Sentry Insurance v. Brand Management Inc.

120 F. Supp. 3d 277
CourtDistrict Court, E.D. New York
DecidedAugust 13, 2015
DocketNos. 10-CV-0347 (ENV)(RLM), 11-CV-3966 (ENV)(RLM)
StatusPublished
Cited by7 cases

This text of 120 F. Supp. 3d 277 (Sentry Insurance v. Brand Management Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sentry Insurance v. Brand Management Inc., 120 F. Supp. 3d 277 (E.D.N.Y. 2015).

Opinion

MEMORANDUM & ORDER

ERIC N. VITALIANO, District Judge.

Plaintiff Sentry Insurance (“Sentry”) commenced two separate actions arising [279]*279out of essentially the same occurren'ces against defendants Brand Management, Inc. (“Brand”), in one complaint, and Budget Services, Inc. (“Budget”) and Hershel Weber, in the other, which interpose a variety of claims and theories of liability, including breach of contract, unjust enrichment, trademark infringement, false designation of origin, dilution by tarnishment, dilution of trademark, deceptive trade practices, and alter ego liability. Following consolidation of the two actions, plaintiff filed the instant motion for partial summary judgment with respect to its breach of contract claim and on its theory of alter ego liability. Budget and Weber filed a cross-motion for partial summary judgment on Sentry’s alter ego liability claim. Incidentally, for having had- to defend the cross-motion, Sentry seeks attorney’s fees.

What started as a disagreement over workers’ compensation insurance contracts has denigrated into a war of attrition over discovery matters. At bottom, as explained further below, there can be no real dispute that Brand and Budget breached their contract with Sentry. Nor are there any facts properly before the Court that can refute plaintiffs alter ego liability theory. Simply, as a matter of law, Brand and Budget are alter egos of Weber, who is, therefore, liable for Brand’s breach of contract. Consequently, plaintiffs motion for partial summary judgment must be granted, and the cross-motion of Budget and Weber denied.

Background

I. Procedural History

Pressing a basic breaeh of contract claim as its core grievance, Sentry, on January 27, 2010, sued Brand; (Compl., ECF No. 1, at ¶¶ 5-6).1 The case actually proceeded tu trial, but, with testimony underway, Brand filed a voluntary bankruptcy case without warning. It announced the strategic ploy at trial and in open court only after confirming that the bankruptcy petition had, in fact, been filed. (Minute Entry, ECF No. 49). In compliance with the bankruptcy stay, on August 9, 2011, a ihis-trial was declared. (Mem. & Order, ECF No. 51). Eight days later, on August 17, 2011, Sentry brought an action against Budget and its owner, Weber, which arises out of the same facts, and the same contract, as the then-stayed action against Brand. (Compl., ll-CV-3966, ECF No. 1, at ¶¶ 44-55). Subsequent to these maneuvers, 1 the bankruptcy court dismissed Brand’s bankruptcy case because, the bankruptcy court found, Brand’s filing “borderfed] on bad faith.” (Order, 11-bk-46230, ECF No. 49). Freed of the stay, the two district court actions were then consolidated. (Order, ECF No. 55).

With gratitude for the able pre-trial management of Magistrate Judge Roanne L. Mann, the parties were able to emerge from discovery and proceed to motions seeking partial summary judgment. The course of discovery, however, was more than difficult. It was marred by the strategy and guile of defendants, who engaged in conduct-that can best be described as recalcitrant and sanctionable. After systematically ratcheting up discovery orders and sanctions, finally, Magistrate Judge Mann issued a Report and Recommendation (“R & R”), on February 7, 2013, which recommended that the Court impose a still harsher sanction:- precluding defendants from presenting evidence in opposition to plaintiffs alter ego claim. .(R & R, ECF No. 179), On October 21, 2013, the Court agreed, adopting the R & R in full, which [280]*280thereby precluded- defendants “from offering evidence opposing Sentry’s -alter ego claim, for the purposes of both summary judgment and trial.” Sentry Ins. A Mut. Co. v. Brand Mgmt., Inc., 295 F.R.D. 1, 8 (E.D.N.Y.2013).2

Following the close of the cantankerous discovery., phase of the litigation, on May 30, 2014, plaintiff filed the instant motion for summary judgment, (Pl.’s Mot., ECF No. 223), which has drawn a cross-motion for summary judgment by Budget and Weber. (Defs.’ , Mot., ECF No. 225). Trading legal salvos, the parties first war over what facts the Court may rely upon to decide these motions. Fr.om one trench, Sentry objects to affidavits, (Weber Decl., ECF No. 225-2; Rosenfeld Decl., ECF No. 225-4), Budget and Weber submitted in opposition, to Sentry’s motion, arguing that they are proffered in dear contravention of the Court’s October 21, 2013 Order.3 (PL’s Reply Br., ECF No. 227, at 2-3). On the other side of the front, Budget and Weber, barricaded in their own trench, submit that Sentry wrongfully used depositions taken before the Brand and Budget actions were consolidated, i.e., to be used against Budget and Weber, who were not parties when the depositions were taken. (Defs.’ Br., ECF No. 225-6, at 13).

First and foremost, despite their legal Sailings, Budget and Weber cannot wriggle away from the devastating impact of the Order barring them opposition to Sentry’s alter ego theory of liability. See In re Goldstein, 430 F.3d 106, 110 (2d Cir.2005), Those declarations will not be considered. As-for Budget and Weber’s objection to Sentry’s use of particular depositions,4 the Court will not rely, to the extent it is material, on testimony from any deposition where Budget or Weber were neither noticed as a party nor present. See Bascom Launder Corp. v. Telecoin Corp., 15 F.R.D. 277, 277-78 (S.D.N.Y.1953); In re Socony Vacuum Transp. Co., 93 F.Supp. 718, 721-22 (S.D.N.Y.1950). The precluded submissions of both sides will not be considered.

II. Factual Background

Weber is the president of Spring Services,. through which he, “take[s] care of a whole bunch of corporations,” (the “Weber .entities”). (Weber Dep. (“WD1”), ECF No. 226, Ex. 9, at 6:12-14). As Weber puts it, these constituent entities “pay Spring Services and Spring Services pay[s] me.” (Id). Most of the Weber entities are “professional employment organizations” (“PEOs”), which provide employee leasing5 and payroll services to health[281]*281care-related entities, such as nursing homes, and provide workers’ compensation insurance for the benefit of leased employees. (PL’s, R. 56.1 Statement (“S”),. ECF No. 223-2, at ¶¶ 5-7). Each PEO has one or two employees who “do[ ] the work for their nursing homes,” (WD1. at 12:21— 14:25, 20:4-9, 29:9-11). Weber maintains that it is beneficial to have “multiple corporations doing the same thing” because “[i]t makes the bookkeeping system easier because it’s split up.” {Id. at 13:4-8). The Weber entities operate from one office , on South Eighth Street in Brooklyn and, although they each have separate checking accounts, the office expenses and employee salaries are aggregated and paid for by Spring Services. (S at ¶¶ 17 — 19; WD1, at 15:11-16:17,18:6-8,20:4-12).

Budget and Brand are PEOs. They are located at the shared South Eight Street office. (S at ¶¶ 1-2,16; WD1 at 16:14-17). Like the other Weber entities, Brand and Budget are owned and operated by Weber. He is the controlling shareholder,6- serves as president and director of each, and is responsible for their daily operations. (S at ¶¶ 9-11).

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120 F. Supp. 3d 277, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sentry-insurance-v-brand-management-inc-nyed-2015.