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American Manufacturers Mutual Insurance Co. v. Payton Lane Nursing Home

February 22, 2010

AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY AND AMERICAN MOTORISTS INSURANCE COMPANY, PLAINTIFFS,
v.
PAYTON LANE NURSING HOME, INC., PERKINS EASTMAN ARCHITECTS, P.C. AND LINCOLN GENERAL INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: A. Kathleen Tomlinson, Magistrate Judge

ORDER

I. PRELIMINARY STATEMENT

Defendant Payton Lane Nursing Home, Inc. ("Payton Lane") moves, in limine, for an order excluding the introduction of evidence by Plaintiffs "that any payments made by [P]laintiffs to E.W. Howell & Company, Inc. ('Howell') were on account of the obligations of Payton Lane (i.e. were not on account of [P]laintiffs' construction completion obligations)." See Affirmation of Jeffrey G. Stark in Support of In Limine Motion ("Stark Aff.") [DE 218], ¶ 1. Annexed to the Stark Affirmation are Payton Lane Exhibits A through M.*fn1 Payton Lane also submitted the Supplemental Affirmation of Robert C. Angelillo ("Angelillo Supp. Aff.") [DE 222] with Exhibits N and O.*fn2 Defendant Lincoln General Insurance Company ("Lincoln") joins Payton Lane's motion in limine to preclude the evidence referenced here. See DE 223. In support of its motion, Lincoln submitted only a Notice of Motion and relies entirely on Payton Lane's papers. Id.

Plaintiffs American Manufacturers Mutual Insurance Company and American Motorists Insurance Company ("Plaintiffs" or "Sureties") filed opposition papers which consist of a Memorandum of Law in Opposition to Defendant's In Limine Motion ("Pls.' Mem.") [DE 232] and the Affidavit of Steven H. Rittmaster ("Rittmaster Aff.") [DE 231], to which Exhibits 1 through 4 are annexed.

Based upon my review of the parties' submissions and the applicable case law, Payton Lane's Motion In Limine, joined in by Defendant Lincoln,is DENIED.

II. THE PARTIES'CONTENTIONS

In a prior litigation entitled American Manufacturers Mutual Insurance Company and American Motorists Insurance Co. v. IDI Construction Co., Inc., James Stumpf, Theodore (Ted) Kohl, Kent M. Swig and Trevor Prince, Index No. 602394-04 (N.Y. Sup. Ct. N.Y. County) (the "IDI case"), the Sureties brought claims against Ted Kohl ("Kohl") and others*fn3 seeking indemnification (for losses incurred during the course of the Project and the instant litigation) under a General Indemnity Agreement ("GIA") (Stark Aff., Ex. G), which the Sureties had entered into pursuant to their role as IDI's insurer on the Project. According to Payton Lane, in the IDI case, the Sureties sought indemnification from Kohl and others for payments made to Howell which "were part of plaintiffs' 'construction completion obligations[.]'" Stark Aff., ¶ 6. In other words, Payton Lane argues, the Sureties took the position that the money they paid to Howell was on account of the Sureties' obligations under the Takeover Agreement -- obligations for which the Sureties were not entitled to payment from Payton Lane. Further, Payton Lane maintains that the Sureties "obtained a judgment against Kohl based on those sworn allegations." Stark Aff., ¶ 6.

In the instant motion, Payton Lane contends that the Sureties' position in the current litigation -- that Payton Lane is liable for payments made by the Sureties to Howell in the amount of $3,638,065.00 -- is contradictory to their earlier position in the IDI case. Id., ¶ 7. Thus, Payton Lane argues, under the doctrine of judicial estoppel, Plaintiffs are barred from asserting this contradictory position in the instant litigation. Id., ¶ 8. Specifically, Payton Lane asserts as follows:

To the extent that plaintiffs seek to offer proof in the present action that Payton Lane is liable for any of the monies for which plaintiffs have obtained judgment against Kohl, they are barred from doing so pursuant to the doctrine of judicial estoppel. Similarly, because of their claims to the contrary in the IDI case, plaintiffs are estopped from offering proof in the present case that any payments to Howell were the responsibility of Payton Lane, not plaintiffs.

Id.

In opposition, the Sureties argue that, in the IDI case, they took the position that "as of December 5, 2005, the Sureties had paid $21,806,973 'to meet and perform its construction completion obligations under the Payton Lane Performance Bond[,]" (id., ¶ 2 and Stark Aff. Ex. D at 4), and, under the GIA, the Sureties were entitled to repayment of the entire amount paid to Howell. Pls.' Mem. at 2-3. The Sureties maintain that, contrary to Payton Lane's characterization, their position in the instant action is that Payton Lane is liable for approximately $19.5 million which the Sureties paid to Howell "for work the Sureties agreed to perform under the Takeover Agreement [and] the substantial payments made to Howell for additional and/or corrective work." Rittmaster Aff., ¶ 4. The Sureties further contend that the fact that the Sureties' indemnitor is liable to repay the Sureties for all of the Sureties 'loss' as defined in the Indemnity Agreement he signed - but lacks the money to do so - in no way exculpates Payton Lane from its obligation to honor its own commitments in the Takeover Agreement it signed.

Pls.' Mem. at 5. According to the Sureties, their position in the instant litigation is not contrary to their earlier position in the IDI case and thus, the doctrine of judicial estoppel is inapplicable. Id., ¶¶ 1, 4, 5. The Sureties also maintain that, in any event, their earlier position (as characterized by Payton Lane) was not adopted by the court in the IDI action, as further required under the doctrine of judicial estoppel. Rittmaster Aff., ¶ 7 and Ex. 1; Pls.' Mem. at 5.

III. LEGAL STANDARD

Judicial estoppel "prevents a party from asserting a factual position in a legal proceeding that is contrary to a position previously taken by him in a prior legal proceeding." Bates v. Long Island R.R. Co., 997 F.2d 1028, 1037 (2d Cir. 1993); see also New Hampshire v. Maine, 532 U.S. 742, 749 (2001) ("Where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position....") (quoting Davis v. Wakelee, 156 U.S. 680, 689 (1895)). "It is a 'rare remedy' used to avoid inconsistent outcomes and to prevent litigants from abusing the power of the court." In re Initial Pub. Offering Secs. Litig. (Liu v. Credit Suisse First Boston Corp.), 383 F. Supp. 2d 566, 574 (S.D.N.Y. 2005) (citing cases). A party invoking judicial estoppel must show (1) that the party against whom the estoppel is asserted took an inconsistent position in a prior proceeding, and (2) the initial position was adopted by the first tribunal in some manner. Mitchell v. Washingtonville Cent. Sch. Dist., 190 F.3d 1, 6 (2d Cir. 1999) (citing Bates, 997 F.2d at 1038). In addition, courts in the Second Circuit often consider "whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped." Uzdavines v. Weeks Marine, Inc., 418 F.3d 138, 147 (2d Cir. 2005) (quoting New Hampshire v. Maine, 532 U.S. at 750-51); Galin v. Goldfischer, 03 Civ. 9019, 2008 WL 5484318, at *5 (S.D.N.Y. Dec. 31, 2008) (quoting Zedner v. United States, 547 U.S. 489, 503 (2006)). "Judicial estoppel aims to 'preserve the sanctity of the oath by demanding absolute truth and consistency in all sworn positions' and to 'protect judicial integrity by avoiding the risk of inconsistent results in two proceedings.'" Negron v. Weiss, No. 06-CV-1288, 2006 WL 2792769, at *3 (E.D.N.Y. Sept. 27, 2006) (quoting Bates, 997 F.2d at 1038). However, the application of judicial estoppel is highly fact-specific. See, e.g., United States v. West Prods., Ltd., 168 F. Supp. 2d 84, 88-89 (S.D.N.Y. 2001) (summarizing cases). Within the Second Circuit, the application of judicial estoppel is limited to ...


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