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SCHEINER v. WALLACE

February 11, 1997

RANDY SCHEINER, ROYCE SCHEINER, CINDY ROYCE CREATIONS, INC. and MAXIMUS CREATIONS LIMITED, Plaintiffs, against 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.


The opinion of the court was delivered by: SWEET

 Sweet, D.J.

 Plaintiffs, Randy Scheiner, Royce Scheiner, Cindy Royce Creations, Inc. and Maximus Creations, Limited, have moved, pursuant to Local Rule 3(j), to reargue this Court's opinion dated September 4, 1996 granting summary judgment in favor of Defendants Derek Wallace, Brian Daniels, Paul Hunt, David Williams, Lloyd's Underwriters Subscribing to Policy Numbers ZJB8901346, 251NM and ZJB900233 255M, White, Fleischner, Fino & Wade, Graham Miller, Inc., Shaun Coyne, Karl Alizade, City Safe, Inc. and John M. McNicholas (the "Omnibus Defendants"). Plaintiffs have also moved, pursuant to Fed.R.Civ.P. 59(e), to amend the judgments entered pursuant to the Opinion.

 For the reasons set forth below, the Plaintiffs' motions will be denied.

 The Parties

 Cindy Royce and Maximus are New York corporations with offices in New York City and a primary business of the manufacture and sale of jewelry. *fn1"

 Samuel Scheiner, who is not a party to this action, was at all times relevant to this action 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.

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

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

 White, Fleischner, Fino & Wade ("White Fleischner" or "WFFW"), a law firm, is a general partnership organized and existing under the laws of the State of New York and was, at all times relevant to this action, New York counsel for the Lloyd's Defendants. Attorneys at White Fleischner are licensed to practice law in the State of New York.

 Prior to becoming a partner in White Fleischner, Dennis Wade ("Wade") was employed first as an Assistant District Attorney and later as Deputy Chief of the Rackets Bureau in the New York County District Attorney's Office.

 Holmes Protection of New York ("Holmes") is a corporation organized and existing under the laws of New York. At times relevant to this action, Holmes was under contract to provide security services to Cindy Royce and Maximus.

 Hartley Cooper Associates, Ltd. ("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 on the London market for Cindy Royce and Maximus.

 Levmore-Finch, Inc. ("Levmore-Finch"), an insurance brokerage, is a New York corporation having its principal place of business in New York City.

 Graham Miller, Inc. ("Miller") is an adjustment firm retained by Lloyd's. Shaun Coyne ("Coyne") is a loss adjuster at Miller.

 City Safe, Inc. ("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 ("Alizade") is a principal of City Safe.

 While employed as a detective with the New York City Police Department, John M. McNicholas ("McNicholas") helped investigate the reported burglary of the premises of Cindy Royce and Maximus that underlies this action.

 The facts and prior proceedings of this action are set forth in the previous opinions of this Court, Scheiner v. Wallace, 1996 U.S. Dist. LEXIS 16258, 93 Civ. 62, 1996 WL 633418 (S.D.N.Y. Oct. 31, 1996) ("Scheiner IV "); *fn2" Scheiner v. Wallace, 1995 U.S. Dist. LEXIS 11070, 1995 WL 464944 (S.D.N.Y. Aug. 4, 1995) ("Scheiner III "); Scheiner v. Wallace, 860 F. Supp. 991 (S.D.N.Y. 1994) ("Scheiner II "); Scheiner v. Wallace, 832 F. Supp. 687 (S.D.N.Y. 1993) ("Scheiner I "), familiarity with which is assumed.

 On January 5, 1989, underwriters from Lloyd's issued Jewelers' Block Policy No. ZJB8901346 252NM 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. On February 9, 1989, Plaintiffs paid a $ 9,500.00 premium for an additional "excess policy" for losses in excess of $ 2,500,000.

 On August 18, 1989, while both policies were still in effect, the premises of Cindy Royce and Maximus were allegedly burglarized. At the time of the alleged burglary, the premises of Cindy Royce and Maximus were protected by Holmes pursuant to a series of written agreements. McNicholas was chiefly responsible for investigating the burglary for the New York City Police Department.

 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, which was rejected by Lloyd's on December 19, 1989.

 On February 7, 1990, Cindy Royce and Maximus filed a law suit in London against Lloyd's for breach of contract (the "English Action"). In defense, Lloyd's alleged: (1) an employee or a principal of Cindy Royce and Maximus had been dishonestly involved in the burglary, which involvement entitled 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 had been no burglary, the outer vault door having been "torched" while in the open position and other evidence reasonably indicating that the theft had been staged and perpetrated by someone on the inside with access to the premises, alarm system, safe and vault combinations; (3) Samuel Scheiner had fraudulently been involved with the burglary; (4) Cindy Royce and Maximus had breached the policies by failing to properly maintain a detailed and itemized inventory of their property; (5) Cindy Royce and Maximus had fraudulently inflated the amount of their claim; (6) Cindy Royce and Maximus had breached a condition of their policies by keeping inadequate records; and (7) Cindy Royce and Maximus had committed a variety of breaches of warranty, misrepresentations, and nondisclosure, which entitled the Underwriters to avoid their policies.

 The English Action began on April 23, 1991. The English judge, Justice Waller, traveled to New York, visited the premises and the vault and safe. On October 2, 1991, the thirtieth day of trial, the Plaintiffs asked for a discontinuance on terms that they would not bring other proceedings elsewhere and that the court should order costs accordingly. Justice Waller denied the application for a discontinuance. The next day, the Plaintiffs abandoned their claims, and Justice Waller entered a dismissal in favor of the Defendants. The Plaintiffs later lost their appeal of the denial of discontinuance in the English Court of Appeal.

 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 § 105.10(1); (2) Insurance Fraud in the First Degree, in violation of Penal Law § 176.30; and (3) Attempted Grand Larceny in the First Degree, in violation of Penal Law §§ 110.00, 155.42. Among those testifying before the Grand Jury were Alizade, Coyne, and McNicholas.

 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 ...


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