23-57-cv Associated Indus. Ins. Co. v. Kleinhendler
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 7th day of December, two thousand twenty-three.
PRESENT: AMALYA L. KEARSE, GUIDO CALABRESI, ALISON J. NATHAN, Circuit Judges. _____________________________________
Associated Industries Insurance Company, Inc.,
Plaintiff-Counter- Defendant-Appellee, 23-57
v.
Howard Kleinhendler, Defendant-Appellant,
Wachtel Missry LLP,
Defendant-Counter-Claimant. _____________________________________
FOR PLAINTIFF-COUNTER- APRIL H. GASSLER, Sperduto DEFENDANT-APPELLEE: Thompson & Gassler PLC, Washington, DC.
FOR DEFENDANT-APPELLANT: HOWARD KLEINHENDLER, pro se, New York, NY.
Appeal from a judgment of the United States District Court for the
Southern District of New York (Schofield, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is
AFFIRMED.
Associated Industries Insurance Company (AIIC) sued Howard
Kleinhendler and his former law firm, Wachtel Missry LLP, seeking a declaration
that it need not provide insurance coverage for either defendant in another
lawsuit brought by Allan Applestein. Applestein sought damages for legal
malpractice, breach of fiduciary duty, elder abuse, and fraud related to the 2017
2 sale of land in Virginia, known as the Fones Cliffs Land, to Kleinhendler’s
company, the Virginia True Corporation.
As relevant here, the insurance policy contained an explicit exclusion for
activities undertaken in the capacity of an officer of another business enterprise.
The district court thus granted judgment on the pleadings to AIIC because it
determined the policy exclusion unambiguously excluded coverage due to
Kleinhendler’s position with Virginia True. See Associated Indus. Ins. Co., Inc. v.
Wachtel Missry LLP, No. 21-cv-3624, 2022 WL 4109771 (S.D.N.Y. Sept. 8, 2022).
After additional proceedings not relevant here, Kleinhendler, an attorney
proceeding pro se, appealed that decision. We assume the parties’ familiarity
with the remaining underlying facts and the record of prior proceedings, to
which we refer only as necessary to explain our decision.
We review orders granting judgment on the pleadings de novo. See Lively
v. WAFRA Inv. Advisory Grp., Inc., 6 F.4th 293, 301 (2d Cir. 2021). “The standard
for granting a Rule 12(c) motion for judgment on the pleadings is identical to that
for granting a Rule 12(b)(6) motion for failure to state a claim,” under which a
3 complaint must “state a claim to relief that is plausible on its face.” Id.
(quotation marks omitted).
Kleinhendler contends that AIIC has a duty to defend him in the
Applestein lawsuit because the lawsuit alleges some acts that could give rise to
claims covered by the insurance policy, namely acts that occurred before the
formation of Virgina True and acts related to the Fones Cliffs Land transaction
that were unrelated to Kleinhendler’s position with Virginia True. AIIC
responds that it does not have a duty to defend him because the Applestein
complaint squarely centers on the conflicted sale of the Fones Cliffs Land to
Kleinhendler’s company and its claims thus arise from Kleinhendler’s position
with that company.
Under New York law, an insurer’s duty to defend is “exceedingly broad.”
Cont’l Cas. Co. v. Rapid-Am. Corp., 80 N.Y.2d 640, 648 (1993) (quotation marks
omitted). To be relieved of its duty based on a policy exclusion, an insurer has
a “heavy burden of demonstrating that the allegations of the complaint cast the
pleadings wholly within that exclusion,” that the exclusion is “subject to no other
reasonable interpretation,” and that there is no “possible factual or legal basis
4 upon which the insurer may eventually be held obligated to indemnify the
insured under any policy provision.” Frontier Insulation Contractors, Inc. v.
Merchs. Mut. Ins. Co., 91 N.Y.2d 169, 175 (1997). Importantly, “[i]f any of the
claims against the insured arguably arise from covered events, the insurer is
required to defend the entire action.” Id.
The issue, then, is whether the Applestein complaint brings claims that
could potentially result in liability not arising out of Kleinhendler’s position with
Virginia True. Upon review of the complaint, we conclude that it does not.
Although the complaint contains allegations predating the creation of Virginia
True, it does not state any claim for liability that does not arise out of
Kleinhendler’s position with his company. AIIC has carried its burden to
demonstrate it has no duty to defend Kleinhendler in the Applestein suit.
Applestein brought four claims against Kleinhendler: (1) legal malpractice;
(2) breach of fiduciary duty; (3) elder abuse; and (4) fraud. The core premise of
the legal malpractice claim was that Kleinhendler and Wachtel Missry failed to
advise Applestein to obtain a mortgage on the Fones Cliffs Land transaction with
Virginia True, that they had a conflict of interest in the Fones Cliffs Land
5 transaction because of Kleinhendler’s position with Virginia True, and that they
failed to obtain Applestein’s informed consent for the land sale.
The other three claims similarly arise from Kleinhendler’s actions in
relation to the same conflicted transaction. The claim for breach of fiduciary
duty alleges that Kleinhendler encouraged Applestein “to agree to a risky and
less favorable deal” for the Fones Cliffs Land and “negotiat[ed] and enter[ed] a
transaction where [Kleinhendler’s] interests were adverse to [Applestein’s].”
The elder abuse claim similarly alleges that Kleinhendler took advantage of
Applestein’s diminished capacity in order to obtain the land. And the fraud
claim alleges that Kleinhendler made knowingly false statements “in order to
induce [Applestein’s] reliance upon the misrepresentations . . . with the express
purpose of inducing Plaintiffs to sell Virginia True the Fones Cliffs Land.”
That each and every claim arises from the sale of the Fones Cliffs Land to
Virginia True is confirmed by the damages Applestein seeks—$7,724,200.36,
apparently corresponding to the amount he lost as a result of the transaction and
a loan he made to HK Consulting Group LLC (another Kleinhendler company)
in connection with it, plus interest.
6 True, the complaint also contains allegations about conduct predating the
existence of Virginia True. Applestein alleges that Kleinhendler misadvised
him to reject two advantageous offers to purchase the land from a Peter Jarowey
because he “had come up with an idea to develop the land.” App’x 45, ¶ 11A-
B. Kleinhendler allegedly “want[ed] to scuttle the deal so that he could get
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23-57-cv Associated Indus. Ins. Co. v. Kleinhendler
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 7th day of December, two thousand twenty-three.
PRESENT: AMALYA L. KEARSE, GUIDO CALABRESI, ALISON J. NATHAN, Circuit Judges. _____________________________________
Associated Industries Insurance Company, Inc.,
Plaintiff-Counter- Defendant-Appellee, 23-57
v.
Howard Kleinhendler, Defendant-Appellant,
Wachtel Missry LLP,
Defendant-Counter-Claimant. _____________________________________
FOR PLAINTIFF-COUNTER- APRIL H. GASSLER, Sperduto DEFENDANT-APPELLEE: Thompson & Gassler PLC, Washington, DC.
FOR DEFENDANT-APPELLANT: HOWARD KLEINHENDLER, pro se, New York, NY.
Appeal from a judgment of the United States District Court for the
Southern District of New York (Schofield, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is
AFFIRMED.
Associated Industries Insurance Company (AIIC) sued Howard
Kleinhendler and his former law firm, Wachtel Missry LLP, seeking a declaration
that it need not provide insurance coverage for either defendant in another
lawsuit brought by Allan Applestein. Applestein sought damages for legal
malpractice, breach of fiduciary duty, elder abuse, and fraud related to the 2017
2 sale of land in Virginia, known as the Fones Cliffs Land, to Kleinhendler’s
company, the Virginia True Corporation.
As relevant here, the insurance policy contained an explicit exclusion for
activities undertaken in the capacity of an officer of another business enterprise.
The district court thus granted judgment on the pleadings to AIIC because it
determined the policy exclusion unambiguously excluded coverage due to
Kleinhendler’s position with Virginia True. See Associated Indus. Ins. Co., Inc. v.
Wachtel Missry LLP, No. 21-cv-3624, 2022 WL 4109771 (S.D.N.Y. Sept. 8, 2022).
After additional proceedings not relevant here, Kleinhendler, an attorney
proceeding pro se, appealed that decision. We assume the parties’ familiarity
with the remaining underlying facts and the record of prior proceedings, to
which we refer only as necessary to explain our decision.
We review orders granting judgment on the pleadings de novo. See Lively
v. WAFRA Inv. Advisory Grp., Inc., 6 F.4th 293, 301 (2d Cir. 2021). “The standard
for granting a Rule 12(c) motion for judgment on the pleadings is identical to that
for granting a Rule 12(b)(6) motion for failure to state a claim,” under which a
3 complaint must “state a claim to relief that is plausible on its face.” Id.
(quotation marks omitted).
Kleinhendler contends that AIIC has a duty to defend him in the
Applestein lawsuit because the lawsuit alleges some acts that could give rise to
claims covered by the insurance policy, namely acts that occurred before the
formation of Virgina True and acts related to the Fones Cliffs Land transaction
that were unrelated to Kleinhendler’s position with Virginia True. AIIC
responds that it does not have a duty to defend him because the Applestein
complaint squarely centers on the conflicted sale of the Fones Cliffs Land to
Kleinhendler’s company and its claims thus arise from Kleinhendler’s position
with that company.
Under New York law, an insurer’s duty to defend is “exceedingly broad.”
Cont’l Cas. Co. v. Rapid-Am. Corp., 80 N.Y.2d 640, 648 (1993) (quotation marks
omitted). To be relieved of its duty based on a policy exclusion, an insurer has
a “heavy burden of demonstrating that the allegations of the complaint cast the
pleadings wholly within that exclusion,” that the exclusion is “subject to no other
reasonable interpretation,” and that there is no “possible factual or legal basis
4 upon which the insurer may eventually be held obligated to indemnify the
insured under any policy provision.” Frontier Insulation Contractors, Inc. v.
Merchs. Mut. Ins. Co., 91 N.Y.2d 169, 175 (1997). Importantly, “[i]f any of the
claims against the insured arguably arise from covered events, the insurer is
required to defend the entire action.” Id.
The issue, then, is whether the Applestein complaint brings claims that
could potentially result in liability not arising out of Kleinhendler’s position with
Virginia True. Upon review of the complaint, we conclude that it does not.
Although the complaint contains allegations predating the creation of Virginia
True, it does not state any claim for liability that does not arise out of
Kleinhendler’s position with his company. AIIC has carried its burden to
demonstrate it has no duty to defend Kleinhendler in the Applestein suit.
Applestein brought four claims against Kleinhendler: (1) legal malpractice;
(2) breach of fiduciary duty; (3) elder abuse; and (4) fraud. The core premise of
the legal malpractice claim was that Kleinhendler and Wachtel Missry failed to
advise Applestein to obtain a mortgage on the Fones Cliffs Land transaction with
Virginia True, that they had a conflict of interest in the Fones Cliffs Land
5 transaction because of Kleinhendler’s position with Virginia True, and that they
failed to obtain Applestein’s informed consent for the land sale.
The other three claims similarly arise from Kleinhendler’s actions in
relation to the same conflicted transaction. The claim for breach of fiduciary
duty alleges that Kleinhendler encouraged Applestein “to agree to a risky and
less favorable deal” for the Fones Cliffs Land and “negotiat[ed] and enter[ed] a
transaction where [Kleinhendler’s] interests were adverse to [Applestein’s].”
The elder abuse claim similarly alleges that Kleinhendler took advantage of
Applestein’s diminished capacity in order to obtain the land. And the fraud
claim alleges that Kleinhendler made knowingly false statements “in order to
induce [Applestein’s] reliance upon the misrepresentations . . . with the express
purpose of inducing Plaintiffs to sell Virginia True the Fones Cliffs Land.”
That each and every claim arises from the sale of the Fones Cliffs Land to
Virginia True is confirmed by the damages Applestein seeks—$7,724,200.36,
apparently corresponding to the amount he lost as a result of the transaction and
a loan he made to HK Consulting Group LLC (another Kleinhendler company)
in connection with it, plus interest.
6 True, the complaint also contains allegations about conduct predating the
existence of Virginia True. Applestein alleges that Kleinhendler misadvised
him to reject two advantageous offers to purchase the land from a Peter Jarowey
because he “had come up with an idea to develop the land.” App’x 45, ¶ 11A-
B. Kleinhendler allegedly “want[ed] to scuttle the deal so that he could get
control of the Fones Cliffs Land.” Id. ¶ 11B. All this occurred several years
before, as alleged in the complaint, Kleinhendler created the Virginia True
Corporation in order to purchase the Fones Cliffs Land. See id. at 49, ¶ 27.
However, as noted above, the actual claims stated in the Applestein
complaint all arise from Kleinhendler’s position with Virginia True. While the
fraud claim alleges that “Kleinhendler also specifically stated that the Jarowey
deal was fraudulent, when in fact, it was not,” id. at 57, ¶ 76, this alone does not
state a fraud claim under Florida law. That claim requires not only a knowingly
false statement concerning a material fact, but also “the intent by the person
making the statement that the representation will induce another to act on it,” as
well as “reliance on the representation to the injury of the other party.” Lance v.
Wade, 457 So. 2d 1008, 1011 (Fla 1984). Here, the intent to induce and the
7 reliance alleged in the complaint both relate to the sale of the Fones Cliffs Land
to Virginia True. The complaint alleges that Kleinhendler made his
misrepresentations “with the express purpose of inducing [Applestein] to sell
Virginia True the Fones Cliffs Land,” which Applestein then did. The actual
basis for potential liability that the claim creates, then, still arises from
Kleinhendler’s conduct in his capacity with Virginia True. Even if some of the
underlying allegations predate Virginia True, when read in context they do not
support any legal claims that do not arise at least in part from Kleinhendler’s
position with that company.
In short, all of Kleinhendler’s potential liability in the Applestein suit
stems at least in part from his position with that company. Therefore, the
district court properly concluded that AIIC’s policy exclusion applied. AIIC
does not have a duty to defend Kleinhendler in the Applestein action.
Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court