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AMERICAN GUARANTEE AND LIABILITY INS. v. FOJANINI

March 14, 2000

AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, PLAINTIFF,
V.
MARCO FOJANINI, ARMANDO FERRONI EUROPE INVEST, S.R.L., NOUVEAU INTERNATIONAL, INC. GARY W. BLACK, SR., GARY W. BLACK, JR., DEFENDANTS.



The opinion of the court was delivered by: Lowell A. Reed, Jr., Senior District Judge.

MEMORANDUM

I. BACKGROUND

One of the great wonders of the modern global economy is the ironies it produces. Nations rich in natural resources are among the world's poorest. Technology brings people closer together, while economic and cultural divisions drive peoples apart. American icons such as Michael Jackson and the television drama "Baywatch" are more popular overseas than in the United States. This declaratory judgment action is rooted in an irony of the culinary variety; the collapse of a business deal in which an American company was to send pizzas to Italy.*fn1

According to the complaint in the underlying action, the saga leading up to this case began in May 1994, when defendant Armando Ferroni ("Ferroni"), an Italian businessman, and defendant Gary W. Black, Sr. ("Black Sr."), on behalf of his company, defendant Nouveau International, Inc. ("Nouveau"), explored the possibility of a pizza-related business arrangement. Black Sr. had invented a method of preserving microwaved dough products and incorporated it into a robotic pizza vending machine. He sought Ferroni's assistance in delivering these machines to Europe. During those initial discussions, Black Sr. allegedly represented to Ferroni that his company, Nouveau, was financially sound.*fn2

Ferroni believed Nouveau's pizza vending machine had all the ingredients of success and agreed to market Nouveau's machines in Italy and Europe. In February 1995, Ferroni, joined by fellow Italian businessman Marco Fojanini (together, the "Italian defendants"), entered into an agreement with Nouveau under which the Italian defendants would serve as Nouveau's exclusive marketer and distributor in Europe. Allegedly in reliance on the Blacks' representations concerning the financial soundness of their company, the Italian defendants invested a significant amount of their own funds in promoting the Nouveau machines in Italy and Europe, purchasing numerous pizza machines, and entering into distribution contracts.

A dispute between the parties began to mushroom when Nouveau and the Blacks failed to deliver on numerous assurances. The machines sent by Nouveau to Ferroni and Fojanini were defective in several respects due to technical and aesthetic incompatibilities with Europe,*fn3 and Nouveau did not promptly address the defects, despite promises that it would do so. Without working machines to test or show to customers, Ferroni and Fojanini's business prospects fell like dominos.

Topping it all off was the fact that Black Sr.'s lofty account of Nouveau's financial status was mere pie in the sky; in December 1995 Black Sr. admitted to the Italian defendants Nouveau was in bankruptcy, and had been throughout their relationship. Black also revealed that Nouveau had sued an individual for overselling its distributorships and another corporation for supplying Nouveau with defective pizza vending machines. In February 1996, Black Sr. promised to compensate the Italian defendants for their losses, but they never received the full amount promised.

Fojanini and Ferroni sought a slice of the profits from the sales of the pizza machines, and in April 1996, the parties renegotiated their exclusive distributorship deal to require Nouveau to make monthly payments to the Italian defendants of $20,000 plus a percentage from the sale of every machine. However, the Italian defendants later discovered that Black Sr. made deals with other distributors in Europe in apparent violation of the agreement. Nouveau continued to deliver deficient machines to the Italian defendants.

Defendants Black Sr., and Black Jr., sought coverage in that suit under a directors and officers liability insurance policy that Nouveau purchased from plaintiff American Guarantee Liability and Insurance Company ("American Guarantee").*fn5 American Guarantee then filed this suit, seeking a declaration that it has no duty to cover or defend in the underlying action. Plaintiff and defendants Fojanini, Ferroni, and Europe Invest have filed cross-motions (Document Nos. 22 and 23) for summary judgment in this declaratory judgment action.*fn6

For the following reasons, upon consideration of the parties' motions and the evidence pursuant to Rule 56 of the Federal Rules of Civil Procedure, the motion of plaintiff will be denied, and the motion of defendants will be granted in part and denied in part.

II. ANALYSIS

According to Rule 56(c) of the Federal Rules of Civil Procedure, "if the 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," then a motion for summary judgment must be granted. The question before the Court at the summary judgment stage is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." See Anderson v. Liberty Lobby, 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The Court's role at summary judgment is not to weigh the evidence, but to determine whether there is a genuine issue for trial; that is, an issue upon which a reasonable jury could return a verdict in the non-moving party's favor. See id. at 249, 106 S.Ct. at 2511.

The moving party "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." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The nonmoving party must then "go beyond the pleadings and by her 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.'" Id. at 324, 106 S.Ct. at 2553.

In deciding whether there is a disputed issue of material fact, the "inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962)). On cross-motions for summary judgment, the court must determine separately on each party's motion whether judgment may be entered in accordance with the summary judgment standard. See Sobczak v. JC Penny Life Ins. Co., 1997 WL 83749 (E.D.Pa. Feb. 18, 1997), ...


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