TRUSTED TRANSPORTATION SOLUTIONS, LLC. v. GUARANTEE INSURANCE COMPANY

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

TRUSTED TRANSPORTATION 1:16-cv-7094-NLH-JS

SOLUTIONS, LLC,

OPINION

Plaintiff,

v.

GUARANTEE INSURANCE COMPANY,

et al.,

Defendants.

APPEARANCES:

WILLIAM B. IGOE

CASEY GENE WATKINS

WILLIAM J. DESANTIS

BALLARD SPAHR LLP

210 LAKE DRIVE EAST

SUITE 200

CHERRY HILL, NJ 08002

On behalf of Plaintiff

CHRISTINA M. RIEKER

LARRY C. GREEN, JR.

ANDREW N. JANOF

WINGET, SPADAFORA & SCHWARTZENBERG LLP

2500 PLAZA 5

HARBORSIDE FINANCIAL CENTER

JERSEY CITY, NEW JERSEY 07311

On behalf of Defendants

HILLMAN, District Judge,

This matter comes before the Court on the Motion for

Clarification [Docket No. 164] brought by Defendants Brown &

Brown of New Jersey (“Brown and Brown”) and John F. Corbett

(“Corbett” and collectively “Defendants”) with respect to the

Court’s September 27, 2019 Opinion [Docket No. 158] and Order

[Docket No. 159] denying summary judgment to both Defendants and

Plaintiff Trusted Transportation Solutions (“Plaintiff”). In

essence, Defendants are asking the Court to rule on whether

Plaintiff is precluded from seeking disgorgement and punitive

damages as a matter of law. The Court will grant Defendants’

motion and, for the reasons expressed below, will hold that

Plaintiff is not precluded from seeking disgorgement and

punitive damages as a matter of law.

BACKGROUND

As this Opinion is written primarily for the parties, the

Court will not discuss in detail the facts of this case.1

Briefly, Plaintiff alleges that Defendants misrepresented the

terms of a workers’ compensation insurance policy that Plaintiff

purchased through Defendants. [See generally Docket No. 38.2]

On September 27, 2019, the Court denied Defendants’ Motion for

1 A more complete version of the relevant facts can be found in

the September 29, 2019 Opinion. [Docket No. 158.]

2 The Court notes that there are two separate docket items that

appear to be the operative Amended Complaint. [See Docket Nos.

35, 38.] The Court further notes that those two Amended

Complaints appear to be identical. In the interest of clarity,

the Court will cite only to Docket No. 38 when referring to the

operative Amended Complaint.

Summary Judgment and Plaintiff’s Cross-Motion for Summary

Judgment. [Docket No. 159.] In its Opinion, the Court did not

address the parties’ arguments about the viability of

Plaintiff’s assertions that it is entitled to disgorgement and

punitive damages. [See Docket No. 158, at 23 n.6.] The Court

now takes the opportunity to clarify that issue.

DISCUSSION

A. Subject Matter Jurisdiction

The Court has jurisdiction over Plaintiff’s claims under 18

U.S.C. § 1332, as the requirements of diversity are met.3

B. Standard for Motion for Summary Judgment

Summary judgment is appropriate where the Court is

satisfied that “‘the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits if any,’ . . . demonstrate the absence of a genuine

issue of material fact” and that the moving party is entitled to

3 Plaintiff Trusted Transportation Solutions, LLC is a limited

liability company whose sole member is a citizen of New Jersey.

Defendant Guarantee Insurance Company is a corporation

incorporated in and with its principal place of business in

Florida. Defendant Patriot Underwriters, Inc., is a corporation

incorporated in Delaware with its principal place of business in

Florida. Defendant Douglas Cook is a citizen of Pennsylvania.

Defendant Brown & Brown of New Jersey, LLC is a limited

liability company whose sole member is a corporation

incorporated in and with its principal place of business in

Florida. Defendant John F. Corbett is a citizen of Delaware.

judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S.

317, 322-23 (1986) (quoting FED. R. CIV. P. 56).

An issue is “genuine” if it is supported by evidence such

that a reasonable jury could return a verdict in the nonmoving

party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986). A fact is “material” if, under the governing

substantive law, a dispute about the fact might affect the

outcome of the suit. Id. “In considering a motion for summary

judgment, a district court may not make credibility

determinations or engage in any weighing of the evidence;

instead, the non-moving party’s evidence ‘is to be believed and

all justifiable inferences are to be drawn in his favor.’”

Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004)

(quoting Anderson, 477 U.S. at 255).

Initially, the moving party bears the burden of

demonstrating the absence of a genuine issue of material fact.

Celotex, 477 U.S. at 323 (“[A] party seeking summary judgment

always bears the initial responsibility of informing the

district court of the basis for its motion, and identifying

those portions of ‘the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any,’ which it believes demonstrate the absence

of a genuine issue of material fact.”); see Singletary v. Pa.

Dep’t of Corr., 266 F.3d 186, 192 n.2 (3d Cir. 2001) (“Although

the initial burden is on the summary judgment movant to show the

absence of a genuine issue of material fact, ‘the burden on the

moving party may be discharged by “showing” — that is, pointing

out to the district court — that there is an absence of evidence

to support the nonmoving party’s case’ when the nonmoving party

bears the ultimate burden of proof.” (quoting Celotex, 477 U.S.

at 325)).

Once the moving party has met this burden, the nonmoving

party must identify, by affidavits or otherwise, specific facts

showing that there is a genuine issue for trial. Celotex, 477

U.S. at 324. A “party opposing summary judgment ‘may not rest

upon the mere allegations or denials of the . . . pleading[s].’”

Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir. 2001). For

“the non-moving party[] to prevail, [that party] must ‘make a

showing sufficient to establish the existence of [every] element

essential to that party’s case, and on which that party will

bear the burden of proof at trial.’” Cooper v. Sniezek, 418 F.

App’x 56, 58 (3d Cir. 2011) (quoting Celotex, 477 U.S. at 322).

Thus, to withstand a properly supported motion for summary

judgment, the nonmoving party must identify specific facts and

affirmative evidence that contradict those offered by the moving

party. Anderson, 477 U.S. at 257.

C. Disgorgement

Defendants first seek a ruling that Plaintiff is precluded

from recovering disgorgement as a form of damages in this case.

New Jersey Supreme Court precedent indicates that disgorgement

and unjust enrichment are two names for the same doctrine. See

Cty. of Essex v. First Union Nat’l Bank, 891 A.2d 600 (N.J.

2006) (repeatedly using the phrase “unjust

enrichment/disgorgement”); see also Iliadis v. Wal-Mart Stores,

Inc., 922 A.2d 710, 723 (N.J. 2007) (using unjust enrichment

standard to analyze whether disgorgement would be appropriate).

A successful unjust enrichment/disgorgement claim requires that

the plaintiff “show both that defendant received a benefit and

that retention of that benefit without payment would be unjust.”

Iliadis, 922 A.2d at 723 (quoting VRG Corp. v. GKN Realty Corp.,

641 A.2d 519, 526 (N.J. 1994)). The plaintiff must also “show

that it expected remuneration from the defendant at the time it

performed or conferred a benefit on defendant and that the

failure of remuneration enriched defendant beyond its

contractual rights.” Id. (quoting VRG Corp., 641 A.2d at 526).

Here, it cannot be disputed that Defendants received a

benefit from Plaintiff in the form of $45,465.00 in commissions

paid to Defendants. [Docket No. 158, at 20.] The issue, then,

is whether it would be unjust for Defendants to retain that

benefit. Put another way, the issue is whether Plaintiff

expected but did not receive remuneration from Defendants such

that Defendants were enriched beyond their contractual rights.

Defendants argue that, as a matter of law in New Jersey, “a

plaintiff may not seek disgorgement where it received the

product or service at issue and reaped some value therefrom.”

[Docket No. 153, at 22.] Defendants point to two cases to

support this argument. The first case, In re Cheerios Marketing

and Sales Practices Litigation, involved Cheerios consumers who

were suing Cheerios for allegedly making false statements about

the health benefits of Cheerios. Civil Action No. 09-cv-2413,

2012 WL 3952069, at *1 (D.N.J. Sept. 10, 2012).

In Cheerios, the plaintiffs could not satisfy the second

prong of the unjust enrichment/disgorgement test because they

could not show that they “received a product that failed to work

for its intended purpose or was worth objectively less.” Id.

(quoting Koronthaly v. L’Oreal USA, Inc., 374 F. App’x 257, 259

(3d Cir. 2010)). Rather, the Court noted that “[h]ealthy

ingredients, crunchiness, convenience and taste are value

components” that the plaintiffs received with the Cheerios that

they purchased. Id. In sum, the Court held that “[u]njust

enrichment is not a viable theory — and disgorgement is

therefore not available — in circumstances in which a consumer

purchases specific goods and receives those same specific

goods.” Id.

The second case that Defendants rely on is Hoffman v.

Cogent Solutions Group, LLC. Civil Action No. 13-00079, 2013 WL

6623890 (D.N.J. Dec. 16, 2013). In that case, the Court quoted

the standard set forth in Cheerios and held that, since the

plaintiff could “not articulate how” the product he purchased

and received “failed to function as advertised,” disgorgement

was not available. Id. at *5.

Plaintiff responds to Defendants’ argument by asserting

that Cheerios and Hoffman are inapposite here because they

concern issues with consumer goods (Cheerios and a dietary

supplement, respectively), whereas this case is about alleged

professional malpractice. [Docket No. 147-1, at 28-29.]

Plaintiff argues that the malpractice alleged here is analogous

to legal malpractice, about which the New Jersey Supreme Court

has noted: “Ordinarily, an attorney may not collect attorney

fees for services negligently performed.” Saffer v. Willoughby,

670 A.2d 527, 534 (N.J. 1996). Plaintiff also cites an

unpublished New Jersey case in which the Court held that, “if

malpractice could be proven, disgorgement would constitute an

appropriate basis for recovery.” Geyer v. Pitney, Hardin, Kipp

& Szuch, Docket No. L-2680-03, 2008 WL 1721883, at *18 (N.J.

Super. Ct. App. Div. Apr. 15, 2008).

The goods-services dichotomy, while an interesting take on

the issue before the Court, is not dispositive. The parties,

perhaps optimistically, interpret the cases upon which they rely

to create hard and fast rules that support their respective

positions. But whether disgorgement is available turns less on

whether a product or service is at issue and more on whether the

Iliades test outlined above has been met.

Given the facts of this case, a reasonable jury could find

that Defendants’ retention of the commission fees would be

unjust. As discussed in the September 27, 2019 Opinion, if a

jury were to believe Plaintiff’s version of events, it could

find “that Defendants at best had inadequate knowledge about the

policy and at worst actively mischaracterized the policy to

Plaintiff.” [Docket No. 158, at 14 (emphasis added).] The jury

could then conclude that Plaintiff “received a product that

failed to work for its intended purpose or was worth objectively

less.” See Koronthaly, 374 F. App’x at 259. This would be

sufficient to satisfy the second prong of an unjust

enrichment/disgorgement claim, the first prong of which is

indisputably met here. Therefore, because a reasonable jury

could find that Plaintiff is entitled to disgorgement, the Court

will hold that Plaintiff is not precluded at this stage from

seeking disgorgement.

D. Punitive Damages

Defendants also argue that Plaintiff is precluded from

seeking punitive damages here. Under New Jersey law,

[p]unitive damages may be awarded to the plaintiff

only if the plaintiff proves, by clear and convincing

evidence, that the harm suffered was the result of the

defendant’s acts or omissions, and such acts or

omissions were actuated by actual malice or

accompanied by a wanton and willful disregard of

persons who foreseeably might be harmed by those acts

or omissions. This burden of proof may not be

satisfied by proof of any degree of negligence

including gross negligence.

N.J. STAT. ANN. § 2A:15-5.12(a). “‘Actual malice’ means an

intentional wrongdoing in the sense of an evil-minded act.” Id.

§ 2A:15-5.10. “‘Wanton and willful disregard’ means a

deliberate act or omission with knowledge of a high degree of

probability of harm to another and reckless indifference to the

consequences of such act or omission.” Id.

Defendants point out the language that the “burden of

proof” required for punitive damages “may not be satisfied by

proof of any degree of negligence including gross negligence.”

[Docket No. 164-1, at 3 (quoting N.J. STAT. ANN. § 2A:15-

5.12(a)).] They argue that the only way to accomplish this is

by proving an intentional tort, which is impossible here because

Plaintiff’s fraud claim has already been dismissed and only a

negligence claim remains. [Id.]

The Court recognizes the apparent incongruity of allowing

punitive damages in what appears to be largely a negligence

case, as punitive damages are a remedy and not a claim in and of

themselves. Nevertheless, the Court will not grant Defendants’

motion for summary judgment on this issue for two reasons.

First, although Plaintiff imprecisely denominates its remaining

claim as “Negligence/Broker Malpractice,” the claim appears to

encompass more than mere ordinary negligence and has as an

element a breach of fiduciary duty. [See Docket No. 158, at 12-

19.] As a general rule, punitive damages may be awarded in

breach of fiduciary duty cases. See St. James v. Future

Finance, 776 A.2d 849, 874 (N.J. Super. 2001) (upholding award

of punitive damages for breach of fiduciary duty claim).

Therefore, punitive damages could be warranted in this case if

Plaintiff can meet the high burden required to justify them.

Second, although the caselaw on this issue is surprisingly

sparse, there is nonbinding authority to support allowing

punitive damages even if only negligence claims exist in a case.

For instance, in Gillman v. Rakouskas, the plaintiffs’ complaint

“only state[d] a claim for gross negligence.” 2017 U.S. Dist.

LEXIS 10835, at ¶ 7 (D.N.J. Jan. 26, 2017). While the late

Honorable Jerome B. Simandle did dismiss the prayer for punitive

damages, he did so not because punitive damages could never be

available in such a case, but because the complaint was

“completely devoid of any facts that would allow the Court to

reasonably infer that Defendants acted in a manner that could be

classified as ‘actual malice’ or a ‘wanton or reckless

disregard’ for others.” Id. ¶¶ 6-8. In fact, Judge Simandle

permitted the plaintiffs to amend their complaint specifically

so that they could “articulat[e] specific facts supporting a

prayer for punitive damages.” Id. ¶ 8.

In Brand Marketing Group LLC v. Intertek Testing Services,

N.A., the Third Circuit, applying Pennsylvania law, addressed

this issue more squarely by holding that “punitive damages may

be awarded in negligence cases if the plaintiff proves greater

culpability than ordinary negligence at trial.” 801 F.3d 347,

358 (3d Cir. 2015). In support of this conclusion, the court

approvingly quoted a Pennsylvania Supreme Court case as saying

that

while a showing of ordinary negligence cannot support

a punitive damages award, “neither is there anything

in law or logic to prevent the plaintiff in a case

sounding in negligence from undertaking the additional

burden of attempting to prove . . . that the

defendant’s conduct was not only negligent but that

the conduct was also outrageous,” such that it

warrants punitive damages.

Id. (quoting Hutchinson ex rel. Hutchinson v. Luddy, 870 A.2d

766, 773 (Pa. 2005)).

The Court agrees with the logic implicit in Gillman and

explicit in Brand Marketing and, importantly, finds no binding

precedent to contradict that logic. It is true in this case

that Plaintiff is not required to prove actual malice or wanton

and willful disregard in order to succeed on the issue of

liability. But that does not make it impossible for Plaintiff

to meet such a standard. In other words, just because Plaintiff

failed to properly plead its fraud claim earlier on in this

litigation does not mean that it cannot present sufficient

evidence to show that Defendants acted with actual malice or

wanton and willful disregard in proving its negligence claim

that includes an element of breach of a fiduciary duty.

Therefore, Plaintiff will not be precluded from seeking punitive

damages on the basis that the only remaining claim is a

negligence claim.

Thus, the issue of punitive damages comes down to whether,

viewing the evidence in the light most favorable to Plaintiff

and making all reasonable inferences in its favor, a reasonable

jury could find that Defendants acted with actual malice or

wanton and willful disregard. This “is a fact-specific inquiry

requiring examination of [Defendants’] intent and knowledge.”

Daloisio v. Liberty Mut. Fire Ins. Co., 754 F. Supp. 2d 707, 710

(D.N.J. 2010). The New Jersey Punitive Damages Act establishes

a non-exhaustive list of four factors that the trier of fact

shall consider in determining whether the defendant acted with

actual malice or wanton and willful disregard:

(1) The likelihood, at the relevant time, that

serious harm would arise from the defendant’s

conduct;

(2) The defendant’s awareness of reckless disregard

of the likelihood that the serious harm at issue

would arise from the defendant’s conduct;

(3) The conduct of the defendant upon learning that

its initial conduct would likely cause harm; and

(4) The duration of the conduct or any concealment of

it by the defendant.

N.J. STAT. ANN. § 2A:15-5.12(b).

Accepting Plaintiff’s version of events to be true and

making all reasonable inferences in Plaintiff’s favor, a

reasonable jury could find that Defendants acted with

actual malice or wanton and willful disregard in this case.

The key fact is whether Defendants actively

mischaracterized the policy to Plaintiff. If they did so

with the goal of getting Plaintiff to agree to the policy,

in the context of an owed fiduciary duty, then each of the

four factors listed above would cut in favor of an award of

punitive damages. Under Plaintiff’s version of events,

Defendants knew that they were misrepresenting the terms of

the policy, knew that such representation might induce

Plaintiff to agree to the policy, knew that such an

agreement would cause harm to Plaintiff in the form of

excess expenses, concealed accurate information about the

policy, and disregarded the risks of all the above

allegations in order to get Plaintiff to agree to the

policy.

Determining whether the evidence presented will

actually lead a jury to make such a conclusion is not

within the province of the Court. If the proffered proofs

fail, Defendant may renew its argument that punitive

damages should not be available on the facts of this case

at the appropriate time and under the appropriate rule

during the upcoming trial process. Therefore, summary

judgment will not be granted on this issue at this time,

and Plaintiff will not be precluded as a matter of law from

seeking punitive damages on the current record.

CONCLUSION

For the reasons expressed above, the Court will grant

Defendants’ Motion for Clarification [Docket No. 164] and will

hold that Plaintiff is not precluded from seeking disgorgement

and punitive damages.

An accompanying Order will be entered.

May 4, 2020 s/Noel L. Hillman

DATE NOEL L. HILLMAN, U.S.D.J.