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The Guardian Life Insurance Co. of America v. Liberty Wealth Strategies, LLC

United States District Court, S.D. New York

July 28, 2014



J. PAUL OETKEN, District Judge.

This action arises out of an agency relationship between Plaintiff, The Guardian Life Insurance Corporation of America ("Guardian"), and Defendants Liberty Wealth Strategies, LLC ("Liberty") and its individual members Carlos Liberty Rocha, Kim Lee Myers, and Sean Frank McIvor.[1] Guardian claims that Defendants owe $832, 117.83, plus interest accruing during the pendency of this action. (Dkt. No. 28, Plaintiff's Rule 56.1 Statement, at ¶ 163 [hereinafter: "Pl.'s 56.1"].) Defendants counter-claim that Guardian withheld money due to Liberty, undermined Defendants' business by delaying the start of the agency relationship, improperly billed Defendants for payments on a commercial lease, and improperly billed Defendants for certain other expenses. Guardian moves for summary judgment on its claims and Defendants' counterclaims. For the reasons that follow, Guardian's motion is granted.

I. Background[2]

From 2004 to 2008, Rocha served as a "career development manager" at Guardian's Seattle agency. (Pl.'s 56.1 at ¶ 19.) In this capacity, he sold insurance policies and other financial products on Guardian's behalf, apparently with considerable success. ( See id. at ¶ 34.) As a manager, Rocha was authorized to hire two "career development supervisors." ( Id. at ¶ 24.) He chose McIvor and Myers. ( Id. )

In 2008, Rocha, McIvor, and Myers (the Individual Defendants) decided to become general agents of Guardian. They incorporated Liberty as an LLC under Washington law, with Rocha owning an 80% interest, and McIvor and Myers each owning 10% interests. Liberty negotiated a series of agreements with Guardian establishing the agency relationship. Pursuant to these agreements, Guardian provided Liberty with a rotating line of credit to cover operating expenses. Liberty was expected to pay the debts amassed out of the commissions it earned selling insurance policies. Because Guardian was concerned about Liberty's limited liability under Washington law, it required Rocha, McIvor, and Myers to sign individual promissory notes guaranteeing payment on any Liberty debt that went unpaid. Rocha asserts that it was Guardian's policy to "slip in" individual promissory notes. (Dkt. No. 38, Defendant Rocha's Response, at 2.) Guardian insists that all three Individual Defendants were given an opportunity to read each contract that they signed and that they either read the contracts or deliberately chose not to. ( See generally Pl.'s 56.1.)

After Defendants started the agency, business apparently took a turn for the worse. According to Guardian, Defendants began failing to pay for various expenses and eventually amassed approximately $830, 000 of debt ( e.g., Pl.'s 56.1 at ¶ 28), in response to which Guardian began withholding commission payments on Defendants' insurance sales. ( Id. at ¶ 169.) Defendants maintain that their business woes were caused by Guardian's "routine[] and continuous[] act[ions] to undermine Liberty's efforts and deprive Liberty of substantial income and revenues." (Dkt. No. 38, Defendant Rocha's Response, at 1.) These actions include: (1) delaying the start of the agency arrangement by about three months, which "damaged Liberty's business and unfairly broke Liberty's momentum going forward"; (2) failing to "provide promised transition assistance to Liberty"; and (3) withhold[ing] excessive commissions" and "roll[ing]-over expenses" from the time when Rocha, McIvor, and Myers were Guardian employees. ( Id. at 1-2.)

Defendants were represented by counsel at the outset of this litigation. Since then, counsel was granted permission to withdraw. ( See Dkt. No. 34, Order Granting Motion to Withdraw.) Individual Defendants now appear pro se.

II. Discussion

A. Legal Standard

Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. A fact is material if it "might affect the outcome of the suit under the governing law, " Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), and a dispute is genuine if, considering the record as a whole, a rational jury could find in favor of the non-moving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

The initial burden of a movant on summary judgment is to provide evidence on each element of her claim or defense illustrating her entitlement to relief. Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004). If the movant meets this initial burden of production, the non-moving party must then identify specific facts demonstrating a genuine issue for trial. Fed.R.Civ.P. 56(f). The court views all evidence "in the light most favorable to the nonmoving party and draw[s] all reasonable inferences in its favor." Anderson, 447 U.S. at 250-51. A motion for summary judgment may be granted only if "no reasonable trier of fact could find in favor of the nonmoving party." Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir. 1995) (citation omitted). But the non-moving party cannot rely upon mere "conclusory statements, conjecture, or speculation" to meet its burden. Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir. 1996) (citing Matsushita, 475 U.S. at 587).

The contracts at issue in this case include a New York choice-of-law clause. ( See, e.g., Dkt. No. 29-2, Plaintiff's Exhibit 13, at 2.) Because the general agreements are essentially contracts for services, they are governed by New York's common law and general obligations law. N.Y. Gen. Oblig. Law § 1-201 (McKinney 2014). The promissory notes, which are negotiable commercial paper, are governed by Article Three of New York's Uniform Commercial Code. See N.Y. U.C.C. Law §§ 3-101, et. seq. (McKinney 2014).

Under New York law, a breach of contract claim requires proof of "the existence of a contract, the plaintiff's performance pursuant to the contract, the defendant's breach of his or her contractual obligations, and damages resulting from the breach." Dee v. Rakower, 112 ...

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