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FRANK BRISCOE CO., INC. v. TRAVELERS INDEM. CO.

September 13, 1999

FRANK BRISCOE COMPANY, INC., A NEW JERSEY CORPORATION, PLAINTIFF,
v.
THE TRAVELERS INDEMNITY COMPANY AND THE TRAVELERS COMPANIES, CONNECTICUT CORPORATIONS, DEFENDANTS, GABRIEL R. CALAFATI, ADDITIONAL DEFENDANT ON COUNTERCLAIM.



The opinion of the court was delivered by: Greenaway, District Judge.

    AMENDED OPINION

INTRODUCTION

This matter concerns an on-going contractual dispute between Plaintiff, Frank Briscoe Company, Inc. ("Briscoe"), and Defendants, The Travelers Indemnity Company and The Travelers Companies (collectively "Travelers"). The Court previously has issued several Opinions and Orders in this matter, including Frank Briscoe Co., Inc. v. Travelers Indem. Co., 899 F. Supp. 1304 (D.N.J. 1995) (hereinafter the "Agency Opinion"). The matter now comes before the Court on Travelers' four motions for partial summary judgment and Briscoe's motion for partial summary judgment. Travelers seeks summary judgment on Briscoe's entire Complaint and the award of various items of recovery on its counterclaims. Briscoe seeks summary judgment (1) on Travelers' counterclaims, (2) on certain defenses that Travelers asserts and (3) on various forms of relief requested in its Complaint. For the reasons set forth below, Travelers' motions are granted in part and denied in part. Likewise, Briscoe's motions are granted in part and denied in part.

BACKGROUND

The Agency Opinion sets forth a detailed account of the facts preceding the instant motions. However, for purposes of clarity, a brief overview of those events and the background facts shall be set forth.

Briscoe was a renowned construction company. Among its many major projects were two of the Gateway office buildings in Newark, New Jersey, and Giants Stadium and Meadowlands Race Track in East Rutherford, New Jersey. Since the early 1970s, Travelers provided Briscoe with payment and performance bonds for Briscoe's construction contracts. In late 1979, Briscoe encountered severe financial troubles. As a result, Briscoe became unable to meet its obligations. Travelers estimated that, if Briscoe should default on its various construction projects, its potential exposure based on the outstanding bonds would be approximately $100 million. To avoid this possibility, Travelers chose to assist Briscoe with a series of loans totaling approximately $24 million. In exchange for the loans, Travelers obtained a security interest in all of Briscoe's assets. The parties memorialized their agreement in the "Loan and Security Agreement" (as amended and supplemented).

The Loan and Security Agreement provided that Briscoe would make monthly interest payments on the loans. Briscoe eventually failed to make the scheduled monthly payments and defaulted. At the time of default, Briscoe owed Travelers $22 million in loan principal and $6 million in accrued interest. Travelers, as a secured creditor, chose to take possession of all of Briscoe's assets (the collateral for the loans) and to liquidate them. In an effort to avoid bankruptcy and the discontinuation of its business, Briscoe desired to participate in the disposal of its assets.

Travelers agreed to allow Briscoe to participate in the disposition of the collateral. Travelers believed Briscoe's argument that it (Briscoe) was in the best position to help Travelers successfully liquidate the various assets. Those assets included, among other things, payment for completion of construction projects and legal claims against land owners that had failed to pay Briscoe for construction work. The parties entered into the "Agreement for Disposition of Collateral" ("ADC") on August 2, 1982. The ADC set forth a procedure ("Program") for the disposition of Briscoe's assets and the deposit of liquidated funds with Travelers. The ADC provided, among other things, that Briscoe would receive a fee for its participation and also receive funding to complete the Program.*fn1 The parties also agreed that Briscoe would receive a 50% share of the net Program proceeds ("Entitlement"), minus certain set-offs, upon completion of the Program.*fn2 Furthermore, Travelers agreed to forebear on any deficiency that Briscoe might owe it upon the completion of the Program.*fn3 The parties' ongoing dispute has centered around the interpretation of, and performance required of the parties by, the ADC.

Agency Opinion

After a two day trial, Judge Wolin issued the Agency Opinion. In that Opinion, he considered Briscoe's claim that it was entitled to accumulated interest on all of the funds deposited with Travelers pursuant to the ADC. Briscoe, 899 F. Supp. at 1307. Briscoe asserted that it and Travelers were partners in the ADC and, therefore, Travelers was required to accrue interest for Briscoe on the Program proceeds. Id. By 1995, Briscoe had collected and deposited over $84 million with Travelers. Briscoe claimed that it was entitled to $400 million in interest on those gross proceeds. Id.

Construing the express language of the ADC, the Court concluded that "Travelers owns the money deposited under the ADC as a secured creditor. Any interest earned on the money after it was deposited is the sole and exclusive property of Travelers." Id. at 1316. This conclusion did not end the Court's inquiry. Noting that the U.C.C. did not alter the Court's interpretation of the ADC, the Court next examined the parties' conduct. Id. at 1317. The Court found that the parties' pre-execution conduct evidenced that Travelers had rejected several attempts by Briscoe to include an interest component into the ADC. Id. at 1323. Further, the Court found that in late 1989, William F. Kelly distributed a Briscoe internal memorandum in which he proposed several ways to interpret the ADC that would allow Briscoe to increase its recovery. Id. That memorandum, coupled with Briscoe's silence with respect to interest until 1989, led the Court to conclude that Briscoe was making "an after-the-fact attempt . . . to earn more money under the ADC." Id. The Court found that "the post-execution conduct of the parties demonstrates that after the Program dragged on far longer than anyone anticipated, Briscoe began to search for ways to maximize its share." Id. at 1325.

The Court also analyzed the trial testimony of the parties. Id. at 1325-1332. The Court found the testimony of Briscoe's two witnesses, Howard Loeffler, former Travelers employee, and Gabriel Calafati, Briscoe President, not credible. Id. at 1325-1330, In contrast, the Court found the testimony of Travelers' witness, Mark Larner, the ADC's scrivener, "highly convincing." Id. at 1332. Larner testified, among other things, that the ADC follows the U.C.C. and was designed to articulate Travelers' rights after Briscoe's default under the Loan and Security Agreement. Id. at 1330. The Court held that Briscoe could not imply terms into the ADC based on the unsupported contention that the driving force behind the ADC was Travelers' fear of third-party claimants.*fn4 Id. at 1332.

The Court held that Travelers, as the exclusive owner of all money deposited under the ADC, had no duty to accrue interest on Briscoe's behalf. Id. at 1334. The Court based its holding on, among other things, the following factual and legal conclusions: (1) the ADC language and meaning was clear and unambiguous; (2) the ADC created an agency relationship whereby Briscoe was Travelers' agent; and (3) Travelers was the owner of all of the collateral under the ADC. Id.

Briscoe's Complaint

The Agency Opinion disposed of Briscoe's claim seeking interest on the Program proceeds deposited with Travelers. The Agency Opinion also set forth the Court's conclusions that the ADC was the clear and complete expression of the parties' agreement, and that the parties' relationship would be governed by the terms of the ADC. As such, this Court now sets forth Briscoe's claims that survived the Agency Opinion.

Briscoe's Complaint seeks the following relief:

  (2) Count Two — injunctive relief, awarding the
  relief requested in Count One, and further enjoining
  Travelers' wrongful acts, such as the interference
  with Briscoe's contract claims and the failure to
  provide Program funding.
  (3) Count Three — tortious interference with
  prospective economic advantage, awarding compensatory
  damages, punitive damages and costs of suit.
  (4) Count Four — accounting, ordering Travelers to
  make a full accounting to Briscoe because Travelers
  failed to make the accountings over the life of the
  Program as specified in the ADC.
  (5) Count Five — breach of contract by improper
  application of receipts and failure to release
  Briscoe's money, ordering Travelers to make a full
  accounting and pay Briscoe its Entitlement along with
  the award of compensatory damages and costs of suit
  because Travelers (a) failed to repay non-program
  loans as funds became available, (b) did not properly
  earn interest on net proceeds and (c) failed to
  estimate and pay Briscoe its Entitlement.
  (6) Count Six — breach of contract by failing to
  credit interest to Briscoe and improper charging of
  interest against Briscoe, awarding the relief
  requested in Count Five because Travelers failed to
  credit Briscoe with 15% interest on its estimated
  Entitlement and improperly allowed interest to accrue
  on the non-program loans instead of repaying them as
  proceeds became available.
  (7) Count Seven — breach of contract by improper
  classification of expenses, awarding the relief
  requested in Counts Five and Six because Travelers
  improperly classified various expenses as non-program
  loans when they actually were Program advances.
  (8) Count Eight — failure to deal in good faith,
  awarding the relief requested in Counts Five, Six and
  Seven because Travelers did not deal with Briscoe
  fairly, particularly with respect to funding the
  Program and interfering with the settlement of
  Briscoe's contract claims.
  (9) Count Nine — breach of contract by failing to
  pursue construction litigation, awarding the relief
  requested in Counts Five, Six, Seven and Eight, and
  indemnification against third-party claimants because
  Travelers unilaterally cut funding of the pursuit of
  various Briscoe contract claims.
  (10) Count Ten — exercise of domination and control
  over Briscoe, awarding the relief requested in Count
  Nine because Travelers' refusal to act in good faith
  reduced Briscoe's Entitlement and destroyed its
  chance for continuance as a viable entity upon
  Program completion.

Briscoe's Complaint essentially presents three legal causes of action: (1) breach of contract; (2) interference with prospective economic advantage; and (3) failure to act in good faith and fair dealing.*fn5 Although the Agency Opinion did not dismiss Briscoe's Complaint or any of the counts contained therein explicitly, it did draw into question the counts in Briscoe's Complaint, and the arguments relating thereto, that seek to alter or avoid the express language of the ADC.

ISSUES PRESENTED

Travelers classifies its four motions for summary judgment as follows: (1) Program Claims, (2) Calculation Claims, (3) Riveredge Claims and (4) Pension Plan Claims.

Program Claims

Travelers seeks summary judgment as to all of Briscoe's Program Claims, i.e., those claims regarding the funding and management of the Program. Briscoe contends that (1) Travelers should not have settled the Las Vegas Litigation, (2) Travelers intentionally underfunded Briscoe pursuant to the Program, (3) Briscoe was forced to take out non-program loans because of the underfunding and (4) Travelers wrongfully dominated and controlled Briscoe. Travelers seeks summary judgment based on the following: (1) Briscoe's failure to state a claim because of the language of the ADC; (2) Briscoe's execution of various releases which alleviate any liability to Travelers; and (3) Briscoe's express waiver in paragraph 6.3 of the ADC of the right to assert any Program Claims.

Calculation Claims

Travelers seeks summary judgment as to Briscoe's Calculation Claims, i.e., those claims by which Briscoe seeks to establish the formula for the calculation of its Entitlement. Those claims also concern Briscoe's arguments with respect to the estimation of its Entitlement and the advances it should have received pursuant thereto. Travelers asserts that no genuine issues of material fact exist based on (1) the language of the ADC, (2) the law of the case, (3) Briscoe's disregard for the formula set forth in the ADC and (4) the prematurity of Briscoe's claims. Therefore, Travelers argues that it is entitled to judgment as a matter of law.

Riveredge Claims

Travelers seeks summary judgment on its counterclaim awarding it attorneys' fees and costs. Travelers claims that Briscoe has instituted this action in bad faith. In support of its motion, Travelers relies on Riveredge Associates v. Metropolitan Life Insurance Co., 774 F. Supp. 897 (D.N.J. 1991).

Pension Plan Claims

Travelers seeks summary judgment on its counterclaim awarding it those Program proceeds that Briscoe has wrongfully diverted and the return of all other funds that have been paid to Briscoe over the life of the Program. At a Court hearing on May 28, 1996, Judge Wolin found that (1) the Briscoe Pension Plan was overfunded, i.e., the value of the assets of the Plan exceeded its liabilities, (2) the overfunding was being applied to benefit an entity named Briscoe Company, Inc. ("BCI"),*fn6 (3) the overfunding was collateral under the ADC belonging to Travelers and (4) Briscoe could not refuse to allow Travelers to inspect its documents concerning the Pension Plan. See 11/13/1997 Ct.Op.

Pursuant to that ruling, Travelers seeks summary judgment (1) declaring Briscoe in breach of the ADC, (2) awarding Travelers damages and (3) granting judgment as a matter of law to Travelers on Briscoe's Complaint.

Briscoe's Motion

Briscoe seeks summary judgment as to all of Travelers' counterclaims and certain of Travelers' defenses. Briscoe asserts that it has not breached the ADC and as such cannot be denied its Entitlement. Briscoe further asserts that Travelers should not be awarded damages based on its failure to set forth a quantifiable measure of damages caused by any alleged breach.

DISCUSSION

Law of the Case Doctrine

The ongoing nature of this litigation and the number of previous rulings in this matter require the Court to set forth the law of the case governing the disposition of the motions presented.

The law of the case doctrine militates against courts re-deciding issues of law that were earlier resolved in the same case, either expressly or by necessary implication. Public Interest Research Group of N.J., Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 116 (3d Cir. 1997); Schultz v. Onan Corp., 737 F.2d 339, 345 (3d Cir. 1984). "Although it does not limit the power of trial judges from reconsidering issues previously decided by a predecessor judge from the same court or from a court of coordinate jurisdiction, it does recognize that as a matter of comity a successor judge should not lightly overturn decisions of his predecessors in a given case." Fagan v. City of Vineland, 22 F.3d 1283, 1290 (3d Cir. 1994) (citations omitted). The Third Circuit "has recognized several `extraordinary circumstances' that warrant a court's reconsideration of an issue decided earlier in the course of litigation." Public Interest Research ...


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