Cypress Creek Intermediaries, Inc. v. Westport Ins. Corp.

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CYPRESS CREEK INTERMEDIARIES, INC., Plaintiff, v. WESTPORT INSURANCE CORP., Defendant.

No. 22-cv-3649 (ER)

United States District Court, S.D. New York

February 6, 2023

OPINION & ORDER

EDGARDO RAMOS, U.S.D.J.

Cypress Creek Intermediaries, Inc. (“CCI”), a broker brings this action against Westport Insurance Corporation (“Westport”) for breach of contract, unjust enrichment, quantum meruit, breach of covenant of good faith and fair dealing, fraud, and a violation of a Massachusetts law for unfair and deceptive practices Massachusetts General Laws Chapter 93A. Doc. 1 ¶¶ 6-10, 62-96. CCI alleges that Westport failed to pay the fee that CCI earned in connection with brokering Westport's acquisition of TMS, Re, Inc. (“TMS”), another insurance business. Id. ¶ 6.

Before the Court is Westport's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), along with CCI's request for oral argument on the motion. Doc. 20; Doc. 25. For the reasons set forth below, Westport's motion is GRANTED in part and DENIED in part, and CCI's request for oral argument is DENIED as moot.

I. BACKGROUND

A. Factual Background

The following facts are based on the allegations in the complaint, which the Court accepts as true for purposes of the instant motion. See Koch v Christie S Int l PLC, 699 F.3d 141, 145 (2d Cir. 2012). “Documents that are attached to the complaint . . . are deemed part of the pleading” and are also considered by the Court in this case. See Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007) (citation omitted).

In April 2020, CCI became aware that TMS had an interest in being acquired by another insurance company. Doc. 1 ¶¶ 7-10. CCI thereafter assisted with the facilitation of a possible deal with an interested purchaser.^[1] Id. ¶ 11. As part of that process, CCI drafted an agreement, titled “Confidentiality/Non-Disclosure and Representative Agreement,” which was signed by TMS and the would-be “First Purchaser.” Id. ¶ 13; see also Doc. 1-1 at 2-5. The agreement noted that CCI was “recognized by the [First Purchaser] as representative regarding all negotiations with [TMS] and involving the Transaction[.]” Doc. 1-1 ¶ 10. It further stated that CCI would be “an authorized agent of [the First Purchaser] for the purposes of section 5 of this Agreement.”^[2] Doc. 1-1 ¶ 10. CCI thus alleges that TMS knew that CCI was working for a fee, and both parties understood that the fee would be paid by the First Purchaser.^[3] Doc. 1 ¶ 14.

The prospective deal between TMS and the First Purchaser fell through after several months. Id. ¶ 15. CCI, however, maintained its efforts to find TMS a purchaser. CCI proposed “TMS to Westport as a potential target of a purchase/acquisition” in late June 2020. Id. ¶ 16. According to CCI, its president, Andrew Pyle, had a good working relationship with Katie McGrath, an executive at Westport who was Managing Director and Head of Accident and Health when CCI approached Westport about the possible acquisition of TMS. Id. ¶ 17. Pyle and McGrath had previously completed other deals together when McGrath was employed at another company. Id. ¶ 18. Prior to CCI's outreach to McGrath, Westport had no relationship with TMS and was not aware that it was looking to be acquired. Id. ¶ 19.

On June 29, 2020, Pyle sent McGrath an email stating the following:

Dear Katie,

Good morning, Trust all is well.

He Staff of Cypress Creek Intermediaries looks forward to working with you on a greater basis in 2020. As you look to grow Swiss RE's A&H Division,^[4] wanted to inquire whether your organization would have an interest via acquisition in acquiring a turnkey Employer Stop Loss/Provider Excess MGU organization. [ . . . ]

He principals have in interest in selling to a carrier organization. [ . . . ] Merely looking to gauge your interest at this time.

[ . . . ]

Doc. 1-2 at 2; see also Doc. 1 ¶ 20. He same morning, McGrath stated that “[w]e would have an interest. Let me know next steps.” Doc. 1-2 at 2; Doc. 1 ¶ 21.

Hereafter, the parties engaged in a series of calls and email discussions. On August 28, 2020, Pyle wrote to McGrath stating that, “[f]urther to our discussion last week, it appears you've been given the ‘green light' by Swiss Re upper management to pursue opportunities which will grow the Swiss Re A&H portfolio.” Doc. 1-3 at 2. Pyle then stated that he thought Westport “might have an interest” in “the following opportunity,” and thereafter provided details about TMS. Id. He email noted that TMS was “not actively pursuing anything formal,” however, TMS “would listen to an offer to strategically partner with and/or acquire” TMS. Id. Pyle asked whether McGrath had time to participate in a call regarding a possible deal with TMS the following week. Id.; see also Doc. 1 ¶¶ 22-24. McGrath proposed a date and time for the introductory call the following day. Doc. 1-3 at 2; Doc. 1 ¶ 25.

He parties held a three-way telephone conference with TMS on September 1, 2020. Doc. 1 ¶ 26; see also Doc. 1-3 at 2. Hey discussed the need for a nondisclosure agreement (“NDA”) “to protect the confidentiality of the deal and to recognize Cypress Creek as the ‘representative regarding the negotiations.'” Doc. 1 ¶ 26. CCI alleges that the parties agreed that CCI would draft the agreement, which would include a provision naming CCI “as the facilitator of the transaction.” Id. ¶ 27.

CCI sent Westport the NDA, along with an email discussing the parties' phone call “regarding a possible partnership,” on September 11, 2020. Id. ¶ 28; see also Doc. 14 at 2; Doc. 1-5 at 2-5. The NDA was titled “Confidentiality/Non-Disclosure and Representative Agreement.” Doc. 1-5 at 2. Westport signed and returned the NDA to CCI the same day.^[5] Doc. 1 ¶ 29; Doc. 1-4 at 2; Doc. 1-5 at 5.

As relevant to the parties' dispute, the NDA provides that “Cypress Creek Intermediaries, Inc., is recognized by [Westport] as representative regarding all negotiations with [TMS] and involving this Proposed Acquisition and/or Strategic Partnership.”^[6] Doc. 1-5 ¶ 10; Doc. 1 ¶ 31. It also makes clear that it was to become effective on “the date of execution by the party signing last in time.” Doc. 1-5 ¶ 16; Doc. 1 ¶ 34. The NDA further notes that its terms are governed by Massachusetts law. Doc. 15 ¶ 13; see also Doc. 1 ¶ 32.

Several weeks after Westport signed the NDA, on September 29, 2020, McGrath had a telephone call with Pyle to discuss the acquisition of TMS. Doc. 1 ¶ 35. Later the same day, McGrath sent Pyle an email memorializing the parties' conversation, and indicating that Westport was interested in proceeding “quickly.” Id. ¶¶ 35-36; see also Doc. 1-6 at 2-3. The email stated, however, that there was a “clarification that should be made in the TMS document,” the NDA, prior to its finalization. Doc. 1-6 at 3. Specifically, McGrath noted Westport's understanding that CCI had been “engaged by TMS for strategic discussions that could potentially lead to a sale post July 2021.” Id. (emphasis added); Doc. 1 ¶ 37. McGrath therefore noted that various changes needed to be made to the NDA, including a “change to item #10 showing [CCI] as representative for [TMS].” Doc. 1-6 at 3.

Pyle responded the following day, on September 30, 2020, stating the following:

Dear Katie,

Spoke to our friend Mike Shevlin at TMS Re today. We're enclosing a revised Non Disclosure Agreement accommodating his changes.

1. Section 1. We can't make mention of any type of “acquisition” in the contractual verbiage. So we've eliminated this.

2. Section 10. Cypress Creek Intermediaries, Inc. is the party which brought this opportunity to you directly. While we don't need to be recognized as an actual “representative” of either Swiss Re or TMS re, we do need to be recognized as the facilitating party. We've already initiated a conference call between the parties, so the facilitation role has been established.

While this might be a bit premature, we want to be clear with/in our expectations. In the spirit of full disclosure (and as there is no reinsurance to be placed), CCI would anticipate compensation if any partnership took effect. We'd anticipate a 1%-2% facilitation fee on all gross premium which would flow through the Swiss Re issuing carrier platform by TMS Re. His would be paid by Swiss Re to CCI if any such partnership was solidified.

Trust we can move forward with the NDA, and provide you with the background data so you can begin exploring this opportunity. His program would be an ideal “building block” as you look to grow the Swiss Re portfolio. We have your best interests at heart.

Hanks Katie. Let's move forward.

Doc. 1-6 at 2 (emphases omitted); Doc. 1 ¶ 38. According to CCI, “[t]he reason that TMS and Westport wanted to avoid any mention of any ‘acquisition' was because TMS would be required to pay another company, Munich Reinsurance Corp. (‘Munich Re'), a large fee in the event TMS was sold or acquired at that time, and TMS and Westport conspired to conceal from Munich Re any information about the Westport acquisition.” Doc. 1 ¶ 47.

While the complaint states that “[n]o one on behalf of either Westport or TMS” objected, the documents that CCI attached to the complaint show the contrary. Doc. 1 ¶¶ 39, 41, 46. On October 1, 2020, the day after Pyle sent the email indicating its anticipated facilitation fee, the CEO of TMS, Michael Shevlin, sent an email to CCI and Westport representatives. Doc. 1-7 at 2. In it, Shevlin noted that TMS was not looking to be acquired, or have any discussions regarding acquisition; TMS had not engaged CCI in any capacity; and it urged CCI to immediately stop having discussions about TMS in the marketplace. Id. Shevlin further noted that “[i]f we decide to execute an NDA with Swiss Re Corporate Solutions for a potential ESL...