CNH Industrial America LLC v. American Casualty Company of Reading, Pennsylvania

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
CNH INDUSTRIAL AMERICA LLC,
Plaintif``f, C.A. No. NlZC-07-108 EMD CCLD
V.
TRIAL BY JURY OF TWELVE
DEMANDED
AMERICAN CASUALTY COMPANY
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OF READING, PENNSYLVANIA, et al., )
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Defendants. )
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Subrnitted: October 17, 2016
Deoided: November 2, 2016
MEMORANDUM OPINION
Upon Consia'eration of on Defendant T he Travelers Indemnity Company ’s
Motion to Vacate or Revise Prior Orders
DENIED IN PARTAND STA YED IN PART FUR FUR THER BRIEFING
Bl'ian M. Rostocki, Esquire, and Jolm C. Cordrey, Esquire. Reed Smith L_LP_, Wilmington,
Delaware and J ames M. Davis, Esquire, Thomas A. Marrinson_. Esquire, Elvan T. Knott, Esquire,
and Emily E. Garrison, Esquire, Reed Smith LLP, Chicago, Illinois. Attorneysfor CNH
Industrial America LLC.
Neal J. Levitsky, Esquire, and Seth A. Niederrnan, Esquire, FoX Rothschild LLP, Wilrnington,
Delaware and Richard L. McConnell, Esquire, and Dale E. Hausman, Esquire, Wiley Rein LLP,
Washington, DC. Attorneysfor Travelers Indemnity Company.
DAVIS, J.
This Z"d day of``November, 2016, upon consideration of Defendant The Travelers
Indemnity Company’s Motion to Vacate or Revise Prior Orders (the “Motion”) filed by
Def``endant The Travelers Indemnity Company (“Travelers”); CNH Industrial America LLC’s
Response in Opposition to Defendant The Travelers Indemnity Company’s Motion to Vacate or
Revise Prior Orders (the “Opposition”) filed by Plaintiff CNH Industrial America LLC (“CNH”);
Defendant The Travelers Indemnity Company’s Reply Brief`` in Further Support of Its Motion to
Vacate or Revise Prior Orders (the “Reply”) filed by Travelers; all exhibits and attachments to
the Motion, the Opposition and the Reply; the arguments made by the parties at the hearing held
by the Court on October 17, 2016; the Opinion and Order of Special Discovery Master decided
on July 20, 2016 (“Special Master Decision”); the May 13, 2016 Order granting in part and
denying in part Plaintif``f`` CNH Industrial America LLC’s Motion for Leave to File a Second
Amended Complaint (the “Leave to Amend Order”); and the Court’s previous decision on choice
of law issued from the bench on May 18, 2015 (the “Decision”), the Court finds and holds as
follows:
APPLICABLE LEGAL STANDARD
Superior Court Civil Rule 54(b) states:
When more than one claim for relief`` is presented in an action, whether as a claim,
counterclaim, cross-claim, or third-party claim, the Court may direct the entry of a
final judgment upon one or more but fewer than all of`` the claims or parties only
upon an express determination that there is no just reason for delay and upon an
express direction f``or the entry of``judgment. In the absence of such determination
and direction, any order or other form of decision, however designated which
adjudicates fewer than all the claims or the rights and liabilities of fewer than all
the parties shall not terminate the action as to any of the claims, or parties and
the order or other form ofdecision is subject to revision at anytime before the
entry ot]itci\g;iiietit adjudicating all the claims and the rights and l.'.'al)il.'itic.sr ofall
the partie.\'.
The Court’s power to vacate or revise is to be exercised as a matter of`` discretion where justice
requires.2 The United States District Court for the District of`` Delaware has recognized that,
under Delaware law, the discovery of new evidence that would alter an earlier ruling is a basis
f``or revising a non-final order under Federal Rule 54(b).3
' Super. Ct. Civ. R. 54(b)(emphasis added).
2 il#lr)rll:``n \'. lselin, 1986 WL 202, at *l (Del. Ch. Jun. 5, 1986) (inl'erpreling Chancery Court Ru|e 54(b)).
3 Proctor & Gamble Co. v Paragon Trade Brands, Inc., 15 F.Supp.£d 406. 415, n.8 (D. I)e]. 1998). Delaware
Courts rely on authority from federal courts to interpret Ru|e 54. See Jolm.s'on v. Prcferred l’rot"." lns. C'o., 2015 WL
413608, at *5 (Del. Super. Jan. 28, 2015).
2
DISCUSSICN
In its Motion, Travelers asks the Court to vacate its orders on choice of law, assignment,
duty to defend and defense costs, and allowing CNH to amend its complaint to add a bad faith
claim against Travelers. Travelers contends newly discovered evidence, which CNH allegedly
withheld, and the deposition testimony of CNH’s 30(b)(6) representative and J ames Dorion,
Senior Vice President at Marsh USA, Inc. (“Marsh”), show there are still material issues that
either warrant new briefing or revising the existing orders so that the orders find in Traveler’s
favor.
As set forth below, the Court finds and holds that this new evidence does not alter its
earlier rulings on the issues of choice of law, assignment, and duty to defend. After reviewing
the briefing on the Motion, the Leave to Amend Order, and the Special Master Decision, the
Court has determined additional briefing is necessary on whether the Leave to Amend Order
should be vacated. The Court will stay that briefing and address appropriate scheduling until the
Rule 16 conference that is to be held on CNH’s bad faith claim after the conclusion of the
December 5, 2016 trial.4
The Decision did not “critically” rely upon the assumption that Tenneco was merely a
holding company or that Marsh did not negotiate or handle the Travelers policies outside of
Texas. A closer reading of the Decision shows that the Court contemplated suits against
Tenneco on products manufactured by J.I. Case, and assumed that the Travelers Policies were
mostly negotiated out of Tean.5 Travelers also provides what it contends are new facts
regarding what CNH, Marsh, and others believed in 2008 or later regarding applicable policies,
4 See Leave to Amend Order at 1[20.
5 Decision at 13:11-22; 18:3-4; 21:15-23; and 26:1-17.
assignment and alike. The Court does not find these relevant to the legal determinations
regarding choice of law, assignment, or duty to defend and defense costs.6
Utilizing Sections 6, 188, and 193 of the Restatement (Second) of Conflicts of Law7 and
relevant Delaware law,8 the Court found more significant the fact that (i) this is a complex
insurance case with multiple insureds; (ii) the Travelers Policies did not contain a choice of law
provision; (iii) J.I. Case is a named insured under the Travelers Policies; (iv) J.I. Case’s principal
place of business was in Wisconsin; and (v) the risk of loss and situs of the insured was in
Wisconsin.9 Accordingly, the Court finds and holds that the ruling issued on May 18, 2015 -
i.e. , the Decision - remains the same: Wisconsin law applies in this civil action even with the
new evidence provided by Travelers in the Motion.
Because Wisconsin law continues to apply, the Court will not vacate its orders on choice
of law, assignment, and duty to defend and defense costs.
In addition, the Court will not, at this time, vacate its decision to allow CNH to amend its
complaint to add a bad faith claim against Travelers. After argument, the Court understands
Travelers’ position that the evidence in this civil action will not support a bad faith claim by
CNH against Travelers. That may or may not be true. However, the Court did not decide to
allow CNH to amend its complaint to add a bad faith claim against Travelers solely on the
strength of the claim. Instead, the Court utilized Superior Court Civil Rule 15(a) to determine
whether to allow CNH to amend its complaint10
6 See also Special Master Decision at pp. 12, 13-14.
l See. e.g., id. at 10:6~20; |]:5-21; and 19:14-24:19.
3 Lig_gett G."ortp ima v. Af/ilittted FM ln,r. (``o., 788 A.2d l34 {Del. Super. 2001); Monsanto Co. v. Aetna Cas. & Sur.
Co., C.A. No. 88C-JA~] |8 (De|. Super. Ocl. 29, 1991); see also Decision at 6:6-'7:|?; 11:22-12:6; 14:8-15:23;
17:18-23; and 24:20-21.
9 Decision at 1611-17:12; 17:15-23; and 26:1-17.
10 Leave to Amend Order at 111.
Under Superior Court Civil Rule 15(a), a party may amend a pleading by agreement of all
parties or by leave of Court.ll Delaware Courts generally liberally grant motions to amend, but it
is not automatic.12 Denial may be permitted when there is evidence of undue delay, bad faith or
dilatory motive on part of the movant, repeated failure to cure deficiencies, or prejudice.13 The
Court may also consider the proposed amendment’s impact on a scheduled trial date.14
Utilizing these factors, the only new relevant facts on those issues are the ones relating to
CNH’s discovery violations and whether they demonstrate undue delay, bad faith or dilatory
motive on the part of CNH. The Court understands that the Special Discovery Master sanctioned
CNH for discovery violations. The Court, however, notes that the Special Discovery Master did
not recommend dismissal of any claims due to those violations, finding only that CNH was either
negligent or grossly negligent.15
This does not end the inquiry. The Court granted CNH leave to amend its complaint to
add the bad faith claim but, in doing so, the Court raised concems. Paragraph 18 of the Leave to
Amend Order provides:
The Court is concerned with CNH’s delay in raising the bad faith claim against
Travelers. CNH filed this lawsuit in 2012. Trial is scheduled for December 5,
2016. CNH admits it had believed that Travelers was acting in bad faith since the
inception of this civil action. CNH, however, did not move to add the bad faith
claim until February 2016, eight months after confirming Travelers’ alleged bad
faith behavior. Moreover, CNH filed the Motion after the Court directly asked
the parties if there were any matters potentially affecting the December 2016 trial
date at the January 7, 2016, trial scheduling conference16
The Court also recognized “. . .the merit of Travelers’ undue delay and prejudice arguments.”17
“ super ct. civ. R. 15(a).
12 See, e.g., Sokol Hr)lding.v, lnc. v. Dorsey & Whitney, LLP, 2010 WL 59930, at *2 (Del. Super. Feb. 19, 2010)
(Parkins, J.).
13 Hess v. Carmine, 396 A.2d 173, 177 (Del. Super. 1978).
14 See, e.g., Spady v. Keen, 2006 WL 2559853, at *3 (Del. Super. Aug. 25, 2006) (Silverman, J.).
15 See Special Master Decision at 23 and 24-25.
16 Leave to Amend Order at 1118.
" 1a at 1120.
The new evidence raised by Travelers in the Motion could have been helpful to the Court
when it decided to allow CNH leave to amend its complaint - i.e. , whether CNH’s conduct
demonstrates undue delay, bad faith or dilatory motive. According to the Special Masters
Decision and the Motion, CNH may have had access to these facts before May 13, 2016 when
the Court issued the Leave to Amend Order. Could these facts demonstrate that CNH acted with
undue delay, bad faith or dilatory motive? Unfortunately, the Motion, the Opposition and the
Reply fail to address the new evidence (and CNH’s failure to provide it) in the context of the
legal standards that apply to Superior Court Civil Rule 15(a). Instead, the parties focus on the
merits of the bad faith claim and the procedural time to address the merits of the bad faith claim
(e.g., on summary judgment). Therefore, the Court is staying its decision on whether to vacate
the Leave to Amend Order pending further briefing on the issue which briefing will commence
after the December 5, 2016 trial, and only upon a schedule set by the Court.
Because the decision to vacate the Leave to Amend Order is not crucial to the issues to be
tried beginning on December 5, 2016, THE COURTDOES NOT WANTANYPARTY T 0
FILE ANY SUPPLEMENTAL BRIEFS ON THIS MATTER UNTIL AFTER THE COURT
SETS ISSUES TO BE BRIEFED AND A BRIEFING SCHEDULE A T THE RULE 16
CONFERENCE TO BE HELD AFTER THE DECEMBER 5, 2016.18
CONCLUSION
IT IS HEREBY ORDERED that the Motion is DENIED in part and STAYED in part
as set forth in this Order. §
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18 The Court wants the parties to focus on the issues to be tried, and the Court reserves the right to sanction any party
that files a supplement brief Without leave of the Court prior to the entry of a supplemental briefing schedule.
6