Centrix Financial, LLC et al v. Sutton et al
Filing
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ORDER. The 36 Motion to Reconsider Order Granting Plaintiffs' Unopposed Motion to Consolidate Cases is granted. The 35 Court's Order granting Unopposed Motion to Consolidate Cases is VACATED. Case No. 09-cv-00088-PAB-CBS and Case No. 09-cv-01542-PAB-CBS are severed. By Judge Philip A. Brimmer on 7/26/13.(mnfsl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 09-cv-00088-PAB-CBS
In re: CENTRIX FINANCIAL, LLC, et al.,
Debtors,
CENTRIX FINANCIAL LIQUIDATING TRUST, et al.,
Plaintiffs,
v.
ROBERT E. SUTTON, et al.,
Defendants.
_____________________________________________________________________
ORDER
_____________________________________________________________________
This matter is before the Court on the Motion to Reconsider Order Granting
Plaintiffs’ Unopposed Motion to Consolidate Cases [Docket No. 36] filed by defendants
National Union Fire Insurance Company of Pittsburgh, Pa. and Chartis Claims, Inc.
(f/k/a AIG Domestic Claims, Inc.) (collectively “National Union”). Case No. 09-cv00088-PAB-CBS arises from an adversary proceeding, see No. 08-01593-EEB, in the
bankruptcy case of Centrix Financial, LLC, see No. 06-16403-EEB, and concerns
claims brought by plaintiffs Centrix Financial Liquidating Trust (“Centrix”) and Jeffrey A.
Weinman, as trustee, against defendants Robert E. Sutton (“Sutton”); 6762 Potomac,
LLC (“Potomac”); Centrix Consolidated, LLC; Founders Insurance Company, Ltd.;
Johnson Street Holdings, LLC; RES Capital Holdings, Inc.; Williston Holdings, Ltd.;
Grand Construction, LLC; Harrison Custom Builders, Ltd.; Design Management, Inc.;
Katherine Sutton; Julie Sutton; Elizabeth Sutton; David Sutton; Birdie, LLC; Julie L.
Sutton Revocable Trust; and Potomac Aviation, LLC (collectively, the “Sutton
defendants”); Gerald Fitzgerald; Howard Klemmer; John Schreven; Roland Anderson;
and Dyerwhite Construction, LLC for tortious conduct leading to the demise of Centrix
Financial, LLC. See Docket No. 1. The higher-numbered consolidated case, No. 09cv-01542-PAB-CBS, arises from a separate adversary proceeding, No. 09-01150-EEB,
and concerns Centrix’ allegations that National Union is liable to Centrix on a fidelity
bond covering losses caused by the dishonest or fraudulent acts of Centrix employees.
See No. 09-cv-1542-PAB-CBS, Docket No. 1. On April 26, 2013, the Court granted
plaintiffs’ motion to consolidate these two cases. Docket No. 35. At the time of the
Court’s consolidation order, National Union had not yet responded with its position
regarding consolidation.
“Until final decree the court always retains jurisdiction to modify or rescind a prior
interlocutory order.” N.W. Cent. Pipeline Corp. v. JER P’ship, 943 F.2d 1219, 1225
(10th Cir. 1991) (internal citations omitted). The Court will consider both judicial
economy and fairness to the parties in determining whether reconsideration of the
consolidation Order is warranted. See Harris v. Illinois-California Express, Inc., 687
F.2d 1361, 1368 (10th Cir. 1982).
Rule 42(a) of the Federal Rules of Civil Procedure provides that “[i]f actions
before the court involve a common question of law or fact, the court may . . .
consolidate the actions.” FED . R. CIV. P. 42(a)(2). The decision whether to consolidate
actions involving common questions of law or fact is committed to the sound discretion
of the district court. Shump v. Balka, 574 F.2d 1341, 1344 (10th Cir. 1978). The
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purpose of Rule 42(a) is “to give the court broad discretion to decide how cases on its
docket are to be tried so that the business of the court may be dispatched with
expedition and economy while providing justice to the parties.” Breaux v. American
Family Mut. Ins. Co., 220 F.R.D. 366, 367 (D. Colo. 2004) (quoting 9 C. W RIGHT & A.
MILLER , FEDERAL PRACTICE & PROCEDURE § 2381 at 427 (2nd ed. 1995)).
National Union argues that consolidation is prejudicial because the knowledge
that damages will be paid by an insurance company–as opposed to an individual–will
make the jury more likely to find the individual entities liable on the claims advanced in
No. 09-cv-00088-PAB-CBS. Docket No. 36 at 6-10, ¶¶ 7-13. Plaintiffs counter that
prejudice is not a concern here because Centrix is the insured party and not the
defendants. Docket No. 41 at 13.
In Colorado, “evidence of a party’s liability insurance is irrelevant to the question
of whether he acted negligently or otherwise, and as such, any allusion to insurance
coverage is improper.” Prudential Prop. & Cas. Ins. Co. of Am. v. District Court, 617
P.2d 556, 559 (Colo. 1980); see also Jacobs v. Commonwealth Highland Theatres,
Inc., 738 P.2d 6, 12 (Colo. App. 1986) (carving out a narrow exception for “mere
inadvertent or incidental mention of insurance before the jury”). In Prudential, the Court
held that a trial court abused its discretion by trying an insurance company’s declaratory
judgment claim against its insured in the same trial as a claim to determine the
insured’s underlying liability for injuring someone else in his home. Prudential, 617
P.2d at 557-58. This approach is not unique to Colorado. See, e.g., Medick v. Millers
Livestock Market Inc., 669 N.Y.S.2d 776-77 (N.Y.A.D. 1998) (“It is generally recognized
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that, even where common facts exist, it is prejudicial to insurers to have the issue of
insurance coverage tried before the jury that considers the underlying liability claims.”)
(internal citations omitted); Christian v. First Liberty Ins. Corp., 2011 WL 949754, at *2
(M.D. Pa. Mar. 16, 2011) (recognizing “the risk that ‘knowledge of the fact of insurance
against liability will motivate the jury to be reckless in awarding damages to be paid, not
by the defendant, but by a supposedly well-pursed and heartless insurance company
that has already been paid for taking the risk’”) (quoting Price v. Yellow Cab Co. of
Phila., 278 A.2d 161, 166 (Pa. 1971)).
As these cases make clear, the purpose of the rule excluding evidence of
insurance coverage from a trial on liability is to avoid tainting the jury’s assessment of
the defendant’s wrongdoing with knowledge that, even if found liable, the defendant will
not be the one required to compensate the plaintiff. See, e.g., Price, 278 A.2d at 166.
Hence, the Colorado Supreme Court’s holding that “any allusion to insurance coverage
is improper.” Prudential, 617 P.2d at 559 (emphasis added). This reasoning does not
turn on the identity of the insured party. For example, where plaintiff Centrix is the party
carrying insurance, a jury may nonetheless be tempted to find liability on the part of the
Sutton defendants based on the knowledge that National Union will be the entity
required to pay any resulting damages. Accordingly, the Court concludes that National
Union’s interests would be prejudiced by a consolidated trial.
Plaintiffs suggest that the Court could mitigate any prejudice to National Union
through litigation management, for example, by bifurcating the trials or through rulings
on motions in limine. Docket No. 41 at 15. However, litigation management of this sort
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is unlikely to be practical. Not only would it be difficult to minimize the aforementioned
risk of prejudice to National Union, but the two consolidated cases are not similarly
situated with respect to trial. Specifically, whereas the parties in No. 09-cv-00088 are
ready for trial, the parties in No. 09-1150-EEB do not appear to be. The bankruptcy
judge held that either Centrix or National Union may file, at the close of discovery in No.
09-01150-EEB, “a brief (5 page) motion to amend the dispositive motions deadline
specifying why discovery clearly shows there is no longer any genuine dispute as to any
material fact.” Docket No. 36-11 at 3 (emphasis in original). There is still a possibility
that National Union may file a motion for summary judgment before the bankruptcy
judge, which would considerably delay the progress of the case towards trial.
Furthermore, on May 7, 2013, plaintiffs produced an additional 95,000 pages of
material to National Union. See No. 09-1150-EEB, Docket No. 174 at 2. National
Union maintains that this production is incomplete and, on May 29, 2013, filed a motion
to compel production of additional materials. No. 09-01150-EEB, Docket No. 176. This
motion is set for a hearing before the bankruptcy judge on August 15, 2013. No. 0901150-EEB, Docket No. 181. Thus, it appears that discovery is likely to continue for
some length of time while, in contrast, defendants in No. 09-cv-00088 do not dispute
that the case is ready for trial. See Docket No. 28 (plaintiffs’ unopposed motion to set
trial date).
In consideration of the issues raised by National Union, the Court concludes that
consolidation is not appropriate. Wherefore, it is
ORDERED that the Motion to Reconsider Order Granting Plaintiffs’ Unopposed
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Motion to Consolidate Cases [Docket No. 36] filed by defendants National Union Fire
Insurance Company of Pittsburgh, PA and Chartis Claims, Inc. (f/k/a AIG Domestic
Claims, Inc.) is GRANTED. It is further
ORDERED that the Court’s Order granting Unopposed Motion to Consolidate
Cases [Docket No. 35] is VACATED. Case No. 09-cv-00088-PAB-CBS and Case No.
09-cv-01542-PAB-CBS are severed.
DATED July 26, 2013.
BY THE COURT:
s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge
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