Opinion
No. 650737/2021
11-03-2022
AmTrust North America, Inc., Plaintiff, v. Myles Share, Defendant.
Unpublished Opinion
ROBERT R. REED, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 were read on this motion to DISMISS.
In this action to recover damages for breach of contract, negligence, intentional interference with a contract, and account stated, defendant moves, pursuant to CPLR 3211 (a)(1) and (7), to dismiss the amended complaint.
BACKGROUND
Plaintiff AmTrust North America, Inc. (AmTrust) brings this action on behalf of its insurance company affiliates, Wesco Insurance Company, Security National Insurance Company, Rochdale Insurance Company, Technology Insurance Company, Inc., Sequoia Insurance Company, Milford Casualty Insurance Company, and AmTrust Insurance Company of Kansas, Inc. AmTrust alleges that defendant Myles Share, either individually or through various corporate entities, acted as an agent of AmTrust, for and on behalf of these affiliates, to solicit applications for insurance. In turn, Share was paid a commission on premiums he generated.
The policies AmTrust provided to Share's clients required the insured to pay an initial estimated premium. Following the expiration of the policy period, a final premium amount would be determined by an audit of the insured's books and records. If the final audit premium was more than the estimated premium, the policy obligated the insured to pay the difference.
According to the amended complaint, Share not only acted as AmTrust's agent in soliciting applications, but was also involved "in collecting audit premiums from his clients" (Amended Complaint at ¶ 16). AmTrust alleges that it entered into an agreement with Share, pursuant to which Share "agreed to assist AmTrust in the presentation and collection of premium audit invoices for his clients" and that he breached this agreement "by failing to collect" such premiums (id. at ¶¶ 22-23). It also alleges "[o]n information and belief" that Share "actively discouraged his clients from paying audit premiums" (id. at ¶ 24).
In addition, the amended complaint alleges that Share owes return commissions to AmTrust. In this regard, the amended complaint asserts that Share "was only entitled to commissions on premiums actually collected" (id. at ¶ 19). Thus, while he received commissions on the total estimated premium for the entire policy term when a policy was issued, he was required "to pay return premium [sic] if the estimated premium was not collected" (id.). According to AmTrust, Share "was overpaid commissions on policies for which the estimated premium was greater than the final premium" and that "[a]s of March 31, 2021, [he] owed AmTrust return commissions in a total amount of $247,093.15" (id. at ¶ 20). The amended complaint alleges that Share has refused to pay the return commissions owed.
Based upon these allegations, the amended complaint sets forth causes of action, sounding in breach of contract (counts I and IV), negligence (count II), intentional interference with contract (count III), and account stated (count V). Share now moves pursuant to CPLR 3211 (a)(1) and (7) to dismiss the amended complaint. For the following reasons, the motion is granted.
ANALYSIS
Dismissal is warranted under CPLR 3211 (a)(1) "only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" (Leon v Martinez, 84 N.Y.2d 83, 88 [1994]). On a motion pursuant to CPLR 3211 (a) (7), however, the "court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint and the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one" (id.).
"On a motion to dismiss for failure to state a cause of action, the complaint must be liberally construed, and courts must provide a plaintiff with every favorable inference" (Carlson v American Intl. Group, Inc., 30 N.Y.3d 288, 297 [2017]). "[N]evertheless, allegations consisting of bare legal conclusions, as well as factual claims either inherently incredible or flatly contradicted by documentary evidence, are not entitled to such consideration" (Wilson v Hochberg, 245 A.D.2d 116, 116 [1st Dept 1997]; see Cangro v Reitano, 92 A.D.3d 483, 483 [1st Dept 2012]). "Dismissal of the complaint is warranted if the plaintiff fails to assert facts in support of an element of the claim, or if the factual allegations and inferences to be drawn from them do not allow for an enforceable right of recovery" (Connaughton v Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 142 [2017]; see Godfrey v Spano, 13 N.Y.3d 358, 373 [2009]).
First Cause of Action-Breach of Contract
The elements of a breach of contract claim "include the existence of a contract, the plaintiff's performance thereunder, the defendant's breach thereof, and resulting damages" (Harris v Seward Park Hous. Corp., 79 A.D.3d 425, 426 [1st Dept 2010]). "To create a binding contract, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms" (Detringo v South Is. Family Med., LLC, 158 A.D.3d 609, 610 [2d Dept 2018], quoting Matter of Express Indus. & Term. Corp. v New York State Dept. of Transp., 93 N.Y.2d 584, 589 [1999]). "The presence of a contract will only be found where the material terms are reasonably certain" (Martin Assoc., Inc. v Illinois Natl. Ins. Co., 188 A.D.3d 572, 573 [1st Dept 2020]; see 166 Mamaroneck Ave. Corp. v 151 East Post Rd. Corp., 78 N.Y.2d 88, 91 [1991]["a court cannot enforce a contract unless it is able to determine what in fact the parties have agreed to"]).
In the first cause of action, AmTrust alleges that it entered into an agreement with Share, pursuant to which Share "agreed to assist AmTrust in the presentation and collection of premium audit invoices for his clients" (Amended Complaint at ¶ 22). AmTrust alleges that it "fully performed" the agreement and that Share breached it "by failing to collect audit premium from his clients" (id. at ¶ 23). AmTrust further alleges "[o]n information and belief" that Share "actively discouraged his clients from paying audit premiums due AmTrust" and that as a result of Share's breach, AmTrust was damaged in an amount exceeding $4 million (id. at ¶¶ 24-23).
The amended complaint fails to allege anything about the formation of the alleged contract, whether it was oral or written, or what Share promised with regard to the collection of premiums for his clients. As such, dismissal of this claim is warranted on the ground that AmTrust's "allegations as to the formation and terms of" the "alleged contract are vague and entirely conclusory" (Detringo v South Is. Family Med., LLC, 158 A.D.3d at 610; see Mandarin Trading Ltd. v Wildenstein, 16 N.Y.3d 173, 181-182 [2011] ["Generally, a party alleging a breach of contract must demonstrate the existence of a... contract reflecting the terms and conditions of their... purported agreement"][quotation marks and citation omitted]; Canzona v Atanasio, 118 A.D.3d 837, 839 [2d Dept 2015] ["plaintiff's allegations regarding the alleged oral agreement were too vague and indefinite to plead a breach of contract cause of action"]; Barker v Time Warner Cable, Inc., 83 A.D.3d 750, 751 [2d Dept 2011]["In order to state a cause of action to recover damages for a breach of contract, the plaintiff's allegations must identify the provisions of the contract that were breached"]; Marino v Vunk, 39 A.D.3d 339, 340 [1st Dept 2007]["vague and conclusory allegations are insufficient to sustain a breach of contract cause of action"]; Island Surgical Supply Co. v Allstate Ins. Co., 32 A.D.3d 824, 824 [2d Dept 2006]["The complaint was properly dismissed pursuant to CPLR 3211 (a) (7) and 3013 because the allegations were vague, conclusory, and indefinite as to the alleged breach of numerous contracts by the defendant"]; Matter of Sud v Sud, 211 A.D.2d 423, 424 [1st Dept 1995][affirming dismissal of breach of contract claim based upon "plaintiff's failure to allege, in nonconclusory language, as required, the essential terms of the parties' purported contract, including the specific provisions of the contract upon which liability [was] predicated [and] whether the alleged agreement was, in fact, written or oral"]).
Furthermore, while the amended complaint alleges that Share breached the purported agreement by failing to "collect the audit premiums from his clients," the documentation submitted by Share in support of his motion demonstrates that AmTrust, not Share, was solely responsible for sending out invoices and collecting premiums from Share's clients (see NYSCEF Doc. Nos. 13-26). Indeed, in opposition to the motion, AmTrust acquiesces that Share was not responsible for and did not agree to collect audit premiums from his clients. It now alleges that, under the terms of an oral contract between the parties, AmTrust agreed to send Share the final premium audits of his clients' books and records before sending an invoice to Share's clients. In turn, Share agreed to determine within 25 days of receipt of this paperwork whether there were any discrepancies in the audit results. If AmTrust agreed with Share's assessment regarding a discrepancy, it would then notify the auditor and request that the policy be re-audited within 10 days. AmTrust alleges that instead of advising whether he had any issues with the audit results within 25 days, Share delayed in reviewing the audits by months and sometimes by more than a year. In addition, Share requested that AmTrust hold off on sending out invoices to his clients until he had reviewed the client's audit. As a result, AmTrust failed to timely send invoices to Share's clients, rendering it unable to collect millions of dollars in premium balance due.
Like the allegations in the amended complaint, these allegations do not state a claim for breach of contract. Assuming Share agreed to determine within 25 days whether there were discrepancies in the results of an audit, AmTrust fails to allege that Share's delay in doing so required it to hold off on sending invoices to Share's clients. Indeed, AmTrust alleges that it agreed to hold off on releasing invoices until Share approved the client's audit as a "special accommodation" to Share (Mem of Law in Opp at 5, NYSCEF Doc. No. 38)-indicating that AmTrust had no obligation under the parties' alleged contract to do so. In addition, AmTrust's counsel acknowledged during oral argument that nothing prevented AmTrust from sending out an invoice without Share's approval if it did not hear back from Share within 25 days (Tr at 21:1-8, NYSCEF Doc. No. 41). Therefore, assuming Share breached the parties' alleged contract by failing to respond to the receipt of audit paperwork within 25 days, AmTrust could have sent out the invoices without his approval. Accordingly, AmTrust fails to allege an essential element of the claim, namely, damages resulting from the alleged breach.
Thus, the first cause of action for breach of contract is dismissed.
Second Cause of Action-Negligence
"In order to prevail on a negligence claim, a plaintiff must demonstrate (1) a duty owed by the defendant to the plaintiff, (2) a breach thereof, and (3) injury proximately resulting therefrom" (Pasternack v Laboratory Corp. of Am. Holdings, 27 N.Y.3d 817, 825 [2016] [internal quotation marks and citation omitted]). In the second cause of action, AmTrust alleges that Share had a legal duty to assist it in the presentation and collection of premium audits invoices from his clients. According to the amended complaint, Share breached this duty by "failing to pursue collection of audit premiums" and that "[o]n information and belief," he "actively discouraged... clients from paying audit premiums due AmTrust" (Amended Complaint at ¶¶ 28-29).
This claim is essentially seeking economic damages for Share's breach of the parties' alleged contract that he would assist in the collection of audit premiums from his clients. This is improper because AmTrust cannot "recover contract damages under negligence theory" (610 W. Realty LLC v Riverview W. Contr. LLC, 146 A.D.3d 422, 422 [1st Dept 2017]; see Dworkin Constr. Corp (USA) v Consolidated Edison Co. of NY, Inc., 191 A.D.3d 596, 597 [1st Dept 2021]["plaintiff's negligence claim may not stand as it is essentially seeking economic damages for breach of contract, despite the assertion of a tort claim"]; see also Board of Mgrs. of Soho N. 267 W. 124th St. Condominium v N.W. 124 LLC, 116 A.D.3d 506, 507 [1st Dept 2014]["Breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated"]). Moreover, as already noted, Share demonstrated, and AmTrust acknowledges, that Share did not have a duty to collect premiums from his clients, thereby negating the allegation in the amended complaint that Share had a duty to do so.
In opposition to this motion, AmTrust adjusts the theory behind its negligence claim, now alleging that:
"AmTrust detrimentally relied on Share's representation that he would timely advise AmTrust with potential audit premium issues and facilitate AmTrust's premium collection. Instead he is alleged to have delayed AmTrust's premium invoicing and then discouraging clients from paying those invoices. Even in the absence of specific contractual provisions governing his behavior, that conduct would be actionable"(Mem of Law in Opp at 13, NYSCEF Doc. No. 38). However, Share's alleged delay in reviewing and responding to audits could not have caused AmTrust's damages inasmuch as it was always within AmTrust's power to send the invoices to Share's clients after Share failed to respond within the 25-day period. AmTrust's assertion that Share discouraged his clients from paying the invoices, aside from being conclusory, is inherently incredible given AmTrust's allegation that Share's commissions were dependent upon AmTrust's collection of premiums from his clients (see Amended Complaint at ¶¶ 19, 38).
Thus, the second cause of action for negligence is dismissed.
Third Cause of Action - Intentional Interference with Contract
In the third cause of action, AmTrust alleges that Share intentionally procured his clients' breach of their insurance policies by "actively discouraging them from paying audit premiums due under the terms and conditions of" such policies (Amended Complaint at ¶ 34). AmTrust alleges that were it not for Share's interference, "his clients would have paid the audit premium due and would not have breached their obligations under" their policies (id. at ¶ 35).
"The tort of inducement of breach of contract, now more broadly known as interference with contractual relations, consists of four elements: (1) the existence of a contract between plaintiff and a third party; (2) defendant's knowledge of the contract; (3) defendant's intentional inducement of the third party to breach or otherwise render performance impossible; and (4) damages to plaintiff" (Kronos, Inc. v AVX Corp., 81 N.Y.2d 90, 94 [1993]). The amended complaint fails to state such a claim in that it does not satisfy the third element-that Share intentionally induced his clients to breach their insurance policies. This element is supported only by the conclusory statement that Share "actively discouraged" his clients from paying the audit premiums due under their policies. As previously noted, this assertion is inherently incredible given that AmTrust alleges that Share's commissions were dependent upon the collection of premiums from his clients. Consequently, AmTrust's allegations are insufficient to state a cause of action against Share for intentional interference with contract
Thus, the third cause of action for intentional interference with contract is dismissed.
Fourth Cause of Action-Breach of Contract
In the fourth cause of action, the amended complaint alleges that "in accordance with the parties' agreement," Share "was only entitled to commissions on premiums actually collected by AmTrust" (Amended Complaint at ¶ 38). It further alleges that he "received commissions on the total estimated premium for the entire policy term when a policy was issued, subject to the requirement to return premium if the estimated premium was not collected" (id. at ¶19). AmTrust asserts that despite that agreement, Share "retained commissions on premiums that AmTrust did not collect, primarily as a result of policies being cancelled or audited premium being less than estimated premium on many insurance policies" (id. at ¶ 39). According to the amended complaint, as of March 31, 2021 Share owed AmTrust $ 247,093.15 in return commissions and despite demand, has refused to pay the amount owed.
In opposition, Share argues that no contractual relationship existed between Share and AmTrust (or any of the affiliates represented by AmTrust in this action) regarding the treatment of commissions paid to Share when a premium is lowered following an audit. Share contends that there is no evidence of such an agreement and the amended complaint is sparse and conclusory with respect to this claim. In this regard, Share points out that the amended complaint does not allege the date, time, or place where this alleged agreement was entered into and fails to set forth the parties to such an agreement. It also does not allege the duration of the agreement or the material provisions at issue.
The court agrees that AmTrust's allegations are too vague and indefinite to plead a breach of contract cause of action. The only allegations reflecting the terms and conditions of such an agreement are that Share "was only entitled to commissions on premiums actually collected by AmTrust" (Amended Complaint at ¶ 38 [emphasis added]) and that he was required to "pay return premium if the estimated premium was not collected" (id. at ¶ 19 [emphasis added]). These allegations are confusing and do not address the circumstances under which Share would be obligated to return commissions to AmTrust after AmTrust had already collected the estimated premium from Share's client.
In opposition to the motion, AmTrust submits, among other things, the affidavit of its Vice President of Operations, Richard Gossett (NYSCEF Doc. No. 31). According to Gossett, on September 28, 2018, he "advised" Share in an e-mail that "AmTrust will not pay commissions on premium collections it sends to an outside vendor" (id. at ¶ 15). Gossett also states in his affidavit that AmTrust rendered monthly commission statements to Share which "reflect the parties' understanding that return commissions are due from Mr. Share if AmTrust pays return premium to the policyholder" (id. at ¶ 16). However, Gossett's claim that he "advised" Share that he would not be paid commissions on premium collected through an outside vendor and that he had an "understanding" with Share that he was to pay return commissions when AmTrust had to return premiums to Share's clients is insufficient to establish a contract right. Accordingly, the allegations in the amended complaint, even as amplified by AmTrust's opposition to Share's motion, are insufficient to sustain a breach of contract claim (see Mandarin Trading Ltd., 16 N.Y.3d at 181-182; Detringo, LLC, 158 A.D.3d at 610; Canzona, 118 A.D.3d at 839; Barker, 83 A.D.3d at 751; Marino, 39 A.D.3d at 340; Island Surgical Supply Co., 32 A.D.3d at 824; Matter of Sud, 211 A.D.2d at 424).
Thus, the fourth cause of action for breach of contract is dismissed.
Fifth Cause of Action-Account Stated
In the fifth cause of action, AmTrust alleges that it "provided [Share] with regular accounts of the return commissions owed [by him] through December 2019" (Amended Complaint at ¶ 41). AmTrust alleges that as of December 2019, Share owed return commissions to it in the amount of $120,249.01 and that in January 2020, it placed Share's account "on a commission hold" (id.). According to the amended complaint, AmTrust presented the accounts to Share and Share "accepted the accounts without objection and accepted that they were correct" (id. at ¶ 43). The amended complaint states that despite being obligated to pay the accounts presented to him, Share has failed to do so.
"An account stated is an agreement between parties to an account based upon prior transactions between them with respect to the correctness of the account items and balance due" (Ryan Graphics, Inc. v Bailin, 39 A.D.3d 249, 250 [1st Dept 2007] [internal quotation marks and citation omitted]). "An account stated exists where a party to a contract receives bills or invoices and does not protest within a reasonable time" (Bartning v Bartning, 16 A.D.3d 249, 250 [1st Dept 2005]) or makes a partial payment (see Morrison Cohen Singer & Weinstein, LLP v Waters, 13 A.D.3d 51, 52 [1st Dept 2004]). Such a claim "cannot be used to create liability where none otherwise exists" (M. Paladino, Inc. v. J. Lucchese & Son Contr. Corp., 247 A.D.2d 515, 515 [2d Dept 1998]) and "may not be utilized simply as another means to attempt to collect under a disputed contract" (Martin H. Bauman Assoc. v H & M Intl. Transp., 171 A.D.2d 479, 485 [1st Dept 1991]).
Here, the account stated claim is simply another means to attempt to collect under the disputed contract alleged to exist in the fourth cause of action concerning return commissions. Further, "[i]n the absence of a claim establishing underlying liability, the account stated claim [is] not viable" (Unclaimed Prop. Recovery Serv., Inc. v UBS PaineWebber Inc., 58 A.D.3d 526, 526 [1st Dept 2009]; see Michael R. Gianatasio, PE, P.C. v City of New York, 53 Misc.3d 757, 774 [Sup Ct, NY County 2016], affd 159 A.D.3d 659 [1st Dept 2018]).
Thus, the fifth cause of action for account stated is dismissed.
CONCLUSION
For the foregoing reasons, it is hereby
ORDERED that the motion by defendant Myles Share to dismiss the amended complaint is granted in its entirety and the amended complaint is dismissed; and it is further
ORDERED that the Clerk of the court shall enter judgment accordingly.
This constitutes the decision, order, and judgment of the Court.