DIMENSION SERVICE CORPORATION v. WESTCHESTER FIRE INSURANCE COMPANY Complaint

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DIMENSION SERVICE CORPORATION Case N'iPa : l l r s - c r v : ~ O i .rJliiO 1400 Metro Place North, Suite 300 II U. l inl l :pl ~ \ J \Dublin, Ohio 43017 J u d g e ~ r C X E c c t l H ~ B l I S Magistrate JudgePlaintiff,v.WESTCHESTER FIRE INSURANCE COMPANY 436 Walnut Street Philadelphia, Pennsylvania 19106 Defendant.

COMPLAINT WITH JURY DEMAND

Now comes the Plaintiff Dimension Service Corporation, by and through counsel, and forits Complaint against Defendant Westchester Fire Insurance Company alleges on informationand belief as follows:

PARTIES, JURISDICTION. AND VENUE1. This action arises under the common law.2. This Court has diversity jurisdiction pursuant to 28 U.S.C. 1332. The parties arecitizens of different states and the amount in controversy exceeds $75,000.3. Defendant has sufficient contact with this district generally and, in particular, withrespect to the events alleged herein so as to subject it to personal jurisdiction in this Court.4. Venue is proper in the Southern District of Ohio because the events giving rise to thisdispute arose in the Southern District ofOhio.5. Plaintiff Dimension Service Corporation ("Dimension") is an Ohio corporation with itsprincipal place of business at 400 Metro Place North, Suite 300, Dublin, Ohio 43017.

Case: 2:11-cv-00221-MHW-EPD Doc #: 2 Filed: 03/11/11 Page: 1 of 6 PAGEID #: 2


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6. Defendant Westchester Fire Insurance Company ("WFIC") is a New York corporationwith its principal place of business at 436 Walnut Street, Philadelphia, Pennsylvania 19106.

BACKGROUND7. At all times relevant to this complaint WFIC, through its parent and sole shareholderACE USA, Inc., was the majority and controlling shareholder ofDimension.8. WFIC, which was in the business ofproviding and administering vehicle servicecontracts, had the need for a third party to administer all aspects of said contracts.9. To that end, Dimension and WFIC entered intd a business relationship whereby

Dimension would fully administer all aspects ofWFIC's vehicle service contract business.10. In connection with and to compensate Dimension for its services, Dimension and WFICentered into that certain Profit Share Agreement, executed on June 30, 1999 and made effectiveJanuary 1, 1999 (the "PSA"), attached hereto and incorporated herein as Exhibit "A."11. Pursuant to the terms of the PSA, WFIC agreed to provide Dimension with 100% ofunderwriting profits and investment income (as defined in the PSA) with respect to the vehicleservice contracts administered by Dimension.12. The PSA also provided Dimension with the r i ~ t , but not the obligation, to direct certainportions ofthe underwriting profits and investment income to agents and/or dealers who sold thevehicle service contracts to consumers.l3. Section 5 of the PSA provides that it was "to continue in full force and effect until allcontract obligations to contract holders and policy obligations of [WFIC] have expired and allprofit and investment income due Dimension hereunder has been paid."14. Four years later, WFIC utilized its dominion alld control over Dimension to causeDimension to enter into another so-called agreement pursuant to which the PSA was terminated

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and Dimension forfeited to WFIC its rights to any underwriting profits and investment incomeidue thereunder for contracts issued after the effective 4.ate of the termination of the PSA.,

15. An arrangement in which the CLIP insurer retains underwriting profits and investmentincome is unheard of in this industry.16. The so-called agreement between Dimension and WFIC was entitled Profit ShareFunding Agreement and was executed on August 8, 2003 but made effective June 30, 2003 (the"PSFA"). A copy of the PSFA is attached hereto and incorporated herein as Exhibit "8."17. WFIC provided Dimension with no consideration whatsoever in exchange for the

,wholesale concessions made by Dimension in the PSF:A. Notably, the PSFA fails to allegeconsideration of any kind or in any amount.18. The PSFA was executed on behalfofDimension by an individual under the dominionand control ofWFIC and/or its parent.19. The PSFA was never approved by a majority Of disinterested directors or shareholders ofDimension.20. At the time the PSF A was executed, the PSA was, by its unambiguous terms, still ineffect.21. Ultimately, the PSFA was entered into solely fur the benefit ofWFIC to the exclusionand at the expense ofDimension, its subsidiary.22. When the parent has received a benefit to the exclusion and at the expense of thesubsidiary, the "intrinsic fairness" rule requires the parent to prove that its transactions wereobjectively fair. Sinclair Oil Corp. v. Levien, 280 A.2d 717,720 (DeL,1971). See also,Schreiber v. Pennzoil Co., 419 A.2d 952 (Del.Ch., 1980); Warren v. Century Bankcorporation,Inc., 741 P.2d 846 (Okl.,1987).

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23. Under no circumstances can the tenns of the PSFA be considered objectively fair.24. WFIC engaged in impennissible self-dealing when, by virtue of its domination andcontrol ofDimension, it caused Dimension to enter into the PSF A, resulting in WFIC receivingthe benefits of the PSF A, most importantly its p u r p o r t ~ d tennination of the PSA andDimension's rights to underwriting profits and investn!tent income from the vehicle servicecontracts, to the exclusion of and detriment to Dimension. Id.25. Further, WFIC's wrongful acts, which began ptior to the present ownership ofDimension's acquisition of the company, continue to cause Dimension loss and place Dimensionin jeopardy ofadditional loss in that Dimension continues to be burdened by the tenns of thePSF A and WFIC continues to wrongfully benefit therefrom.26. Additionally, WFIC concealed the unconscionable change in tenns purportedly broughtabout by the PSFA from Dimension's minority shareholders and current ownership.27. Once the PSFA is declared unenforceable, the amount due to Dimension under the PSAexceeds $75,000.00.

C O U N T I - D E C L A R A T O ~ Y JUDGMENT28. Dimension incorporates each of the preceding paragraphs as if fully rewritten herein.29. There is ajusticiable controversy between Dimension and WFIC regarding the validityand enforceability of the PSFA.

i30. WFIC contends that Dimension is bound by the unfair and unconscionable terms of thePSF A and is not entitled to payments due to Dimension under the PSA.31. Dimension avers it is not bound by the PSF A because it was entered into solely for thebenefit ofWFIC to the exclusion and at the expense ofDimension, its subsidiary, and wasentered into with any consideration of any kind inuring to the benefit ofDimension.

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WHEREFORE, Dimension requests that this Court enter judgment in its favor and against WFICas follows:

(i) Declaring, pursuant to Ohio Revised Code 2721 et. seq., that the PSFA is not a validor enforceable agreement and that the PSA is the contt.olling agreement between the parties withrespect to the subject matter set forth therein;

(ii) Awarding attorneys fees and costs as appropriate;(iii) Awarding prejudgment interest and costs as appropriate; and(iv) Awarding such other and further relief as this Court and/or jury deems equitable,

appropriate and just.COUNT II - BREACH OF CONTRACT

32. Dimension incorporates each of the preceding paragraphs as if fully rewritten herein.33. The PSA constitutes a valid and enforceable contract between WFIC and Dimension.34. Dimension has performed pursuant to the terms of the PSA.35. WFIC has breached the terms of the PSA by, inter alia, failing to pay to Dimension theunderwriting profits and investment income from the vehicle service contracts due to Dimension

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pursuant to the terms of the PSA.36. Dimension has suffered damages as a result of said breach. WHEREFORE, Dimension requests that this Court enter judgment in its favor and against WFIC as follows:

(i ) Awarding Dimension damages for WFIC's breach of the PSA;(ii) Awarding attorneys fees and costs as apprdpriate;(iii) Awarding prejudgment interest and costs as appropriate; and

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(iv) Awarding such other and further relief as this Court and/or jury deems equitable,appropriate and just.

JURY DEMAND Dimension demands a jury on all issues so triable.

Dated: March 11,2011 Jdseph F. Murray, Tr ru Attorney (0063373)Brian K. Murphy (0070654)Robert H. Miller (0076939)Murray Murphy Moul + Basil LLP1533 Lake Shore DriveColumbus, OH 43204Telephone: 614.488.0400Facsimile: 614.488.0401E+-mail: [email protected]@[email protected] for Dimension Service Corporation

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DIMENSION SERVICE CORPORATION v. WESTCHESTER FIRE INSURANCE COMPANY Complaint