderance of the evidence standard. Mhany
Mgmt., Inc. v. Cnty. of Nassau, 819 F.3d 581, 599 (2d Cir. 2016.)
5
6
A list of the items stolen is included as an appendix to this opinion.
7 The
Court notes that Altman’s confirmation is corroboration of other evidence and is itself
unnecessary to the Court’s determination. If no evidence had been received from Altman at trial, the
Court’s decision would remain the same in all material respects.
7
When Goldstein ordered products from suppliers, he would at times direct
them to make delivery at Bestway. (Id. ¶ 22.) He would notify Ceseretti of the
expected shipment, and upon its arrival Ceseretti would check the delivery and
report any variances to Goldstein. (Id.) Ceseretti would then create a receiving
document for the delivery, which he would send to Goldstein. (Id.) Goldstein would
then add the newly purchased products to Peachtree. (PX-112.8)
Approximately weekly, Warehouse Wines would fax an order to Bestway
requesting delivery of certain items the following week. (Goldstein Am. Decl. ¶¶ 2324.) Bestway employees would generate a shipping receipt and load the requested
items into Bestway trucks. (Id. ¶ 23.) Upon the trucks’ arrival at the Manhattan
retail store, a Bestway employee would greet the truck and count the inventory
delivered. (Id. ¶ 25.) If there was a discrepancy between what Goldstein had
ordered and what Ceseretti had sent, which happened frequently in minor respects,
Goldstein would notify Ceseretti by email. (Id. ¶ 26.) Bestway would then send a
revised shipping document for that week’s delivery, which Goldstein would use to
update Peachtree. (Id.)
Bestway also maintained its own inventory system. (Id.) Each month,
Bestway would provide Warehouse Wines with a Stock Status Report which showed
all Warehouse Wines inventory held at Bestway. (Id. ¶ 27.) Goldstein would
compare that report to Peachtree to learn of, and receive an explanation for, any
discrepancies prior to paying the monthly storage charges. (Id.)
8 Travelers objected to the admission of PX-112 on hearsay grounds. The Court rules it admissible as
a business record kept in the normal course of activity. Fed. R. Evid. 803(6).
8
On occasion, Bestway would not be able to locate inventory that the records
showed should be in the warehouse. (Id.) In such cases Bestway would pay for
these losses, and Goldstein would remove these items from Peachtree using a code
such as MIA, LOST, or BREAK. (Id.; PX-72.9) However, if a case arrived from
Bestway contained some number of broken bottles, Warehouse Wines would record
the entire case as having been received from Bestway and relieve that amount from
Peachtree. (Trial Tr. Goldstein 327:4-11.)
Peachtree tracked each inventory item’s stock status over time. These
Inventory Tracking Flows for each of the items included in Warehouse Wine’s
claimed loss are collected in PX-112. They provide a clear explanation of how
Peachtree worked.
For example, take the first page of the exhibit, which has a Bates stamp
ending in “021.” It captures the perpetual inventory flow for item “1800
REPOSADO – 1.75,” presumably cases of 1.75 liter bottles of 1800 Reposado tequila.
(PX-112 at 021.) Peachtree indicates that Warehouse Wines first ordered 20 cases
from the supplier to Bestway on September 24, 2008, then had the cases delivered
to the retail site 5 at a time until January 3, 2009. Warehouse Wines then ordered
25 more cases on March 16, 2009, and again had the cases delivered 5 at a time
until September 11, 2009. The September 11, 2009 delivery only contained 4 cases,
9 Travelers objected to the admission of PX-72 on hearsay grounds. Although PX-72 is a document
prepared for this litigation, it was generated by running a simple search in Peachtree, the software
Warehouse Wines used in the normal course of business. The Court therefore deems it admissible as
a business record and based on its general indicia of reliability. Fed. R. Evid. 803(6), 807. In any
event, PX-72 simply repeats information available in PX-112 and its admission or absence is
immaterial to the Court’s findings and conclusion.
9
and on October 31, 2009, one final case was relieved from inventory as “Lost.”
Shortly thereafter,10 Warehouse Wines ordered 75 more cases, and this supply was
steadily delivered from Bestway to Warehouse Wines’ retail location. After a
delivery of 3 cases on December 16, 2011, there should have been 32 case of this
item at Bestway.
The validity of the inventory transaction flow records in PX-112 is supported
by a “snap shot” of the total inventory at a particular moment in time. PX-1011 is a
print-out of the Peachtree record for each item Warehouse Wines stored with
Bestway, and it lists the quantity that should have been in the warehouse as of
December 31, 2011. (Goldstein Am. Decl. ¶ 39; Trial Tr. Goldstein 284:10-19.) In
every case, the quantity listed on PX-10 as “Qty on Hand” for a particular item
matches the value of “Remaining Qty” for that item as of December 31, 2011 on PX112. (E.g., compare PX-10 at 5460 (32 cases of 1800 REPOSADO – 1.75), with PX112 at 021 (same).)
Before getting to the important final three lines on the first page of PX-112,
the Court pauses to note and explain an important practice other entries on this
page illustrate. Goldstein used a “zero out method” to test the inventory held at
Bestway. (Goldstein Am. Decl. ¶ 28.) This method involved requesting that all of a
given item be delivered to the retail store, leaving none in the warehouse. (Id.) For
The Court notes that the Peachtree perpetual inventory record indicates that Warehouse Wines
received 5 cases of this item on February 22, 2011, despite having no cases available at the time.
(PX-112 at 021.) No party explained the meaning behind a negative value in the “Remaining Qty”
column, although, as discussed below, Peachtree entries could be back-dated.
10
11 Travelers objected to the admission of PX-10 on hearsay and authentication grounds. The Court
finds that Goldstein adequately authenticated it and that it was generated in the normal course of
business using reliable methods. Fed. R. Evid. 803(6), 807, 901.
10
example, the item on the front page of PX-112 was zeroed out on January 3, 2009
and October 31, 2009.12 (PX-112 at 021.) Following October 31, 2009, Bestway did
not store any of this item until the next order from the supplier, on February 23,
2011. (Id.) Any losses of this item included in Warehouse Wines’ claim thus must
have occurred following the latter date.
Warehouse Wines generally zeroed out 25 items per month.13 (Goldstein Am.
Decl. ¶ 28.) It did not, however, zero out every item it stored at Bestway. (Trial Tr.
Goldstein 339:1-5.) Of the 84 items that constitute Warehouse Wines’ claimed loss,
20 were never zeroed out.14 (PX-112.)
The Court now returns to the final three lines on the first page of PX-112,
which tell the following story. Goldstein testified that between the time in late
December 2011 when he discovered that much of his inventory had been stolen and
the eventual emptying of the Bestway warehouse at the end of January 2012, he
continued to order deliveries to his retail store from Bestway. (Trial Tr. Goldstein
247:25-248:7.) The penultimate line in the Peachtree inventory flow for this tequila
does indicate that 5 cases were delivered on January 6, 2012 and relieved from
inventory, and thus not included in Warehouse Wines’ claim. (PX-112 at 021.)
Indeed, zeroing out this item between September 11, 2009 and October 31, 2009 may have led to
the discovery of the lost case relieved from inventory (and thus not included in Warehouse Wines’
claim) on October 31, 2009. (PX-112 at 021; cf. Trial Tr. Goldstein 331:2-7.)
12
13
The last date on which each item was zeroed out is included in the appendix.
14 Some of these 20 items were first purchased relatively shortly before Warehouse Wines discovered
the theft. (See PX-112 at 042-043, 073, 093, & 121.) Others were purchased in significant
quantities, such that zeroing out might have overwhelmed the retail space. (See id. at 023-024, 036039, 052-053, 058, 095, 100, 104, 106, & 115.) For yet other items that were not zeroed out, neither
of these explanations seems to apply. (See id. at 056, 086-087, & 113-114.)
11
On January 18-21 and 26-27, Goldstein and his wife and son worked to load
trailers to transport Warehouse Wines’ inventory from Bestway to Beehive.
(Goldstein Am. Decl. ¶ 44; Trial Tr. Goldstein 220:25-221:7.) The Court credits
Goldstein’s testimony that he “counted and touched every pallet” as it was loaded
into a truck. (Trial Tr. Goldstein 238:16-24.) The Court also credits Goldstein’s
testimony that he prepared the bills of lading for transportation between Bestway
and Beehive, which were received into evidence as PX-79.15 (Id. 233:3-16.)
These bills of lading record the quantities of inventory that were removed
from Bestway in late January. (PX-79.) For example, one of the final trucks was
loaded with, among other things, 17 cases of “1800 REPOSADO 1.75.” (Id. at 5728.)
Those cases were recorded and relieved from inventory, and Peachtree was updated
using the code “LOAD” to reflect that these 17 cases were accounted for. (PX-112 at
021.)
The Court credits the validity of the bills of lading based on Goldstein’s
testimony. The figures that make up these bills are also further confirmed in
several ways. First, as described above, the numbers in PX-79 match those in PX112; each “LOAD” entry in Peachtree has a corresponding entry in the bills of
lading. (E.g. compare PX-112 at 120 (19 cases of TANQUERAY GIN – LIT listed as
transported to Beehive), with PX-79 at 5724 (same).) Second, almost every entry in
the bills of lading lists the item count once in Goldstein’s handwriting and once in a
different script, which Goldstein testified came from Beehive. (Trial Tr. Goldstein
15 Travelers objected to the admission of PX-79 on hearsay and authentication grounds. The Court
finds that Goldstein adequately authenticated it and that it was generated in the normal course of
business using reliable methods. Fed. R. Evid. 803(6), 807, 901.
12
235:19-237:23.) In almost all cases the numbers match, and in the rare location
where they do not Warehouse Wines’ number is replaced by Beehives’. (See, e.g.,
PX-79 at 5712, 5715.)
The third way the bills of lading are confirmed is through Beehive’s
documents, which were entered into evidence as part of a report of Kenneth
Williams, a Travelers Investigator. (PX-9.16) These Beehive documents list a total
of 30,290 cases. (Id. at 11.) The cases listed on the bills of lading sum to the same
amount. Both of these documents break down that total by item in identical ways
(although the items are ordered differently). The Court therefore credits this figure
as the total number of cases that were transported from Bestway to Beehive, and
does not credit the 30,516 case figure Warehouse Wines included in the Proof of
Loss it submitted to Travelers in April 2012. (PX-1317 at 5441.) That number is not
supported by any documentation, and its only purpose within the proof of loss is as
a means of calculating the “in/out charge” payable to Beehive (discussed below).
Once the “LOAD” entries were entered into Peachtree, the system reflected
all of the inventory that had left Bestway, either by delivery to the retail location in
Manhattan or by transportation to Beehive. The remaining quantity should have
been zero for every item, and evidently it was in many cases; many of the items
Travelers objected to the admission of PX-9 on hearsay and authentication grounds. The Court
finds that Goldstein adequately authenticated it and that it was generated in the normal course of
business using reliable methods. Fed. R. Evid. 803(6), 807, 901.
16
17 Travelers objected to the admission of PX-13 on hearsay grounds. The Court does not here
consider PX-13 for the truth of the matter asserted therein (indeed, as discussed above the Court
explicitly does not credit the relevant assertion in PX-13), but instead to address an apparent
inconsistency Travelers highlighted.
13
listed in the bills of lading are not included in PX-112 and are not part of
Warehouse Wines’ claim. (See, e.g., PX-79 at 5679.)
However, some items had a non-zero value in Peachtree’s “Remaining
Quantity” field. (Goldstein Am. Decl. ¶ 48.) This quantity was the unaccounted-for
loss which makes up Warehouse Wines’ claim. (Id.) These amounts were entered in
Peachtree under the code “THEFT.” (E.g. PX-112 at 021.) All of the “THEFT”
entries were post-dated to January 3, 2012, the date of the partial physical
inventory (discussed below), although they were not – and could not have been –
calculated until all of the inventory was transported from Bestway to Beehive in
late January 2012. (Id.; Goldstein Am. Decl. ¶ 48.) As listed in the appendix to this
opinion, the “THEFT” entries collectively sum to 4,095 cases. (PX-112, PX-9 at 2-3.)
The Court finds that the method described above accurately and competently
permitted Warehouse Wines and, in turn, the Court, to determine that Ceseretti
stole 4,095 cases from Warehouse Wines.
2.
Ceseretti Plea and Restitution
As discussed above, Ceseretti has pled guilty to stealing inventory from
Warehouse Wines. The nature of his plea and the resulting restitution order
provide additional proof of the quantity of product that he stole.
On January 9, 2015, Ceseretti pled guilty to stealing “in excess of one million
dollars” from Warehouse Wines before the New York Supreme Court for Suffolk
County. (PX-194 at 7:17-18.) During that proceeding, Ceseretti’s attorney informed
the court that Ceseretti had “agreed to make partial restitution to the victims”
14
immediately, and had further “agreed to execute restitution judgment orders in
favor of the four victims in this case in an amount to be determined by the
Department of Probation representing any unpaid restitution balances.” (Id. at
3:12-13, 4:7-11.)
Consistent with the representations at the plea in March 2015 a Restitution
Judgment Order was entered against Ceseretti. (PX-195.) The order listed the
amount of restitution as $1,155,479.54 for victim/judgment creditor Steven
Goldstein. (Id.) This is the same amount, to the cent, that Warehouse Wines
submitted to Travelers in its April 24, 2012 Proof of Loss as the value of the
property Ceseretti stole. (PX-13 at 5440.)
At trial, Travelers’ counsel raised a concern that the identity between
Warehouse Wines’ and Ceseretti’s respective valuations indicated that it arose from
an “echo chamber.” (ECF No. 197 at 56:8-60:4.) While there is no evidence in the
record from which the Court could determine how the restitution amount was
reached, it is true that calculating this figure seems to require knowledge of both
the number of cases stolen and the price per case in January 2012.
Ultimately, the Court is convinced that Ceseretti’s allocution and restitution
amount support the conclusion that he stole 4,095 cases of Warehouse Wines’
products. In addition to the precise amount listed in the Restitution Judgment
Order, Ceseretti also personally affirmed that he had stolen “in excess of one million
dollars” from Warehouse Wines. (PX-194 at 7:12-20.) This figure, like the
judgment, demonstrates Ceseretti’s acknowledgment of the magnitude of the theft.
15
Given Ceseretti’s legal obligation to pay the amount listed in the judgment entered
against him, he had an important financial incentive not to inflate the size of his
theft. Finally, Ceseretti owes restitution not only to Warehouse Wines but also to
the other retailers who used Bestway warehouses. Each retailer is due to receive a
percentage of Ceseretti’s restitution payments, calculated based on each retailer’s
loss. (Id. at 3:12-5:2; Trial Tr. Goldstein 227:19-23.) It follows that each retailer
had an incentive to monitor the restitution amounts owed to the others for signs
that such amounts were inflated.
As a result, the Court concludes that Ceseretti’s plea allocution and
restitution order support the finding of fact that Ceseretti stole 4,095 cases from
Warehouse Wines.
3.
Altman
Kenneth Altman, the accountant Travelers hired to investigate Warehouse
Wines’ claim in early 2012, testified at trial.18 (Trial Tr. Altman 59:6-193:8.) His
testimony provided supplemental support for quantifying the size of the loss at
4,095 cases. Altman testified that he surveyed Warehouse Wines’ claimed loss and
“validated it was consistent with the records that [he] saw.” (Id. 81:19-20.) He
further testified that nothing in his investigation had demonstrated “that those
records aren’t reliable.” (Id. 98:23-24.) To the contrary, Altman explained that for
Altman was the subject of dueling motions in limine; Warehouse Wines sought to estop Travelers
from contradicting Altman’s report and argued that it constituted an agent admission, while
Travelers sought to preclude any use of Altman as an expert witness. (ECF Nos. 164 & 168.) As
discussed in the Court’s memorandum decision and order of April 19, 2016, Altman’s testimony was
accepted as relevant but neither binding on Travelers as an agent admission nor competent expert
testimony. (ECF No. 183.) In all events, Altman’s testimony is unnecessary; even in its absence
there is a factual record more than sufficient to support the Court’s findings as set forth herein.
18
16
certain items he had requested the supplier invoices to validate their initial delivery
to Bestway and the date, quantity, and price of purchase. (Id. 111:12-112:1.) Each
of the twelve items tested was consistent with Warehouse Wines’ records, which
allowed Altman to “conclude that the perpetual inventory was accurate.” (Id. 119:45.)
Altman’s confirmation that Warehouse Wines’ accurately depicted the size of
its claimed loss is bolstered by the fact that his report to Travelers did mention a
different concern, specifically regarding documentation of the claimed moving costs.
(PX-1719 at 2053.) The report does not contain any similar hesitation regarding the
number of cases stolen, nor did Altman indicate that he harbored any such concern
at trial. (Trial Tr. Altman 128:13-19.)
4.
Partial Physical Inventory
As discussed above, on January 3, 2012, Goldstein visited the Bestway
warehouse and conducted a partial physical inventory. He used a print-out from
Peachtree that captured the expected quantity on hand as of December 31, 2011 for
each item Warehouse Wines stored there. (Goldstein Am. Decl. ¶¶ 37-38; PX-10.)
His record from this partial physical inventory provides further supplementary
support for the 4,095 cases figure.
As Goldstein explained at trial, he did not believe he had the time or
manpower to do a full inventory of Bestway when he visited on January 3. (Trial
19 Travelers objected to the admission of PX-17 on hearsay, relevance, and improper opinion grounds.
As to this point, the Court does not consider PX-17 for the truth of the matter asserted, but instead
for the fact that it raised certain concerns and not others. The Court also finds that PX-17 was
admissible generally on the basis of significant indicia of reliability, including its source, recipient,
purpose, and age.
17
Tr. Goldstein 259:1-260:3.) Instead, his goal was “to understand damage control,
understand what [were] the general conditions, general counts.” (Id. 260:3-5.)
While many of the items listed on the Peachtree print-out have a handwritten
number next to the item description representing the number of cases Goldstein
observed during the partial inventory, many are blank. (PX-10.)
The results of the partial physical inventory support Warehouse Wines’ 4,095
cases figure because the number of cases Goldstein recorded observing largely
matches the number of items later removed from Bestway. For example, Goldstein
recorded 20 cases of BOMBAY SAPPHIRE LIT, 19 cases of CIROC VODKA
COCONUT – LIT, and 10 cases of CIROC VODKA RED BERRY – LIT. (PX-10 at
5460-62.) The inventory transaction flow for each of these items similarly reflects
that precisely that many cases were removed from Bestway after January 3, 2012.
(PX-112 at 35, 42, 43.) In every instance in which the numbers in PX-10 and PX112 disagree but one, the inventory transaction flow shows that there were actually
more cases subsequently removed from Bestway than Goldstein counted on January
3, 2012. (E.g., compare PX-10 at 5460 (21 cases of ABSOLUT CITRON – LIT and
46 cases of BAILEYS IRISH CREAM – 750 GLAS), with PX-112 at 23, 32 (28 cases
of ABSOLUT CITRON – LIT and 49 cases of BAILEYS IRISH CREAM – 750
GLAS).) This type of discrepancy is logical, as Goldstein may have missed cases in
his partial review, and serves to reduce Warehouse Wines’ ultimate claim, as fewer
cases were missing than it originally seemed.
18
As mentioned, one product exhibited a different pattern. According to
Peachtree, there should have been 45 cases of J WALKER DOUBLE BLACK – 750
in Bestway when Goldstein visited. (PX-10 at 5465.) The record of the partial
physical inventory indicates that Goldstein observed “15 + 30,” that is, 45, cases on
January 3, 2016. (Id.) However, the inventory transaction flow for this item shows
that 15 cases were delivered to the retail location on January 26, 2012, and none
were sent to Beehive; as a result, 30 cases of this product are included in Warehouse
Wines’ claim. (PX-112 at 72.) At trial, Goldstein testified that he did not know how
to explain this particular discrepancy. (Trial Tr. Goldstein 391:7-15.)
Notwithstanding this 30 case disconnect, the Court otherwise finds that the
record of Goldstein’s partial physical inventory on January 3, 2016 supports
Warehouse Wines’ claim that 4,095 cases were stolen. The large majority of the
items that make up the claim were either not inventoried, inventoried in a manner
consistent with the claimed loss, or inventoried in a way that would have increased
the claimed loss had it not been later revised. The one item that is an exception
does not meaningfully challenge PX-10’s significant value as a spot-check of PX-112.
The partial physical inventory therefore substantiates Warehouse Wines’ claim that
Ceseretti stole 4,095 cases of its product.
B.
Timing of Theft and Replacement
As described above, the major shortages indicating theft emerged in
December 2011, and by December 28, 2011 Ceseretti had informed Goldstein that
he would not be able to deliver certain items. At his plea allocution in January
19
2015, Ceseretti answered affirmatively when asked whether he had stolen from
Warehouse Wines “on or about and between 2010 and December 22nd of 2011.”
(PX-194 at 7:12-20.) Other than the possible post-January 3, 2012 disappearance of
30 cases of J WALKER DOUBLE BLACK – 750, discussed above, there is no
meaningful evidence in the record from which the Court could conclude that the
theft began before or continued after December 2011. (C.f. Trial Tr. Goldstein
358:15-17.) The Court therefore finds that Ceseretti’s theft occurred during
December 2011.
Goldstein credibly testified that, even if he had known the full extent of his
loss as of December 26, 2011 (the date of the major shortages that presaged
discovery of Ceseretti’s theft), he would not have been able to fully replace his stock
before January 2012. (Id. 363:22-366:11.) While there was evidence that
Warehouse Wines did receive deliveries at its retail location directly from suppliers
in the final days of December 2011 and that Warehouse Wines placed orders in late
December using a “bill-and-hold” method, there was insufficient evidence to
determine that this method could have been used before year end to replace entirely
the stolen inventory – particularly where the extent of the theft was not yet known.
(Id. 400:1-403:11.)
The insurance policy Travelers issued Warehouse Wines provides that the
value of covered property will be the least of the property’s actual cash value, the
cost of restoring the property to its prior condition, or the cost of replacing the
property. (PX-37 at 15.) It further provides that “[i]n the event of loss or damage,
20
the value of property will be determined as of the time of loss or damage.” (Id.) A
separate provision on the same page provides that legal action against Travelers
must be brought “within 2 years after [the insured] first ha[s] knowledge of the
direct loss or damage.” (Id.)
C.
Product Pricing
In New York, the prices suppliers charge per case of wine or liquor are
published monthly. (Goldstein Am. Decl. ¶ 49.) Warehouse Wines established the
value of its loss using the January 2012 prices. (PX-13 at 5439-40; PX-11420; Trial
Tr. Goldstein 358:6-14.) These prices for each stolen item are included in the
appendix.
Neither party entered the publication listing the December 2011 prices into
evidence. However, the December 2011 prices of at least some of the items
Ceseretti stole are available in the record. First, there are a set of invoices from
that month which document the price Warehouse Wines paid to obtain cases of
KETEL ONE – 1.75 (DX-9 at 5363), JACK DANIELS – LIT (id. at 4776), J
WALKER BLACK – 750, LITER, and 1.75 (id. at 4778), GLENFIDDICH 12YR 750
(id. at 4779), STOLICHNAYA 80 – LIT and 1.75 (DX-11 at 4774), and AMARETTO
DI SARONNO – LITER (id. at 4775). In addition, the report Altman produced for
Travelers in March 2012 included the price at last purchase for each of the items he
tested. (See PX-17 at 2049-50, 2059-2110.) One of these items, DEWARS WHITE
LABEL – 1.75, had most recently been purchased in December 2011. (Id. at 209520 Travelers objected to the admission of PX-114 on hearsay grounds. The Court rules it admissible
as a business record kept in the normal course of activity and as generally reliable. Fed. R. Evid.
803(6), 807.
21
96.) Accordingly, Altman included in his report both the pricing page from
December 2011 that listed Dewar’s White Label products, including both the tested
product and DEWARS WHITE LABEL – LITER. (Id. at 2097.)
Thus, for 11 of the 84 stolen items that make up the bulk of Warehouse
Wines’ claim, the record includes evidence of per-case prices in both December 2011
and January 2012. Comparing those prices indicates that the December 2011 prices
of these 11 items were, on average, 87% of the January 2012 prices.21
D.
Moving Costs
Warehouse Wines incurred a number of costs associated with moving its
inventory out of Bestway and into Beehive. (PX-13 at 5441.) Specifically, it
incurred $5,745 in staffing costs, $603 in hotel costs, $142 in travel costs, $473 in
meal costs, $167 in long-distance telephone costs, and $9,075 in trailer costs. (Id.;
21
The following table displays the pricing information for these products.
Item
Dec. 2011
price ($)
Cite
Jan. 2012
price ($)
Cite
%
AMARETTO DI SARONNO - LITER
267.88
DX-11
318.23
PX-114
84
DEWARS WHITE LABEL - 1.75
179.94
PX-17
197.96
PX-114
91
DEWARS WHITE LABEL - LITER
317.93
PX-17
317.93
PX-114
100
GLENFIDDICH 12YR 750
411.28
DX-9
510.40
PX-114
81
J WALKER BLACK - 1.75
339.91
DX-9
432.29
PX-114
79
J WALKER BLACK – 750
363.29
DX-9
423.29
PX-114
86
J WALKER BLACK – LIT
460.42
DX-9
460.42
PX-114
100
JACK DANIELS - LIT
304.41
DX-9
364.45
PX-114
84
KETEL ONE – 1.75
219.91
DX-9
247.51
PX-114
89
STOLICHNAYA 80 – 1.75
165.90
DX-11
198.96
PX-114
83
STOLICHNAYA 80 – LIT
232.45
DX-11
280.42
PX-114
83
Total
3,263.32
22
3,751.86
87
Goldstein Am. Decl. ¶¶ 44-46.) These costs total $16,205. The Court finds that
Warehouse Wines properly and actually incurred these costs.
E.
Restitution
As described above, Ceseretti pled guilty on January 9, 2015. (PX-194 at
7:17-18.) During that proceeding, Ceseretti’s attorney informed the court that
Ceseretti had “agreed to make partial restitution to the victims in this case in the
amount of $308,000,” which would be “paid to the Office of the District Attorney on
or before the date of sentence.” (Id. at 3:12-18.) Ceseretti further “agreed to execute
restitution judgment orders in favor of the four victims in this case in an amount to
be determined by the Department of Probation representing any unpaid restitution
balances,” and specifically agreed to “make an annual payment in the amount of
$20,000 to the Office of the District Attorney” during each of the five years of his
probation. (Id. at 4:7-18.)
Consistent with the representations at the plea, and as also discussed above,
in March 2015 a Restitution Judgment Order was entered against Ceseretti. (PX195.) The order listed the amount of restitution as $1,155,479.54 for
victim/judgment creditor Steven Goldstein. (Id.)
In May 2015, Goldstein received a check from Ceseretti’s attorneys in the
amount of $185,594.40. (Trial Tr. Goldstein 228:5-7.) This represented
approximately 62% of the initial amount Ceseretti had placed into escrow prior to
his sentencing. Goldstein expected 62% of the five annual $20,000 restitution
payments Ceseretti was obligated to pay under the conditions of his sentence. (Id.
23
227:15-23.) He also was aware of the Restitution Judgment Order for the whole
amount of Ceseretti’s theft. (Id. 229:8-11.) Since the initial May 2015 check,
Goldstein had received three additional restitution checks, totaling $4,750. (Id.
226:19-23.) Thus, as of the close of evidence in this case on April 28, 2016,
Warehouse Wines had received $190,344.40 in restitution payments from Ceseretti.
More than one year had passed since Ceseretti’s guilty plea and Restitution
Judgment Order, but a year had not yet passed since the first restitution checks
were distributed.
Warehouse Wines’ treatment of these restitution amounts was initially
troublingly opaque. For example, on November 4, 2015, after the Court granted
summary judgment to Warehouse Wines in its entirety but before the Court agreed
to reconsider damages, Warehouse Wines submitted a proposed form of judgment.
(ECF No. 121.) This proposed judgment was for $1,538.771.95, an amount which
does not account for the May 2015 restitution payment Warehouse Wines had
already received. (Id.) Similarly, the first, unsigned draft of Goldstein’s trial
declaration stated that Warehouse Wines had “sustained unreimbursed damages in
an amount of $1,177,788.00.” (ECF No. 156 at 15.)
However, Warehouse Wines did go on to edit Goldstein’s trial declaration.
The amended declaration, the only one Goldstein swore to in open court, removed
the word “unreimbursed” from its concluding paragraph. (See Goldstein Am. Decl.
¶ 57.) When Travelers raised the question of reimbursement at the April 22 FPTC,
Warehouse Wines readily acknowledged that it had received restitution and
24
informed the Court that “there may even be more coming in the future.” (ECF No.
188 at 5:24.) Furthermore, on January 29, 2015, more than one year before the
trial, Warehouse Wines had submitted a letter to the Court stating that Ceseretti
had entered his guilty plea. (ECF No. 90.) Enclosed with the letter was a
transcript of the plea proceeding, which included the references to restitution
discussed above. (Id. at Exh. 1.)
The Court therefore finds that, although Warehouse Wines fell significantly
short of its obligation to keep the Court and Travelers properly informed about the
restitution process, it did not do so intentionally or with an eye to recovering more
from Travelers than it was due. The Court credits Warehouse Wines’ explanation
that it intended to address the role of restitution following the Court’s
determination of the overall damages amount.
F.
“In/Out Charges”
Goldstein calculated the total costs of moving the remaining inventory from
Bestway to Beehive to be $22,308. (Goldstein Am. Decl. ¶ 47; T Prop. ¶ 45; WW
Prop. ¶ 60.) Included in this total was $6,103 for “in/out charges” from Beehive.
(Goldstein Am. Decl. ¶ 45; T Prop. ¶ 45; WW Prop. ¶ 58.) This amount was based
on 20 cent/case rate applied to 30,516 cases, and was included in the Proof of Loss
Warehouse Wines submitted to Travelers on April 24, 2012. (PX-13 at 6; Trial Tr.
Goldstein 249:1-5.) As discussed above, this number of cases was an error; only
30,290 cases were actually received into Beehive.
25
The number 30,516 does not appear on any documents received from Beehive.
Indeed, there is no invoice or receipt for “in/out charges” from Beehive at all. As
Goldstein testified, Beehive never charged Warehouse Wines for this expense, and
there is no reason to believe it ever will. (Trial Tr. Goldstein 249:6-19.) Goldstein
further testified that it was his understanding that Beehive had retired the “in/out
charge” debt as part of a “right of offset” when much of the inventory Warehouse
Wines stored with Beehive was flooded in Hurricane Sandy, ten months after the
January 2012 move. (Id. 251:7-20.) According to Goldstein, the “offsets” associated
with flood losses in late 2012 included not only the 20 cent/case “in/out charge” but
also a more significant overall $1.62/case charge which Beehive never collected from
Warehouse Wines.22 (Id. 254:6-16.) He also, however, testified that he had never
specifically discussed or confirmed this understanding with anyone from Beehive.
(Id. 251:21-25.)
The Court credits Goldstein’s testimony on this point and finds that,
although Warehouse Wines reasonably anticipated having to pay Beehive an “in/out
charge” in connection with moving its inventory out of Bestway at the time of the
proof of loss, Warehouse Wines never actually paid Beehive any “in/out charge.”
G.
Deductible
Under the terms of the insurance contract, the inventory Warehouse Wines
stored at Bestway was subject to a $25,000 deductible. (PX-37 at 24.) This
deductible applied to each “occurrence.” (Id. at 17.) Warehouse Wines did not
22
This $1.62/case charge was not part of Warehouse Wine’s claimed loss. (See PX-13.)
26
account for this deductible in the proof of loss it submitted to Travelers. (Trial Tr.
Goldstein 352:24-353:2.)
III.
CONCLUSIONS OF LAW
A.
Warehouse Wines Has Met Its Burden Of Proof As To Damages
Under New York law, a plaintiff bears the burden of proving a breach of
contract by a preponderance of the evidence. Diesel Props S.r.l. v. Greystone
Business Credit II LLC, 631 F.3d 42, 52 (2d Cir. 2011). “The insured bears the
burden of proving the amount of damage, and the insurance company bears the
burden of proving facts in mitigation of damage.” C-Suzanne Beauty Salon, Ltd. v.
Gen. Ins. Co. of Am., 574 F.2d 106, 114 (2d Cir. 1978) (footnote omitted). Where
there are multiple means of calculating damages, “the plaintiff need only present
evidence as to one measure of damages, and that measure will be used when neither
party presents evidence going to the other measure.” Jenkins v. Etlinger, 432
N.E.2d 589, 591 (N.Y. 1982).
Although it is Warehouse Wines’ burden to prove its entitlement to damages
from Travelers’ wrongful refusal to pay its claim, once the fact of damages is
established “‘[t]he plaintiff need only show a stable foundation for a reasonable
estimate’ of the damage incurred as a result of the breach.” Tractebel Energy
Marketing, Inc. v. AEP Power Marketing, Inc., 487 F.3d 89, 110 (2d Cir. 2007)
(quoting Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 926 (2d
Cir. 1977)). “Such an estimate necessarily requires some improvisation, and the
party who has caused the loss may not insist on theoretical perfection.” Id. at 111
27
(quoting Entis v. Atl. Wire & Cable Corp., 335 F.2d 759, 763 (2d Cir. 1964)). “The
rule of certainty as applied to the recovery of damages does not require
mathematical accuracy or absolute certainty or exactness, but only such reasonable
certainty as serves as a basis for the ordinary conduct of human affairs.” 36 N.Y.
Jur. 2d Damages § 12 (2016) (footnotes omitted).
Courts will refuse to award damages which are “merely speculative, possible,
and imaginary,” Wakeman v. Wheeler & Wilson Mfg. Co., 4 N.E. 264, 266 (N.Y.
1886), or for which a party has “provided no substantiation whatsoever.” BaskinRobbins Inc. v. S & N Prinja, Inc., 78 F. Supp. 2d 226, 232 (S.D.N.Y. 1999). In some
circumstances, a party’s inability to distinguish injury caused by a breach from
unrelated injuries may prevent it from recovering damages. See Meda AB v. 3M
Co., 969 F. Supp. 2d 360, 388-90 (S.D.N.Y. 2013) (noting, in dicta, that damages had
not been proved due to a failure to “isolate the effects of the breach or
misrepresentation”). However, unless the difficulty in calculating damages is
extreme or insurmountable, an injured party should be made whole to the law’s best
ability. See, e.g., Contemporary Mission, 557 F.2d at 926-27 (approving of damages
for lost sales profits based on improper failure to promote).
It would be contrary to general principles of contract law, which are
heightened in favor of insured parties in insurance disputes, cf. Morgan Stanley
Grp. Inc. v. New Eng. Ins. Co., 225 F.3d 270, 276 (2d Cir. 2000), to demand that
Warehouse Wines either advance perfect proof of the amount of its loss or receive no
award whatsoever. Instead, consistent with both precedent and fairness, “[t]he law
28
will make the best appraisal that it can, summoning to its service whatever aids it
can command.” Contemporary Mission, 557 F.2d at 926-27 (quoting Sinclair Rfg.
Co. v. Jenkins Co., 289 U.S. 689, 697 (1933)).
Warehouse Wines has met its burden of providing a stable and reasonable
estimate of the damage it suffered and which Travelers is required to indemnify. As
discussed above, Warehouse Wines has established the quantity and type of cases
that were stolen. It has also provided evidence of a relevant price for each case,
specifically the January 2012 price. The crucial evidence, as discussed above,
included Goldstein’s written declaration and trial testimony, as well as certain
documents admissible as reliable business records, including but not limited to PX10, PX-79, PX-112, and PX-114.23 Importantly, damages in this case are based
entirely on historical facts; they do not inherently require the Court to hypothesize
future performance, market trends, etc.
As discussed further below, Travelers has persuasively argued that these
prices do not perfectly reflect the price that the contract requires be applied.
However, plaintiffs have introduced evidence which allows the Court to calculate a
proper price based on the evidence in the record. In so doing, they have carried
their burden as to the quantum of damages.
Contrary to Travelers’ argument, New York does not impose an extracontractual requirement that all insured parties conduct periodic physical
inventories of their stored products or forgo insurance coverage. The cases
23 The Court specifically notes that it need not rely on any testimony from Altman to reach all of its
determinations of fact and conclusions of law.
29
Travelers cites in support of this view, New York Univ. v. Continental Ins. Co., 662
N.E.2d 763 (N.Y. 1995), and Ace Wire & Cable Co. v. Aetna Cas. & Sur. Co., 457
N.E.2d 761 (N.Y. 1983), do not stand for the broad proposition Travelers advances.
As discussed in both the Court’s October 16, 2015 opinion granting summary
judgment to Warehouse Wines on liability (ECF No. 114) and the Court’s April 19,
2016 opinion on motions in limine (ECF No. 183), the NYU and Ace Wire cases
concerned insurance for losses caused by an employee’s dishonest or criminal acts.
See NYU, 662 N.E.2d at 771; Ace Wire, 457 N.E.2d at 763. The cases cited by the
New York Court of Appeals in Ace Wire clarify that insurers may insist upon an
inventory exclusion to protect themselves from “[t]he possibility that [a] loss was
only a paper loss resulting from an error on the inventory.” Stadham Co. v. Century
Indem. Co., 74 A.2d 511, 514 (Pa. Super. Ct. 1950). However, the same cases
further clarify that such a policy does not prevent an insured from proving loss
through “an enumeration of each missing item, suit by suit, based upon a check of
the stock record … against the stock actually on hand.” Sun Ins. Co. of N.Y. v.
Cullum’s Men Shop, Inc., 331 F.2d 988, 991 (5th Cir. 1964).
The insurance policy that governed the relationship between Warehouse
Wines and Travelers required the insured to take a number of steps related to the
records that might be the basis of a claim. For example, Warehouse Wines
committed to allow Travelers to “examine and audit [its] books and records as they
relate to this policy at any time during the policy period and up to three years
afterwards.” (PX-37 at 5.) Travelers was also permitted, but not required, to
30
“[m]ake inspections and surveys at any time” and recommend changes as a result.
(Id.) In the event of a loss, Travelers was permitted to examine and copy
Warehouse Wines’ books and records, and examine any insured under oath “about
any matter relating to this insurance or the claim.” (Id. at 13.)
If Travelers wished to condition its coverage on Warehouse Wines’
performance of physical inventories at the third-party warehouses it employed, it
was incumbent upon Travelers to clearly include such a requirement in the
agreement between the parties. See City of New York v. Evanston Ins. Co., 830
N.Y.S.2d 299, 302 (App. Div. 2007) (courts construe ambiguous policy language in
favor of coverage and only exclude coverage if exclusion is the only fair
interpretation). No such requirement appears in the policy, and the Court will not
retroactively alter the parties’ agreement by imposing it.24 See SR Int’l Bus. Ins.
Co., Ltd. v. World Trade Ctr. Props., LLC, 467 F.3d 107, 125 (2d Cir. 2006).
The Court concludes, as a matter of law, that Warehouse Wines has carried
its burden to prove its entitlement to damages and a stable basis for those damages
for most of its claim. The proper valuation of the stolen merchandise is discussed
below. Warehouse Wines incurred $16,205 in moving costs; the Beehive “in/out
charges” were never incurred and the argument that they were a portion of the
24 In any event, a periodic physical inventory would likely have provided little information relevant
to determining damages in this case. The stated purpose of such a requirement is to avoid “losses
that may accumulate to excessive amounts over a period of years.” NYU, 662 N.E.2d at 772.
However, the zero-out method Goldstein employed, combined with the evidence that the bulk of the
thefts occurred during December 2011, suggest that a physical inventory would not have appreciably
reduced the proper size of Warehouse Wines’ claim.
31
Hurricane Sandy-related negotiations between Warehouse Wines and Beehive is too
speculative and unsubstantiated to form a proper basis for damages.
B.
Warehouse Wines’ Claim Must Be Valued As Of The Date Of Loss
“The cardinal principle for the construction and interpretation of insurance
contracts—as with all contracts—is that the intentions of the parties should
control.” Id. (quoting Newmont Mines Ltd. v. Hanover Ins. Co., 784 F.2d 127, 135
(2d Cir. 1986)). “Under New York law, this is accomplished by looking to ‘the
objective manifestations of the intent of the parties as gathered by their expressed
words and deeds.’” Id. (quoting Brown Bros. Elec. Contractors, Inc. v. Beam Constr.
Corp., 361 N.E.2d 999, 1001 (N.Y. 1977)).
The Valuation provision of the insurance policy Travelers issued Warehouse
Wines requires that “the value of property … be determined as of the time of loss or
damage.” (PX-37 at 15.) There can be no doubt that this language means what it
says. On its face, this timing provision does not contain any suggestion that the
“time of loss” should be interpreted as the “time of discovery of loss.” Moreover, on
the very same page of the insurance contract, the parties did adopt a deadline that
runs beginning when the insured “first ha[s] knowledge of the direct loss or
damage.” (Id.) The fact that such a rule appears on the same page as the binding
language of the valuation provision demonstrates that the parties knew how to
adopt a “time of discovery” rule but chose not to for valuation purposes.
The valuation provision is equally unamenable to Warehouse Wines’
alternative argument that, because replacing the stolen inventory in December
32
would have proved logistically difficult (see Trial Tr. Goldstein 404:14-23), the loss
should be valued using January prices. As an initial matter, there is evidence in
the record that Warehouse Wines did order a significant quantity of product,
totaling at least multiple thousands of cases, in the final days of December 2011,
and that some or all of this product remained with the suppliers under “bill and
hold” arrangements. (See id. 401:6-402:2.) More importantly, expanding the timing
of valuation to encompass various practical challenges in replacing the stolen
products would diverge even further from the stated “as of the time of loss” rule
than would a “date of discovery” interpretation because products cannot be replaced
until they are known to be missing. Again, had the parties intended to adopt a
different rule, they would not have included the phrase “determined as of the time
of loss or damage” in the valuation provision.
Therefore, Warehouse Wines’ stolen products must be valued as of the time of
their theft, which the Court has found occurred in December 2011. Despite the
apparent ease with which one can acquire the monthly publicly listed prices of
wholesale alcohol in New York, neither party submitted a full list of December 2011
prices. However, Goldstein acknowledged at trial that prices were generally lower
in December 2011 than in January 2012. (Id. 359:17-20.) This is consistent with
the 11 products the Court was able to compare across the two months, which as
discussed above were available in December 2011 at 87% of the January 2012
prices. (See PX-17 at 2097, DX-9 at 4776-79, 5363; DX-11 at 4774-75, PX-114.)
33
The Court therefore concludes that the evidence and legal requirements of
this case require the Court to apply a 13% discount to the January 2012 prices that
appeared in Warehouse Wines’ proof of loss to determine the appropriate value of
its stolen property. As demonstrated in the appendix, applying this discount
generates a total theft value of $1,007,480.40. The Court finds that this figure
accurately represents “the best appraisal that [the Court] can” make of the value of
the property at the heart of Warehouse Wines’ claim. Contemporary Mission, Inc. v.
Famous Music Corp., 557 F.2d 918, 926-27 (2d Cir. 1977) (quoting Sinclair Rfg. Co.
v. Jenkins Co., 289 U.S. 689, 697 (1933)).
C.
Ceseretti’s Theft Was A Single Occurrence
The insurance policy Travelers issued Warehouse Wines provides that
property stored at Bestway was subject to a $25,000 deductible on a per
“occurrence” basis. (PX-37 at 17-18, 24.) The policy does not define “occurrence.”
The Second Circuit has held that in the context of property damage and loss
insurance, “the meaning of ‘occurrence’ must be interpreted in the context of the
specific policy and facts of [each] case.” Newmont Mines Ltd. v. Hanover Ins. Co.,
784 F.2d 127, 136 n.9 (2d Cir. 1986). It has further explained that an event
amounts to a single occurrence when “damage occurring at one point in time was
merely part of a single, continuous event that already had caused other damage.”
Id. at 136.
Applying these principles, the Second Circuit has affirmed a jury’s
determination that “the collapse on two different days of two separate sections of
34
the roof of a cooper concentrator mill building,” each caused by snow buildup, were
separate occurrences based on evidence that “each half of the concentrator was
structurally distinct and capable of supporting a weight of ice and snow
independent of the other” and the strong deference due to jury determinations. Id.
at 129, 137. It also ruled that whether the two plane crashes that constituted the
September 11th terrorist attack was one occurrence or two was, at the summary
judgment stage, “an open question as to which reasonable finders of fact could reach
different conclusions.” World Trade Ctr. Props. L.L.C. v. Hardford Fire Ins. Co., 345
F.3d 154, 190 (2d Cir. 2003). The Second Circuit has repeatedly emphasized that
the intent of the parties dictates and that courts should thus examine the
reasonable expectations of coverage under insurance policies. See, e.g., In re
Prudential Lines Inc., 158 F.3d 65, 79 (2d Cir. 1998).
The Court concludes, based on the record at trial and the policy language at
issue, that Ceseretti’s theft was a single occurrence. There is no indication in the
record as to whether Ceseretti stole all of the missing inventory at one fell swoop or
over time. (See Trial Tr. Ceseretti 54:1-55:25 (invoking Fifth Amendment right
against self-incrimination).) There is no evidence of any “clear separation in time
[between thefts] or change in circumstances of [the thefts.]” Nat’l Union Fire Ins.
Co. v. Stroh Co., No. 98 Civ. 8248(DLC), 2000 WL 264320, at *4 (S.D.N.Y. 2000).
Moreover, there is no indication that the policy, which included coverage for
dishonest acts by carriers for hire (see ECF No. 114), was intended to only protect
Warehouse Wines from incidents in which a dishonest carrier stole more than
35
$25,000 at one instant, rather than through a single continuous method that
unfolded over a number of weeks. In light of the principles of contract
interpretation which apply to insurance policies, the Court will not read such a
limitation into the parties’ use of the undefined word “occurrence.”
D.
Calculation
Warehouse Wines has demonstrated, as a matter of the Court’s factual
findings and legal conclusions, that it is entitled to $1,007,480.40 for its stolen
products and $16,205 for its moving expenses. The record also indicates that a
$25,000 deductible applies to this claim, and that Warehouse Wines has received
$190,344.40 in restitution from Ceseretti. Summing these figures generates a total
outstanding amount of $808,341, excluding interest.
IV.
JUDGMENT
For the reasons stated above, Warehouse Wines is entitled to damages.
Judgment shall be entered in favor of Warehouse Wines in the pre-interest amount
of $808,341. The Clerk of Court is respectfully directed to prepare a form of
judgment which reflects this amount plus any pre-judgment interest to which
Warehouse Wines is properly entitled, and to close this matter.
SO ORDERED.
Dated:
New York, New York
July 14, 2016
_________________________________________
KATHERINE B. FORREST
United States District Judge
36
APPENDIX
Item
1800 REPOSADO - 1.75
1800 SILVER - 1.75
ABSOLUT CITRON - LIT
ABSOLUT MANDRIN - LIT
AMARETTO DI SARONNO - LITER
BACARDI 151 - LIT
BACARDI GOLD - 1.75
BACARDI LIGHT - 1.75
BACARDI LIGHT - LIT
BAILEYS IRISH CREAM - 750 GLAS
BELVEDERE VODKA-750 SILVER BTL
BOMBAY SAPPHIRE 1.75
BOMBAY SAPPHIRE LIT
BUSHMILLS IRISH WHISKEY - 1.75
BUSHMILLS IRISH WHISKEY - LIT
CAPTAIN MORGAN RUM - LIT
CAPTAIN MORGAN RUM 70pr - 1.7
CIROC VODKA COCONUT - LIT
CIROC VODKA RED BERRY - LIT
COINTREAU - LITER 194
CROWN ROYAL - 750
CROWN ROYAL - LITER
CUERVO GOLD - LIT
CUERVO TRADITIONAL - 750
DEWARS WHITE LABEL - 1.75
DEWARS WHITE LABEL - LITER
EL JIMADOR TEQ - REPOSADO- LIT
FREIXENET CORDON NEGRO - 1.5
GLENFIDDICH 12YR - LITER
GLENFIDDICH 12YR 750
GRAND MARNIER - 750
GRAND MARNIER - LIT
GREY GOOSE - 1.75
GREY GOOSE - 750
GREY GOOSE - LITER
HENNESSY VS - LIT
J WALKER BLACK - 1.75
J WALKER BLACK - 750
J WALKER BLACK - 750 GIFT
J WALKER BLACK - LIT
J WALKER BLUE - 750
J WALKER DOUBLE BLACK - 750
J WALKER GOLD - 750
J WALKER RED - 1.75
J WALKER RED - LIT
JACK DANIELS - 1.75
Last
Date
Zeroed
2/23/11
2/23/11
N/A
N/A
11/22/11
11/30/10
12/2/11
12/2/11
5/20/10
10/18/11
2/1/11
4/28/11
5/27/10
N/A
N/A
5/31/11
5/31/11
N/A
N/A
9/29/11
8/30/11
8/30/11
6/28/11
12/6/11
12/6/11
11/22/10
N/A
12/7/11
N/A
12/28/09
N/A
12/31/10
12/21/11
12/14/09
4/16/09
10/28/10
6/28/11
6/28/11
5/2/11
6/28/11
6/28/11
N/A
6/28/11
12/7/11
6/28/11
12/6/11
37
Theft
10
5
15
5
10
4
10
45
32
51
60
20
47
4
14
68
15
15
5
40
2
11
140
5
169
42
70
11
6
42
26
35
34
67
636
7
40
15
20
107
36
30
14
5
37
75
Jan.
2012
Price ($)
195.90
195.90
236.90
236.90
318.23
244.68
119.94
119.94
175.13
138.60
188.95
242.94
341.88
257.11
359.63
255.26
183.32
206.22
206.22
184.62
377.69
422.02
235.17
183.36
197.96
317.93
232.44
101.99
598.45
510.40
397.00
487.00
321.54
326.30
194.96
443.89
432.96
423.29
211.64
460.42
1,146.54
229.65
926.29
213.31
317.88
261.92
Adj./Dec.
2011
Price ($)
170.43
170.43
206.10
206.10
267.88
212.87
104.35
104.35
152.36
120.58
164.39
211.36
297.44
223.69
312.88
222.08
159.49
179.41
179.41
160.62
328.59
367.16
204.60
159.52
179.94
317.93
202.22
88.73
520.65
411.28
345.39
423.69
279.74
283.88
169.62
386.18
339.91
363.29
184.13
460.42
997.49
199.80
805.87
185.58
276.56
227.87
Adj. Value
($)
1,704.30
852.15
3,091.50
1,030.50
2,678.80
851.48
1,043.50
4,695.75
4,875.52
6,149.58
9,863.40
4,227.20
13,979.68
894.76
4,380.32
15,101.44
2,392.35
2,691.15
897.05
6,424.80
657.18
4,038.76
28,644.00
797.60
30,409.86
13,353.06
14,155.40
976.03
3,123.90
17,273.76
8,980.14
14,829.15
9,511.16
19,019.96
107,878.32
2,703.26
13,596.40
5,449.35
3,682.60
49,264.94
35,909.64
5,994.00
11,282.18
927.90
10,232.72
17,090.25
JACK DANIELS - 750
JACK DANIELS - LIT
KETEL ONE - 1.75
KETEL ONE - LITER
KORBEL BRUT - 750 - 15PK
LAGAVULIN 16YR SCOTCH - 750
MACALLAN 10YR - 750
MAKERS MARK - 1.75
MAKERS MARK - 750
MAKERS MARK - LIT
MOET IMPERIAL - 750 GIFT
MOET NECTAR IMP ROSE - 750
OBAN DISTILLERS EDITION - 750
OBAN SCOTCH - 750
REMY MARTIN VSOP - LIT
ROMANO SAMBUCCA - 750
ROMANO SAMBUCCA - LITER
RUSSIAN STANDARD - 1.75
SOUTHERN COMFORT - LIT
ST MARGHERITA PINOT GRIGIO 750
STERLING VINT COL CAB SAUV-750
STERLING VINT COL CHARD - 750
STERLING VINT COL PINOT - 750
STOLICHNAYA 80 - 1.75
STOLICHNAYA 80 - LIT
STOLICHNAYA BLUEBERRY - LIT
STOLICHNAYA RASBERI - LIT
SVEDKA VODKA - 750
SVEDKA VODKA - LITER
TALISKER 25YR SCOTCH - 750
TANQUERAY GIN - 1.75
TANQUERAY GIN - 750
TANQUERAY GIN - LIT
VEUVE CLICQ YELLOW BR-750 GFT
VEUVE CLICQ YELLOW BRUT - 75
WOODFORD RESERVE BOURBON - 75
YELLOW TAIL CHARDONNAY - 1.5
YELLOW TAIL SHIRAZ - 1.5
Total
11/29/11
6/30/11
10/12/11
6/15/11
12/19/11
N/A
7/14/11
9/28/11
9/28/11
9/28/11
N/A
3/2/11
N/A
10/18/11
6/1/11
4/29/10
12/31/10
N/A
8/30/11
6/30/11
N/A
10/15/09
N/A
11/23/09
11/23/09
12/31/10
12/21/09
N/A
N/A
N/A
5/31/11
5/31/11
5/31/11
N/A
3/29/11
2/24/11
4/8/10
4/8/10
38
40
226
40
206
40
49
5
8
5
10
10
13
25
10
11
1
5
126
38
5
162
10
54
109
66
6
16
6
10
4
5
25
75
74
319
4
60
60
4,095
267.28
364.45
247.51
335.73
149.40
809.64
419.88
230.28
246.84
322.08
224.94
332.94
379.62
699.24
616.89
287.88
347.57
153.68
209.95
228.00
107.92
83.92
107.92
198.96
280.42
280.44
280.44
141.16
166.22
600.00
250.50
270.88
339.21
419.89
419.89
178.62
56.60
56.60
232.53
304.41
219.91
292.09
129.98
704.39
365.30
200.34
214.75
280.21
195.70
289.66
330.27
608.34
536.69
250.46
302.39
133.70
182.66
198.36
93.89
73.01
93.89
165.90
232.45
243.98
243.98
122.81
144.61
522.00
217.94
235.67
295.11
365.30
365.30
155.40
49.24
49.24
9,301.20
68,796.66
8,796.40
60,170.54
5,199.20
34,515.11
1,826.50
1,602.72
1,073.75
2,802.10
1,957.00
3,765.58
8,256.75
6,083.40
5,903.59
250.46
1,511.95
16,846.20
6,941.08
991.80
15,210.18
730.10
5,070.06
18,083.10
15,341.70
1,463.88
3,903.68
736.86
1,446.10
2,088.00
1,089.70
5,891.75
22,133.25
27,032.20
116,530.70
621.60
2,954.40
2,954.40
1,007,480.40
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