Opinion
Case No. 6:20-cv-875-Orl-40DCI
2020-11-16
ASPEN AMERICAN INSURANCE COMPANY, Plaintiff, v. TASAL, LLC, and Shahab Karmely, Defendants.
Jacqueline Louise Goldman, Steven E. Goldman, Goldman & Hellman, Ft. Lauderdale, FL, for Plaintiff. Benjamin C. Hassebrock, Daniel Litman Gross, Stephen A. Marino, Jr., Ver Ploeg & Marino, PA, Miami, FL, for Defendants.
Jacqueline Louise Goldman, Steven E. Goldman, Goldman & Hellman, Ft. Lauderdale, FL, for Plaintiff.
Benjamin C. Hassebrock, Daniel Litman Gross, Stephen A. Marino, Jr., Ver Ploeg & Marino, PA, Miami, FL, for Defendants.
ORDER
PAUL G. BYRON, UNITED STATES DISTRICT JUDGE This cause is before the Court on Defendants Tasal, LLC and Shahab Karmely's Motion to Dismiss (Doc. 54 (the "Motion ")). Upon consideration, the Motion is due to be granted.
I. BACKGROUND
On or around January 11, 2020, Tasal, LLC ("Tasal ") and Shahab Karmely (collectively, "Defendants ") applied for a marine insurance policy with Plaintiff Aspen American Insurance Company ("Aspen ") for a 2019 45-foot Vanquich VQ 45 (hereinafter, the "Vessel "). (Doc. 44, ¶ 8; Doc. 55, ¶ 8). Aspen issued a Marine Insurance Policy (the "Policy "), which names Captain Kim Boxer as the only declared "Operator" of the Vessel and includes a forum selection clause directing all coverage disputes to be decided pursuant to New York law. (Doc. 44-2, pp. 2, 25).
Forum selection clauses are presumptively valid and enforceable. See, e.g. , DeRoy v. Carnival Corp. , 963 F.3d 1302, 1310 (11th Cir. 2020) ; P & S Bus. Machs., Inc. v. Canon USA, Inc. , 331 F.3d 804, 807 (11th Cir. 2003) ; Loeffelholz v. Ascension Health, Inc. , 34 F. Supp. 3d 1187, 1189 (M.D. Fla. 2014) (citing Krenkel v. Kerzner Intern. Hotels Ltd. , 579 F.3d 1279, 1281 (11th Cir. 2009) ). Thus, the Court applies New York law here in accordance with the forum selection clause contained in the Policy.
Shortly thereafter, the Vessel, operated by Doug Koch, collided with a Government Cut Jetty. (Doc. 44, ¶ 15; Doc. 55, ¶ 15). Defendants presented a claim to Aspen under the Policy, seeking reimbursement of the Vessel's full value. (Doc. 44, ¶ 16). Aspen denied coverage and filed its Complaint in this Court on May 21, 2020, seeking a declaratory judgment that Defendants lack coverage under the Policy. (Doc. 3).
On June 5, 2020, Aspen voluntarily dismissed its claims against Mr. Karmely without prejudice. (Docs. 9, 10). Tasal then filed its Answer, asserting a counterclaim against Aspen for breach of contract and alleging that Mr. Koch stole the Vessel. (Doc. 20). Aspen filed its Answer to Tasal's counterclaim, asserting the affirmative defense of fraud. (Doc. 23). Specifically, Aspen addressed Tasal's contention that Mr. Koch operated the Vessel without Defendants’ permission or knowledge:
Mr. Koch was a personal friend of Shahab Karely and was also a business associate who had directly and personally assisted Mr. Karmely in purchasing, documenting, and insuring the vessel which is the subject of this litigation. Mr. Koch had operated the vessel on numerous occasions prior to February 23, 2020 with the knowledge and the consent of Mr. Karmely. Mr. Koch had operated the vessel on numerous occasions prior to February 23, 2020 with the knowledge and consent of Mr. Boxer. Mr. Koch was operating the vessel on February 23, 2020 with the knowledge [sic] and consent of both Mr. Karmely and Mr. Boxer.
(Id. ¶ 6). Aspen further alleged that Mr. Koch contacted Captain Boxer on February 23, 2020 "in order to inform him of his intention to operate the vessel later that same morning, and in order to obtain the combination to a security gate/fence which was required in order to obtain direct access to the vessel at its dock on the Miami River." (Id. ¶ 7). Aspen states that Captain Boxer provided Mr. Koch with the security code. (Id. ¶ 8). Aspen argues that after learning of the incident, Mr. Karmely, realizing that the terms of the Policy barred coverage, "decided to accuse his friend and business associate of theft as part of a fraudulent attempt obtain [sic] coverage for the incident." (Id. ¶ 9).
On September 14, 2020, Aspen, with the Court's permission, filed an Amended Complaint, adding two causes of action against Tasal and Mr. Karmely: (1) Count II, Fraud Under the Policy; and (2) Count III, Fraud Under New York Law. (Docs. 31, 35, 44). Defendants moved to dismiss Counts II and III (Doc. 54), and Aspen responded in opposition (Doc. 69). The matter is now ripe for review.
II. STANDARD OF REVIEW
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(1). Thus, to survive a motion to dismiss made pursuant to Rule 12(b)(6), the complaint "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is plausible on its face when the plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. To assess the sufficiency of factual content and the plausibility of a claim, courts draw on their "judicial experience and common sense" in considering: (1) the exhibits attached to the complaint; (2) matters that are subject to judicial notice; and (3) documents that are undisputed and central to a plaintiff's claim. See id. ; Parham v. Seattle Serv. Bureau, Inc. , 224 F. Supp. 3d 1268, 1271 (M.D. Fla. 2016).
Though a complaint need not contain detailed factual allegations, mere legal conclusions or recitation of the elements of a claim are not enough. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Moreover, courts are "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Iqbal , 556 U.S. at 679, 129 S.Ct. 1937. Courts must also view the complaint in the light most favorable to the plaintiff and must resolve any doubts as to the sufficiency of the complaint in the plaintiff's favor. Hunnings v. Texaco, Inc. , 29 F.3d 1480, 1483 (11th Cir. 1994) (per curiam).
In sum, courts must (1) ignore conclusory allegations, bald legal assertions, and formulaic recitations of the elements of a claim; (2) accept well-pled factual allegations as true; and (3) view well-pled allegations in the light most favorable to the plaintiff. Iqbal , 556 U.S. at 679, 129 S.Ct. 1937.
In addition to Rule 8 ’s plausibility standard, parties asserting fraud claims must satisfy Rule 9's particularity standard: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice intent, knowledge, and other conditions of a person's mind may be alleged generally." FED. R. CIV. P. 9(b) ; see Iqbal , 556 U.S. at 686–87, 129 S.Ct. 1937 ; Carvelli v. Ocwen Fin. Corp. , 934 F.3d 1307, 1317–18 (11th Cir. 2019). " ‘[P]ursuant to Rule 9(b), a plaintiff must allege: (1) the precise statements, documents, or misrepresentations made; (2) the time, place and person responsible for the statement; (3) the content and manner in which these statements misled [him]; and (4) what the defendants gained by the alleged fraud.’ " Wilding v. DNC Servs. Corp. , 941 F.3d 1116, 1128 (11th Cir. 2019) (quoting Am. Dental Ass'n v. Cigna Corp. , 605 F.3d 1283, 1291 (11th Cir. 2010) ). Bare allegations of reliance on alleged fraudulent statements, without supporting details, are insufficient under Rule 9(b). Id.
III. DISCUSSION
As a preliminary matter, the Court notes that Count II of Aspen's Amended Complaint—"Fraud Under the Policy"—is not a recognized cause of action. The Court therefore only examines the adequacy of Count III, "Fraud Under New York Law," under Rules 8(a) and 9(b).
Aspen potentially meant to assert a claim for breach of contract, which is a cognizable claim. If Aspen chooses to file an Amended Complaint, the Court notes that, "even where a fraud claim is sufficiently pled, ‘[u]nder New York law, no fraud claim is cognizable if the facts underlying the fraud relate to the breach of contract.’ " Ithaca Cap. Invs. I S.A. v. Trump Panama Hotel Mgmt. LLC , 450 F. Supp. 3d 358, 369 (S.D.N.Y. 2020) (quoting Auerbach v. Amir , No. 06 Civ. 4821, 2008 WL 479361, at *5 (E.D.N.Y. Feb. 19, 2008) ); State St. Glob. Advisors Tr. Co. v. Visbal , 431 F. Supp. 3d 322, 355 (S.D.N.Y. 2020) (citations omitted) (" ‘New York law does not recognize claims that are essentially contract claims masquerading as claims of fraud ....’ "); see also Bridgestone/Firestone, Inc. v. Recovery Credit Servs. Inc. , 98 F.3d 13, 20 (2d Cir. 1996).
Under New York law, a party properly pleads a fraud claim if it demonstrates: (1) a material misrepresentation of a fact; (2) knowledge of its falsity; (3) intent to induce reliance; (4) justifiable reliance by the plaintiff; and (5) causation of injury (i.e. , damages). See Trahan v. Lazar , 457 F. Supp. 3d 323, 350 (S.D.N.Y. 2020) (citing Fin. Guar. Ins. Co. v. Putnam Advisory Co. , 783 F.3d 395, 402 (2d Cir. 2015)) (applying New York law) ; Carlson v. Am. Intern. Grp., Inc. , 30 N.Y.3d 288, 67 N.Y.S.3d 100, 89 N.E.3d 490, 503–04 (2017) (quoting Eurycleia Partners, LP v. Kissel, LLP , 12 N.Y.3d 553, 883 N.Y.S.2d 147, 910 N.E.2d 976, 979 (2009) ).
Here, Defendants argue that Aspen fails to properly allege the third, fourth, and fifth elements of fraud. (Doc. 54, pp. 6–8). The Court addresses each element in turn.
A. Intent to Induce Reliance
Defendants assert that Aspen presents "conclusory allegations" and that Defendants’ "allegedly fraudulent actions were those of a reasonable and practical insured." (Doc. 54, p. 7). Aspen counters that it alleged "specific facts which demonstrate Defendants’ ‘motive and opportunity.’ " (Doc. 69, p. 12). Aspen also argues that Defendants ignore its allegations that Defendants knew coverage was unavailable unless Mr. Koch stole the Vessel. The Court agrees.
To properly allege an intent to induce reliance under Rule 9(b), the plaintiff must plead a factual basis that " ‘give[s] rise to a strong inference of fraudulent intent.’ " Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Secs., LLC , 797 F.3d 160, 176 (2d Cir. 2015) (quoting Lerner v. Fleet Bank, N.A. , 459 F.3d 273, 290 (2d Cir. 2006) ). The plaintiff can establish a strong inference of fraudulent intent " ‘(a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.’ " Duran v. Henkel of Am., Inc. , 450 F. Supp. 3d 337, 353 (S.D.N.Y. 2020) (quoting Lerner , 459 F.3d at 290–91 ). In determining whether the plaintiff has pled a strong inference, the court considers " ‘the complaint in its entirety’ " and assesses the " ‘plausible opposing inferences.’ " Id. (quoting Loreley Fin. , 797 F.3d at 177 ). If the inference of fraudulent intent is " ‘cogent and at least as compelling as any opposing inference one could draw from the facts alleged,’ then it is sufficiently strong." Id. (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 324, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) ; Loreley Fin. , 797 F.3d at 177 ). Notably, a general profit motive is insufficient to plead fraudulent intent. See Duran , 450 F. Supp. 3d at 354 (citing Chill v. Gen. Elec. Co. , 101 F.3d 263, 268 (2d Cir. 1996) ; In re Frito-Lay N. Am., Inc. All Nat. Litig. , No. 12 MD 2413, 2013 WL 4647512, at *25 (E.D.N.Y. Aug. 29, 2013) ); Negrete v. Citibank, N.A. , 187 F. Supp. 3d 454, 464–65 (S.D.N.Y. 2016).
The Amended Complaint alleges that the Policy obligates Aspen to pay $750,000 for loss or damage of the Vessel unless an individual other than the Named Operator operated the Vessel at the time of the incident. (Doc. 44, ¶ 46). The Amended Complaint further alleges that Captain Boxer is the only Named Operator under the Policy and that Defendants were "at all times relevant hereto aware of the fact that Kim Boxer was the only Named Operator." (Id. ¶ 47). The Amended Complaint states that Mr. Koch "had operated the vessel on numerous occasions prior to February 23, 2020" with Defendants’ knowledge and consent and that Defendants gave Mr. Koch a key to the Vessel. (Id. ¶¶ 48, 50).
The Amended Complaint further alleges that Mr. Koch operated the Vessel on February 23, 2020. (Id. ¶ 48). Moreover, the Amended Complaint alleges that on February 23, 2020, Captain Boxer gave Mr. Koch the security code to access to the Vessel upon Mr. Koch's request. (Id. ¶¶ 49–50). Therefore, the Amended Complaint alleges that Defendants knew of and consented to Mr. Koch's operation of the Vessel on February 23, 2020. (Id. ¶ 51). Finally, the Amended Complaint states that, after the accident, Defendants accused Mr. Koch of stealing the Vessel in order to receive coverage under the Policy:
Upon learning of the incident in which the vessel was damaged, KARMELY realized that there would be no coverage for loss or damage because of the breach of the policy's Named Operator provision. KARMELY therefore decided to accuse his friend and business associate Mr. Koch of theft as part of a dishonest and fraudulent attempt to obtain coverage for the incident. This was despite KARMELY's complete awareness of the fact that Mr. Koch's operation of the vessel had been with his own knowledge and consent of Kim Boxer.... The Stolen Boat affidavit was made by Karmely with the intention of causing criminal charges top [sic] be brought against Douglas Koch so that he could assert the existence of coverage under Plaintiff's policy of marine insurance, which would cause injury to the Plaintiff.
(Id. ¶¶ 52, 57).
Far from "conclusory allegations," the Amended Complaint pleads specific facts reflecting Defendants’ motive and opportunity to commit fraud. See Duran , 450 F. Supp. 3d at 353. For example, the Amended Complaint clearly alleges that the Policy excludes coverage for damage occurring during the operation of the Vessel by an individual who is not a Named Operator. (Id. ¶ 46). Aspen infers that because Defendants were aware of this provision and knew that Captain Boxer is the only Named Operator under the Policy, they understood that coverage was available only if Mr. Koch had stolen the Vessel. (Id. ¶¶ 47, 52, 57).
Thus, the Amended Complaint sufficiently alleges that: (a) Defendants were motivated to commit fraud by their knowledge of the coverage terms and their inability to claim $750,000 payment; and (b) Defendants had the opportunity to commit fraud when they filed a false claim for reimbursement. Consequently, the Court finds that Aspen properly pleads the third element of fraud. B. Justifiable Reliance and Damages
Defendants argue that Aspen fails to properly allege the fourth element of fraud because the Amended Complaint did not assert that it reasonably relied on the allegedly fraudulent statements and, in fact, Aspen denied Defendants’ claim. (Doc. 54, pp. 7–8). Additionally, Defendants argue that the Amended Complaint fails to properly allege the fifth element of fraud because Aspen fails to identify the damages caused by Defendants’ allegedly fraudulent statements. (Id. at p. 8). Aspen concedes that it discovered the alleged fraud before the payment of Defendants’ claim, but it argues that it relied on Defendants’ allegedly false statements in opening a claim investigation and in bringing the instant lawsuit. (Doc. 69, p. 14). Aspen further contends that it would be required to provide coverage under the Policy if Defendants’ allegedly fraudulent claim succeeds. (Id. ). The Court finds Aspen's arguments unpersuasive.
" ‘[A] plaintiff cannot close his eyes to an obvious fraud, and cannot demonstrate reasonable reliance without making inquiry and investigation if he has the ability, through ordinary intelligence, to ferret out the reliability or truth ....’ " Trahan , 457 F. Supp. 3d at 350 (quoting Crigger v. Fahnestock & Co. , 443 F.3d 230, 234 (2d Cir. 2006) ). " ‘In assessing the reasonableness of a plaintiff's alleged reliance, we consider the entire context of the transaction, including factors such as its complexity and magnitude, the sophistication of the parties , and the content of any agreements between them.’ " Crigger , 443 F.3d at 235 (quoting Emergent Cap. Inv. Mgmt., LLC v. Stonepath Grp., Inc. , 343 F.3d 189, 195 (2d Cir. 2003) ); see Lugones v. Pete & Gerry's Organic, LLC , 440 F. Supp. 3d 226, 244 (S.D.N.Y. 2020) (finding that the plaintiffs sufficiently alleged reasonable reliance because they had "no reason to be on alert as to potential misrepresentations" and "had no independent means of ascertaining the truth of Defendant's misrepresentations—short of driving themselves to Defendant's facilities and sleuthing about the grounds for the truth").
"To satisfy [the fifth element], a plaintiff must allege both that the defendant's misrepresentation induced plaintiff to engage in the transaction in question (transaction causation) and that the misrepresentations directly caused the loss about which plaintiff complains (loss causation)." Fin. Guar. Ins. Co. , 783 F.3d at 402 (internal quotations and citations omitted). Transaction causation requires the plaintiff to allege that, but for the fraudulent statements, he would not have engaged in the transaction. See Fin. Guar. Ins. Co. , 783 F.3d at 402 ; Trahan , 457 F. Supp. 3d at 351 (quoting Taylor Precision Prods., Inc. v. Larimer Grp., Inc. , No. 1:15-cv-4428, 2018 WL 4278286, at *32 (S.D.N.Y. Mar. 26, 2018)) (" ‘[T]ransaction causation ... is concerned with whether ‘defendant's misrepresentation induced plaintiff to engage in the transaction in question.’ "). Loss causation " ‘is the causal link between the allegedly misconduct and the economic harm ultimately suffered by the plaintiff.’ " Fin. Guar. Ins. Co. , 783 F.3d at 402 (quoting Lentell v. Merrill Lynch & Co. , 396 F.3d 161, 172 (2d Cir. 2005) ).
Here, the Amended Complaint alleges that the Policy provides coverage for loss or damage to the Vessel unless "any individual(s) other than a Named Operator [were] operating the vessel at the time of the incident." (Doc. 44, ¶ 46). The Amended Complaint asserts that Aspen investigated Defendants’ claim for the "full insured value of the vessel": "Upon receipt of the first notice of the February 23, 2020 incident described herein, Plaintiff caused a full and thorough investigation to be done with regard to the facts and circumstances with respect to the issuance of the policy and the facts and circumstances with respect to the incident of February 23, 2020. Based on the aforesaid investigation, Plaintiff has denied the claim ...." (Id. ¶¶ 17–18, 58). As a result of this investigation, Aspen concluded that Defendants "filed a fraudulent claim for coverage." (Id. ¶ 53). Finally, Plaintiff requests declaratory relief:
As a result of the aforesaid demands notwithstanding lack of coverage under the terms of the policy attached hereto, Plaintiff has sustained actual prejudice and seeks this Court's Declaratory Judgment regarding the coverage afforded under the terms of Policy No. ASU00802900. Until such time as the Plaintiff is able to have its rights and responsibilities under the marine insurance policy construed by this Court, Plaintiff will suffer uncertainty with respect to its responsibilities and obligations under the terms of the said policy.
(Id. ¶¶ 25, 43, 59–60).
First, the Court finds that Aspen failed to allege reasonable reliance because it had reason to be "on alert as to potential misrepresentations" and had "independent means of ascertaining the truth." Cf. Lugones , 440 F. Supp. 3d at 243. The Amended Complaint itself states that Aspen performed "a full and thorough investigation" as to Defendants’ claim. (Id. ¶ 17). Presumably, Aspen, as an insurer, always has a reason to "be on alert as to potential misrepresentations" from insureds. Cf. id. In fact, Aspen instituted their investigation shortly after the Defendants submitted their claims. This implies that Aspen was "on alert" as to Defendants’ alleged fraud. (Id. ¶¶ 17–18).
Second, the Court finds that Aspen failed to allege monetary damages. The Amended Complaint states that Aspen denied Defendants’ claim. (Id. ). Therefore, Aspen fails to allege both transaction causation and loss causation because Defendants’ allegedly fraudulent statements did not induce it to cover the loss and, ultimately, it did not suffer any economic harm. See Fin. Guar. Ins. Co. , 783 F.3d at 402. Aspen's request for declaratory relief—as opposed to damages—reinforces this conclusion. (Id. ¶ 59). Although Aspen attempts to salvage its claim by pointing to the $750,000 coverage limit, this is, at most, a future loss that depends entirely on the resolution of this case. (Id. ¶ 46).
For these reasons, Aspen fails to properly allege the fourth and fifth elements of fraud under New York law.
IV. CONCLUSION
Accordingly, it is ORDERED AND ADJUDGED as follows:
1. Defendant Tasal, LLC's ("Tasal ") Motion to Dismiss (Doc. 54) is GRANTED ;
2. Count II is DISMISSED WITHOUT PREJUDICE ;
3. Count III is DISMISSED WITHOUT PREJUDICE ; and
4. On or before November 30, 2020, Plaintiff Aspen American Insurance Company may file a Second Amended Complaint consistent with the directives of this Order, if they believe they can do so in accordance with Rule 11.
DONE AND ORDERED in Orlando, Florida on November 16, 2020.