United States District Court, S.D. New York
LIBERTY MUTUAL FIRE INSURANCE COMPANY, Plaintiff,
MYSTIC TRANSPORTATION, INC. and MYSTIC LEASING CORP. (a Delaware corporation) and MYSTIC LEASING CORP. (a New York corporation) and MYSTIC BULK CARRIERS, INC. and MYSTIC PETROLEUM PRODUCTS CORP. and WESTERN NASSAU TERMINALS, INC. and WESTERN SUFFOLK TERMINAL CORPORATION and 65 SOUTH 4th STREET REALTY CORP. and EAST BAY TERMINALS, INC. and MYSTIC LEASING OF NEW JERSEY, INC. and MICHAEL LEASING OF NEW JERSEY, INC. and LEONARD BALDARI, Defendants.
The opinion of the court was delivered by: GERARD E. LYNCH, District Judge
OPINION AND ORDER
Plaintiff Liberty Mutual Fire Insurance Company ("Liberty
Mutual") moves for partial summary judgment on its first and
third claims, respectively a claim for monetary judgment against
certain defendant corporations under a settlement agreement and a
claim against Leo Baldari, their president and the guarantor of
the Agreement.*fn1 For the reasons set forth below,
plaintiff's motion will be granted.
From the period of July 8, 1996 through November 1, 1997,
Liberty Mutual provided workers' compensation, employer liability
and business auto insurance to defendants. A dispute arose
between the parties concerning premiums, and on June 19, 2001,
the parties entered into a settlement agreement and limited
release ("the Agreement"). (Kuller Aff., Ex. B.) Paragraph 1(K)
of the Agreement states the amount due Liberty Mutual to be
$471,600.75. (Id.) Paragraph 4(G) of the Agreement also
Upon default by Mystic as to any payment, after
written notice of default to counsel for Mystic,
following a ten (10) day grace period, Liberty [m]ay
institute legal action against Mystic . . . Mystic
does further agree that in the even[t] of default,
Liberty may enter judgment by confession against
Mystic, pursuant to the Affidavit for Judgment by
(Id.) Additionally, defendant Baldari executed an unconditional
guaranty of payment ("the Guarantee"), pursuant to which Baldari
is also liable for attorney's fees and costs. (Id. at Ex. J.)
It is undisputed that defendants paid $354,166 under the
Agreement and thereafter defaulted, leaving a balance of
$117,434.75. (Potvin Aff. 3; D. Answ. ¶ 29.) Following the appropriate notice period, plaintiff filed this
complaint in the Southern District of New York, pursuant to
28 U.S.C. § 1332,*fn2
and to a provision in the Agreement
laying venue in this district, and subsequently filed for partial
summary judgment on its claims against defendant companies for
moneys due under the Agreement and against Baldari as guarantor.
During the pendency of that motion, defendants defaulted, despite
having twice entered stipulations extending their time to answer
the complaint. In addition, the deadline for filing their
opposition to the motion for summary judgment came and went.
Having learned from the plaintiff that a suggestion of bankruptcy
had been filed and certain non-bankrupt defendants*fn3
filed an answer out-of-time, the Court then denied the
plaintiff's motion as moot (without prejudice to its refiling),
stayed the case as to the bankrupt defendants, and deemed the
remaining defendants' answer timely filed. Plaintiff then
reinstated its motion for summary judgment, which the
non-bankrupt defendants then timely opposed. DISCUSSION
A party may move for summary judgment "upon all or any part" of
its complaint at any time after 20 days after the commencement of
an action. Fed.R. Civ. P. 56(a). Summary judgment is appropriate
when "the pleadings, depositions, answers to interrogatories, and
admissions of file, together with the affidavits, if any, show
that there is no genuine issue of material fact and that the
moving party is entitled to a judgment as a matter of law."
Fed.R. Civ. P. 56(c). The party moving for summary judgment bears the
initial responsibility of informing the District Court of the
basis for its motion and identifying those portions of the record
which it believes "demonstrate[s] the absence of a genuine issue
of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). The burden then shifts to the nonmoving party to produce
evidence sufficient to create a genuine issue of material fact
for trial. Fed.R. Civ. P. 56(e); Celotex, 477 U.S. at 323;
Matsushita v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Plaintiff has presented evidence that the amount claimed in
default is indisputably due under the Agreement. Defendants do
not dispute plaintiff's accounting of either the amount paid or
the remaining balance. Instead, they assert that this represents
"only half the story," and suggest several purported defenses
calling into question the validity of the Agreement and Guarantee
in the first instance: (1) that conflicts of interest on behalf
of the defendants' former law firm potentially invalidate the
Agreement and Guaranty; (2) that Mr. Baldari received no
consideration for guaranteeing the Agreement; (3) that the
non-bankrupt defendants are not in, possession of documents
regarding the case that are purportedly still in the possession
of former counsel; (4) that they need to examine why certain of
the defendants, which they assert are "holding companies without
any employees" were named as insured parties and/or signatories
to the Agreement.
Defendants fail to present a coherent account of the "other
half" of the story, or to satisfy their burden of raising triable
questions of fact. First, they have failed to submit a single
affidavit, to point to any other piece of admissible evidence in
support of their assertions, or to counter plaintiff's rule 56(e)
statement of undisputed facts. See Local R. 56.1(d) ("Each
statement of material fact by a movant or opponent must be
followed by a citation to evidence which would be admissible, set
forth as required by Federal Rule of Civil Procedure 56(e).").
They have thus failed to carry their burden of pointing to
evidence demonstrating a triable issue of fact.
Even if the Court were to overlook these evidentiary and
procedural deficiencies, the defenses they have raised appear to
be entirely without merit. Their opposition brief, which cites no
substantive case law in support of their arguments, does nothing
more than parrot unsubstantiated assertions in their Answer,
without providing any additional factual detail or supporting
authority. They have made no effort to explain why the
circumstances they have identified as meriting "exploration" are
in any way material to the validity of the Agreement or the
First, defendants fail to provide support in either fact or law
for their contention that any of the answering corporate entities
or Baldari somehow lacked the "capacity" to enter the Agreement,
or that a conflict in attorney representation somehow
"fraudulently induced" them to sign it. Defendants do not specify
which of the moving entities were so induced or in what way,
which lacked "capacity," or for what reason. Nor do they point to
any support for their argument that a conflict of interest by an
attorney representing multiple affiliated entities, each of which was a sophisticated business entity, would void that settlement.
They do not dispute that the person who executed the Agreement on
behalf of all the defendant signatories is defendant Baldari, who
also served as the guarantor of the Agreement. On each
acknowledgment form executing the Agreement, Baldari represented
that he signed in his capacity as the president of each entity
and that he was "fully authorized to and did execute this
instrument as the act of the entity." (Kuller Aff. Ex. B.) Under
the circumstances, it is entirely unclear how any purported
attorney conflict could operate as a fraudulent inducement for
any of these entities.*fn4
Defendants have similarly failed to explain the legal relevance
of their contention that the answering defendants did not need
workers' compensation and employers liability insurance. The
Agreement represents a contract that was collateral to, and
entered into in contemplation of the settlement of, a dispute
over the underlying insurance contract. Whether these defendants
did or did not need insurance coverage in the first place is
irrelevant to the present dispute over the amount due under the
Agreement, which was intended to settle any underlying dispute
about the insurance contract.
As for the argument that Baldari lacked sufficient
consideration on the Guarantee, it is well established that
"consideration passing from a creditor to a principal obligor is
sufficient consideration to support a third-party guaranty of the
principal obligor's debts." First New York Bank for Business v.
DeMarco, 130 B.R. 650, 654 (S.D.N.Y. 1991), citing Walter E.
Heller & Co. Inc. v. Cox, 343 F. Supp. 519, 527-28 (S.D.N.Y.
1972), aff'd, 486 F.2d 1398 (2d Cir. 1973). Furthermore, the
New York Court of Appeals has held that an individual who
executes an absolute and unconditional guaranty is precluded from raising not
only lack of consideration, but also various contractual defenses
such as fraud in the inducement. See Citibank, N.A. v.
Plapinger, 66 N.Y.2d 90, 93 (1985). The Guarantee in question
was such an unconditional guarantee.
In any event, defendants, under Baldari's direction, ratified
the Agreement by performing their part of the bargain for over
two years namely, abiding by the payment schedule it set forth
and only raised their objections once they had breached and
plaintiff sought to collect pursuant to the Agreement's terms.
Under these circumstances, any potential defenses to the contract
would no longer be available, as "it is well established that
rescission must be promptly sought after the aggrieved party
learns of the alleged fraud, or else is waived." Goodridge v.
Harvey Group, Inc., 778 F. Supp. 115, 130 (S.D.N.Y. 1991);
accord S.E.C. v. Credit Bancorp, Ltd. 147 F. Supp. 2d 238,
256 (S.D.N.Y. 2001); Industrial Recycling Systems, Inc. v.
Ahneman Associates, P.C., 892 F. Supp. 547, 551 (S.D.N.Y. 1995).
At best, defendants' argument that they have "not yet had an
opportunity to obtain access to or possession of" the relevant
documents in the case might be construed as a request for further
discovery pursuant to Rule 56(f) of the Federal Rules. However,
that rule requires that such a showing be made upon affidavits,
which, as previously discussed, defendants here have not
submitted. Furthermore, such affidavits "must establish (1) the
nature of the uncompleted discovery, (2) how these facts are
likely to create a genuine issue of fact, (3) what efforts the
party has made to obtain those facts, and (4) why those efforts
were unsuccessful." State Bank of India v. Star Diamonds, Inc.,
901 F. Supp. 177, 179 (S.D.N.Y. 1995), citing Burlington Coat
Factory Warehouse v. Esprit De Corp., 769 F.2d 919, 926 (2d Cir.
1985). Even apart from their failure to identify any specific document or pieces of evidence
that they wish to obtain, defendants have utterly neglected
even in their unsworn submission to explain what efforts they
have made to obtain them or explain why they were unsuccessful.
Defendants have been on notice of the motion since the motion was
originally filed and served, in April 2004. Even given current
counsel's late entry on the scene, defendants have now had two
months since their answer was filed in which to obtain any
relevant records from prior counsel. Moreover, as Baldari was
apparently intimately involved in the underlying transactions, he
would surely be in a position to identify and describe any
documents relating to the matter that would need to be reviewed
in order to establish any of defendants' purported defenses.
Defendants have therefore failed to make the necessary showing
for the Court to delay a ruling on the instant summary judgment
motion in order to permit further discovery.
Equally unpersuasive is defendants' suggestion that the Court
may not grant partial summary judgment because the bankruptcy of
the remaining defendants would render the entry of such a
judgment "unjust." Pursuant to Rule 54(b), the Court may only
enter a final order of judgment "as to one or more but fewer than
all of the claims or parties only upon an express determination
that there is no just reason for delay." Fed.R. Civ. P. 54(b).
Defendants present no reason why the Court should not make such a
finding. They offer no justification for delaying adjudication of
plaintiff's motion until the distant and unpredictable date when
the bankruptcy proceedings are finally resolved. By requiring a
stay of claims only against entities involved in bankruptcy
proceedings, but not against other defendants, the Bankruptcy
Code seeks to prevent precisely such delays. Cf. Teachers Ins.
and Annuity Ass'n of America v. Butler, 803 F.2d 61, 65-66 (2d
Cir. 1986) ("While we decline to define under what circumstances,
if any, a bankruptcy court may properly exercise § 105 jurisdiction to
issue a stay with respect to non-bankrupt co-defendants, it is
clear that any such jurisdiction cannot extend to efforts made in
bad faith by non-bankrupt co-defendants in order to escape from
the liability imposed by an adverse district court judgment.").
The prompt adjudication of plaintiff's claims against the
non-bankrupt defendants would promote the goals of fairness,
efficiency, and justice.
Accordingly, plaintiff's motion for partial summary judgment on
the first and third causes of action with respect to the
non-bankrupt defendants is granted, and a final order of judgment
will be entered.