United States District Court, S.D. New York
For Xl Specialty Insurance Company, Plaintiff: David H. Topol, LEAD ATTORNEY, Wiley, Rein LLP, Washington, DC USA; John H. Eickmeyer, LEAD ATTORNEY, Vedder, Price, Kaufman & Kammholz, P.C., New York, N.Y. USA; Jonathan Alan Wexler, LEAD ATTORNEY, Vedder Price P.C. (NY), New York, N.Y. USA.
For John R. Lakian, Diane W. Lamm, Defendants: Brian Jonathan Osias, Richard Alan Beran, LEAD ATTORNEYS, McCarter & English, LLP (NJ), Newark, N.J. USA.
For Kobre & Kim Llp, Defendant: Edward Stein, LEAD ATTORNEY, Anderson Kill P.C. (N.Y.), New York, N.Y. USA.
For Marc D Youngelson, Intervenor Defendant: Marc David Youngelson, Dentons U.S. LLP, New York, N.Y. USA.
For Knox, Llc D/B/A Knox, Llc of New York, Djw Advisors, Llc, Intervenor: Philip M. Halpern, LEAD ATTORNEY, Collier, Halpern, Newberg, Nolletti & Bock, LLP, White Plains, N.Y. USA.
Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., Intervenor, Pro se, New York, N.Y. USA.
For Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., Intervenor: Eric R. Levine, LEAD ATTORNEY, Eric P Heichel, Kiah David Beverly-Graham, Eiseman, Levine, Lehrhaupt & Kakoyiannis, P.C., New York, N.Y. USA.
For Brief Carmen & Kleiman, Llp, Intervenor: Richard Eric Carmen, LEAD ATTORNEY, Brief Justice Carmen & Kleiman, LLP, New York, N.Y. USA.
MEMORANDUM AND ORDER
ANALISA TORRES, United States District Judge.
Interpleader Plaintiff, XL Specialty Insurance Company (" XL"), brings this action seeking to resolve conflicting and competing demands for the remaining $1, 372, 596.10 of a $3 million insurance policy that it issued to Capital L Group, LLC (" Capital L"). XL has named John R. Lakian, Diane W. Lamm, and Kobre & Kim LLP (" Kobre & Kim") as interpleader defendants (collectively, " Interpleader Defendants"). Now before the Court are four Rule 24 motions to intervene submitted by the following parties: (1) Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. (" Eiseman"); (2) Brief Carmen & Kleiman (" Brief'); (3) Merrill Communications LLC (" Merrill"); and (4) Knox, LLC d/b/a Knox, LLC of New York and DJW Advisors, LLC (collectively, " Knox and DJW"). XL's position is that all parties asserting a claim to the policy proceeds should be permitted to intervene. The motions of Eiseman, Brief, and Merrill are unopposed. Lakian, Lamm, Kobre & Kim, Eiseman, Brief, and Merrill each oppose Knox and DJW's motion to intervene.
For the following reasons, the motions of Eiseman, Brief, and Merrill are GRANTED. Knox and DJW's motion is DENIED with leave to renew.
This interpleader action arises from an insurance coverage dispute. XL issued a financial services liability insurance policy (the " Policy") to Capital L for the period from November 1, 2011 to November 1, 2012. Compl, ¶ 15, ECF No. 2. The Policy provides coverage to the insured parties--namely Capital L, Lakian, and Lamm--for losses, including damages, judgments, settlements, and defense expenses, arising from claims first asserted during that period for specified wrongful acts. Id. ¶ ¶ 17, 23; see also Compl. Ex. A at 35-40 (General Terms & Conditions), ECFNo 2-1. The Policy has a $3 million maximum aggregate limit of liability. Compl. ¶ 17. Under the terms of the Policy, the $3 million limit of liability to pay damages or settlements is reduced, and may be exhausted, by defense expenses incurred in defense of a claim. Compl. ¶ 20. Once XL has paid an aggregate $3 million in losses and covered defense expenses, it has no further obligations under the Policy. Id. ¶ ¶ 21-22.
On July 14, 2013, XL filed this interpleader action to resolve competing claims for the proceeds of the Policy and to be discharged from further liability with respect to those proceeds. Id. ¶ ¶ 55-58. Pursuant to Local Civil Rule 67.1 and as required under 28 U.S.C. § 1335, XL has deposited the remaining $1, 372, 596.10 limit of the $3 million Policy into the Registry of this Court. Docket Entry, dated July 31, 2014, Receipt Number 465401101200; see also Order to Deposit Funds into the Registry of the Court, ECF No. 3.
I. Interpleader Defendants
A. Lakian and Lamm
The insured parties, Lakian and Lamm, have sought coverage under the Policy for defense expenses incurred in two actions: (1) Knox, LLC v. Capital L. Group, LLC, No. 651880/2012 (N.Y. Sup. Ct., N.Y. Cnty.) (the " Knox Action"); and (2) Branigan v. Lakian, No. 651975/2012 (N.Y. Sup. Ct., N.Y. Cnty.) (the " Branigan Action"). Id. ¶ 26, 37.
The Knox Action involved allegations that Lakian and Lamm fraudulently induced investments in the now defunct Capital L and breached their fiduciary duties by allegedly misusing the plaintiffs' investments. Id. ¶ 37. The Knox plaintiffs alleged damages in excess of $2 million. Id. By letter dated June 20, 2012, XL acknowledged coverage under the policy for Lakian and Lamm and agreed to advance such expenses incurred in defending the Knox action. Id. ¶ 38. Lakian and Lamm initially retained Kobre & Kim to defend them in the Knox action. Id. ¶ 39. Kobre & Kim withdrew in late May or early June 2013, and Lakian and Lamm each retained separate counsel. Id. ¶ 41. Lamm hired Eiseman, and Lakian hired Brief. Capital L was also named as a defendant in the Knox Action, and, as described in greater detail below, a default judgment was entered against Capital L. See Halpem Aff. ¶ ¶ 4-13, ECF No. 27. XL does not acknowledge coverage for Capital L in connection with the Knox action, XL Mem. 2, 9-10, ECF No. 37, and, when XL contacted Capital L regarding its obligation to defend, XL received no response from Capital L or its agent, Hansen Decl. ¶ ¶ 4-5, ECF No. 40.
The Branigan Action involved similar allegations that Lakian and Lamm, among others, engaged in fraudulent inducement and fiduciary breaches. Compl. ¶ 26. The Branigan plaintiffs alleged damages in excess of $10 million. Id. By letter dated October 16, 2012, XL acknowledged coverage under the policy for Lamm for the Branigan Action and agreed to advance defense expenses. Id. ¶ 38. Lamm initially retained Kobre & Kim to represent her. Id. ¶ 29. Kobre & Kim withdrew in late May or early June 2013, and Lamm subsequently retained counsel at Eiseman. Id. ¶ ¶ 33-34. XL, however, denied coverage to Lakian in connection with the Branigan Action. Id. ¶ 32. The parties stipulated to resolve the Branigan Action by arbitration. Id. ¶ 27.
To date, XL has advanced $1, 627, 403.90 in defense expenses, including expenses incurred by Lakian and Lamm in the Knox Action and expenses incurred by Lamm in the Branigan Action. Id. ¶ ¶ 35, 42. Both the Knox and Branigan Actions are still at the discovery stage, and Lakian and Lamm continue to incur defense expenses and request that XL cover such expenses. Id. ¶ ¶ 36, 43-44. XL states that, based on invoices received and the current status of these actions, defense expenses and/or settlement amounts will exceed the remaining limit of the Policy. Id. ¶ 5.
B. Kobre & Kim
Kobre & Kim represented Lakian and Lamm in the Knox Action and Lamm in the Branigan Action through late May or early June 2013. Id. ¶ ¶ 33, 41. During the time that Kobre & Kim represented Lamm in connection with the Branigan Action, Kobre & Kim billed Lamm approximately $1, 314, 780.19 in fees and costs, more than $1 million of which remains outstanding. Id. ¶ 45. Lamm disputed the Kobre & Kim invoices and instructed XL not to pay the full amount on the grounds that the invoices did not represent work performed on her behalf and that the amount was unreasonable. Id. ¶ ¶ 46, 47. ...