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SCHEINER v. WALLACE

September 13, 1993

RANDY SCHEINER, ROYCE SCHEINER, CINDY ROYCE CREATIONS, INC. and MAXIMUS CREATIONS LIMITED, Plaintiffs,
v.
DEREK WALLACE, BRIAN DANIELS, PAUL HUNT, and DAVID WILLIAMS, sued on their own behalf and on behalf of all other Lloyd's Underwriters subscribing to Policy Numbers ZJB8901346 251NM and ZJB900233 255M, WHITE, FLEISCHNER, FINO & WADE, DENNIS WADE, HOLMES PROTECTION OF NEW YORK, INC., HARTLEY COOPER ASSOCIATES, LTD., LEVMORE-FINCH, INC., GRAHAM MILLER, INC., SHAUN COYNE, KARL ALIZADE, CITY SAFE, INC. and J.M. McNICHOLAS, Defendants.


SWEET


The opinion of the court was delivered by: ROBERT W. SWEET

Sweet, D. J.

 Defendants Derek Wallace, Brian Daniels, Paul Hunt, David Williams, Lloyd's Underwriters Subscribing to Policy Numbers ZJB8901346 251NM and ZJB900233 255M, ("Lloyd's"), White, Fleischner, Fino & Wade ("WFFW"), Holmes Protection of New York, Inc. ("Holmes"), Graham Miller, Inc. ("Miller"), Shaun Coyne, Karl Alizade, City Safe, Inc. ("City Safe") and Detective John M. McNicholas ("McNicholas"), (collectively the "Defendants") have moved for an order dismissing Plaintiffs Randy Scheiner's, Royce Scheiner's, Cindy Royce Creations, Inc.'s ("Cindy Royce"), and Maximus Creations Limited's ("Maximus"), ("collectively the "Plaintiffs") Complaint, pursuant to Rule 12(b), Fed. R. Civ. P., or granting summary judgment against Plaintiffs' claims, pursuant to Rule 56, Fed. R. Civ. P.

 Defendant Hartley Cooper Associates, Limited ("Hartley Cooper") separately moved for an order granting summary judgment pursuant to Rule 56 Fed. R. Civ. P. or dismissing all claims for lack of pendant jurisdiction.

 For the reasons set forth below, the Defendants' motions are granted in part and denied in part.

 Parties

 Plaintiff Cindy Royce is a New York corporation. Its principal office is in New York City and its primary business is manufacturing and selling jewelry.

 Plaintiff Maximus is a New York corporation. Its principal office is in New York City and its primary business is manufacturing and selling jewelry.

 Samuel Scheiner was and is Secretary/Treasurer and fifty-percent shareholder of Cindy Royce and Secretary/Treasurer and one-third owner of Maximus. Samuel Scheiner supervised the overall operations and finances of both Cindy Royce and Maximus.

 Morton Gold was President and fifty-percent owner of Cindy Royce and Vice-President and one-third owner of Maximus. Gold supervised the jewelry manufacturing on the premises at 501 Madison Avenue.

 Daniel Squillante was President and one-third owner of Maximus. Squillante supervised the overall operations of the Maximus line of jewelry.

 Randy Scheiner is a New York citizen and resident residing in Cedarhurst, New York. He was a salesman for Maximus. He is the son of Samuel Scheiner and plaintiff Royce Scheiner.

 Royce Scheiner is the wife of Samuel Scheiner.

 Derek Wallace, Brian Daniels, Paul Hunt and David Williams are citizens of the United Kingdom, with their principal place of business in London. As Lloyd's underwriters, they subscribed to the insurance policies in this case.

 Holmes is a corporation organized and existing under the laws of New York. Cindy Royce and Maximus contracted Holmes to provide security services.

 Hartley Cooper, an insurance brokerage, is an English Corporation with its principal place of business in England. Hartley Cooper acted as a "placing broker" by placing primary and excess insurance policies for Cindy Royce and Maximus on the London market.

 Levmore-Finch, an insurance brokerage, is a New York corporation with its principal place of business in New York City.

 Graham Miller is an adjustment firm retained by Lloyd's. Shaun Coyne is a loss adjuster at Miller.

 City Safe, a New Jersey corporation, has its principal place of business in New Jersey and New York. The firm provides safe expertise for Lloyd's. Karl Alizade is a principal of City Safe.

 Detective McNicholas, formerly with the New York City Police Department, helped investigate the reported burglary of Cindy Royce and Maximus.

 Prior Proceedings

 On January 7, 1990, Cindy Royce and Maximus initiated a civil suit in the English High Court of Justice, Queen's Bench Division, Commercial Court (the "English Action") against 106 Lloyd's underwriters. Mr. Justice Waller presided. In their "Points of Claim" (Complaint), Cindy Royce and Maximus alleged that Lloyd's' rejection of the Plaintiffs' Proof of Loss statement was a breach of contract on Jewelers Block Insurance Policies ZJB8901346 251NM and ZJB900233 255M. Plaintiffs sought $ 2,475,000.00 and $ 2,500,000.00 per policy and interest.

 On October 2, 1991, in the thirtieth day of the trial, Cindy Royce and Maximus applied to discontinue the English Action, provided they would not pursue their claims elsewhere with court ordered costs. Their application for discontinuance was denied. On October 3, 1991, the Plaintiffs' abandoned their claims and Mr. Justice Waller entered a dismissal for the Defendants.

 Plaintiffs appealed Mr. Justice Waller's denial of discontinuance to the English Court of Appeal. Lord Donaldson upheld the denial of discontinuance and affirmed the dismissal in favor of the Defendants.

 On March 25, 1992, Samuel Scheiner, Morton Gold, Daniel Squillante, Benoit Dreyfus, Randy Scheiner, Cindy Royce, and Maximus were indicted by the Grand Jury of the County of New York on three counts: (1) Conspiracy in the Fourth Degree, in violation of Penal Law Section 105.10(1); (2) Insurance Fraud in the First Degree, in violation of Penal Law Section 176.30; and (3) Attempted Grand Larceny in the First Degree, in violation of Penal Law Sections 110.00 and 155.42.

 In a plea agreement entered into on October 16, 1992, all charges against Randy Scheiner, Cindy Royce and Maximus were dismissed. At the same time, Samuel Scheiner, Morton Gold and Daniel Squillante pled guilty to Attempted Grand Larceny in the Fourth Degree. As a result of a separate indictment, Daniel Squillante pled guilty to violating Tax Law Section 1804(b), failing to properly report his taxable income for the years 1986 through 1990.

 Also in 1992, Cindy Royce and Maximus filed suit in the Southern District of New York against their English counsel, Simmons & Simmons. On July 27, 1993, Judge Patterson granted Simmons & Simmons' motion for summary judgment against Cindy Royce and Maximus' claims of professional malpractice, breach of contract, and violation of New York judiciary law section 487 and denied summary judgment on their claims of unjust enrichment. Judge Patterson also granted Simmons & Simmons' motion to dismiss pursuant to the doctrine of forum non conveniens.

 On January 6, 1993, Plaintiffs Randy Scheiner, Royce Scheiner, Cindy Royce and Maximus filed this action against Defendants. In their complaint, the Plaintiffs allege the following:

 
(1) Lloyd's breached its contract for both the primary and excess policies;
 
(2) Lloyd's practiced deceptive business policies and acts proscribed by § 349 of the General Business Law of New York State;
 
(3) Defendants maliciously prosecuted Randy Scheiner, Cindy Royce ad Maximus for their personal unjust enrichment and benefit;
 
(4) Defendants intentionally inflicted emotional distress upon Randy Scheiner;
 
(5) Defendants intentionally inflicted emotional distress upon Royce Scheiner;
 
(6) Defendants initiated a criminal investigation of Randy Scheiner, Cindy Royce and Maximus constituting an abuse of process;
 
(7) Defendants violated RICO by engaging in a pattern of racketeering activity;
 
(8) Defendants Hartley Cooper and Levmore-Finch committed acts of negligence and malpractice by failing to perform their brokerage services according to generally accepted principles;
 
(9) Defendant Holmes breached its contract to protect the Plaintiffs' premises because other premises they protected were burglarized;
 
(10) Defendant Holmes defrauded Cindy Royce and Maximus by failing to provided contracted and paid for security devices; and
 
(11) Defendants violated Cindy Royce's and Maximus' civil rights under § 1983 by conspiring to commit perjury, tamper with evidence and to prevent Cindy Royce and Maximus from presenting truthful witnesses in violation of due process.

 On March 9, 1993, *fn1" the collective Defendants filed a motion for summary judgment, on the grounds of res judicata and/or collateral estoppel, as to all asserted claims or, in the alternative, a motion to dismiss all asserted claims for failure to state a claim and failure to plead two of the claims sounding in fraud, and requesting an order requiring Plaintiffs to post a security bond for $ 250,000.

 On May 14, 1993, Defendants Hartley Cooper filed a separate motion for summary judgment as to all claims asserted against it on the grounds of collateral estoppel, or in the alternative, an order dismissing all claims against Hartley Cooper for lack of pendant jurisdiction.

 Defendant Levmore-Finch did not answer or file motions to dismiss in this action.

 Oral argument on the motions was heard on June 30, 1993 and the motions were considered fully submitted as of that date.

 Facts

 On January 5, 1989, underwriters from Lloyd's issued Jewelers' Block Policy No. ZJB8901346 251NM to Plaintiffs Cindy Royce and Maximus for a premium of $ 110,000.00. The policy insured Cindy Royce and Maximus for a period of 12 months, beginning July 10, 1989, against loss by theft up to a maximum of $ 2,500,000.00, with a $ 25,000.00 deductible. (Complaint P 19). On February 9, 1989, Plaintiffs paid a $ 9,500.00 premium for an additional "excess policy" for losses in excess of $ 2,500,000.00. Both policies contained a "Service of Suit Clause," meaning the underwriters agreed to adjudicate claims before a court of competent jurisdiction in the United States, as well as a "False Swearing Clause."

 On August 18, 1989, the premises of Cindy Royce and Maximus were reportedly burglarized. Both insurance policies were in effect at the time of the burglary. On November 2, 1989, Samuel Scheiner, in his capacity as Secretary/Treasurer for Cindy Royce and Maximus, filed a Proof of Loss with Lloyd's for more than $ 5 million. Lloyd's rejected the Proof of Loss on December 18, 1989. (Complaint P 23).

 In January, 1990, Plaintiffs Cindy Royce and Maximus met with Mr. Philip Vaughn, a partner in the English law firm Simmons & Simmons, at Cindy Royce's New York office. Mr. Vaughn advised the Plaintiffs, and their New York attorney Mr. Fiore, that a law suit in London would take significantly less time than in New York.

 On February 7, 1990, Cindy Royce and Maximus initiated the English Action alleging that Lloyd's' rejection of their Proof of Loss breached the contract. Lloyd's' "Amended Points of Defense" (the English Answer), alleged the following:

 
(1) a principal or employee of Cindy Royce and Maximus was dishonestly involved in the burglary, entitling the Underwriters to refuse to make payment under the false swearing clause;
 
(2) the Underwriters were entitled to reject the Proof of Loss because there was no burglary; the outer vault door was "torched" while in the open position and other physical evidence reasonably indicated that the theft was staged and perpetrated by someone on the inside with access to the premises, alarm system, safe and vault combinations;
 
(3) Samuel Scheiner, a principal of Cindy Royce and Maximus, was fraudulently involved with the burglary;
 
(4) Cindy Royce and Maximus breached the policies by failing to properly maintain a detailed and itemized ...

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