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ST. PAUL FIRE & MARINE INS. CO. v. HEATH FIELDING

April 29, 1996

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Plaintiff, against HEATH FIELDING INSURANCE BROKING LTD., individually and as agent for FAREX G.I.E. and AMERICAN INTERNATIONAL GROUP, INC.; FAREX G.I.E. and MICHAEL P. KEARNEY, Defendants.


The opinion of the court was delivered by: LOWE

 MARY JOHNSON LOWE, D.J.

 BACKGROUND

 The facts and prior proceedings in this diversity action are fully set forth in the prior opinions of this Court. See St. Paul Fire and Marine Ins. Co. v. Heath Fielding Ins. Broking Ltd., 1993 U.S. Dist. LEXIS 7066, 1993 WL 187778 (S.D.N.Y. May 25, 1993) ("May 1993 Opinion"); St. Paul Fire and Marine Ins. Co. v. Heath Fielding Ins. Broking Ltd., 1995 U.S. Dist. LEXIS 19847, 1996 WL 19028 (S.D.N.Y. December 30, 1995) ("December 1995 Opinion"). The facts relevant to the instant motion are presented below.

 St. Paul, a Minnesota corporation engaged in the insurance and reinsurance business, entered into a treaty retrocession contract ("Contract") with Farex G.I.E. ("Farex") and its constituent French insurance/reinsurance companies. Heath, a United Kingdom insurance broker, negotiated the Contract on Farex's behalf. The Heath brokers were Duncan Playford ("Playford") and John MacKensie-Green ("MacKensie-Green"). Defendant Michael P. Kearney ("Kearney"), previously employed as an insurance underwriter by an affiliate of St. Paul, accepted the Contract on St. Paul's behalf. The Contract bound St. Paul to pay losses on certain property risks insured by American International Group, Inc. ("AIG") and reinsured by Farex over a two-year period.

 Two years after the execution of the Contract, Farex sought payment from St. Paul of approximately $ 40 million allegedly due under the Contract. Thereafter, St. Paul filed this action. St. Paul asserted fraud and negligence claims against Heath. With respect to the negligence claim, Count VI of the Original Complaint alleged, inter alia, that Heath (1) knew or should have known that Kearney acted without authority, (2) did not take proper steps to alert St. Paul, and (3) made material misrepresentations concerning the risks insured under the Contract. Original Complaint PP 59-68, 92-96. The Original Complaint further alleged that "[a] reinsurance broker owes a duty of care as a professional to all parties in the negotiation and placement of reinsurance and retrocession transactions." Id. P 93.

 Heath moved to dismiss the Original Complaint. The Court referred the motion to Magistrate Judge Barbara A. Lee pursuant to Federal Rule of Civil Procedure 636(b)(1)(b). The Magistrate Judge issued a Report and Recommendation dated November 15, 1991 ("November 1991 Report"). The November 1991 Report recommended dismissal of St. Paul's negligence claim because St. Paul "had not identified any source of duty that could give rise to a cause of action for negligence against Heath." November 1991 Report at 62-64. St. Paul never objected to this portion of the Magistrate Judge's report.

 In its May 1993 Opinion, the Court addressed various objections to a number of the rulings of the Magistrate Judge. St. Paul Fire and Marine Ins. Co., 1993 U.S. Dist. LEXIS 7066, 1993 WL 187778, at *4-*8. As to the negligence claim asserted against Heath, the Court adopted the Magistrate Judge's recommendation, dismissing the claim with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6). Id. at *8. The Court granted St. Paul leave to amend its complaint against Heath to adequately allege fraud damages. Id.

 After the completion of discovery, Heath moved for summary judgment on St. Paul's negligent misrepresentation claim. Heath argued that: (1) the Court had already ruled that Defendant owed no duty to Plaintiff to support a negligence claim, and (2) Plaintiff failed to demonstrate a "special relationship" between it and Defendant. (See Def.'s Mem. Supp. Mot. S.J. at 29-31.) That motion was subsequently referred to Magistrate Judge Lee to issue a report and recommendation.

 The Magistrate Judge issued a Report and Recommendation dated July 26, 1995 ("July 1995 Report"). The July 1995 Report recommended that the Court grant Heath's motion for summary judgment. July 1995 Report at 46. The Magistrate Judge held that this Court's prior dismissal of St. Paul's negligence claim constituted the "law of the case," barring the negligent misrepresentation claim. Id. at 46-52. Alternatively, the Magistrate Judge found St. Paul's negligent misrepresentation claim legally insufficient because nothing in the record showed a "special relationship" between St. Paul and Heath. Id. at 52-54. St. Paul objected to this portion of the July 1995 Report pursuant to Federal Rule of Civil Procedure 72.

 In its December 1995 Opinion, the Court adopted the Magistrate Judge's finding that St. Paul's negligent misrepresentation claim was barred by the law of the case. St. Paul Fire and Marine Ins. Co., 1995 U.S. Dist. LEXIS 19847, 1996 WL 19028, at *9. Thus, the Court declined to review the Magistrate Judge's alternate ruling concerning the sufficiency of the negligent misrepresentation claim. Id. at *10.

 On January 31, 1996, St. Paul filed a motion, pursuant to Local Rule 3(j) and Rule 59(e), for reargument of the portion of this Court's December 1995 Opinion granting summary judgment to Heath on its negligent misrepresentation claim. St. Paul also moved for clarification of the ...


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