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FRANK BRISCOE CO., INC. v. TRAVELERS INDEM. CO.
September 13, 1999
FRANK BRISCOE COMPANY, INC., A NEW JERSEY CORPORATION, PLAINTIFF,
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.
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.
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
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
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.
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.
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
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.
Travelers classifies its four motions for summary judgment as
follows: (1) Program Claims, (2) Calculation Claims, (3)
Riveredge Claims and (4) Pension Plan 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.
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.
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).
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
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 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.
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
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