The opinion of the court was delivered by: MORRIS E. LASKER
Plaintiff Nicholas Neu and defendants Robert Abrams, James P. Corcoran and Salvatore Curiale, on behalf of the state of New York, cross-move for summary judgment under Fed. R. Civ. P. 56(c) on Neu's claim under 42 U.S.C § 1983. Plaintiff's motion is denied and defendants' motion is granted.
This case has its origin in numerous New York state court proceedings relating to Neu's alleged violations of provisions of the New York Insurance Law which prohibit unauthorized persons from conducting an insurance business. Between 1985 and 1987, Neu was the president and chief operating officer of the American Motor Club, Inc. ("AMC"). AMC sold "prepaid service collision contracts" to New York automobile owners that, in theory, obligated AMC to repair automobiles damaged in collisions and other casualties. Persons holding contracts with AMC paid an annual fee and a service charge every time their automobile was repaired. During AMC's two years in business, it sold approximately 40,000 service contracts.
Responding to consumer complaints that AMC had denied valid claims by contract holders, unreasonably delayed repairs and failed to repair vehicles in a workmanlike manner, the state commenced a proceeding against AMC and an individual defendant named John Senise in the Supreme Court, New York County, alleging that AMC and Senise were selling insurance in contravention of New York Insurance Law §§ 1102 and 2117. Neu was not initially named as a defendant in the state court proceedings.
On or about January 14, 1986, the state Supreme Court determined that AMC's prepaid service contracts were insurance contracts but denied the state's motion for sanctions as well as its motion to add Neu as a defendant. On April 8, 1986, however, the Supreme Court issued an Order and Judgment which granted the state leave to amend its petition to include Neu as a defendant and, at the same time, held Neu and Senise liable for multiple violations of Insurance Law §§ 1102 and 2117, for which they and AMC were jointly and severally liable together with AMC for an amount in excess of $ 5,000,000.
On October 29, 1987, the Appellate Division reversed the Supreme Court's order as to the imposition of sanctions against Neu. People by Abrams v. American Motor Club, Inc., 133 A.D.2d 593, 520 N.Y.S.2d 383 (1st Dep't 1987). The court found that Neu had not received adequate notice of the state' allegations and accordingly had been deprived of an opportunity to oppose the imposition of sanctions. Id. at 385.
After further proceedings on remand, the Supreme Court found Neu liable for civil penalties under § 2117, issued a permanent injunction against his further aiding and abetting the unauthorized sale of insurance and set down for a hearing the issue of Neu's liability under Insurance Law § 1102.
The Appellate Division again reversed in part on April 9, 1992, holding that no questions of fact existed as to whether Neu violated Insurance Law § 1102. People by Abrams v. American Motor Club, Inc., 179 A.D.2d 277, 582 N.Y.S.2d 688 (1st Dep't 1992). The court wrote:
On the prior appeal we indicated Neu could be held personally liable for violating both Insurance Law § 2117 and § 1102. Given Neu's prior admissions in this proceeding, it is clear, from the record herein, that he was intimately involved in AMC operations between March 1985 and March 1987 and there is no need for . . . a hearing.
Id. at 693. The Appellate Division directed that the lower court's order be amended to include a finding of liability against Neu for violations of § 1102 and ordered that the case be remanded for a determination of the appropriate amount of civil penalties. Id. The New York Court of Appeals dismissed Neu's appeal. People v. American Motor Club, Inc., 80 N.Y.2d 893, 587 N.Y.S.2d 909, 600 N.E.2d 636 (Ct. App. 1992).
On June 10, 1993, the Supreme Court issued a Modified Order and Judgment against Neu. In addition to incorporating the Appellate Division's findings as to Neu's liability, the state court found Neu personally liable for civil penalties in the amount of $ 5,011,500 -- $ 1,000 for the first violation and $ 5,000,000 for subsequent violations of Insurance Law § 1102 and $ 500 for the first violation and $ 10,000 for subsequent violations of Insurance Law § 2117. Once again, Neu appealed to the Appellate Division, where a decision is pending.
On August 3, 1993, Neu filed an action under 42 U.S.C. § 1983 in this Court, seeking to vacate and enjoin enforcement of the June 10 order. Neu alleges both in his complaint and on this motion that the state courts' failure to conduct a jury trial before imposing a penalty under Insurance Law § 1102 violated rights guaranteed him by the Sixth Amendment because, as he argues, the penalty is purely punitive -- and therefore criminal -- in nature. The state cross-moves for summary judgment on numerous grounds, among them that this court lacks subject matter jurisdiction. The state is correct.