Court Opinion

ID: 4204982
Source: CourtListenerOpinion
Date Created: 2017-09-21 14:00:38.198213+00
Date Added: 2024-06-11T09:23:44.346466
License: Public Domain

16-2611-cv
    Warehouse Wines and Spirits v. Travelers Prop. Casualty Co. of Am.

                  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 TO 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 21st day of September, two
    thousand seventeen.

    PRESENT:
                 ROBERT D. SACK,
                 PETER W. HALL,
                 CHRISTOPHER F. DRONEY,
                           Circuit Judges.

    _____________________________________

    WAREHOUSE WINES AND SPIRITS,

                        Plaintiff-Appellee,

                 v.                                                      16-2611-cv

    TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA,

                      Defendant-Appellant.
    _____________________________________

    For Appellant:                                  CHRISTOPHER S. FINAZZO, Finazzo
                                                    Cossolini O’Leary Meola & Hager,
                                                    LLC, New York, NY.
For Appellee:                                    DENNIS T. D’ANTONIO (Joshua L.
                                                 Mallin, on the brief), Weg and Myers,
                                                 P.C., New York, NY.

      Appeal from a judgment of the United States District Court for the Southern

District of New York (Forrest, J.).

      UPON       DUE      CONSIDERATION,           IT    IS   HEREBY     ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is

AFFIRMED.

      Defendant-Appellant Travelers Property Casualty Company of America

(“Travelers”) appeals from a final judgment entered in favor of Plaintiff-Appellee

Warehouse Wines and Spirits (“Warehouse Wines”) following the entry of summary

judgment as to liability and a bench trial as to damages. Travelers argues that the

district court erred in granting summary judgment in favor of Warehouse Wines as

to liability and improperly determined the amount of damages and prejudgment

interest. We assume the parties’ familiarity with the underlying facts, procedural

history, and issues on appeal.

                                            I.

      We review de novo a district court’s grant of summary judgment, McBride v.

BIC Consumer Prods. Mfg. Co., 583 F.3d 92, 96 (2d Cir. 2009), and will affirm “only

where, construing all the evidence in the light most favorable to the non-movant

and drawing all reasonable inferences in that party’s favor, ‘there is no genuine

issue as to any material fact and . . . the movant is entitled to judgment as a matter

of law.’” Id. (omission in original) (quoting Fed. R. Civ. P. 56(c)).

                                            2
      Travelers initially denied coverage for Warehouse Wines’ insurance claim,

asserting that the “dishonest acts” exclusion applied. In response, Warehouse

Wines argued that the “carrier for hire” exception to the dishonest acts exclusion

applied, and the district court agreed. Travelers contends that this was error. We

disagree.

      Under New York law, insurance policies are interpreted according to general

rules of contract interpretation. See, e.g., World Trade Ctr. Props., L.L.C. v.

Hartford Fire Ins. Co., 345 F.3d 154, 183–84 (2d Cir. 2003), abrogated on other

grounds by Wachovia Bank v. Schmidt, 546 U.S. 303 (2006). Under those

principles, insurance contracts should be interpreted “to give effect to the intent of

the parties as expressed in the clear language of the contract.” Morgan Stanley

Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 275 (2d Cir. 2000). The “words and

phrases [in a contract] should be given their plain meaning, and the contract should

be construed so as to give full meaning and effect to all of its provisions.” LaSalle

Bank Nat’l Ass’n v. Nomura Asset Capital Corp., 424 F.3d 195, 206 (2d Cir.2005)

(internal quotation marks and ellipsis omitted).

      In contending that the carrier for hire exception does not apply, Travelers

asserts that Bestway Logistics Transportation was acting in its capacity as a

warehouseman at the time of the loss. While the Policy does not define the term

“carrier for hire,” as understood in common usage, a “carrier” is “[a]n individual or

organization (such as a shipowner, a railroad, or an airline) that contracts to

transport . . . goods for a fee.” Carrier, Black’s Law Dictionary (10th ed. 2014)

                                           3
(emphasis added). As this definition implies, it is the nature of the relationship

between the transportation company and customer that determines whether an

entity is a carrier for hire. Moreover, in determining whether an entity is a “carrier

for hire,” courts have looked to the primary goal or purpose of the entity entrusted

with the goods or property. See, e.g., Nippon Fire & Marine Ins. Co., Ltd. v. Skyway

Freight Sys., Inc., 45 F. Supp. 2d 288, 292 (S.D.N.Y. 1999) (concluding that Skyway

was acting as a carrier because it “was engaged to ship [goods] by air, and any

storage was temporary and incidental to that primary goal”); Cougar Sport, Inc. v.

Hartford Ins. Co., 737 N.Y.S.2d 770, 774–75 (Sup. Ct. 2000) (holding that

warehouseman was not a carrier for hire because its “responsibility ended once it

moved goods to the loading dock”), aff’d 733 N.Y.S.2d 151 (1st Dep’t 2001). The

underlying purpose of the contractual relationship between a carrier and the

customer controls whether the exception applies.

      Here, because Warehouse Wines contracted with Bestway Logistics

Transportation to ship its products from the Hauppauge warehouse to its

Manhattan retail store, the carrier for hire exception applies. Indeed, Bestway

Logisitcs Transportation was registered with the Department of Transportation as

a carrier for hire. The fact that Warehouse Wines’ property was stolen from

Bestway’s warehouse does not alter the fact that it was in the custody of Bestway

Logistics Transportation—a company contracted to transport goods for a fee. Cf.

Nippon Fire & Marine, 45 F. Supp. 2d at 292 (concluding that Skyway was acting as

                                          4
a carrier because it “was engaged to ship [goods] by air, and any storage was

temporary and incidental to that primary goal”).

      Travelers makes much of the fact that by the time of the loss, James

Ceseretti (the owner and president of the Bestway companies) had incorporated

Bestway Warehouse & Transportation (strictly a warehousing business), and

Warehouse Wines had entered an agreement with Bestway Warehouse &

Transportation to store its products at the Hauppauge warehouse. Travelers

contends that, because Warehouse Wines’ product was in the custody of Bestway’s

warehousing operation (and not Bestway Logisitcs), the carrier for hire exception is

inapplicable. In any event, because Travelers conceded that both companies were

the alter egos of Ceseretti—and there is nothing to suggest that the warehousing

agreement replaced the transportation agreement—Ceseretti remained a carrier for

hire at the time of the loss. Indeed, Ceseretti expanded his operations under

Bestway Logistics Transportation to provide warehouse services before

incorporating Bestway Warehouse & Transportation, and both companies shared a

common bank account. Ceseretti also made all decisions for the two companies and

exercised complete dominion and control over them. In these circumstances, it is of

no significance that Ceseretti also provided warehousing services to Warehouse

Wines under a separate agreement, or that the goods were stored pursuant to that

agreement at the time of the loss, because these facts do no undermine Bestway’s

relationship with Warehouse Wines as a carrier for hire.

                                         5
                                                 II.

       “When reviewing a judgment following a bench trial in the district court, we

review the court’s findings of fact for clear error and its conclusions of law de novo.”

Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247, 255 (2d Cir. 2014). “The insured

bears the burden of proving the amount of damage, and the insurance company

bears the burden of proving facts in mitigation of damage.” C-Suzanne Beauty

Salon, Ltd. v. Gen. Ins. Co. of Am., 574 F.2d 106, 114 (2d Cir. 1978) (footnote

omitted).1 Once the fact of damages is established “[t]he plaintiff need only show a

stable foundation for a reasonable estimate of the damage incurred as a result of

the breach.” Tractebel Energy Mktg., Inc. v. AEP Power Marketing, Inc., 487 F.3d

89, 110 (2d Cir. 2007) (internal quotation marks and citation omitted). “Such an

estimate necessarily requires some improvisation, and the party who has caused the

loss may not insist on theoretical perfection.” Id. at 111 (internal quotation marks

omitted).

       Travelers contends that the district court’s finding that 4,095 cases of wine

and other spirits were stolen from Warehouse Wines is unsupported because there

is “[a]n unexplained discrepancy” in Warehouse Wines’ inventory records, as the

amount of cases of alcohol claimed to have been shipped from the Hauppauge

warehouse to the Beehive warehouse following the loss differed from the amount of

1 Travelers argues that New York law imposes a stricter standard here because the damages are

“fixed” and “readily ascertainable,” as compared to “prospective” and “inherently speculative,” in
which case a reasonable estimate is sufficient. Reply Br. at 16–17. However, Travelers offers no
authority to support the proposition that New York courts have carried the burden of proof
depending on the nature of damages at issue.

                                                  6
cases that Beehive actually received. Appellant’s Br. at 54. Notwithstanding any

purported discrepancy,2 the district court’s finding as to the number of cases stolen

is adequately supported by (1) the allocution of Ceseretti—who confessed to stealing

$1,115,479.54 worth of property from Warehouse Wines—(2) inventory records of

the Hauppauge warehouse demonstrating inventory amounts that should have been

in stock at the warehouse; (3) post-loss inventory records and bills of lading between

Warehouse Wines and Beehive showing what inventory remained after the theft; (4)

records of a partial inventory conducted by Warehouse Wines’ president following

discovery of the loss; and (5) the testimony of Warehouse Wines’ president, who had

personal knowledge of the items lost and personally counted the inventory. It

cannot be said, therefore, that the district court erred, much less clearly erred, in

finding that Warehouse Wines had reasonably demonstrated that 4,095 cases of

alcohol had been stolen from the Hauppauge warehouse. See Vasquez v. GMD

Shipyard Corp., 582 F.3d 293, 297 (2d Cir. 2009) (“Under [the clear error] standard,

factual findings by the district court will not be upset unless we are left with the

definite and firm conviction that a mistake has been committed.” (internal

quotation marks and citation omitted)).

2 To the extent there was a discrepancy between the amount of cases delivered to Beehive and

Warehouse Wines’ inventory records, the difference can be explained by a shipment of products that
was sent to Warehouse Wines’ retail store in Manhattan. Warehouse Wines’ president testified that
while the Beehive records correctly note that 23 trucks delivered products from Warehouse Wines to
Beehive at the same time as that shipment, a 24th truck delivered product to the Manhattan retail
store. It is this shipment that accounts for the “discrepancy” in Warehouse Wines’ records and the
amount of goods actually delivered to Beehive. There was thus no error in the district court’s finding
as to the number of cases stolen.

                                                  7
      Similarly, Travelers challenges the district court’s calculation of the value of

Warehouse Wines’ stolen inventory. Travelers argues that because Warehouse

Wines only presented evidence of January 2012 liquor prices—when the Policy

requires the value of property to be determined as of the time of the loss (December

2011)—Warehouse Wines has not met its burden of proving damages. So the

argument goes: The district court’s methodology of applying a “13% discount” to the

January 2012 prices in Warehouse Wines’ proof of loss to determine the appropriate

value of stolen property is unsupported and speculative. The district court did not,

however, manufacture the 13% discount rate out of thin air; rather, it considered

the increase in prices from December 2011 to January 2012 for the 11 products for

which the record contained such information and calculated the discount rate

accordingly. The court then applied that rate to the remaining stolen products.

      Faced with incomplete evidence of the December 2011 prices for the

remaining stolen liquor products, and absent an alternative method for determining

value, the district court reasonably calculated the total loss based on the record

before it. It was not clear error for the district court to calculate the amount of

damages suffered by Warehouse Wines based on a 13% discount figure, reasonably

grounded in the record evidence. Travelers was entitled to rebut this calculation,

but it simply failed to do so. Its belated attack on the district court’s method for

determining the value of loss is unpersuasive.

                                           8
                                          III.

      Section 5001 of New York Civil Practice Law and Rules “permits a party that

prevailed in a breach of contract action to obtain prejudgment interest.” NML

Capital v. Republic of Argentina, 952 N.E.2d 482, 488 (N.Y. 2011); N.Y.C.P.L.R. §

5001(b). It specifically provides, in relevant part, that “[i]nterest shall be computed

from the earliest ascertainable date the cause of action existed . . . .” N.Y.C.P.L.R.

§ 5001. In an insurance-coverage dispute, the application of § 5001(b) requires that

prejudgment interest be calculated from the date the insurer becomes obligated to

indemnify the insured. Cf. NML Capital, 952 N.E.2d at 488.

      It is undisputed that Warehouse Wines submitted a sworn proof of loss on

April 24, 2012, as required by its Policy. Travelers nonetheless asserts that,

because the Policy obligates the insured to submit to an examination under oath

and permit examination of its books and records, and such examination was not

complete until March 29, 2013, Warehouse Wines had not fully complied with the

Policy at the time it submitted the proof of loss. Instead, Travelers argues that

prejudgment interest may not be assessed any earlier than April 28, 2013, or 30

days after full compliance and thus the date upon which Travelers became obligated

to indemnify Warehouse Wines. See Appellant’s Br. at 58–59; App’x at 569.

      Although the Policy allows Travelers to conduct an investigation into

Warehouse Wines’ claims, Warehouse Wines nonetheless submitted a sworn proof of

loss on April 24, 2012, triggering Travelers’ obligation to indemnify within 30 days

of receipt. See App’x at 570. Travelers cannot circumvent § 5001(b) by denying

                                           9
coverage while conducting a nearly year-long investigation into Warehouse Wines’

claims and then, once it is adjudicated liable, avoid paying prejudgment interest

from the “earliest ascertainable date the cause of action existed.” N.Y.C.P.L.R. §

5001(b); see Seward Park Hous. Corp v. Greater N.Y. Mut. Ins. Co., 43 A.D.3d 23, 34

(1st Dep’t 2007) (concluding that plaintiff was entitled to prejudgment interest from

30 days of the submission of its sworn proof of loss). To adopt Travelers position

would be to undermine § 5001(b)’s purpose “to make an aggrieved party whole.”

Spodek v. Park Prop. Dev. Assocs., 759 N.E.2d 760, 762 (N.Y. 2001). Accordingly,

because Warehouse Wines submitted a sworn proof of loss on April 24, 2012, the

district court properly determined that prejudgment interest began to accumulate

on May 24, 2012.

      We have considered all of Travelers’ remaining arguments on appeal and

determine they are without merit. For the foregoing reasons, the judgment of the

district court is AFFIRMED.

                                              FOR THE COURT:
                                              Catherine O’Hagan Wolfe, Clerk

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