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SOCIETE GENERALE ENERGIE CORP. v. N.Y. MARINE AND GEN. INS.

May 6, 2005.

SOCIETE GENERALE ENERGIE CORP., Plaintiff,
v.
NEW YORK MARINE AND GENERAL INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: DENNY CHIN, District Judge

MEMORANDUM DECISION

In July 1993, Societe Generale Energie Corp. ("SGE") discovered that approximately 1.7 million gallons of its petroleum was missing from a storage facility at Star Terminal in Highland, New York. SGE sued a number of defendants, including Hudson Energy Terminal ("Hudson"), in this Court. In 1997, the case was resolved as to all defendants except Hudson. SGE apparently requested a default judgment against Hudson, but the Court did not rule on the application and the case was closed on July 31, 1997. In December 2002, more than five years later, SGE wrote the Court (Brieant, J.) and asked that a default judgment be entered against Hudson. By memorandum endorsement filed December 12, 2002, Judge Brieant denied the request "[i]n light of the passage of time and laches." SGE did not appeal.

  Although the case remained closed, in June 2003, nearly ten years after the loss, SGE and Hudson purported to settle the case. Hudson agreed to pay SGE $1.6 million plus attorneys' fees and costs and Hudson assigned to SGE all its rights under a commercial liability insurance policy it had with New York Marine and General Insurance Company, Inc. ("NY MAGIC"). When it entered into the settlement, SGE knew that Hudson had no assets to pay the settlement amounts and it did not intend even to attempt to collect any monies from Hudson. Instead, five days later, SGE brought the instant action against NY MAGIC, alleging that it was entitled, as assignee of Hudson's rights under the policy, to indemnification from NY MAGIC for the amounts that Hudson had agreed to pay SGE in settlement of the prior lawsuit.

  Before the Court are the cross-motions of SGE and NY MAGIC for summary judgment. As discussed more fully below, I conclude as a matter of law that Hudson's purported settlement with SGE was not reasonable. Hudson's agreement to pay SGE $1.6 million plus fees and costs to settle a lawsuit that had been closed for more than five years made no sense. Accordingly, SGE's motion is denied, NY MAGIC's cross-motion is granted, and the complaint is dismissed. BACKGROUND

  A. The Facts

  The following facts are not in dispute, except where noted:

  SGE is a French corporation that, for at least the period September 1992 to September 1993, was engaged in the wholesale distribution of petroleum products. (Def.'s 56.1 Statement ¶ 1; Pl.'s Counter-Statement ¶ 1). Star Terminal, Inc. ("Star Terminal") was a New York corporation that owned and operated a fuel storage terminal in Highland, New York. (Def.'s 56.1 Statement ¶ 2; Pl.'s Counter-Statement ¶ 2). Hudson was a New York corporation formed by Richard Ferrara in 1992 for the purpose of purchasing Star Terminal. (Def.'s 56.1 Statement ¶¶ 3, 4; Pl.'s Counter-Statement ¶¶ 3, 4). Neither Star Terminal nor Hudson is an active corporation. NY MAGIC is a New York corporation in the commercial insurance business. (Def.'s 56.1 Statement ¶ 6; Pl.'s Counter-Statement ¶ 6).

  SGE entered into a storage agreement with Star Terminal on September 18, 1992 for storage of its petroleum products at the Star Terminal facility in Highland, New York. (Pl.'s Ex. A, Storage Agreement). The agreement provided that SGE's petroleum products could not be sold or removed from Star Terminal without prior payment to, and written approval from, SGE. (Id.). From the period September 1992 through July 1993, SGE regularly delivered petroleum products to Star Terminal for storage; as of July 1993, SGE stored more than 1.7 million gallons of petroleum products at Star Terminal. (Pl.'s 56.1 Statement ¶¶ 3, 4; Def.'s Reply Statement ¶¶ 3, 4).*fn1

  In early 1993, Star Terminal withdrew from operation of its terminal, turning it over to Hudson. (Pl.'s 56.1 Statement ¶ 7).*fn2 Hudson obtained a one-year Comprehensive General Liability insurance policy from NY MAGIC for the period December 30, 1992 through December 30, 1993. (Pl.'s 56.1 Statement ¶ 21; Def.'s Reply Statement ¶ 21). The anticipated sale of Star Terminal to Hudson was never consummated, but, according to plaintiff, Hudson maintained operation of the terminal. (Pl.'s Counter-Statement ¶ 16). NY MAGIC cancelled Hudson's policy effective June 27, 1993, for failure to pay premiums.*fn3 (Def.'s 56.1 Statement ¶ 24).

  In July 1993, SGE became concerned that it was not receiving regular inventory reports as required by the storage agreement; it appointed a surveyor to inventory its products at Star Terminal. (Pl.'s 56.1 Statement ¶ 5; Def.'s Reply Statement ¶ 5). SGE determined that approximately 1.7 million gallons of petroleum products were missing from Star. (Pl.'s 56.1 Statement ¶ 6; Def.'s Reply Statement ¶ 6). SGE placed its insurer — certain Underwriters at Lloyd's — on notice of a claim for the lost products. (Pl.'s 56.1 Statement ¶ 17; Def.'s Reply Statement ¶ 17). SGE's insurer paid SGE $2 million under its policy. (Id.). The consulting firm hired by SGE's insurer concluded that the missing petroleum had been stolen. (Def.'s 56.1 Statement ¶ 20; Pl.'s Counter-Statement ¶ 20).

  B. Prior Suit and Settlement

  On February 24, 1995, SGE filed a diversity action in this Court against, inter alia, Star Terminal and Richard Ferrara for breach of contract, bailment, and conversion. Societe Generale Energie Corp. v. Ferrara, 95 Civ. 1307 (CLB) (S.D.N.Y. 1995). SGE filed an amended complaint on May 8, 1997, adding Hudson as a defendant.*fn4 (Pl. Ex. G). SGE mailed a copy of the amended complaint to NY MAGIC on June 6, 1997. (Pl.'s 56.1 Statement ¶ 22; Def.'s Reply Statement ¶ 22; Pl. Ex. I). In response, NY MAGIC sent a letter dated June 12, 1997 to SGE stating that the claims "would not fall under [Hudson's] policy." (Pl. Ex. J).*fn5

  On June 13, 1997, Judge Brieant entered a default judgment in the amount of $1.6 million against Star Terminal, and on July 31, 1997 entered a stipulation of judgment against Emporium Oil Terminal, that also dismissed the complaint as to Richard Ferrara. (Pl. Ex. L, docket sheet). On July 14, 1997, SGE filed a request for a default judgment against Hudson,*fn6 but Judge Brieant apparently took no action on it. The Clerk of the Court closed the case on July 31, 1997. (Pl. Ex. L, docket sheet).

  Nearly five and a half years later, SGE's counsel wrote a letter to Judge Brieant, explaining that the Court had never ruled on its request for a default judgment against Hudson, and asked that Judge Brieant do so. (Pl. Ex. M, letter dated December 9, 2002). Judge Brieant "memo endorsed" the letter, declining to enter a default judgment and stating: [t]his letter is treated as some sort of motion in a case long since closed. The last docket entry is August 13, 1997, more than five ...


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