The opinion of the court was delivered by: HAROLD BAER, Jr., District Judge
Plaintiff Allianz Insurance Company ("Allianz") moves for summary
judgment against defendants/third-party plaintiffs, Dominic Cavagnuolo
and Angela Cavagnuolo (collectively "the Cavagnuolos"), who cross-move
for summary judgment against Allianz. The Cavagnuolos also move for leave
to amend their answer to add a cross claim against Andrea Maiorano. For
the reasons set forth below, Allianz's motion is granted and the
Cavagnuolos' cross-motion is denied. The Cavagnuolos' motion for leave to
amend their answer is also denied. I. BACKGROUND*fn1
On January 17, 1998, Dominic Cavagnuolo and his mother, Angela
Cavagnuolo, entered into a written lease agreement ("the Lease") with the
Mercedes Benz Credit Corporation ("MBCC") to lease a 1998 Mercedes Benz
model ML-320 automobile from David Michael Motor Car Corporation in
Freehold, New Jersey. Pursuant to paragraph 16 of the Lease, the
Cavagnuolos obtained liability insurance with Allstate Insurance Company
("Allstate") in the amount of $100,000 per person.
On October 7, 1998, Mr. Cavagnuolo asked Andrea Maiorano to pick up the
leased vehicle from where it was parked and drive it to Mr. Cavagnuolo's
place of business so it could be used by Ms. Cavagnuolo. En route,
Maiorano struck and injured a pedestrian, Paul Gagliano, who was crossing
the street at the corner of Fulton and Gold Streets in Manhattan.
Gagliano filed suit ("the Gagliano lawsuit") in New York State Supreme
Court, Kings County against Maiorano and Ms. Cavagnuolo and subsequently
amended his complaint to add Mr. Cavagnuolo and MBCC as additional
defendants. Frank Merlino, Allstate's in-house counsel, filed an answer
on behalf of all defendants, although Allstate later assigned MBCC
separate counsel, Lester, Schwab, Katz & Dwyer LLP. The Gagliano
lawsuit was ultimately settled for the amount of $260,000. Of that sum,
Allstate paid $100,000 on behalf of the Cavagnuolos and Maiorano, the
full extent of their insurance coverage. Allianz agreed to pay the
remaining $160,000 on behalf of MBCC.
On March 10, 2003, Allianz filed the instant action to obtain common
law and contractual indemnification from the Cavagnuolos and Maiorano
under the terms of the Lease, which provides that the Cavagnuolos would
pay all of the "costs and expenses, including attorneys' fees," associated
with "any claims, losses, injuries, expenses, or costs related to the
use, maintenance, or condition of the vehicle." Lease ¶ 23. On July 2,
2003, the Cavagnuolos instituted a third-party action against Allstate, Merlino, Robert Tusa,
and the Law Offices of Robert Tusa f/k/a the Law Offices of Frank
Merlino, in which they asserted malpractice and negligence claims and
sought indemnification in the event that Allianz prevailed on its
claims. Allianz now moves for summary judgment, contending that the
indemnification clause entitles MB'CC, and Allianz and its subrogee, to
be repaid for the $160,000 MBCC expended to settle the Gagliano lawsuit,
as well as costs, disbursements, and legal fees, for a total of
$217,933.99. The Cavagnuolos cross-move for summary judgment on the
grounds that the indemnification clause is against public policy and thus
unenforceable. Alternatively, the Cavagnuolos seek a fairness hearing to
determine whether the Gagliano lawsuit was settled for an appropriate
sum. The Cavagnuolos also seek leave to amend their answer to add a
cross-claim against Maiorano, who has not yet appeared in the instant
Pursuant to Federal Rule of Civil Procedure ("Fed.R. Civ. P.") 56(c), a
district court must grant summary judgment if the evidence demonstrates
that "there is no genuine issue as to any material fact and [that] the
moving party is entitled to judgment as a matter of law." Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). "Summary judgment is
properly regarded not as a disfavored procedural shortcut, but rather as
an integral part of the Federal Rules as a whole, which are designed to
`secure the just, speedy and inexpensive determination of every action.'"
Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed.R.Civ.P.
In determining whether there is a genuine issue of material fact, a
court must resolve all ambiguities and draw all inferences against the
moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)
(per curiam); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54,
57 (2d Cir. 1987). However, the mere existence of disputed factual issues
is insufficient to defeat a motion for summary judgment. Knight v. U.S.
Fire Ins. Co., 804 F.2d 9, 11-12 (2d Cir. 1986). The disputed issues of
fact must be "material to the outcome of the litigation," id. at 11, and
must be backed by evidence that would allow "a rational trier of fact to
find for the non-moving party," Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986). The non-movant "must do more than simply show that there is some
metaphysical doubt as to the material facts." Id. With respect to
materiality, "substantive law will identify which facts are material.
Only disputes over facts that might affect the outcome of the suit under
the governing law will properly preclude entry of summary judgment.
Factual disputes that are irrelevant or unnecessary will not be counted."
Anderson, 477 U.S. at 248.
In diversity actions such as this, when conflicts exist between the
rules of two states, the Court applies choice-of-law rules of New York,
the forum state. Klaxon Co. v. Stentor Elec. Mfg., 313 U.S. 487, 496
(1941). It is firmly established under New York law, that where a case
involves a contract with a clear choice-of-law provision, "[a]bsent fraud
or violation of public policy, a court is to apply the law selected in
the contract as long as the state selected has sufficient contacts with
the transaction." Hartford Fire Ins. Co. v. Orient Overseas Containers
Lines (UK) Ltd., 230 F.3d 549, 556 (2d Cir. 2000). Here, as the
Cavagnuolos note, the Lease has a specific choice-of-law provision.
Paragraph 25 of the Lease, titled "Applicable Law" (bold and italics
removed), provides: "The laws of the state in which the Lessor (Dealer)
has its principle place of business will govern this Lease and any
disputes that may arise from it." The Cavagnuolos leased the Mercedes
from a car dealership located in Freehold, New Jersey, thus indicating
that the parties determined that New Jersey law would apply to any
disputes arising from their agreement.
"New York courts generally defer to the choice of law made by the
parties to a contract." Cargill Inc. v. Charles Kowskv Res., Inc.,
949 F.2d 51, 55 (2d Cir. 1991). Moreover, the "parties' intention and the
place of the making of the contract are to be given heavy weight in
determining which jurisdiction has the most significant contacts."
Mechanic v. Princeton Ski Shop, Inc., No. 91 Civ. 6740, 1992 WL 397576,
at *3 (S.D.N.Y. Dec. 30, 1992). These two factors counsel for the
application of New Jersey law. While the parties rely heavily on New York
law in the motion and cross-motion submissions, they have presented
neither arguments or case law for the application of New York law.*fn2 I
see no reason to apply New York law where the relevant contract was entered into in another state, it provides
for the application of the law of another state, and none of the parties
to the contract are New York residents.*fn3 Instead, as the parties
agreed in the contract, New Jersey law applies.
C. Indemnification Clause
Allianz argues that the Lease contains an unambiguous indemnification
clause that requires the Cavagnuolos to reimburse Allianz as subrogee of
MBCC for the total amount of expenses and legal fees associated with
their operation of the vehicle. The Cavagnuolos assert in both their
opposition to Allianz's motion for summary judgment and their own
cross-motion that this clause is void as against public policy because it
is manifestly unfair and solely the result of the disproportionate
bargaining power between the parties to the ...