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NYASCO SPORTS, INC. v. DIRECTOR

March 30, 1983

NYASCO SPORTS, INC., Plaintiff,
v.
DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, et al., Defendants



The opinion of the court was delivered by: BONSAL

MEMORANDUM

 BONSAL, District Judge.

 Plaintiff Nyasco Sports, Inc. ("Nyasco") brought this action to recover the proceeds of two insurance policies, one issued by defendant Director of the Federal Emergency Management Agency *fn1" ("the federal defendant" or "the government") and one issued by defendant American Federal Group, Ltd. ("the private defendant"). Nyasco seeks a total of $30,000 under the first policy and $45,000 under the second, for losses allegedly sustained in two burglaries said to have occurred on July 13 and July 16, 1979. Jurisdiction over the federal defendant is based on 12 U.S.C. § 1749bbb-11, the jurisdictional portion of the Federal Crime Insurance Program, 12 U.S.C. §§ 1749bbb-10a, et seq., pursuant to which the first policy was issued. Jurisdiction over the private defendant is alleged to exist under Rule 18 of the Federal Rules of Civil Procedure and the doctrines of ancillary and pendent jurisdiction.

 Trial of this action was originally scheduled to begin December 14, 1982. Prior to trial, the federal defendant filed a Memorandum of Law raising two defenses to Nyasco's action: (1) that Nyasco misrepresented its gross receipts on its application for federal crime insurance; and (2) that Nyasco failed to submit a detailed, sworn proof of loss within sixty days after each of the alleged burglaries. The court determined that the federal defendant's memorandum should be treated as a motion to dismiss Nyasco's claims against it, and an evidentiary hearing was held on December 14 and 15, 1982 for the purpose of eliciting the relevant facts. *fn2" Following the hearing, both Nyasco and the federal defendant filed further memoranda of law. *fn3"

 For the reasons stated below, the federal defendant's motion to dismiss Nyasco's federal claims is granted. In view of this, the court does not have pendent jurisdiction over Nyasco's state claims against the private defendant. Therefore, these claims are dismissed without prejudice.

 BACKGROUND

 The following facts relevant to this motion emerged from the testimony given at the hearing. Nyasco was founded in January, 1979 by Monroe Messinger, its current president and sole stockholder, for the purpose of selling athletic shoes. Messinger testified that the company sells at both the retail and wholesale levels, "to any type of source we can get." Transcript at 92 (hereinafter, "Tr. at "). Messinger has been self-employed as a seller of sporting goods since 1945. He has been affiliated with a business called New York Athletic Supply Co. since 1950 and became its sole owner in 1979. New York Athletic Supply is also engaged in selling athletic shoes and has the same address as Nyasco, at 301 East 149th Street in The Bronx. Messinger was admitted to the New York bar in 1959 and has practiced law part-time since then.

 In March, 1979 Nyasco applied for a commercial crime insurance policy under the Federal Crime Insurance Program. The application, a standard form issued by the Federal Insurance Administration, was prepared with the help of Nyasco's broker, Alliance Brokerage Corp., and was signed by Messinger. Under "PREMIUM COMPUTATION" the form states: "Annual gross receipts for preceding year as shown on most recent tax return. If new business with no previous tax return, estimate annual gross receipts." In the box next to this on Nyasco's application, the figure "$50,000" appears. The policy was effective for one year beginning March 17, 1979, the date on which Messinger signed the application.

 On arriving for work on Friday, July 13, 1979, Messinger discovered that Nyasco's premises had been burglarized. An inspection of the building by the police revealed that three doors to the building's basement had been pried open. An iron worker hired by Messinger to repair the doors was only able to finish repairing two of them before the end of the day and planned to return the following Monday to complete the job. However, early in the morning of July 16 an anonymous call alerted the police to a burglary in progress at Nyasco's premises. According to the police officer who investigated the scene, a cellar door -- apparently the one which had not yet been fixed -- had again been pried open. On both July 13 and 16 Messinger noticed that merchandise was missing from the storage area in the basement and called Alliance Brokerage to inform them of the losses.

 About two weeks later, a private adjustor named Robert Calabro visited Nyasco on behalf of the federal defendant. After speaking to Messinger about the two burglaries, Calabro wrote out a statement describing in part what had happened. Messinger then signed the statement, which is dated "7/31/79". Messinger also gave Calabro two handwritten documents, prepared by Nyasco's bookkeeper, which purported to list the goods stolen and their value. The total value of the shoes taken in the first burglary was alleged to be $45,090, and the total value of those taken in the second burglary was alleged to be $46,983. Messinger never showed these documents to Alliance Brokerage, but did send them two "inventory lists" dated July 13 and July 16. There was no testimony indicating what action Alliance Brokerage took on behalf of Nyasco following the alleged burglaries, but it is undisputed that neither Nyasco nor its broker filed a formal proof of loss in connection with the burglaries.

 DISCUSSION

 I.

 Under 12 U.S.C. § 1749bbb-10a(b), "[federal crime] insurance shall be provided upon such terms and conditions, and subject to such deductibles and other restrictions and limitations, as the Secretary deems appropriate. . . ." The federal defendant's motion to dismiss is based on Nyasco's alleged failure to comply with two "restrictions and limitations" set ...


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