Valley Forge Insurance Company v. Hartford Iron & Metal Inc et al
Filing
581
OPINION AND ORDER denying 491 MOTION to Appoint Special Master. Signed by Judge Robert L Miller, Jr on 11/22/16. (nal)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
VALLEY FORGE INSURANCE COMPANY, )
)
Plaintiff,
)
)
v.
)
)
HARTFORD IRON & METAL, INC., et al., )
)
Defendants.
)
Cause No. 1:14-cv-6 RLM-SLC
OPINION AND ORDER
Plaintiff Valley Forge moved that the court appoint a special master to
oversee remediation of the Hartford Iron site. The court denies the motion for
these purposes, but will consider appointing a master at the parties’ expense to
address discovery matters if they proceed in excess.
No detailed factual summary is needed. In the order of December 2015
[Doc. No. 298], the court held that Valley Forge’s control of the defense and
remediation under the Second Settlement Agreement created a conflict of
interests while Valley Forge was suing Hartford Iron for allegedly breaching that
agreement. In its April 2016 order [Doc. No. 439], the court clarified that this
conflict didn’t grant Hartford Iron complete control over the defense and
remediation. The parties could just as well comply with the order by arranging
for a truly independent third party to manage defense and remediation at Valley
Forge’s expense.
This motion is in response to Valley Forge’s fruitless efforts to reach out to
Hartford Iron to arrange for an independent third party to manage the defense
and remediation. Valley Forge retained Drewery Simmons Vornehm, LLP to
advise on and to coordinate the remediation, and presents communications
between Erik Mroz, an attorney with this firm, and Hartford Iron.
Mr. Mroz emailed Hartford Iron seeking its cooperation in appointing an
independent third party to manage the remediation and defense, in which he
identified two judges as potential appointees. Hartford Iron’s counsel, Jamie
Dameron, responded wondering “why you are writing to me at all.” After asking
questions about what Mr. Mroz envisions through the appointment, she
explained that it’s “unclear at this point whether there is good reason for us to
be in contact” and that “the vagueness of your introductory letter precludes a
more substantive response.” Mr. Mroz responded that “the [appointed] judge will
be responsible for directing the response action.” The judge wouldn’t replace a
claims administrator nor would it replace Ms. Dameron as defense counsel. Each
party would have the right to communicate with the judge. Mr. Mroz goes on to
explain how Valley Forge “would like to get this site on track for cleanup as soon
as possible” and asks how best to proceed with the Remediation Work Plan.
About a month later, in June 2016, Ms. Dameron forwarded a letter she
prepared for Valerie Rodriguez, Valley Forge’s litigation counsel, to Mr. Mroz.
This letter explains that Hartford Iron authorized Ms. Dameron to grant site
access to Valley Forge through October 31, 2016 for construction of the
Keramida system. In the letter she explains that “[a]ll work subject to this access,
including waste disposal and documentation, must be carried out under the
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management of a truly independent third party,” who may contact her with
reasonable requests related to this authorization.
Mr. Mroz responded with a letter to Ms. Dameron, dated just under two
weeks later, that Valley Forge never received a response from her or Hartford
Iron counsel Mark Shere regarding selection of the independent third party,
which “[o]bviously . . . cannot be done unilaterally by VFIC.” The letter explained
that Valley Forge would seek appointment of an independent third party through
court order if Hartford Iron doesn’t assist in moving forward. After receiving no
response from Ms. Dameron for over three weeks, Mr. Mroz wrote to Ms.
Dameron and Mr. Shere again, saying that he is “hopeful that an independent
third-party can be mutually agreed to by the parties to manage the response
action and finally move the Site towards closure.”
Mr. Shere responded this time. He said the letter from Ms. Dameron
authorizing site access was the end of the matter because Hartford Iron’s grant
of site access was “effective immediately” and “not intended to open negotiations
with CNA’s lawyers regarding additional terms or conditions.” He reiterated that
the previous letter granted CNA immediate access to the site to build the new
stormwater system. He then explained that the insurance claims manager or
administrator must be ethically walled off from the litigators and from the
litigation record. Mr. Mroz, because of his connection to the litigators and
familiarity with the litigation record, can’t do the job.
During the period of this correspondence, rather than cooperate to decide
on an independent third party, Mr. Shere moved for partial summary judgment
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seeking a declaratory judgment that “CNA may attempt to cure the conflict of
interest by ‘arranging for a truly independent third party to manage the defense
and remediation at Valley Forge’s expense.’” In its pending motion for partial
summary judgment [Doc. No. 514], Mr. Shere argues the same.
Valley Forge moves that the court, pursuant to Rule 53, appoint a special
master to manage the remediation of the site.
“Unless a statute provides otherwise, a court may appoint a master only
to . . . perform duties consented to by the parties.” Fed. R. Civ. P. 53(a)(1).
Hartford Iron’s opposition to the motion indicates that it hasn’t consented to the
appointment of a master. That’s enough for the motion to be a nonstarter. The
court agrees with Valley Forge that Hartford Iron’s motions and comments
conflict on this point, but Rule 53(a)(1) doesn’t give the court authority to foist a
special master onto an unwilling party.
Hartford Iron’s reasons to oppose the motion, however, are nonsensical.
First, Hartford Iron argues that a change of venue to another judge “would merely
change the location of the litigation. None of these steps would alter the
underlying conflict of interest or the substance of the insurance dispute.” This
isn’t correct. Rule 53 empowers a master to “take all appropriate measures to
perform the assigned duties fairly and efficiently.” Fed. R. Civ. P. 53(c). Should
the parties agree to a master to serve as something of a ‘remediation czar,’ with
explicit direction from the court as to its function, then there would be no conflict
of interest.
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Hartford Iron’s reliance on Armstrong Cleaners, Inc. v. Erie Insurance
Exchange is misplaced. 364 F. Supp. 2d 797 (S.D. Ind. 2005). Armstrong
Cleaners thoroughly analyzes the “eternal triangle” of liability insurance
company,
insured,
and
insurance
defense
attorney,
and
this
court
applied Armstrong’s reasoning in its two orders addressing the conflict of
interests. Hartford Iron contends that “[a]s Armstrong makes clear, the legal
standard requires separation of both ‘front-line adjusters’ and ‘more senior
supervisors’ for purposes of personnel.” The Armstrong court, however, never
mandates an ethical wall between these personnel. Instead, it says that the weak
ethical wall in place at the insurance company was insufficient to cure the
conflict. The court did mandate that the insurer pay for independent counsel.
That was what cured the conflict, and it did so better than an ethical wall could
have.
Just as Armstrong doesn’t mandate an ethical wall, neither did this court
ever mandate an ethical wall. Instead, its December 2015 order said that Valley
Forge doesn’t have the right to control the defense or the remediation.
Eliminating Valley Forge’s control of these components eliminates the chance
that it would steer them in a manner that supported its breach of contract claims
against Hartford Iron. By ‘outsourcing’ these components, either to Hartford Iron
or to an independent third party, Valley Forge could avoid a conflict of interests
better than with an ethical wall inside the organization.
Second, Hartford Iron’s positions are conflicting. On the one hand, it seeks
a declaration that “CNA may attempt to cure the conflict of interest by ‘arranging
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for a truly independent third party to manage the defense and remediation at
Valley Forge’s expense.’” But at the same time, it spurns Valley Forge’s attempts
to work with Hartford Iron to choose that independent third party. This invites
skepticism about whether Hartford Iron would have allowed Valley Forge to
unilaterally choose the third party or if it would have just litigated that the third
party wasn’t properly insulated from the litigation. If Valley Forge is paying for
the third party, it’s inevitable that the third party interact with, and to some
degree rely on Valley Forge personnel who may not be insulated from the
litigation.
Third, Hartford Iron is incorrect that the vagueness of the motion fails to
meet the standard of Rule 53. Hartford Iron cites the 2003 Advisory Committee
Notes for saying that “Federal Rule 53(b)(2) requires precise designation of the
master’s duties and authority.” This is true, but Rule 53(b)(2) only instructs the
court about the contents of the order appointing the master. Hartford Iron
doesn’t cite authority that the parties moving for appointment of a master need
to have already laid out the master’s precise duties and authority.
Hartford Iron is correct on one point, however. If the court appoints a
master in the future to manage remediation, the procedures under Rule 53 must
be followed, which might lead to some delay. The parties’ agreed appointment of
an independent third party to manage the remediation, using procedures agreed
to by the parties, could also allow for speed and flexibility.
The court does have the power, however, to impose a master without the
parties’ consent to “address pretrial and posttrial matters that cannot be
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effectively and timely addressed by an available . . . magistrate judge . . . .” Rule
53(a)(1)(C). The court won’t use this power now, but it’s perfectly willing to do so
if it perceives ongoing excess in non-dispositive filings.
The court recognizes the obstacles Hartford Iron has presented since the
court’s April 2016 order clarifying the conflict of interests. But Rule 53 doesn’t
allow appointment of a master for the purpose suggested unless both parties
agree to it.
Valley Forge’s motion that the court appoint a special master [Doc. No.
491] is DENIED.
SO ORDERED.
ENTERED: November 22, 2016
/s/ Robert L. Miller, Jr.
Judge
United States District Court
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