Palumbo v. Provident Tr. Grp. LLC

ANTHONY J. PALUMBO, et al., Plaintiffs, v. PROVIDENT TRUST GROUP LLC, Defendant.

6:19-CV-0252 (LEK/ATB)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK

March 23, 2021

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

Plaintiffs Anthony and Phyllis Palumbo bring this action against Defendant Provident Trust Group LLC, asserting the following claims: (1) fraud and misrepresentation; (2) breach of contract; (3) breach of fiduciary duty; and (4) negligence and gross negligence. See Dkt. No. 1 ("Complaint") at 10-14.

Now before the Court is Defendant's motion for summary judgment, which seeks dismissal of the Complaint in its entirety. See Dkt. No. 23-1 ("Motion"); Dkt. No. 23-2 ("Defendant's Statement of Material Facts" or "Defendant's SMF"). Plaintiffs oppose the Motion. See Dkt. No. 26 ("Anthony Palumbo Affidavit"); 27 ("Opposition"); 28 ("Plaintiffs' Statement of Material Facts" or "Plaintiffs' SMF")¹. Defendant filed a reply. See Dkt. No. 29("Reply"); 29-1 ("Defendant's Response to Plaintiffs' Statement of Material Facts" or "Defendant's Response to Plaintiffs' SMF").

For the reasons discussed below, the Court grants Defendant's motion in its entirety.

II. BACKGROUND

A. Factual History

The following facts are undisputed, except where otherwise noted.

1. The Parties

Plaintiffs are a married couple residing in New York. See Compl. ¶ 5. Mr. Palumbo is a retired ophthalmologist. See id. ¶ 8; Def.'s SMF ¶ 6. He is the sole holder of the individual retirement account ("IRA") at the center of this dispute. See Application at 3. Mrs. Palumbo is the primary beneficiary of the account. See id.; see also Def.'s SMF ¶ 50.

Defendant is "a Nevada-chartered trust company that provides custodial and related administrative services" to owners of self-directed IRAs. Def.'s SMF ¶ 1.

2. The Investment

In 2011, Mr. Palumbo met George Inserra, an investment broker. See Def.'s SMF ¶ 8; Dkt. No. 23-5 ("Anthony Palumbo Deposition")² at 35-36. In 2014 or 2015, Mr. Palumbo learned Inserra had been convicted of felonies involving stock fraud. See Def.'s SMF ¶ 10; Anthony Palumbo Dep. at 41. During the summer of 2014, Inserra introduced Mr. Palumbo to two men—Robert Guess and Richard Tilford—who owned and operated a real estate investment company called Texas First Financial. See Def.'s SMF ¶ 12; Anthony Palumbo Dep. at 42-44.

On October 29, 2015, Mr. Palumbo and Inserra flew to Dallas, Texas to meet with Guess, Tilford, and an engineer named Philip Carter. See Def.'s SMF ¶ 16; Anthony Palumbo Dep. at 48-50, 52. During the trip, Mr. Palumbo and Inserra visited an urgent care facility in which Mr. Palumbo was considering investing through a company called Premier Group. See Def.'s SMF ¶ 17-19; Anthony Palumbo Dep. at 47, 52-54.

Upon returning from Texas, Mr. Palumbo received a package of documents from Texas First Financial that he was to fill out in order to open an IRA with Defendant. See Def.'s SMF ¶ 24; Anthony Palumbo Dep. at 66. The package included an application for an IRA. See Dkt. No. 23-7 ("Application"); Def.'s SMF ¶ 25. The Application was blank when Mr. Palumbo received it. See id.; see also Anthony Palumbo Dep. at 64. Tilford, the First Financial principal, instructed Mr. Palumbo to sign the Application. See Def.'s SMF ¶ 26; Anthony Palumbo Dep. at 64. Though a signature appears on the Application, Mr. Palumbo disputes that he signed it, going as far as providing a handwriting sample. See Application at 4; Pls.' SMF ¶ 5; seealso Anthony Palumbo Aff. ¶ 2 ("I have no recollection of signing such documents and only can admit that some documents were sent to me in blank that were produced by the Defendant."), 5 ("Defendant relies on disclaimers above my signature, which I assert appears to me upon further review . . . a forged signature . . . . I don't believe I signed any extensive documents like this, and whatever I may have signed was not the documents that the Defendant now presents to the Court[.]"); Dkt. No. 26-2 (authorization form between Mr. Palumbo and Plaintiffs' counsel, signed by Mr. Palumbo).³ By signing the Application, Mr. Palumbo acknowledged having received Defendant's custodial agreement, see Application at 4; but Plaintiffs dispute actually receiving the custodial agreement, see Pls.' SMF ¶ 5 ("There is no proof that the Plaintiff received any document that is described as a 'custodial agreement' upon which the Defendant relies.").⁴

In addition to the Application, Mr. Palumbo received a form of Defendant's labeled "Direction of Investment." See Dkt. No. 23-9 ("Form"); see also Def.'s SMF ¶ 39; Anthony Palumbo Dep. at 82. Plaintiff signed the Form but does not remember filling out the Form's other fields, which are not in his handwriting. See Def.'s SMF ¶ 40; Anthony Palumbo Dep. at 78, 80-82. One field of the Form directed Defendant to wire $1 million to an account at Chase Bank belonging to "Premier Immediate Care." See Form at 2. In exchange, Mr. Palumbo received a promissory note. See id.

Above the signature field, under a heading that reads "Important: Please read before signing," the Form states:

My account is self-directed and I, alone, am responsible for the selection, due [diligence], management, review, and retention of all Investments in my account. I agree that the Custodian and Administrator are not a "fiduciary" for my account, as the term is defined in the Internal Revenue Code, ERISA or any other applicable federal, state or local laws. I hereby direct the Custodian and Administrator, in their passive capacities, to enact this transaction for my account. I acknowledge and confirm that I have received, read and understand each of the disclosures for my account(s) and direction(s) of investment, and consent and agree to the terms and condition contained therein.

Form at 3.⁵ Plaintiff "[p]robably" did not read the disclaimer before signing the Form. SeeAnthony Palumbo Dep. at 83.

The investment "resulted in [Mr. Palumbo's] loss of one million dollars." Anthony Palumbo Aff. ¶ 7.

B. Procedural History

Plaintiffs initiated this action by filing the Complaint on February 21, 2019. See Docket. On March 18, 2020, Defendant filed its Motion. See id.

III. LEGAL STANDARD⁶

Rule 56 of the Federal Rules of Civil Procedure instructs courts to grant summary judgment if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it "might affect the outcome of the suit under the governing law," and a dispute is "'genuine' . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Thus, while "[f]actual disputes that are irrelevant or unnecessary" will not preclude summary judgment, "summary judgment will not lie if . . . the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.; see also Taggart v. Time, Inc., 924 F.2d 43, 46 (2d Cir. 1991) ("Only when no reasonable trier of fact could find in favor of the non-moving party should summary judgment be granted.").

The party seeking summary judgment bears the burden of informing the court of the basis for the motion and identifying those portions of the record that the moving party claims will demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Similarly, the movant is entitled to summary judgment when the nonmoving party has failed "to establish the existence of an element essential to [the movant's] case, and on which [the movant] will bear the burden of proof at trial." Id. at 322.

In attempting to repel a motion for summary judgment after the moving party has met its initial burden, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). At the same time, a court must resolve all ambiguities and draw all reasonable inferences in favor of the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000). Hence, "a court's duty in reviewing a motion for summary judgment is 'carefully limited' to finding genuine disputes of fact, 'not to deciding them.'" Macera v. Vill. Bd. of Ilion, No. 16-CV-668, 2019 U.S. Dist. LEXIS 169632, at *26 (N.D.N.Y. Sept. 30, 2019) (Kahn, J.) (quoting Gallo v. Prudential Residential Servs., Ltd.. P'ship, 22 F.3d 1219, 1224 (2d Cir. 1994)).

IV. DISCUSSION

A. Fraud and Misrepresentation

1. Applicable Law

a. Whether the Choice-of-Law Provision Applies

Defendant argues that Nevada law governs but that "even if New York law applied to [Plaintiffs'] claims, the analysis and result would be no different." Mot. at 12 n.3. The custodialagreement states that it "shall be governed by and construed under the applicable laws of the State of Nevada." See Dkt. No. 23-8 (the "Custodial Agreement") at 10. As discussed, Defendant has not established that Mr. Palumbo actually received the Custodial Agreement, though he acknowledged receipt and appears⁷ to have agreed to be bound by its terms. See Application at 4.

The Court finds the contractual provision inapplicable to this tort claim. See Cotiviti, Inc. v. Deagle, No. 20-CV-2730, 2020 U.S. Dist. LEXIS 217035, at *15-16 (S.D.N.Y. Nov. 19, 2020) ("Even if such a clause is enforced, however, the contractual choice-of-law clause does not reach tort claims."). "In limited cases, New York courts construe a choice-of-law provision to encompass non-contractual claims if the provision is 'sufficiently broad so as to encompass the entire relationship between the contracting parties.'" Id. at *16 n.5 (quoting Innovative BioDefense, Inc. v. VSP Techs., Inc., No. 12-CV-3710, 2013 U.S. Dist. LEXIS 95429, at *16 (S.D.N.Y. July 3, 2013)). But "[l]anguage that the agreement itself is to be construed or governed by a particular law is too narrow to support such...