Danaher Corp. v. The Travelers Indemnity Co
Cite as: Danaher Corp. v. The Travelers Indemnity Co., 10 Civ. 0121, NYLJ 1202589227264, at *1 (SDNY, Decided January 11, 2013)
Magistrate Judge James C. Francis IV
Decided: January 11, 2013
Brian J. Osias, Esq., Gita F. Rothschild, Esq., McCarter & English LLP., New York, New York.
Stephen V. Gamigliano, Esq., Robert W. Mauriello, Jr., Esq., Graham Curtin PA, Morristown, New Jersey.
Robert M. Flannery, Esq., Mendes & Mount, LLP, New York, N.Y.
Ellen G. Margolis, Esq., Jan C. Walker, Esq., Mound Cotton Wollan & Greengrass, New York, New York.
Claude N. Grammatico, Esq., Epstein, Frankini & Grammatico, Woodbury, New York.
Andrew I. Mandelbaum, Esq., Ford Marrin Esposito Witmeyer & Gieser, LLP, New York, New York.
John T. Wolak, Esq., Gibbons Pc, Newark, NJ.
Jay D. Kenigsberg, Esq., Anthony R. Gambardella, Esq., Rivkin Radler LLP, Uniondale, New York.
Paul E. Breene, Esq., Reed Smith LLP, New York, New York.
MEMORANDUM AND ORDER
Defendants and third-party plaintiffs The Travelers Indemnity Co. and Travelers Casualty and Surety Co. ("Travelers") seek leave to amend their third-party complaint to add six additional third-party defendants. For the reasons below, the motion is granted.
This action, filed on January 7, 2010, is a dispute about insurance coverage for silica and asbestos-related claims against Chicago Pneumatic Tool Co. ("Chicago Pneumatic"), a company that was acquired in 1986 by the plaintiff, Danaher Corp., and sold in 1987 to third-party defendant Atlas Copco North America, Inc. ("Atlas Copco"). (Amended Complaint for Breach of Contract, Breach of the Covenant of Good Faith and Fair Dealing, and Declaratory Relief ("Am. Compl."), ¶¶1, 16). Danaher sued certain of its insurers seeking, among other things, a declaration of the insurers' obligations to defend and indemnify it for claims arising from products manufactured by Chicago Pneumatic prior to June 4, 1987, for which Danaher retains liability. (Am. Compl., ¶¶1, 17).
On February 26, 2010, Travelers, issuers of primary comprehensive general liability policies to Chicago Pneumatic and/or Danaher (the "Travelers Policies"), filed a third-party complaint against Atlas Copco, seeking a declaration "as to the respective rights and obligations of Chicago Pneumatic and Travelers under the Travelers Policies," as well as an allocation of defense and indemnity payments, should it be determined that the Travelers Policies required coverage for the underlying claims against Chicago Pneumatic.1 (Travelers Ans. at 16-19).
The parties engaged in discovery. In mid-April 2012, Atlas Copco completed production of insurance policies issued to it by insurers who are not parties to this action, as well as reinsurance policies covering those policies. (Affirmation of Paul E. Breene dated Nov. 30, 2012 ("Breene Aff."), ¶3). Fact discovery closed on May 31, 2012. (Memorandum Endorsement dated April 30, 2012). On September 6, 2012, the Honorable J. Paul Oetken, U.S.D.J., ruling from the bench, granted Danaher's motion for summary judgment on the duty to defend, holding that "Travelers['] duty to defend in the past and in the future is confirmed." (Excerpt of Oral Argument Transcript dated Sept. 6, 2012 ("Sept. 6. Order"), attached as Exh. D to Breene Aff., at 8).
On October 26, 2012, Travelers filed a motion seeking leave to amend its third-party complaint to join certain of Atlas Copco's
and Chicago Pneumatic's other insurers (the "Additional Insurers") specifically, AIU Insurance Co., Century Indemnity Co. (as successor to Insurance Company of North America), Liberty Mutual Fire Insurance Co., Liberty Mutual Insurance Co., Trygg-Hansa Insurance Co., and Industria Insurance Co. as third-party defendants in order to seek contribution and allocation of defense and indemnity costs. (Brief of the Travelers Indemnity Company and Travelers Casualty and Surety Company in Support of Their Motion for Leave to Amend Their Third Party Complaint for the Purpose of Joining Additional Insurers as Parties ("Travelers Br."), at 1 & n.1; Proposed Amended Third Party Complaint ("Proposed Am. Compl."), attached as Exh. A to Certification of Robert W. Mauriello, Jr., dated Oct. 26, 2012, at 4-5). Atlas Copco objects, arguing that the motion should be denied on grounds of delay and prejudice, bad faith, and futility.
A. Legal Standard for Amendment
A party may amend its complaint once as a matter of right up to 21 days after the service of either a responsive pleading or certain motions under Rule 12 of the Federal Rules of Civil Procedure. Fed. R. Civ. P. 15(a)(1). After that time has run, amendment requires the consent of the opposing parties or leave of court. Fed. R. Civ. P. 15(a)(2). According to the rule, a court should "freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). If the amendment seeks to add a party, Rule 21 of the Federal Rules of Civil Procedure, which allows addition of a party "at any time, on just terms," also governs. Fed. R. Civ. P. 21.
However, that creates no additional obstacle, as the "showing necessary under Rule 21 is the same as that required under Rule 15(a)." Johnson v. Bryson, 851 F. Supp. 2d 688, 703 (S.D.N.Y. 2012). Leave to amend may be denied where the proposed amendment would be futile or where it would result in prejudice to the opposing parties. Williams v. Citigroup Inc., 659 F.3d 208, 214 (2d Cir. 2011) (per curiam); Aetna Casualty and Surety Co. v. Aniero Concrete Co., 404 F.3d 566, 603 (2005). Amendment is futile if the proposed amended complaint could not survive a motion to dismiss. See Ricciuti v. New York City Transit Authority, 941 F.2d 119, 123 (2d Cir. 1991). Prejudice arises when the amendment would "(i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction." Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir. 1993). The nonmoving party has the burden to show prejudice.2 See id.
B. Delay and Prejudice
Travelers argues that it did not delay in seeking leave to amend its third-party complaint to add the Additional Insurers because it did so "shortly after the Court's resolution of Danaher's and Atlas Copco's motion for partial summary judgment against Travelers on the duty to defend." (Travelers Br. at 10; Reply Brief of the Travelers Indemnity Company and Travelers Casualty and Surety Company in Further Support of their Motion for Leave to Amend their Third Party Complaint for the Purpose of Joining Additional Insurers as Parties ("Travelers Reply") at 8). It is true that Travelers announced its intent to move to amend its pleadings on October 11, 2012, approximately one month after Judge Oetken's ruling of September 6, 2012. (Letter of Robert W. Mauriello, Jr., dated Oct. 11, 2012, attached as Exh. D to Certification of Robert W. Mauriello, Jr., dated Dec. 14, 2012 ("Mauriello Cert."), at 1). But Travelers does not explain why the triggering event for this motion to amend should be the resolution of that motion rather than Traveler's acquisition in April 2012 of copies of policies issued by the Additional Insurers to Atlas Copco. Travelers has been aware since it impleaded Atlas Copco that it might be required to defend and indemnify that company in the actions underlying this coverage dispute and, indeed, Travelers asserted counter and cross-claims "against all parties in this action," which includes a number of insurers, "for contribution,
indemnification and/or an appropriate allocation of defense expenses and indemnity payments previously paid by and/or awarded against Travelers." (Travelers Ans. at 16). Travelers' discovery of the existence and identity of the Additional Insurers was the point at which it should have been aware of the claims against the Additional Insurers; the sensible course was to move to amend then. That was not a mere month before it sought permission to bring this motion, but, rather, approximately six months before that date. Six months, then, is the relevant period of delay.
Although Travelers delayed longer than it claims, this six month delay does not, itself, require denial of the motion to amend. "[C]ourts frequently grant leave to amend after much longer periods of delay [than six months]." Margel v. E.G.L. Gem Lab Ltd., No. 04 Civ. 1514, 2010 WL 445192, at *10 (S.D.N.Y. Feb. 8, 2010) (collecting cases). Indeed, delay unaccompanied by prejudice "is usually not sufficient reason" for denying such leave. Id. at *11.
Atlas Copco argues it will be prejudiced because adding the proposed third-party defendants will cause significant delay in the resolution of this dispute. Noting that two of the Additional Insurers Industria and Trygg Hansa are Swedish companies that issued policies governed by Swedish law and choosing a Swedish arbitral forum, Atlas Copco argues that this case will "essentially come to a standstill" while issues such as personal jurisdiction, arbitrability, and coverage are litigated, and complains that discovery may have to be re-opened. (Brief in Support of Atlas Copco North America LLC's Opposition to Defendants Travelers
Indemnity Company and Travelers Casualty & Surety Company, F/K/A The Aetna Casualty & Surety Company Motion for Leave to Amend the Third-Party Complaint to Add Additional Insurers ("Atlas Copco Opp.") at 11). Because Travelers has purportedly taken the position that it need not pay Atlas Copco's defense costs "until the case is resolved, this would significantly delay Atlas Copco's collection of all the funds due under the September 6 Order."3 (Atlas Copco Opp. at 11).
These objections appear overblown. First, Atlas Copco merely speculates about many of the events it asserts will cause such delay. For example, Industria and Trygg Hansa may not object to this Court's personal jurisdiction or the forum, either because they consent or because their view of the facts and the law differs from Atlas Copco's.4 The fact that Atlas Copco might choose to object on either or both grounds does not make this argument any less speculative.
Second, any additional discovery whether jurisdictional or substantive is not likely to be onerous. Atlas Copco has already produced certain discovery materials regarding the
Additional Insurers. Among these are the policies themselves and communications between certain Additional Insurers and Atlas Copco regarding coverage for claims. (Atlas Copco Opp. at 3-6; Mauriello Cert., ¶¶2-3; Letter of Robert Ansehl and Robert Young dated Aug. 23, 2005, attached as Exh. A to Mauriello Cert.; Letter of Denise L. Kleppinger dated June 2, 2010, attached as Exh. B to Mauriello Cert.; Industria Insurance Company Policy 92 05 01-0030, attached as Exh. A to Breene Aff.; Insurance Company of North America Policy No. 011545427, attached as Exh. B to Breene Aff.; Liberty Mutual Policy No. RG2-631-004250-204, attached as Exh. C to Breene Aff.). Thus, it is likely that any added discovery burden on Atlas Copco will be slight. Moreover, given Travelers' tardiness in moving to add these parties, it would be appropriate for the Court to impose a strict, abbreviated discovery schedule to mitigate further delay. See Margel, 2010 WL 445192, at *12 (stating, "The prejudice that would flow from any additional required discovery can generally be mitigated by adjustments to the discovery schedule," and collecting cases). In addition, it is possible that the question of Travelers' obligations to Atlas Copco can proceed toward resolution while discovery related to Travelers' contribution and allocation claims commences. Those coverage questions are not dependent on the resolution of Travelers' contribution and allocation claims indeed, as Travelers recognizes, if leave to amend were denied here, the contribution and allocation claims would likely be decided in an entirely separate action. (Travelers Br. at 6, 8-9). Thus, Atlas Copco has not met its burden to show that adding the Additional Insurers as defendants will significantly delay
resolution of this dispute.5 See JPMorgan Chase Bank, N.A. v. The IDW Group, LLC, No. 08 Civ. 9116, 2009 WL 1357946, at *5-6 (S.D.N.Y. May 12, 2009) (rejecting argument that adding foreign defendant would significantly complicate and delay resolution of action).
On the other hand, including the Additional Insurers as defendants in this action will promote judicial efficiency, which is an appropriate factor to consider when deciding a motion to add parties. See id. at *2, 6. Travelers already seeks contribution, indemnification, or allocation from nine insurers who are currently defendants in this action. (Travelers Br. at 1 n.2). Requiring it to file a separate action to pursue such claims against the Additional Insurers is not the most rational way to proceed. This is particularly true because, should the Court determine that Travelers is obligated to indemnify Atlas Copco, Travelers has signaled that it will seek pro rata allocation of indemnity costs among Atlas Copco's insurers. (Travelers Br. at 8); see Consolidated Edison Co. of New York v. Allstate Insurance Co., 98 N.Y.2d 208, 224-25, 746 N.Y.S.2d 622, 630-31 (2002). Here, "[t]h[e] Court 'has a substantial interest in adjudicating the
entire dispute in one action.'" JPMorgan Chase Bank, 2009 WL 1357946, at *6 (quoting State Farm Mutual Automobile Insurance Co. v. CPT Medical Services, P.C., 246 F.R.D. 143, 149 (E.D.N.Y. 2007)). In short, Atlas Copco has not shown that it will be unduly prejudiced if the motion is granted.
C. Bad Faith
Noting that Travelers did not file this motion until after Judge Oetken's ruling that it had a duty to defend, Atlas Copco asserts that Travelers' "[o]nly [p]lausible [m]otive" is "to defeat this Court's September 6 Order that it is responsible to pay ALL defense costs in the first instance by avoiding payment until AFTER an allocation to other insurance companies," in order to "drag out these proceedings…[and] attempt to compel Atlas Copco and Danaher to agree to a watered down settlement." (Atlas Copco Opp. at 12).
The argument is thin, and the leap from Travelers' delay to a finding of bad faith is wide.6 In fact, Atlas Copco has an explanation for its delay: that it held off on seeking leave to amend until it was clear that it would need to seek contribution from the Additional Insurers. While this does not excuse the six-month delay, it is not an implausible explanation. Thus, Travelers' imputation of bad faith rests only on the fact of the delay. But mere delay is not sufficient evidence of bad faith to merit denial of a motion to amend. See The Randolph Foundation v.
Duncan, No. 00 Civ. 6445, 2002 WL 32862, at *3 (S.D.N.Y. Jan. 11, 2002); Oneida Indian Nation of New York State v. County of Oneida, N.Y., 199 F.R.D. 61, 80 (N.D.N.Y. 2000); Kaplan v. Lily of France, No. 95 Civ. 1046, 1996 WL 297088, at *1 (S.D.N.Y. June 4, 1996).
Finally, Atlas Copco claims that the proposed amendment is futile for three separate reasons: (1) Travelers has not alleged facts that establish that this Court has personal jurisdiction over the Swedish insurers, Trygg Hansa and Industria; (2) the arbitration clause in the policies underwritten by the Swedish insurers preclude Travelers claims against them in this forum; and (3) the Additional Insurers' policies do not provide coverage for the majority of claims at issue. (Atlas Copco Opp. at 13-18). I will address these objections in reverse order.
Atlas Copco asserts that the motion to amend should be denied because certain policies of the Additional Insurers specifically, Insurance Company of North America, Industria, Trygg Hansa, and Liberty Mutual exclude asbestos claims and/or silica claims. (Atlas Copco Opp. at 3-6).
However, Atlas Copco admits that the Insurance Company of North America and Liberty Mutual policies cover silica claims, and fails to assert that the Trygg Hansa policy has a silica exception. (Atlas Copco Opp. at 3-4, 6). Because there are silica claims in the underlying actions, Atlas Cosco has not shown that the Amended Complaint is futile on this basis with respect to these insurers.
As for Industria, Atlas Copco argues that the policy "includes
a dust exclusion, which is intended to exclude coverage for silica claims under Swedish law," and bases this interpretation on information from "Swedish insurance experts." (Atlas Copco Opp. at 5; Henschel Aff., ¶7). That is, in contending that the motion to amend should be denied because of these exclusions, Atlas Copco effectively seeks a ruling on one of the ultimate issues in this litigation whether Trygg Hansa insured the claims at issue without a sufficient record, on the basis of opinion testimony by unidentified witnesses who have not been qualified as experts by this Court. Such a determination is not appropriate. I do not, therefore, find that the proposed amendment is futile on this ground.
2. Arbitration Clauses
Atlas Copco asserts that, although Travelers is not a party to the insurance contracts, it will likely be bound by clauses in the Trygg Hansa and Industria policies requiring arbitration of disputes in Sweden because "[a]ny claim Travelers may have against [those insurers] is effectively derivative of Atlas Cocpco's claim for coverage" under those policies. (Atlas Copco Opp. at 16-17). This argument fails.
First, as noted above, Atlas Copco has not shown that Industria and Trygg Hansa will seek to enforce the arbitration clauses. It is neither necessary nor advisable to rule on the effect of those clauses at this time.
Moreover, Travelers is not a party to the policies that include the arbitration clauses and is not claiming any contractual right under them; its potential causes of action against the
Additional Insurers sound in equity specifically, contribution for defense costs, and pro rata, time-on-the-risk allocation of indemnity payments.7 (Proposed Am. Compl. at 7-9); see Maryland Casualty Co., 218 F.3d at 211 (noting that law of contribution is based on equitable principles). In such a case, it is not clear that the contractual arbitration clauses if Trygg Hansa and Industria attempt to enforce them would require Travelers to litigate its equitable claims in Sweden. See, e.g., Twin City Fire Insurance Co. v. Harel Insurance Co., No. 10 Civ. 7842, 2011 WL 3480948, at *3-4 (S.D.N.Y. Aug. 5, 2011) (rejecting argument that arbitration clause in insurance contract was enforceable against insurance company, not party to contract, seeking contribution); see also Maryland Casualty Co., 218 F.3d at 210 ("Contribution rights, if any, between two or more insurance companies insuring the same event are not based on the law of contracts."); cf. Solomon v. Consolidated Resistance Co. of America, 97 A.D.2d 791, 792, 468 N.Y.S.2d 532, 533 (2d Dep't 1983) (finding arbitration clause in insurance contract enforceable against insurer who was not party to insurance contract where insured had executed subrogation agreement in favor of non-party insurer, who then stepped into shoes of insured under contract).
Therefore, I will not deny the motion to amend based on the
arbitration clauses in the Industria and Trygg Hansa policies.
3. Personal Jurisdiction
Atlas Copco contends that Travelers has not pled sufficient facts that, if true, would establish personal jurisdiction over Industria and Trygg Hansa, and that, therefore, the Proposed Amended Complaint would not withstand a motion to dismiss. (Atlas Copco Opp. at 13-14).
As above, there is no reason to resolve the question of personal jurisdiction at this point in the litigation, not least because there is no evidence that Industria or Trygg Hansa will challenge this Court's exercise of jurisdiction over them. Moreover, as the parties' arguments make clear, determination of this question will likely require further factual development. It is therefore not appropriate to resolve the issue at this stage of the litigation. See Cantone & Co. v. Seafrigo, No. 07 Civ. 6602, 2010 WL 1488014, at *4 (S.D.N.Y. April 12, 2010) (permitting amendment and deferring factual determinations regarding personal jurisdiction); JPMorgan Chase Bank, 2009 WL 1357946, at *5 ("[W]ith respect to [defendant's] concerns about personal jurisdiction [over proposed defendant], this Court need not resolve this issue pre-amendment"); Guideone Specialty Mutual Insurance Co. v. Hapletah, No. CV 2005-1401, 2006 WL 1455468, at *1 (E.D.N.Y. May 24, 2006) (granting leave to amend and finding it "inappropriate" to address defenses involving factual disputes "in the context of a motion to amend"); Rodriguez v. Biltoria Realty, LLC, 250 F. Supp. 2d 122, 126 (E.D.N.Y. 2003) (granting leave to amend and deferring factual determination regarding whether defendant is "agent" of co-
defendant); Topps Co. v. Cadbury Stani S.A.I.C., No. 99 Civ. 9437, 2002 WL 31014833, at *2 (S.D.N.Y. Sept. 10, 2002) (refusing to address defendant's futility argument based on lack of personal jurisdiction over proposed defendant and asserting that proposed defendant may raise issue "on a complete record following service of the proposed amended complaint"); cf. Munoz v. Sesame Place, Inc., No. 97 Civ. 5055, 1998 WL 150495, at *2 (S.D.N.Y. March 30, 1998) (holding that objection to personal jurisdiction does not render proposed amendment "'futile' in a sense relevant to Fed. R. Civ. P. 15(a)"). I therefore will not deny the motion to amend as futile.
For the foregoing reasons, Travelers motion for leave to amend its third-party complaint (Docket no. 101) is granted.
1. Travelers also counterclaimed and cross-claimed against all parties "for contribution, indemnification, and/or an appropriate allocation of defense expenses and indemnity payments previously paid by and/or awarded against Travelers." (Answer, Separate Defenses, Counterclaim and Crossclaim to Complaint and Third Party Complaint ("Travelers Ans.") at 16).
2. This motion could also be characterized as one to implead third-party defendants under Rule 14(a) of the Federal Rules of Civil Procedure. However, this would make little difference to the analysis, as the concerns to be addressed under Rule 14(a) are very similar to those under Rules 15 and 21:
[The] factors relevant to the determination of whether to permit the filing of a third-party complaint [under Rule 14] include: (1) whether the movant deliberately delayed or was derelict in filing the motion; (2) whether impleading would delay or unduly complicate the trial; (3) whether impleading would prejudice the third-party defendant; and (4) whether the proposed third-party complaint states a claim upon which relief can be granted.
Ispat Inland, Inc. v. Kemper Environmental, Ltd., No. 05 Civ. 5401, 2006 WL 3420654, at *2 (S.D.N.Y. Nov. 28, 2006) (internal quotation marks omitted).
3. Travelers disavows this position, stating that it has not tendered a defense because this Court has not yet determined the amount of past costs and because neither Atlas Copco nor Danaher has directed the firms defending the underlying actions to provide invoices to Travelers. (Travelers Reply at 10).
4. The parties note that Industria is "an in-house insurance company owned by Atlas Copco AB," Atlas Copco's Swedish parent company. (Proposed Am. Compl., ¶13; Atlas Copco Opp. at 14; Affidavit of John J. Henschel dated Nov. 29, 2012 ("Henschel Aff."), ¶3). Nevertheless, Atlas Copco does not aver that Industria will, if impleaded here, move to compel arbitration or challenge the personal jurisdiciton of this Court.
5. Atlas Copco is concerned about delay in receiving the benefit of Judge Oetken's order granting its motion for partial summary judgment on the duty to defend. (Atlas Copco Opp. at 11). As discussed in this section, there is little reason to believe that any delay caused by the inclusion of the Additional Insurers as defendants will be extensive or prejudicial to Atlas Copco's rights. To the extent that any delay occurs not because of the addition of the new defendants, but only as a consequence of Travelers' purported position that it need not assume the duty to defend until there is a final judgment in this case, it is irrelevant to the question of prejudice before me.
6. Atlas Copco refers in its papers to its "Contempt Motion" (joined, assertedly, by Danaher), which discusses "in detail" Travelers' refusal to pay for defense costs. (Atlas Copco Opp. at 12). However, no such motion appears on the docket.
7. Travelers also presents claims for equitable subrogation. (Proposed Am. Compl. at 7). Equitable subrogation may not be an appropriate cause of action when an insurer seeks payment from another insurer that insured the same risk. See Maryland Casualty Co. v. W.R. Grace and Co., 218 F.3d 204, 211 (2d Cir. 2000) ("We agree with the magistrate judge that this case does not involve subrogation because the appellants are not seeking reimbursement from a third-party wrongdoer.")