Travelers Indemnity Company of Connecticut et al v. Attorney's Title Insurance Fund, Inc. et al

Filing 195

ORDER granting 155 Intervening Plaintiff RSUI Indemnity Company's Motion to Join in Plaintiffs' Motion for Partial Judgment on the Pleadings or, in the alternative, Motion to Strike and Abate. To the extent, Defendants Section 10 Join t Venture, LLP, Sky Property Venture, LLC, and CAS Group, Inc.'s Counterclaim seeks damages beyond the policy limits, it shall be ABATED until a determination of coverage is made; granting 177 Defendants Section 10 Joint Venture, LLP, Sky Pro perty Venture, LLC, and CAS Group, Inc.'s Motion for Leave to File Amended Counterclaims Against Intervening Plaintiff RSUI Indemnity Company. The Court grants Defendants leave to amend their Counterclaim to add a claim for common law bad faith only. Signed by Judge Sheri Polster Chappell on 4/21/2015. (LMF)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
TRAVELERS INDEMNITY COMPANY
OF CONNECTICUT and ST. PAUL FIRE
& MARINE INSURANCE COMPANY,
Plaintiffs,
v.

Case No: 2:13-cv-670-FtM-38DNF

ATTORNEY’S TITLE INSURANCE
FUND, INC., FLORIDA TITLE CO.,
SECTION 10 JOINT VENTURE, LLP,
SKY PROPERTY VENTURE, LLC,
CAS GROUP, INC., STEPHAN,
COLE & ASSOCIATES, LLC and
INTEGRA REALTY RESOURCES
SOUTHWEST FLORIDA, INC.,
Defendants.
/
ORDER1
There are two interrelated motions pending before the Court. On January 23,
2015, Intervening Plaintiff RSUI Indemnity Company2 filed a Motion to Join in Plaintiffs’
Motion for Partial Judgment on the Pleadings or, in the alternative, Motion to Strike and
Abate. (Doc. #155). Defendants Section 10 Joint Venture, LLP, Sky Property Venture,
LLC, and CAS Group, Inc.3 filed a Response in Opposition to this Motion on February 9,
2015.

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(Doc. #164).

Shortly after, SSC filed a Motion for Leave to File Amended

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2 Hereinafter referred to as “RSUI.”
3 Hereinafter referred to, collectively, as “SSC.”

Counterclaims Against RSUI (Doc. #177), to which RSUI filed a Response in Opposition
(Doc. #191). The Motions are now ripe for review.
Background
The background of this action has been recited at-length on several occasions.
(See, e.g., Doc. #125 at 2-5). In sum, two individuals orchestrated a vast real estate fraud
scheme, resulting in over one hundred investors losing millions of dollars. One of the
victims of this scheme was Defendant Attorney’s Title Insurance Fund (“ATIF”), the title
insurer for several of the properties involved. Believing that the two individuals invested
their ill-gotten fraud proceeds in a property owned by SSC, ATIF instituted an action in
Florida state court against SSC, seeking to recover its losses. After extensive state-court
litigation between SSC and ATIF, the Parties entered into a Coblentz agreement. This
agreement granted judgment in favor of SSC for $40 million, but also prevented SSC from
enforcing the judgment against ATIF. Instead, SSC agreed to enforce the judgment
against only ATIF’s insurers. RSUI was one of those insurers, providing a “Director’s and
Officer’s Liability Policy” (“RSUI Policy”) to ATIF for several years.
After SSC and ATIF entered into the Coblentz agreement, two of ATIF’s other
insurers, Plaintiffs Travelers Indemnity Company of Connecticut and St. Paul Fire &
Marine Insurance Company (“Plaintiffs”), filed the instant action, seeking a declaratory
judgment that the Coblentz agreement is unenforceable against them. Several months
later, RSUI intervened and joined Plaintiffs’ position that it is not liable for any of the
Coblentz agreement judgment either.

Recently, Plaintiffs filed a Motion for Partial

Judgment on the Pleadings or, in the alternative, Motion to Strike and Abate. (Doc. #146).
Before the Court ruled on Plaintiffs’ Motion, RSUI filed the instant Motion, seeking to join

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in the Motion. (Doc. #155). SSC filed a Response in Opposition (Doc. #164) and, shortly
after, a Motion for Leave to File Amended Counterclaims Against RSUI. (Doc. #177).
1. SSC’s Motion for Leave to Amend its Counterclaim
Legal Standard
Pursuant to the Case Management and Scheduling Order, the deadline to amend
pleadings expired on February 10, 2014 (Doc. #57). Motions to amend filed after the Case
Management and Scheduling Order deadline are held to the “good cause” standard under
Rule 16(b) and should be denied unless the schedule mandated in the scheduling order
cannot “be met despite the diligence” of the moving party. Sosa v. Airprint Sys., Inc., 133
F.3d 1417, 1419 (11th Cir. 1998). Because SSC filed its Motion to Amend on March 12,
2015, over one year after the deadline to amend passed, the Rule 16(b) good cause
standard governs.
If the Court finds that good cause exists under this standard, then the Court can
analyze whether the liberal Rule 15 standard is satisfied as well. Rule 15 provides that
leave to amend should be freely given unless there is an undue delay, dilatory motive, or
prejudice to the opposing party. In re Engle Cases, 767 F.3d 1082, 1108 (11th Cir. 2014).
And that a court is required to grant leave to amend a complaint when justice so requires.
Forman v. Davis, 371 U.S. 178, 182 (1962).
Discussion
SSC begins its Motion by focusing on whether it satisfies Rule 16(b)(4)’s goodcause standard. In attempting to illustrate that it does, SSC points the Court’s attention
to the fact that RSUI did not intervene in this action until after the Case Management and
Scheduling Order’s deadline to amend had already expired. (Doc. #177 at 5). This, as

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SSC explains, is significant as it demonstrates that it was “impossible” for it to seek leave
to amend prior to the deadline expiring. (Doc. #177 at 5). RSUI, however, adamantly
contests SSC’s “impossibility” argument. While RSUI acknowledges that it intervened
after the amendment deadline expired, RSUI notes that it has been nearly 10 months
since SSC filed its Answer and Counterclaim. (Doc. #191 at 8). And during these 10
months, the Court entertained several amendments to the Case Management and
Scheduling Order, while SSC never sought to extend the amendment deadline or seek
leave of Court to do so. (Doc. #191 at 8). RSUI believes that these facts “illustrate the
lack of good cause, justification, and diligence on the part of [SSC].” (Doc. #191 at 6).
The Court is inclined to agree with RSUI, in part. In its Motion, SSC seeks to
amend its Counterclaim to “encompass all relevant issues related to coverage and
damages in this matter.” In other words, SSC seeks to add information relating to the
preceding state-court litigation and ATIF’s interactions with RSUI, and to add a claim for
common law bad faith. With regard to adding details related to the state-court litigation,
SSC contends that it did not seek leave to amend prior to filing the instant Motion because
“[i]t was not until RSUI’s . . . motion practice on the pleadings that RSUI’s focus on the
‘single claim condition’ became clear and it therefore became evident that the tender and
rejection of prior pleadings under a prior policy could have importance.” (Doc. #177 at 6).
The Court finds this argument unpersuasive.

The “motion practice on the

pleadings” that SSC references was filed on July 8, 2014 (Doc. #92), and ruled on by the
Court on September 17, 2014 (Doc. #125). That means nearly six months passed
between the date the Court issued its September 17, 2014 Order and the date SSC filed
the instant Motion. And noticeably absent from SSC’s Motion is any explanation detailing

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what prevented them from seeking leave to add these already-known facts to their
Counterclaim during this extended time period.
Moreover, SSC’s reliance on Hess v. Coca-Cola Refreshments USA, Inc., Case
No. 8:13-cv-3136-T-33EAJ, 2014 WL 5080258, at *1 (M.D. Fla. Sept. 29, 2014), is
misplaced. There, the court permitted the plaintiff to amend its third-party complaint only
after deposition testimony subsequently revealed new, pertinent facts. Hess, 2014 WL
5080258, at *2-3. In contrast, the facts that SSC seeks to add relate back to 2011 and
were well known to SSC at the time RSUI intervened and all times subsequent. SSC’s
reliance on Arnold v. Wausau Underwriters Ins. Co., Case No. 13-60299-CIV, 2014 WL
710104, at *1 (S.D. Fla. Feb. 25, 2014), is also misplaced. There, the court allowed the
defendant to amend its answer to replace an already attached insurance policy with a
more complete version. Arnold, 2014 WL 710104, at *7. The Court would probably allow
SSC to replace an attachment to its Answer with a more complete version too. But that
is not what is requested. Instead, SSC seeks to add several paragraphs of factual detail
to its Counterclaim – nearly one year after it was filed – that were well known this entire
time. In the Court’s view, this illustrates that SSC lacked diligence in pursuing its claim,
and, therefore, that Rule 16(b)(4)’s good cause standard has not been met. See Sosa,
133 F.3d at 1419 (finding that Rule 16(b)(4)’s good cause standard is not met where the
party lacked diligence in pursuing its claim).
Notwithstanding the above analysis, the Court finds good cause under Rule 16(b)
to allow SSC to add a claim for common law bad faith. Recently, the Court adopted the
reasoning that a request for a declaratory judgment that the insurer is liable for the full
amount of a Coblentz agreement, which exceeds the applicable policy limits, amounts to

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the same thing as a claim for bad faith. (Doc. #185 at 8-9 (following Mobley v. Capitol
Specialty Ins., Case No. 13-20636-CIV, 2013 WL 3794058, at *3 (S.D. Fla. July 19,
2013)). In its Counterclaim, SSC seeks to recover the full amount of the $40 million
Coblentz agreement judgment against RSUI, despite the fact that the applicable policy
limit is $5 million. (Doc. #71 at 8-14). This amounts to the same thing as a claim for bad
faith. Clearly, there is good cause under Rule 16(b)(4) to allow SSC to formally add a
claim that it has already asserted. Moreover, there is no indication that this amendment
invokes an undue delay, dilatory motive, or prejudice to RSUI, thereby satisfying Rule
15(a) too.
Based on the foregoing, SSC’s Motion for Leave to Amend its Counterclaim is
granted in part. The Court grants SSC leave to amend its Counterclaim to add a claim
for common law bad faith only.
2. RSUI’s Motion to Join in Plaintiffs’ Motion for Partial Judgment on the
Pleadings or, in the alternative, Motion to Strike and Abate
Legal Standard
After the pleadings have closed, but early enough not to delay trial, a party may
move for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). As the
Eleventh Circuit explained, “[j]udgment on the pleadings is proper when no issues of
material fact exist, and the moving party is entitled to judgment as a matter of law based
on the substance of the pleadings and any judicially noticed facts.” Cunningham v. Dist.
Attorney's Office for Escambia Cnty., 592 F.3d 1237, 1255 (11th Cir. 2010). Courts must
analyze motions for judgment on the pleadings using the same standards that govern a
Rule 12(b)(6) motion to dismiss. See Guarino v. Wyeth LLC, 823 F. Supp. 2d 1289, 1291
(M.D. Fla. 2011) aff'd, 719 F.3d 1245 (11th Cir. 2013). Consequently, “[w]hen considering

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such a motion, the Court must accept the facts alleged in the complaint as true and draw
all inferences that favor the nonmovant.” Id. (internal citations and quotations omitted).
Discussion
On January 6, 2015, Plaintiffs filed a Motion for Partial Judgment on the pleadings
or, in the alternative, Motion to Strike or Abate. (Doc. #146). In support, Plaintiffs argued
that any demand for damages beyond the applicable policies’ limits – coming in the form
of a bad faith claim – is improper until there is a determination that coverage exists under
the applicable policies. (Doc. #146 at 12-21). And, therefore, a partial judgment on the
pleadings or abatement is required. The Court agreed and found that abatement was
proper, noting that Florida law prohibits a bad faith claim seeking an amount in excess of
a policy’s limits before a determination of coverage. (Doc. #185 at 9 (citing Vest v.
Travelers Ins. Co., 753 So.2d 1270, 1276 (Fla. 2000)). Now, RSUI seeks to join Plaintiffs’
Motion and abate SSC’s bad faith claim, which is required to recover in excess of the
applicable policy limits, until there is a determination that cover is available under the
RSUI policy. (Doc. #155 at 3). SSC concedes that such relief is proper at this juncture.
(Doc. #177 at 8-9).

Therefore, the Court will abate SSC’s bad faith claim until a

determination that coverage exists under the RSUI policy.

See Mobley, 2013 WL

3794058, at *3.
Accordingly, it is now
ORDERED:
1. Defendants Section 10 Joint Venture, LLP, Sky Property Venture, LLC, and
CAS Group, Inc.’s Motion for Leave to File Amended Counterclaims Against
Intervening Plaintiff RSUI Indemnity Company (Doc. #177) is GRANTED in

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part. The Court grants Defendants leave to amend their Counterclaim to add
a claim for common law bad faith only.
2. Intervening Plaintiff RSUI Indemnity Company’s Motion to Join in Plaintiffs’
Motion for Partial Judgment on the Pleadings or, in the alternative, Motion to
Strike and Abate (Doc. #155) is GRANTED. To the extent, Defendants Section
10 Joint Venture, LLP, Sky Property Venture, LLC, and CAS Group, Inc.’s
Counterclaim seeks damages beyond the policy limits, it shall be ABATED until
a determination of coverage is made.
DONE and ORDERED in Fort Myers, Florida, this 21st day of April, 2015.

Copies: All Parties of Record

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