Exist, Inc. v. Tokio Marine America Insurance Company

Background

Exist, an apparel wholesaler, sued Tokio Marine, its insurer, over the handling of an insurance claim. The parties had entered a Marine Cargo Policy covering Exist’s goods against physical loss or damage, including losses during ocean transport, inland transit, trade disruption, and storage in specified warehouses.

A flood at one of Exist’s warehouses in Fort Lauderdale, Florida, damaged thousands of inventory items. Exist alleged that Tokio Marine’s agents incorrectly calculated the damage, causing an underpayment of $1,607,917.31. Exist also alleged that items the agents were instructed to destroy were instead sold at flea markets near the warehouse.

Exist asserted eight causes of action: breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, conversion, fraud, two civil-conspiracy claims, and violation of New York General Business Law § 349. Exist invoked diversity jurisdiction and demanded a jury trial. Tokio Marine argued that the court had admiralty jurisdiction over the dispute and that the case therefore required a bench trial, meaning a trial decided by the judge rather than a jury.

Contract Claims and Maritime Law

The court concluded that Exist’s contract claims are governed by admiralty law. It relied on the Marine Cargo Policy’s provision applying United States federal common law, or New York law in the absence of federal maritime common law, and on the policy’s connection to maritime commerce. The court also noted that marine cargo insurance policies generally fall within admiralty jurisdiction and that the policy’s coverage of some inland transportation did not remove its maritime character because its maritime aspect was not insubstantial.

The court stated that admiralty-law claims do not carry a jury-trial right. It therefore held that Exist’s breach-of-contract, implied-covenant, and unjust-enrichment claims would not, by themselves, entitle Exist to a jury trial. The court expressly limited its choice-of-law analysis to the jury-trial issue and did not decide the merits of the contract claims.

Tort Claims and Jury Right

The court applied a different test to the tort claims. It found that the alleged tortious conduct occurred in New York and Florida rather than on navigable water. It also found that the alleged unauthorized sale of Exist’s damaged goods had no potentially disruptive effect on maritime commerce and did not have a substantial relationship to traditional maritime activity. The court therefore held that admiralty law does not govern the tort claims.

Because the tort claims were not subject to admiralty jurisdiction, the court considered whether the Seventh Amendment provides a jury-trial right. It held that conversion, fraud, and civil conspiracy are legal claims ordinarily triable by a jury. It also held that Exist’s claim under New York General Business Law § 349 is sufficiently analogous to common-law fraud, and seeks damages, to carry a jury-trial right.

Disposition

The court held that the contract and tort claims arise from the same alleged conduct and depend largely on the same evidence. Under that circumstance, it concluded that separating the claims between a judge and a jury would unnecessarily complicate the trial. The court ruled that Exist is entitled to a jury trial on all claims and that Tokio Marine has no right to a bench trial. The parties were directed to submit pre-motion letters for summary judgment by February 5, 2024.