Prescott v. Nationwide Mutual Insurance Co.

          MEMORANDUM AND ORDER

         ERIC N. VITALIANO UNITED STATES DISTRICT JUDGE.

         Jo Ann Prescott commenced this action on behalf of herself and Prescott Coverage, LLC d/b/a Prescott Insurance & Financial Services (collectively "Prescott"), against Nationwide Mutual Insurance Company ("Nationwide") alleging fraud in the assignment of servicing rights to plaintiffs in 2008 in that it concealed the existence of a federal lawsuit filed by Carlos Balcarcel ("Balcarcel"), who was the previous assignee of the servicing rights. See Complaint ¶¶ 31 -33. Before the Court is the August 27, 2019 Report and Recommendation ("R&R") of Magistrate Judge Steven L. Tiscione, which recommends that (1) Nationwide's motion for summary judgment be granted and, (2) Nationwide's motion for sanctions be denied. Dkt. 36; see also Dkts. 34, 35. On September 10, 2019, Prescott filed timely written objections to portions of the R&R, and, on September 24, 2019, Nationwide responded.^[1] See Dkts. 37 ("Objections"), 38 ("Response to Objections"). For the reasons that follow, the R&R is adopted in its entirety as the opinion of the Court.

         Background

         The Court presumes the parties' familiarity with the procedural history and underlying facts, which relate to Nationwide's relationship with Balcarcel, the agent previously contracted to handle the service territory that was the subject of Prescott's contract and whether Nationwide's supposed concealment of facts related to its prior relationship with Balcarcel masked a fraud in the inducement of Prescott to contract with Nationwide. Any further recitation of them here would be merely redundant and not helpful to an understanding of the R&R and the Court's adoption of it.

         Standard of Review

         In reviewing a magistrate judge's R&R, a district judge "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1). The district judge need only be satisfied "that there is no clear error on the face of the record" to accept the R&R, provided no timely objection has been made in writing. Urena v. New York, 160 F.Supp.2d 606, 609-10 (S.D.N.Y. 2001) (quoting Nelson v. Smith, 618 F.Supp. 1186, 1189 (S.D.N.Y. 1985)); see also Thomas v. Am, 474 U.S. 140, 150, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985).

         The district judge, on the other hand, is required to "determine de novo any part of the magistrate judge's disposition that has been properly objected to." Fed.R.Civ.P. 72(b)(3); see also Arista Records, LLC v. Doe 3, 604 F.3d 110, 116 (2d Cir. 2010). Significantly, though, objections that are general or conclusory, or that "merely recite the same arguments presented to the magistrate judge," do not constitute proper written objections and are reviewed only for clear error. Sanders v. City of New York, No. 12-CV-0113 (PKC) (LB), 2015 WL 1469506, at *1 (E.D.N.Y.Mar. 30, 2015) (citation omitted). Clear error exists "where, upon a review of the entire record, [the district judge] is left with the definite and firm conviction that a mistake has been committed." Saveria JFK, Inc. v. Flughafen Wien, AG, No. 15-CV-6195 (RRM) (RLM), 2017 WL 1194656, at *2 (E.D.N.Y. Mar. 30, 2017).

         Discussion

         In a pre-emptive strike, Nationwide puts the rules of engagement in issue, contending that all of Prescott's objections either restate original objections or attack the R&R in a general or conclusory manner, and as such, should be reviewed for clear error. Practically speaking however, Nationwide's contention is of no matter, because even if the objections are reviewed de novo, they fail and adoption of the R&R in its entirety as the opinion of the Court is warranted.^[2]

         In their overarching objection, plaintiffs attack the R&R's conclusion that Nationwide's failure to disclose the "circumstances" under which the Brooklyn territory was available and offered to Prescott was not material to the fraudulent inducement claim. Prescott argues, essentially, that the R&R is wrong on the law and that, in any event, there is a genuine dispute of fact as to the material terms of contract formation. Dkt. 37 at 1. The argument cannot withstand de novo scrutiny, much less the properly applicable clear error standard of review.^[3]

         To begin, there can be no substantial dispute as to controlling New York law, which requires a party to establish the following four elements to prevail on a claim of fraud: "[1] a misrepresentation or a material omission of fact which was false and known to be false by defendant, [2] made for the purpose of inducing the other party to rely upon it, [3] justifiable reliance of the other party on the misrepresentation or material omission, and [4] injury." Premium Mortg. Corp. v. Equifax, Inc., 583 F.3d 103, 108 (2d Cir. 2009) (quoting Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (N.Y.1996)).

         Drilling further, a party may be liable under New York law for either fraud in the inducement, requiring a misrepresentation, or concealment, requiring a duty to disclose material information. See 28 N.Y. Prac, Contract Law §§ 5:5, 5:18. To prevail on a claim of fraudulent concealment, "a plaintiff must also prove that the defendant had a duty to disclose the material information." Banque Arabe et Internationale D'Investissement v. Maryland Nat. Bank, 57 F.3d 146, 153 (2d Cir. 1995). Though Prescott alleges "Fraud in the Inducement", the substance of the complaint focuses on fraudulent concealment, namely, that Nationwide failed to disclose the existence of the Balcarcel lawsuit. Therefore, Prescott must satisfy the four elements of common law fraud, plus show that Nationwide had a duty to disclose the existence of the suit.

         Prescott's conclusory allegations cannot save plaintiffs' claim. See BellSouth Telecommunications, Inc. v. W.R. Grace & Co.-Conn., 77 F.3d 603, 615 (2d Cir. 1996). Worse yet, Prescott engaged in the baldest of speculation in her objections that the R&R was erroneous because there was a genuine dispute as to other fraudulent conduct by Nationwide, namely the post-motion invention of a putative redlining claim against Nationwide, which the R&R effectively short circuited. This last resort argument, if anything, illustrates the baselessness of Prescott's objection.

         As Judge Tiscione correctly found, the existence of the lawsuit was not material, much less an "essential fact" whose nondisclosure would render the transaction "inherently unfair". Id. Prescott's objections do not compel a different conclusion. No reasonable jury could find Nationwide had a duty to disclose the lawsuit. In sum, Nationwide did not have a duty, as a matter of law, to disclose the existence of Barcarcel's litigation and Prescott's conclusory assertions seeking to establish a material fact dispute undermining that conclusion, revived here in their objections, are not sufficient to upset the R&R's award of summary judgment to Nationwide. Bu ...