United States District Court, S.D. New York
NATIONAL CONVENTION SERVICES, L.L.C. ET AL, Plaintiffs,
APPLIED UNDERWRITERS CAPTIVE RISK ASSURANCE COMPANY, INC. ET AL, Defendants.
OPINION AND ORDER
G. KOELTL, District Judge.
dispute arises out of a complicated insurance scheme executed
by several affiliated insurance carriers, and their other
affiliates, that was allegedly designed to circumvent the
insurance laws of, among other states, New York. It involves
three allegedly interconnected contracts that, according to
the plaintiffs, should be treated as one interdependent
transaction: First, a workers' compensation insurance
contract between a licensed insurer and an insured; second, a
"reinsurance" contract between the licensed insurer
and an affiliated "reinsurer"; and third, a
"reinsurance and profit sharing" contract between
the reinsurer and the insured. The plaintiffs allege that the
"reinsurance and profit sharing" contract is not
actually a separate contract for reinsurance and profit
sharing, but instead is an illegal contract of insurance that
modifies the material terms of the workers' compensation
insurance contract issued by the licensed insurer. The
plaintiffs also claim that the "reinsurance and profit
sharing" contract is materially misleading, and leads
insureds unwittingly to buy back the very risk that they had
yielded to the licensed insurer.
defendants' insurance scheme was so inventive and novel
that it has been patented. In spite of the patent, the scheme
has drawn the scrutiny of the insurance regulators of at
least three states --- California, Wisconsin, and Vermont ---
which have each found that the scheme did in fact violate the
insurance laws of those states.
defendants are Applied Underwriters Inc. ("Applied
Underwriters"), Applied Underwriters Captive Risk
Assurance Company, Inc. ("AUCRA"), Applied Risk
Services Inc. ("ARS"), Applied Risk Services of New
York Inc. ("ARSNY"), Continental Indemnity Company
("Continental Insurance"), and California Insurance
Company ("California Insurance"). The plaintiffs,
on behalf of a purported class, are National Convention
Services, LLC, and Exserv, Inc. (the "NCS
plaintiffs"); and Madjek Construction, Inc., R.D.D.,
Inc., and R.D.D. Management, Inc. (the "RDD
plaintiffs"). The plaintiffs have brought claims against
Continental Insurance and California Insurance for breach of
contract (Count III); and against all of the defendants for
rescission (Count II), violation of N.Y. Gen. Bus. L. §
34 9 (Count IV), and unjust enrichment (Count
plaintiffs brought this action in the New York State Supreme
Court, New York County. After the defendants removed the
action to this Court pursuant to 28 U.S.C. §§ 1332
and 1441, the NCS plaintiffs filed an amended class action
complaint, in which the RDD plaintiffs joined. The RDD
plaintiffs had previously filed their own action against the
defendants in the New York State Supreme Court, New York
defendants have moved to dismiss the Second Amended Complaint
pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. For the following reasons, the defendants'
motion to dismiss is granted in part and denied in part.
deciding a motion to dismiss pursuant to Rule 12(b) (6), the
allegations in the complaint are accepted as true, and all
reasonable inferences must be drawn in the plaintiff's
favor. McCarthy v. Dun & Bradstreet Corp., 482
F.3d 184, 191 (2d Cir. 2007). The Court's function on a
motion to dismiss is "not to weigh the evidence that
might be presented at a trial but merely to determine whether
the complaint itself is legally-sufficient, "
Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.
1985}. The Court should not dismiss the complaint if the
plaintiff has stated "enough facts to state a claim to
relief that is plausible on its face." Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged." Ashcroft v. Igbal, 556 U.S. 662, 678
the Court should construe the factual allegations in the
light most favorable to the plaintiff, "the tenet that a
court must accept as true all of the allegations contained in
the complaint is inapplicable to legal conclusions."
Id.; see also Springer v. U.S. Bank Nat'1
Ass'n, No. 15-CV-1107 (JGK), 2015 WL 9462083, at *1
(S.D.N.Y. Dec. 23, 2015). When presented with a motion to
dismiss pursuant to Rule 12(b)(6), the Court may consider
documents that are referenced in the complaint, documents
that the plaintiff relied on in bringing suit and that are
either in the plaintiff's possession or that the
plaintiff knew of when bringing suit, or matters of which
judicial notice may be taken. Chambers v. Time Warner,
Inc., 282 F.3d 147, 153 (2d Cir. 2002); see also
Springer, 2015 WL 9462083, at *1.
allegations in the Second Amended Complaint are accepted as
true for the purposes of this motion to dismiss.
compensation is a form of insurance that provides wage
replacement and medical benefits to employees injured during
the course of their employment. SAC ¶ 30. New York has
enacted a comprehensive regulatory scheme for workers'
compensation that shifts the risk of on-the-job injuries from
employees to employers. SAC ¶ 30. In turn, under the New
York scheme, employers may purchase workers' compensation
insurance from insurance carriers that are licensed to market
and sell insurance in New York. SAC ¶ 35.
to the Workers' Compensation Law ("WCL")
§§ 10 and 50, all employers must secure the payment
of workers' compensation benefits for their employees.
SAC ¶ 30. The WCL provides that employers may secure the
payment of workers' compensation for their employees by
purchasing a workers' compensation policy from any
insurance carrier authorized to transact such business in New
York. SAC ¶ 31 (citing WCL § 50(2)) . An insurance
carrier must be licensed by the New York Department of
Financial Services (the "DFS") in order to issue
workers' compensation insurance in New
York. SAC ¶¶ 9, 35.
York Insurance Law ("NYIL") regulates the provision
of workers' compensation insurance. SAC ¶ 3. For
example, under the NYIL, all workers' compensation
insurance policy forms, rates, rating plans, rating rules,
and rate manuals must be filed with and approved by the DFS.
SAC ¶ 2. An insurance carrier may not vary an already
approved rate or policy form without prior approval from the
DFS. SAC ¶¶ 3-4, 33-34.
carriers offer two main types of workers' compensation
policies: guaranteed cost ("GC") policies, and
retrospective rating plan ("RRP") policies. A GC
policy essentially fixes insurance premiums at the outset,
meaning that the actual cost of the claims against the policy
will not cause premiums to fluctuate during the life of the
policy. SAC ¶¶ 35-38, 40-41. Premiums under a GC
policy may fluctuate depending upon certain other factors,
such as the size of an employer's workforce, and the
injury risks associated with a particular field of business,
but generally give an employer a degree of certainty as to
the cost of the insurance policy. SAC ¶¶ 36-38. By
contrast, a RRP policy is loss sensitive, meaning that
premiums can fluctuate during the life of the policy
depending on the actual cost of the claims (typically, the
greater the actual cost of the claims, the greater the
premiums owed). SAC ¶¶ 35, 3 9-40. As compared to
large employers, small-to-medium size employers are alleged
to prefer GC policies because such employers require accurate
estimates of future costs and are materially harmed by
increases in costs. See SAC ¶ 94.
defendants are alleged to be members of the Berkshire
Hathaway Group, and are also alleged to be affiliated with
each other. SAC ¶ 22; see also SAC, Ex. D (In
re: Shasta Linen Supply Inc.) at 9-10 (discussing the
complicated organizational structure of the defendants).
Insurance is an Iowa insurance company, with its headquarters
and principal place of business in Nebraska. SAC ¶ 20.
California Insurance is a California insurance company, with
its principal place of business in Nebraska. SAC ¶ 21.
During the relevant period, the Second Amended Complaint
alleges that both Continental Insurance and California
Insurance were doing business in New York as licensed
insurance carriers issuing insurance policies, including
policies for workers' compensation insurance. SAC
Insurance and California Insurance are wholly-owned
subsidiaries of North American Casualty Company, which is not
named as a party in this action. SAC, Ex. D at 9-10. North
American Casualty Company is a wholly owned subsidiary of
Applied Underwriters, a Nebraska financial service
corporation, with its principal place of business in
Nebraska. SAC, Ex. D at 10. Applied Underwriters provides
payroll processing services, and solicits and underwrites the
sale of workers' compensation insurance to
small-to-medium size employers through its affiliated
insurance companies. SAC ¶ 16.
Underwriters is also the parent company of AUCRA and ARS.
SAC, Ex. D at 9-10. AUCRA is an insurance company that,
during the relevant period, was domiciled in the British
Virgin Islands. SAC ¶ 17. AUCRA was not a licensed
insurer in New York. SAC ¶ 9. AUCRA is currently
organized under the laws of Iowa, with its principal place of
business in Nebraska. SAC ¶ 17. ARS is a Nebraska
corporation, with its principal place of business in
Nebraska. SAC, Ex. D at 11; see also SAC ¶ 18.
ARSNY is a New York corporation that does business in New
York. SAC ¶ 19, 22.
plaintiffs allege that the defendants are under common
ownership and control, that they share common officers and
directors, and that they use the same office space. SAC
¶ 22; see also SAC, Ex. D at 11 (finding of the
California Insurance Commissioner that "[t]he Boards of
Directors for [California Insurance], [Applied Underwriters],
and AUCRA are identical in composition").
plaintiffs claim that the defendants used their corporate
structure to thwart the NYIL, and, in the process, willfully
violated many of its sections. See, e.g., SAC ¶
42. Each defendant allegedly played a role in effecting the
first step in the alleged scheme, Continental Insurance and
California Insurance marketed and sold workers'
compensation GC policies that had been filed with, and
approved by, the DFS (the "Approved GC
policies"). SAC ¶¶ 8-9; see also
SAC, Ex. B (Workers' Compensation and Employer's
Liability Insurance Policy Issued by Continental Insurance to
the RDD Plaintiffs). The plaintiffs allege that the Approved
GC policies, as stand-alone policies, gave the appearance of
compliance with the NYIL. SAC ¶¶ 8-9. The Approved
GC Policies contained fixed-cost premiums rates, see
SAC ¶ 13, and were effective for one-year periods, an
allegedly standard term in a GC workers' compensation
policy, SAC ¶¶ 10, 60. The Approved GC Policies
This policy includes at its effective date the Information
Page and all endorsements and schedules listed there. It is a
contract of insurance between you (the employer named in Item
1 of the Information Page) and us (the insurer named on the
Information Page) . The only agreements relating to this
insurance are stated in this policy. The terms of this policy
may not be changed or waived except by endorsement issued by
us to be part of this policy. SAC ¶ 47 (emphasis
plaintiffs allege that the Approved GC Policies were a sham
designed to conceal from the DFS the real terms of unapproved
insurance policies that the defendants were marketing and
selling, which were set forth in a separate document. SAC
¶¶ 42, 44. The plaintiffs allege that purchase of
the Approved GC Policies offered by Continental Insurance and
California Insurance was conditioned on an insured's
entrance into a "Profit Sharing Plan." SAC
¶¶ 9, 48. The Profit Sharing Plans were known by a
variety of names, including "SolutionOne" and
"EquityComp." SAC ¶ 48.
of the Profit Sharing Plan, the insured had to agree to a
"Reinsurance Participation Agreement" (the
"RPA") issued by AUCRA (not Continental Insurance
or California Insurance) that allegedly modified the material
terms of the Approved GC Policy. SAC ¶ 9; see
also Ex. C (The RPA Issued by AUCRA to the NCS
plaintiffs). The RPA stated that AUCRA had entered into a
"Reinsurance Treaty . . . with California Insurance . .
. and, through its pooling arrangement with other affiliates
of Applied Underwriters, Inc., [i]ncluding, but not limited
to Continental [Insurance], " and that the RPA's
purpose was to allow the insured party to "share [i]n
the underwriting results of the Workers' Compensation
policies of Insurance Issued for the benefit of the [Insured]
by the Issuing Insurers." SAC, Ex. C at 1.
was not filed with, or approved by, the DFS; indeed, the
plaintiffs claim that the DFS could not have approved the RPA
(or an Approved GC Policy as modified by the RPA) because the
RPA, on its face, violated numerous sections of the NYIL, and
the regulations promulgated thereunder. SAC ¶¶ 5-8,
60-62. The plaintiffs claim that the RPA was not an
endorsement to the Approved GC Policy, SAC ¶ 49, nor
could it be an instrument of reinsurance because an
instrument of reinsurance is by definition unconnected to the
original insured, SAC ¶ 75.
plaintiffs allege that the RPA superseded the fixed-cost
premium rates in the Approved GC Policies with loss sensitive
rates. SAC % 43. The plaintiffs also allege that the
RPA changed the effective period of an Approved GC Policy
from one year to three years, and that the RPA
imposed additional failure-to-renew costs that incentivized
insureds to renew the RPA beyond the three-year period. SAC
¶¶ 60-61. The plaintiffs allege that the RPA
imposed onerous early cancellation penalties. SAC ¶ 62.
The plaintiffs allege that cancellation of the RPA would
result in cancelation of the Approved GC Policy. SAC ¶
California Insurance Commissioner has reviewed an allegedly
substantially identical insurance package issued by the
defendants to a California-insured where the insured signed
an approved (under California law) GC workers'
compensation insurance policy issued by California Insurance,
and an RPA issued by AUCRA. See SAC, Ex. D; see also
SAC ¶¶ 5, 97. After an adversarial hearing during
which California Insurance had the opportunity to present
evidence, including witness testimony, the California
Insurance Commissioner found that "where the RPA and the
guaranteed cost policy differ, the RPA terms supplant those
of the guaranteed-cost policy." SAC, Ex. D at 55.
plaintiffs allege that, in marketing the Profit Sharing Plan
to employers, the defendants mischaracterized the RPA as a
"reinsurance" and a "profit sharing"
instrument --- when it was in reality an insurance contract
that modified the terms of the Approved GC Policy --- to
escape regulatory scrutiny, and to mislead customers. SAC
¶¶ 5-6, 51-52, 55. The plaintiffs claim that the
RPA obligates an insured to fund a "cell, " with
the amount of funding dependent on a complex formula that
takes into account "loss experience" (in other
words, the cost of the insured's claims filed against the
Approved GC Policy). SAC ¶¶ 56-57. The plaintiffs
allege that, although the defendants represented at the
outset that they will return "excess premium and
fees" at the conclusion of the Profit Sharing Plan, the
Plan contains numerous caveats and delaying provisions, and
no insured has received a distribution or return of premiums.
See SAC ¶ 63-64; see also SAC, Ex. D
at 3 5 (finding of the California Insurance Commissioner
that, as of June 20, 2016, "AUCRA has not made any
profit sharing distributions" to any insured party).
plaintiffs allege that, to explain the transaction to
customers, the defendants provided customers with the
Approved GC Policy along with marketing materials (consisting
of a "Program Summary & Scenario, " a
"Program Proposal, " and a "Request to Bind
Coverages and Services") describing the RPA, but not the
RPA itself. SAC ¶¶ 81, 83; see also SAC,
Ex. E (Request to Bind Coverages and Services provided to the
RDD plaintiffs); SAC, Ex. F (Workers' Compensation
Program Summary & Scenario provided to the RDD
plaintiffs}; SAC, Ex. G (Workers' Compensation Program
Proposal & Rate Quotation provided to the RDD
plaintiffs). As such, a customer of an Approved GC Policy
could not review the final terms of the RPA (to which the
customer had to agree in order to receive coverage under an
Approved GC Policy) until after the customer had agreed in
advance to enter into the Profit Sharing Plan by signing the
Request to Bind Coverages and Services. SAC ¶¶ 53,
71, 81; see also SAC, Ex. E. The Program
Proposal states that the "Profit Sharing Plan is a
reinsurance transaction separate from the guaranteed cost
policies, " and that the "Profit Sharing Plan is
not a filed retrospective rating plan or dividend plan."
See SAC, Ex. G at 3. The plaintiffs claim that this
statement was false and misleading because the RPA in reality
altered the terms of the Approved GC Policy, which a customer
would not understand based upon reviewing the marketing
materials, or even the RPA itself. See SAC ¶¶
50-51, 65, 79-80, 86; see also SAC, Ex. D at 28-29
(finding of the California Insurance Commissioner that an
insured that signed a GC policy issued by California
Insurance, and a Request to Bind Coverages and Services
issued by Applied Underwriters, but later refused to sign an
RPA issued by AUCRA, would lose insurance coverage under the
plaintiffs allege that, even though the marketing materials
disclosed cost estimates for the Profit Sharing Plan, a
customer could not accurately determine the likely costs
associated with the Profit Sharing Plan based upon those
estimates. SAC ¶¶ 87-88. On this point, the
California Insurance Commissioner found that:
[Applied Underwriters'] Sales department distributes a
Program Summary & Scenario to brokers and their clients.
The Scenarios demonstrate the minimum and maximum three-year
program costs and estimate the final program costs based on
ultimate claims costs. The Scenarios chart the single-year
prorated amounts a participant could expect to pay. . . . But
this chart is misleading. EquityComp is sold as a three-year
program and not three one-year programs. Accordingly, the
single-year table does not represent the one-year cost of the
program. In fact, it is the employer's three-year loss
history that ultimately guides the cost of the program. SAC,
Ex. D. at 27.
plaintiffs allege that the defendants' scheme broadly and
aggressively targeted small-to-medium size businesses because
such businesses are less sophisticated than larger companies,
and would be susceptible to agreeing to an Approved GC
Policy, coupled with the RPA, without appreciating the
ramifications of the decision. SAC ¶¶ 65, 77, 82;
see also SAC, Ex. D at 22-23. Indeed, the Plan
Proposal states that "Applied Underwriters and its
affiliates" established Profit Sharing Plan cells that
are "designed specifically for our small and midsized
insureds." SAC, Ex. G at 5. The plaintiffs allege that
the defendants marketed the Profit Sharing Plan nationally
with standardized documents on a take-it-or-leave-it basis.
SAC ¶¶ 81-83.
plaintiffs allege that the defendants operated the Profit
Sharing Plan as a single business unit without regard to
their corporate form, and that the distinction between the
Approved GC Policy and the RPA as distinct contracts issued
by distinct entities is a fiction. SAC ¶ 22. Applied
Underwriters allegedly sent notices of cancellation to
holders of Approved GC Policies issued by Continental
Insurance, or California Insurance, when the holder violated
the terms of the RPA issued by AUCRA, even when the holder
had not violated the terms of the Approved GC Policy. SAC
¶ 23. ARS prepared the Program Summary & Scenario
and the Program Proposal on behalf of Applied Underwriters.
See SAC, Exs. F-G. ARSNY allegedly served as the billing
agent on behalf of AUCRA, Continental Insurance, and
California Insurance. SAC ¶ 22. The Program Proposal
provided that Applied Underwriters used an "integrated
billing system" to assess charges under the Approved GC
Policy and the RPA --- accordingly, payments due on the
Approved GC Policy and the RPA appeared in a single line
item. SAC, Ex. G at 5; see also SAC, Ex. D at 30.
Underwriters has patented the scheme at issue. See
SAC, Ex. A ("Reinsurance Participation Plan",
Patent No. 7, 908, 157 B1). The patent explains that:
One of the challenges of introducing a fundamentally new
premium structure into the marketplace is that the structure
must be approved by the respective insurance departments
regulating the sale of insurance in the states in which the
insureds operate. In the United States, each state has its
own insurance department and each insurance department must
give its approval to sell insurance with a given premium plan
in its respective jurisdiction. Getting approval can be
extremely time consuming and expensive, particularly with
novel approaches that a department hasn't had experience
with before. Also, many states require insurance companies to
only offer small sized and medium sized companies a
Guaranteed Cost plan, without the option of a retrospective
plan. In part, this is because of governmental rules and laws
that regulate the insurance industry. Disclosed herein is a
reinsurance based approach to providing non-linear
retrospective premium plans to insureds that may not have the
option of such a plan directly. SAC, Ex. A at 6.
state insurance departments of California, Vermont, and
Wisconsin have concluded that the defendants' marketing
and sale of a guaranteed cost plan compliant with the laws of
those respective states, coupled with the RPA, does not
comply with the insurance laws of those respective states.
See SAC, Ex. D at 53-63 (determination by the
California Insurance Commissioner that the RPA is a
collateral agreement that modifies the underlying guaranteed
cost policy in violation of California law); SAC, Ex. I
(Vermont Stipulation and Consent Order) at 5-11 (ordering
Continental Insurance, Applied Underwriters, ARS, and AUCRA
to cease marketing and selling the RPA, and to pay
restitution to policyholders that entered into Profit Sharing
Plans); SAC, Ex. J (Wisconsin Office of the Commissioner of
Insurance Orders) (ordering ARS and Continental Insurance to
cease-and-desist marketing and selling the Profit Sharing
Plans); see also SAC, Ex. H (California Insurance
Commissioner Notice of Hearing for Cease & Desist
plaintiffs are New York corporations, with their principal
places of business in New York, that provide services in
connection with exposition and trade shows throughout the
United States. SAC ¶ 14. The RDD plaintiffs are also New
York corporations, with their principal places of business in
New York. SAC ¶ 15.
October 2 012, the NCS plaintiffs began requesting quotes
from workers' compensation insurance carriers. SAC ¶
101. The defendants proposed that the NCS plaintiffs enter
into a Profit Sharing Plan, and provided the plaintiffs with
Approved GC Policies issued by Continental Insurance, and
California Insurance, along with marketing materials
describing the Profit Sharing Plan. SAC ¶ 101-02;
see also Coles Decl., Ex. 1 (Workers'
Compensation Program Proposal & Rate Quotation provided
to the NCS plaintiffs); Coles Decl., Ex. 3 (Workers'
Compensation Program Summary & Scenario provided to the
NCS plaintiffs). The NCS plaintiffs agreed to a Request to
Bind Coverages and Services that bound them to accept the
terms of the Profit Sharing Plan, and were allegedly only
then provided with the actual RPA. SAC ¶ 102; see
also SAC, Ex. B. The plaintiffs allege that their
premiums under the Profit Sharing Plan far exceeded the
premiums set forth in the Approved GC Plan. SAC ¶¶
105-10. For example, while the annual estimated cost of
coverage under the Approved GC Policy for the 2014-2015 term
was $420, 325, the premiums for January 2015 alone were $683,
268. SAC ¶ 109. The NCS plaintiffs refused to pay their
January 2 015 premiums, and the defendants canceled their
insurance coverage on March 22, 2015. SAC ¶¶
111-12. The defendants have since demanded that the NCS
plaintiffs pay $1.59 million in outstanding premiums, plus a
cancellation fee of nearly $1 million. SAC ¶ 112.
plaintiffs' experience with the defendants is alleged to
be substantially similar to that of the NCS plaintiffs. In
November 2009, the RDD plaintiffs' insurance broker
obtained quotations for workers' compensation insurance,
and presented the RDD plaintiffs with the defendants'
marketing materials describing the Profit Sharing Plan. SAC
¶ 115; see also SAC, Exs. E-G. The RDD
plaintiffs agreed to participate in the Profit Sharing Plan
on December 31, 2009. SAC ¶ 116; see also Coles
Decl., Ex. 2 (The RPA Issued by AUCRA to the RDD plaintiffs).
In April 2012, the defendants began charging the RDD
plaintiffs substantially higher premiums, as compared to
prior months. SAC ¶¶ 120-21. In early July 2012,
the RDD plaintiffs notified Applied Underwriters that it had
purchased insurance from another insurance carrier effective
July 1, 2012. SAC ¶ 122. On July 18, 2012, Continental
Insurance canceled the Approved GC Policy issued to the
plaintiffs even though the RDD plaintiffs had allegedly paid
the premiums due on that Approved GC Policy. SAC ¶ 122.
As a consequence, the RDD plaintiffs allege that they may
have no workers' compensation coverage with respect to
any employee claims that arise from events that took place
between December 31, 2011, and August 2, 2012. SAC ¶
December 27, 2013, Applied Underwriters demanded that the RDD
plaintiffs pay an additional $95, 368.54 incurred after the
cancellation of the Profit Sharing Plan. SAC ¶ 124. The
RDD plaintiffs allege that the defendants have not provided
an explanation for the additional charge. SAC ¶ 126.
parties agree that the Approved GC Policies, as contracts of
insurance, must be governed by New York law. See
NYIL § 3103(b). The RPAs provide that they are governed
by Nebraska law. SAC, Ex. C ¶ 16. However, the parties
agree that New York law should apply to all of the issues in
this dispute, and New York law will be applied in accordance
with their agreement. Am. Fuel Corp. v. Utah Energy Dev.
Co., 122 F.3d 130, 134 (2d Cir. 1997) ("[W]here the
parties have agreed to the application of the forum law,
their consent concludes the choice of law inquiry.");
see also Rolon v. U.S. Amada, Ltd., No. 95 Civ. 6231
(LAP), 1997 WL 724798, at *2 (S.D.N.Y. Nov. 18, 1997). In any
event, the parties agree that, for the common law claims,
there is no conflict between Nebraska and New York law, and
that the N.Y. Gen. Bus. L. § 34 9 claims must be
governed by New York law. see 433 Main St.
Realty, LLC v. Darwin Nat'l Assurance Co., No.
14-CV-587 (NGG), 2014 WL 1622103, at *2 n.2 (E.D.N.Y. Apr.
case implicates questions related to the proper
interpretation of New York statutes and New York common law.
A federal court sitting in diversity must look to the
decisional law of the forum state and the state constitution
and statues. Erie R.R. Co. v. Tompkins, 304 U.S. 64,
78 (1938); Travelers Ins. Co. v. 633 Third Assoc, 14
F.3d 114, 119 (2d Cir. 1994) . Where the substantive law of
the forum is ambiguous or uncertain, the federal court must
strive to predict how the highest court of the forum state
would resolve the issue. Travelers, 14 F.3d at 119; In re
Eastern and Southern Districts Asbestos Litig., 772
F.Supp. 1380, 1388-91 (E. & S.D.N.Y. 1991) (Weinstein,
J.), rev'd on other grounds sub nom. In re Brooklyn
Navy Yard Asbestos Litig., 971 F.2d 831 (2d Cir. 1992).
Decisions of the Appellate Division "are entitled to
persuasive, if not decisive consideration." Sphere
Drake Ins. Co. v. P.B.L. Entertainment, Inc., 30 F.3d
21, 23 (2d Cir. 1994), vacated on other grounds, 52
F.3d 22 (2d Cir. 1995) (citation omitted); see also Chase
Manhattan Bank, N.A. v. T & N pic, 905 F.Supp. 107,
113-14 (S.D.N.Y. 1995).
Count II, the plaintiffs have brought claims against the
defendants for rescission to reform the transactions at issue
by voiding the terms of the RPAs such that the plaintiffs are
only bound by the Approved GC Policies, and for rescissory
damages in the amount of any premiums charged and paid
over-and-above the premiums called for by the Approved GC
plaintiffs argue that the RPAs are void as a matter of public
policy. The defendants do not contest the alleged
violations of the NYIL; rather, they argue that there is no
private right of action to enforce the sections of the NYIL
relating to workers' compensation insurance.
plaintiffs concede that the NYIL does not confer a general
private right of action to enforce compliance with all of its
sections, but they do contend that some sections expressly or
impliedly provide for a private right of action as an
enforcement mechanism. See, e.g., Harrison v.
Metro. Life Ins. Co., 417 F.Supp.2d 424, 432 (S.D.N.Y.
2006); Soliman v. Daimler AG, No. CV 10-408 (SJF)
(AKT), 2011 WL 765885, at *9 (E.D.N.Y. Feb. 9, 2011)
(collecting cases), report and recommendation
adopted, No. 10 CV 408 (SJF) (AKT), 2011 WL 765931
(E.D.N.Y. Feb. 24, 2011); see also Cruz v. TD Bank,
N.A., 2 N.E.3d 221, 226-27 (N.Y. 2013).
defendants rely extensively on the decisions of the
Court of Appeals for the Second Circuit and the New York
Court of Appeals in the Schlessinger litigation. In
Schlessinger v. Valspar Corp., 686 F.3d 81, 83, 85
(2d Cir. 2012) (Schlessinger I), the Court of
Appeals for the Second Circuit considered whether private
plaintiffs should be allowed to sue for rescission to excise
a "store closure provision" from a contract because
the provision allegedly violated N.Y. Gen. Bus. L. §
395-a, even though that provision vested the New York
Attorney General with exclusive enforcement authority. The
Court of Appeals observed that, "This issue lies at the
intersection of two legal doctrines that lead to ...