Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


January 26, 1995

N.F.L. INSURANCE LTD. (In Liquidation), by David E.W. Lines and Peter C.B. Mitchell, Joint Liquidators, Plaintiff, against B&B HOLDINGS, INC., f/k/a St. Louis Football Cardinals, Inc., d/b/a Phoenix Cardinals, THE CHICAGO BEARS FOOTBALL CLUB, INC., d/b/a the Chicago Bears, DALLAS COWBOYS FOOTBALL CLUB, LTD., J.W.J., CORP., general partner and/or DALLAS COWBOYS FOOTBALL CLUB, INC., d/b/a the Dallas Cowboys, INDIANAPOLIS COLTS, INC., d/b/a the Indianapolis Colts, KANSAS CITY CHIEFS FOOTBALL CLUB INC., d/b/a the KANSAS CITY CHIEFS, K.M.S. PATRIOTS, L.P., VICTOR KIAM, II, FRAN MURRAY, general partners, d/b/a the New England Patriots, LOS ANGELES RAMS FOOTBALL CO., INC., d/b/a the Los Angeles Rams, MIAMI DOLPHINS, LTD., ROBBIE SPORTS CORP., SOUTH FLORIDA SPORTS CORP., general partners, d/b/a the Miami Dolphins, MINNESOTA VIKINGS FOOTBALL CLUB, INC., d/b/a the Minnesota Vikings, PHILADELPHIA EAGLES FOOTBALL CLUB, INC., d/b/a the Philadelphia Eagles, PITTSBURGH STEELERS SPORTS INC., d/b/a the Pittsburgh Steelers, SAN FRANCISCO FORTY-NINERS, LTD., THE SAN FRANCISCO FORTY-NINERS, INC., general partner, d/b/a the San Francisco 49ers, SEATTLE SEAHAWKS, INC., d/b/a the Seattle Seahawks, TAMPA BAY AREA NFL FOOTBALL, INC., d/b/a the Tampa Bay Buccaneers, NFL MANAGEMENT COUNCIL INC., THE NATIONAL FOOTBALL LEAGUE, Paul Tagliabue, Commissioner, WILLIAM BIDWILL, JOHN M. DONLAN, SUSAN T. FLETCHER, HARRY T. GAMBLE, WARD E. HOLLAND, ROBERT IRSAY, MICHAEL E. LYNN, III, MICHAEL McCORMACK, JOHN NORDSTROM, THEODORE PHILLIPS, JOHN SCHOEMER, KEITH SIMON, DONALD STEADMAN, PATRICK SULLIVAN, DENNIS P. THIMMONS, JEROME R. VAINISI, and J.A. ZYGMUNT, Defendants.

Peter K. Leisure, U.S.D.J.

The opinion of the court was delivered by: PETER K. LEISURE

LEISURE, District Judge,

 Plaintiff N.F.L. Insurance Ltd. ("NFLIL"), represented by its liquidators, brings this action against fourteen teams of the National Football League (the "NFL"), the NFL, the NFL Management Council ("NFLMC"), and seventeen members of NFLIL's Board of Directors. NFLIL is a Bermuda mutual insurance company and was organized as part of a program to self-insure the participating teams' workers' compensation risks, including the risk of player injuries. NFLIL seeks to recover $ 4,734,871 in contributions the company allegedly is owed by the participating teams. NFLIL further seeks damages for defendant directors' alleged breaches of fiduciary duties. Defendants now move this Court for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure. Defendants also assert a counterclaim for the return of contributions by some teams, allegedly placed in escrow by NFLIL pending a decision by the other teams as to whether to contribute. For the reasons stated below, defendants' motion is granted in part and denied in part.


 NFLIL contracted with various insurers, including at various times The Home Insurance Company, The Travelers Insurance Company, The Travelers Indemnity Company, and The Travelers Indemnity Company of Illinois, to act as "fronting" companies. The fronting company wrote the insurance policies for the various teams' workers' compensation insurance plans. NFLIL then reinsured the primary layer of risk of the policies issued by the fronting companies to the participating members of the captive. The members of the captive paid premiums directly to the fronting company. The fronting company then passed the premium received on to NFLIL, less a deposit held by the fronting company, reimbursement for amounts paid by the fronting company to reinsure risk in excess of the primary layer, commissions, and certain taxes. The reinsurance agreements obligated NFLIL, within certain limitations set forth in the agreements, to reimburse the fronting companies for claims paid to injured employees of the participating teams.

 Starting in 1987, Fred S. James (New York) ("James") and its Bermuda subsidiary, James (Bermuda), served as NFLIL's insurance broker and Bermuda managing agent. NFLIL was originally capitalized with a reserve fund of $ 250,000, which was subsequently increased to $ 314,000. By June 30, 1987, however, NFLIL's balance sheet showed a reserve fund of $ 432,000 and a members' deficit of $ 1,504,955. Over the course of 1988, the members contributed $ 1,998,834 to NFLIL in an effort to ensure that it remained solvent. On February 9, 1989, Arthur Andersen & Co. reported that NFLIL had a significant deficit with respect to the fiscal year ending June 30, 1988. The report showed a deficit of $ 3,692,000 as of June 30, 1988. In response, NFLIL's agent sent a letter to the Bermuda Registrar of Companies on February 8, 1989, seeking an extension of NFLIL's time to file its Statutory Financial Return.

 On or about March 1, 1989, eleven NFLIL members or directors attended a meeting (the "Meeting") at which, plaintiff contends, it was decided that the members would need to contribute $ 4,734,871 in new capital in order to remedy NFLIL's deficiency. Plaintiff alleges that the actions taken at the Meeting constituted a valid contract between the members and the NFLIL. In the alternative, plaintiff claims that the members entered into a contract among themselves, with the NFLIL as an intended third party beneficiary to that contract. Of the $ 4,734,871 that allegedly was promised at the Meeting, only $ 595,773 actually was paid by participating teams. Moreover, defendants allege that those funds that were paid, were to be held in escrow until each member of NFLIL contributed its just share of the additional capital.

 Thereafter, NFLIL became the subject of a winding-up proceeding in the Bermuda Supreme Court. On September 26, 1991, David E.W. Lines and Peter C.B. Mitchell were appointed joint liquidators of NFLIL. The liquidators calculated the members' deficiency on the date the winding-up proceeding was commenced as being in excess of $ 14 million. On December 20, 1991, the liquidators purported to issue a call on the participating teams in the aggregate amount of $ 14,508,708. On the same day, the liquidators filed this action.

 The original complaint contained five counts: counts I and II were based on language of the Bermuda Companies Act ("BCA") applicable to mutual companies; count III was based on BCA provisions applicable to non-mutual companies; count IV alleged breach of contract; and count V alleged breach of fiduciary duty. In the Opinion, this Court dismissed, in their entirety, counts I, II, III, and IV, but plaintiff was granted permission to replead the fourth cause of action. Plaintiff was further granted permission to supplement the fifth cause of action to describe with greater specificity the directors' alleged breach of their fiduciary duties.

 On April 19, 1993, plaintiff served an amended complaint seeking to recover under four causes of action. First, plaintiff seeks to recover from the participating teams for breaching their purported contract with NFLIL. Second, plaintiff alleges that the member teams breached their contract to each other, to the detriment of the intended third party beneficiary, NFLIL. Third, plaintiff asserts that the directors and officers of NFLIL breached their fiduciary duty to the company by failing to enforce the March 1, 1989 contract. Finally, plaintiff seeks recovery from the directors and officers of NFLIL, for breaching their fiduciary duty by allowing NFLIL to conduct business when insolvent.


 I. The Standard for Summary Judgment

 Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Lang v. Retirement Living Pub. Co., 949 F.2d 576, 580 (2d Cir. 1991). Summary judgment "is appropriate only 'after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Thornton v. Syracuse Sav. Bank, 961 F.2d 1042, 1046 (2d Cir. 1992) (quoting Celotex, 477 U.S. at 322); accord Irvin Indus., Inc. v. Goodyear Aerospace Corp., 974 F.2d 241, 245 (2d Cir. 1992).

 "In deciding whether to grant summary judgment all inferences drawn from the materials submitted to the trial court are viewed in a light most favorable to the party opposing the motion. The nonmovant's allegations are taken as true and it receives the benefit of the doubt when its assertions conflict with those of the movant." Cruden v. Bank of New York, 957 F.2d 961, 975 (2d Cir. 1992). "Only when no reasonable trier of fact could find in favor of the nonmoving party should summary judgment be granted." Id.; accord Taggart v. Time, Inc., 924 F.2d 43, 46 (2d Cir. 1991); see also Lang, 949 F.2d at 580 ("In determining how a reasonable jury would decide, the court must resolve all ambiguities and draw all inferences against the moving party."); Binder v. Long Island Lighting Co., 933 F.2d 187, 191 (2d Cir. 1991) ("Viewing the evidence produced in the light most favorable to the nonmovant, if a rational trier could not find for the nonmovant, then there is no genuine issue of material fact and entry of summary judgment is appropriate.").

 The substantive law governing the case will identify those facts that are material, and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson, 477 U.S. at 248. "The judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id., 477 U.S. at 249.

 The party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion," and identifying which materials "it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323. Once a motion for summary judgment properly is made, however, the burden then shifts to the nonmoving party, which "'must set forth specific facts showing that there is a genuine issue for trial.'" Anderson, 477 U.S. at 250 (quoting Fed. R. Civ. P. 56(e)); accord Brass v. American Film Technologies, Inc., 987 F.2d 142 (2d Cir. 1993). "The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48 (emphasis in original). "Conclusory allegations will not suffice to create a genuine issue. There must be more than a 'scintilla of evidence,' and more than 'some metaphysical doubt as to the material facts.'" Delaware & Hudson Ry. Co. v. Conrail, 902 F.2d 174, 178 (2d Cir. 1990) (quoting Anderson, 477 U.S. at 252, and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986)), cert. denied, 111 S. Ct. 2041114 L. Ed. 2d 126 (1991). "The non-movant cannot escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts, or defeat the motion through mere speculation or conjecture." Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) (citations and quotation omitted); see also Gnazzo v. G.D. Searle & Co., 973 F.2d 136, 138 (2d Cir. 1992) (the court must "consider the record in the light most favorable to the non-movant. However, the non-movant may not ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.