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PINE BELT ENTERPRISES, INC. v. SC&E ADMINISTRATIVE SERVICES

October 6, 2005.

PINE BELT ENTERPRISES, INC., Plaintiff,
v.
SC&E ADMINISTRATIVE SERVICES, INC., AMERICAN PRIME ASSET, INC., PRUDENTIAL SECURITIES, INC., Defendants.



The opinion of the court was delivered by: STANLEY CHESLER, District Judge

OPINION

This matter comes before the Court on a Motion for Summary Judgment (docket item #27) by Defendant, Prudential Securities, Inc., with respect to Plaintiff's claims of (1) Breach of Fiduciary Duty; (2) Breach of Implied Covenant of Good Faith and Fair Dealing; (3) Breach of Trust Agreement; (4) Misrepresentation; (5) Negligence; (6) Conversion; and (7) Detrimental Reliance. Having considered the parties' written and oral arguments, and for the reasons set forth below, the Court grants Defendant's Motion for Summary Judgment.

I. FACTUAL BACKGROUND

  Plaintiff Pine Belt Enterprises, Inc. ("Pine Belt") is an automobile dealership and service center located in Lakewood, NJ. On or about October 6, 2000, Pine Belt entered into a Smart Choice Dealer Agreement with SC&E ("SC&E Agreement") authorizing Pine Belt to sell extended warranty or service contracts to its customers. (Compl. ¶ 10.) The Smart Choice program was offered by National Warranty Insurance Company ("National Warranty") and was marketed by SC&E. The SC&E Agreement required SC&E to secure insurance indemnification as well as to operate, coordinate and administer the "Service Agreement Program" on Pine Belt's behalf. (Compl. ¶¶ 11-12.) Under the program, Pine Belt sold Vehicle Service Contracts ("VSC") that provided extended warranty or service contracts to its customers. (Compl. ¶ 10.)

  In addition to the SC&E Agreement, Pine Belt also entered into a Smart Choice Profit Participation Addendum ("Addendum") with American Prime Asset ("American Prime") and National Warranty Insurance Company ("National Warranty"). (Compl. ¶ 14.) The Addendum obligated American Prime to establish an Insurance Premium Account with Prudential and to appoint an authorized representative of National Warranty as a designated trustee of the account. (Compl. ¶ 15.) The Addendum further provided that upon the submission and payment of 100 VSCs by Pine Belt, an authorized representative of Pine Belt would be named a co-trustee on the account held with Prudential. (Compl. ¶ 16.) Prudential was not a signatory to the Addendum. (Def.'s Br. 4.)

  Pursuant to the Addendum, on January 22, 2001, American Prime established an account with Prudential titled "American Prime Assets/Escrow Agent FBO PEI Insurance/Escrow Account" ("Account"). (Def's. Stat. of Undisp. Mat. Facts ¶ 8.) Under the Smart Choice program, Pine Belt would remit the proceeds of VSC sales to National Warranty, and National Warranty would subtract certain fees and expenses and remit the balance to Prudential. (Cohen Dep. 19:17-20:13, July 21, 2004.) A portion of the purchase price from each VSC sold by Pine Belt was deposited into the Account to satisfy authorized claims submitted under the plan. (Compl. ¶ 17.)

  The documents opening the Account were signed only by John Sauers of American Prime. (Decl. of Cohen, ¶ 3.) Among the documents was a Fiduciary Certification of Investment Powers ("Fiduciary Certification") which listed four fiduciaries: Donald G. Erway, R. Steven Miller, and Randal G. Erway of National Warranty; and John Sauers of American Prime. (Decl. of Cohen Ex. A; see also Pl. Stat. of Undisp. Mat. Facts in Opp'n 8 ¶ 4.) Pine Belt was not listed as an authorized fiduciary on the Account.*fn1 (Decl. Of Cohen Ex. A.) The Fiduciary Certification authorized Prudential to accept instructions, including authorization to receive and disburse monies, from named fiduciaries only. (Id.) At the request of American Prime, Prudential sent copies of the monthly statements for the Account to both Donald Erway of National Warranty, and David Sicket of Pine Belt. (Decl. of Cohen ¶ 6.)

  In November 2002, John Sauers of American Prime instructed Prudential to create another account entitled "Consolidation Number 2." (Cohen Dep. 46:1-3.) By letter dated November 11, 2002, Donald Erway of National Warranty instructed Prudential to move the assets from the Account, as well as other American Prime accounts, to the Consolidation Number 2 account. (Def.'s Stat. of Undisp. Mat. Facts ¶ 18.) Another letter, sent by Donald Erway on November 26, 2002, instructed Prudential to move all the assets from the Consolidation Number 2 account to a National Warranty account at Prudential. (Id. ¶ 20.) On December 30, 2002, Barry Lake, the new president of National Warranty, instructed Prudential to wire all the money from the National Warranty account to a National Warranty account at Wells Fargo. (Cohen Dep. 57:5-19.)

  National Warranty has not authorized payment for any claims tendered pursuant to a VSC since November of 2002. (Compl. ¶ 23.) In June of 2003, National Warranty was declared insolvent under the laws of the Cayman Islands and filed bankruptcy in United States Bankruptcy Court in Nebraska. (Pl. Stat. of Undis. Mat. Facts in Opp'n ¶ 19.) Pine Belt claims to have incurred damages as a result of claims that National Warranty would no longer honor under the VSCs. (Compl. ¶¶ 24-25.)

  Pine Belt filed its Complaint in this action on January 8, 2004 against SC&E, American Prime, and Prudential. On February 14, 2005, this Court entered an Order granting Pine Belt a default judgment against both SC&E and American Prime. The remaining causes of action against Prudential are for breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, breach of trust agreement, misrepresentation, negligence, conversion, and detrimental reliance.

  II. PRUDENTIAL'S MOTION FOR SUMMARY JUDGMENT

  A. Standard of Review

  Federal Rule of Civil Procedure 56(c) provides that summary judgment should be granted "if pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, (1986); Kreschollek v. Southern Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment, a court must construe all facts and inferences in the light most favorable to the nonmoving party. See Boyle v. Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998). The moving party bears the burden of establishing that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

  The Supreme Court has stated that in evaluating a defendant's motion for summary judgment:
[t]he judge must ask . . . not whether . . . the evidence unmistakably favors one side or the other but whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented. The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. The judge's inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of evidence that the plaintiff is entitled to a verdict. . . .
Anderson, 477 U.S. at 252. A fact is "material" only if it will affect the outcome of a lawsuit under the applicable law, and a dispute over a material fact is "genuine" if the evidence is such that a reasonable fact finder could return a verdict for the nonmoving party. See id.

  Once the moving party has properly supported its showing of no triable issue of fact and of an entitlement to judgment as a matter of law, the non-moving party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita, 475 U.S. at 586; see also Anderson, 477 U.S. at 247-48. The non-moving party must "go beyond the pleadings and by [its] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324; Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992) ("to raise a genuine issue of material fact . . . the [non-moving party] need not ...


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