Zapin v. CBS Coverage Group, Inc.
(Sup. Ct. NY 6/8/05)
We represented: Defendant Emek & Metro Partners, Inc.
Freedman, J.
DECISION and ORDER Motion sequence numbers 003 and 005 are herewith consolidated for disposition. Plaintiff Zapin, Endlich & Lambardo (ZEL) moves for an order grating partial summary judgment in its favor, pursuant to CPLR 3212, dismissing the third, seventh and eighth counterclaims asserted by defendant Metro Partners, Inc. (Metro) and its president, defendant Sharon Emek, in their First Amended Verified Answer with Counterclaims and cross claim, verified September 2, 2004 (Answer).
Emek and Metro oppose ZEL's motion. Additionally, Emek cross-moves for an order granting partial summary judgment dismissing the fourth cause of action set forth in ZEL's complaint, verified July 10, 2003 (Complaint).1
Defendant CBS Coverage Group, Inc. (CBS) has not submitted any papers in response to either the motion or the cross motion.
For the reasons discussed below, ZEL's motion is denied, and Emek's cross motion is granted.
Background
On January 1, 1999, ZEL, a licensed insurance broker/agent, entered into an Insurance Service Center Agreement (Agreement) with Metro, whereby Metro agreed to provide administrative and processing services for ZEL, such as preparation of billings and collections, ratings and marketing services, acceptance, processing and settlement of claim notices and other such usual and customary services as agreed to between the parties.
Under the Agreement, Metro was required to remit to ZEL a predetermined percentage of the net commissions actually received by Metro on all insurance accounts handled by Metro.
Article 9 of the Agreement, pertaining to termination of the Agreement, permits termination on specified grounds. Termination, whether by ZEL or Metro, is subject to 180-days written notice (9.1,9.2,9.3). Sections 9.5 and 9.7 provide that:
9.5. A terminated Agent shall remain subject to [various provisions of the agreement] and shall remit to Metro any such sums which may be due to it thereunder upon presentation of proper accountings by Metro. Metro shall be authorized to set-off against and deduct from any sums which may be due to such terminated Agent. Notwithstanding such right of set-off, the terminated Agent shall be and remain responsible for payment to Metro of any sums due it hereunder and shall remit the same to Metro within thirty (30) days after presentation by Metro of a proper billing and accounting thereof.
9.7. Following termination of the Agent, the terminated Agent shall not cause any then existing policy of insurance to be canceled for the purpose of rewriting the same with another insurance company or through another facility, nor will it take any action to cause the agent or broker of record on such policy to be changed during the then current term of the subject policy.
Section 12.1 of the Agreement provides that ZEL shall indemnify Metro for all losses (including attonerys' fees) incurred by Metro: "(1) by reason of [Metro] acting on behalf of [ZEL] in connection with the provision of the services set forth herein… (2) by reason of [ZEL's] conduct which constitutes (a) a breach of this Agreement, or (b) gross negligence or willful misconduct of [ZEL]."
ZEL claims that, beginning in October 2000, Metro stopped rendering statements of account to ZEL and ceased performing its contractual obligations, and thereafter, abandoned the Agreement. By letter, dated December 28, 2000, ZEL informed Metro that it considered Metro in default of the Agreement, and "demand[ed]…that Metro release and terminate ZEL as a party and make such termination effective immediately." In the December 28, 2000 letter, ZEL further demanded that:
Metro release to ZEL or the insurance carriers all funds paid to Metro and not paid to the insurance carriers, and permit and assist ZEL so that ZEL may deal directly with [various insurance companies] for ZEL's own account as principal. Unpaid commissions due ZEL should likewise be released to ZEL forthwith.
ZEL claims that: (a) in late January 2001, it learned that Metro was "closing its doors" on February 9, 2001; and (b) Metro subsequently transferred all of its business, including its accounts and records and commissions due to ZEL, to CBS pursuant to an Asset Purchase Agreement. ZEL contends that it is currently owed commissions in excess of $ 1 million from Metro.
ZEL takes the position that the Agreement was not "terminated", but instead, was abandoned by Metro. Metro and Emek, dispute ZEL's claim that Metro abandoned the Agreement, and maintain that ZEL wrongfully terminated the Agreement.
Metro and Emek dispute ZEL's claim that Metro ceased performing under the Agreement in December 2000, contending that Metro continued to perform under the Agreement through February 2001, including transmitting account statements to ZEL. Metro and Emek also submit that, during this time period, negotiations were ongoing among Metro, CBS and ZEL pertaining to CBS's acquisition of Metro. According to Metro and Emek, ZEL agreed to the substance of the Asset Purchase Agreement between Metro and CBS, but thereafter revoked its consent, terminated the Agreement, and moved its business to a different service provider, the Whitmore Group.
Metro contends that ZEL failed to comply with the provisions in Article 9 of the Agreement in: (a) not giving 180 days advance notice of its termination of the Agreement; and (b) wrongfully transferring the policies previously managed by Metro to the Whitmore Group by canceling and reissuing the subject policies in favor of the Whitmore Group; thereby depriving Metro of the commissions on those policies.
In the Complaint, ZEL asserts causes of action for breach of contract, accounting, and breach of fiduciary duty against both Metro and CBS. In the fourth cause of action, ZEL charges Emek with prima facie tort and tortuous interference with contractual relations because she allegedly caused CBS to withhold financial records and monies due to ZEL. The Complaint, in relevant part, states:
TWENTY-FOURTH: Upon information and belief, EMEK, in the early part of 2001, individually entered into an illegal, unjustified and tortuous course of conduct, intentionally contrived to injure the Plaintiff by causing Defendants CBS to withhold any accountings, statements and significantly, the disbursal of any funds due to Plaintiff.
TWENTY-FIFTH: Said conduct upon information and belief, was and still is intentionally and maliciously designed to cause damages to the Plaintiff and interfere with its contractual relationships and specifically, deprive Plaintiff of the receipt of its monetary entitlements and otherwise, all without any legal or other justification.
TWENTY-SIX: Said wrongful conduct on the part of Defendant EMEK constitutes malicious or primafacie tort and entitles Plaintiff to compensatory and exemplary damages, as set forth hereinafter.
Metro's and Emek's original answer was filed on October 28, 2003. Thereafter, Metro and Emek moved for leave to amend their answer. The motion was granted on October 1, 2004, and the Answer was deemed served. In the Answer, Metro and Emek plead certain new counterclaims, including the third, seventh and eighth counterclaims, which are the subject of the instant motion.
In the seventh counterclaim, Metro seeks $ 174,000 representing: (a) commissions collected by ZEL, but allegedly due to Metro, after ZEL's alleged termination of the Agreement; and (b) commissions allegedly diverted by ZEL to the Whitmore Group on policies previously managed by Metro, but cancelled and reissued in favor of the Whitmore Group. In the eighth counterclaim, Metro seeks $ 31,000 representing commissions overdue as of the date of ZEL's termination of the Agreement on policies managed by Metro, but billed directly by ZEL under the Agreement. In the third counterclaim, Metro seeks attorneys' fees incurred in the present dispute pursuant to section 12.1 of the Agreement.
At the time this motion and cross motion were made, although there were discovery orders requiring document production and deposition and depositions of the parties, little or no discovery had occurred.
DISCUSSION
ZEL asserts that neither party "terminated" the Agreement but that Metro abandoned the Agreement. ZEL argues that, since there was no termination of the Agreement, the provisions of the Agreement applicable to termination, including sections 9.5 and 9.7 thereof, are irrelevant. Accordingly, ZEL contends that, since the seventh and eighth counterclaims are predicated upon an alleged breach of Article 9 of the Agreement, and since that article has not been implicated here, summary judgment should be granted dismissing those counterclaims as a matter of law.
ZEL contends that attorneys' fees pursuant to section 12.1 of the Agreement are not authorized because this lawsuit does not involve breach of the Agreement by ZEL and that summary judgment should be granted dismissing the third counterclaim as a matter of law.
Metro and Emek claim they are entitled to attorneys fees because Metro continued to perform its contractual obligations, but that ZEL violated Article 9 of the Agreement by unilaterally terminating the Agreement on less than 180 days' notice, and by diverting business from Metro thus depriving it of commissions. Defendants submit that the seventh and eight counterclaims are proper, as is the third counterclaim for attorneys' fees, which is predicated upon ZEL's alleged breach of the Agreement.
CONCLUSION
ZEL's motion is denied at this time. Questions of fact exist with respect to these counterclaims, concerning: (a) whether the Agreement was breached, and, if so, by whom; and (b) whether the Agreement was terminated, and, if so, by whom. The parties' entitlement to commissions and/or damages, as well as Metro's entitlement, if any, to attorneys' fees under section 12.1 of the Agreement depend upon resolution of these issues. Since there has been little or no discovery, ZEL's request for partial summary judgment as to these issues is premature. (See Siga Technologies, Inc. v Fischetti, 6 AD3d 299 [1st Dept 2004]).
Emek's cross motion for partial summary judgment dismissing the fourth cause of action in the Complaint is granted.
A claim for tortious interference with contract or contractual relations requires "the existence of a valid contract between the plaintiff and a third party, defendant's knowledge of that contract, defendant's intentional procurement of the third party's breach of contract without justification, actual breach and damages" (Vigoda v DCA Productions Plus Inc., 293 AD2d 265, 266 [1st Dept 2002], citing Lama Holding Co. v Smith Barney Inc., 88 NY2d 413, 424 [1996]; see also Snyder v Sony Music Entertainment, Inc., 252 AD2d 294, 299 [1st Dept 1999]). Intentional interference is required, not merely an intrusion that is negligent or incident to some other lawful purpose (Constanza Constr. Corp. v City of Rochester, 135 AD2d 1111, 1112 [4th Dept 1987]; see also NBT Bancorp Inc. v Fleet/Norstar Financial Group, Inc., 87 NY2d 614 [1996]).
ZEL has not set forth a basis for claiming that Emek "intentionally procured" an actual breach of a contract (seeLevine v Yokell, 258 AD2d 296 [1st Dept 1999]), or that her conduct caused a breach of any contract with another party. (Snyder v Sony Music Entertainment. Inc., supra).
While ZEL attributes Emek's actions, including her alleged direction to CBS to withhold money due to ZEL, to a personal animosity that Emek had toward ZEL's principal, Ira Zapin, ZEL provides no support this accusation. ZEL's pleading of prima facie tort is likewise deficient is dismissed (see generally American Preferred Prescription, Inc. v Health Management, Inc., 252 AD2d 414, 416 [1st Dept 1998]). ZEL has "advanced no non-speculative basis to believe that additional discovery might yield evidence warranting different disposition" (Rosario v N.Y.C. Tr. Auth., 8 AD3d 147, 148 [1st Dept 2004].
It is ORDERED that the motion (005) by plaintiff Zapin, Endlich & Lombardo for summary judgment dismissing that third, seventh, eighth counterclaims asserted by defendants Sharon Emek and Metro Partners, Inc. in their First Amended Verified Answer with Counterclaims and Cross claim is denied; and it is further ORDERED that the cross motion (003) by defendant Sharon Emek for partial summary judgment dismissing the fourth cause of action set forth in the complaint is granted; and it is further
ORDERED that all parties are directed to appear for a conference on June 28, 2005 at 9:30 a.m. in part 39 of the court, room 208. at 60 Centre Street, New York, New York for a conference.
Date: June 8, 2005
1 ZEL withdrew its original motion for summary judgment because it failed to provide a Rule 19-A Statement of Undisputed Facts (Motion # 003). Emek, however, did not withdraw her cross motion. ZEL then renoticed its motion for summary judgment (Motion # 005). For convenience, Emek's cross motion is being treated as if it was made in response to ZEL's (renoticed) motion for summary judgment.