H.E. MCGONICAL INC. v. HARLEYSVILLE LAKE STATES INSURANCE COMPANY et al

Filing 90

ENTRY ON PLAINTIFF'S MOTION TO CERTIFIY INTERLOCUTORY APPEAL - For the foregoing reasons, the Court DENIES McGonigal's Motion to Certify Interlocutory Appear (Filing No. 84 ). (See Entry.) Signed by Judge Tanya Walton Pratt on 6/5/2017. (JLS)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
H.E. McGONIGAL, INC.,

)
)
Plaintiff,
)
)
v.
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HARLEYSVILLE LAKE STATES INSURANCE )
COMPANY, and COREPOINTE INSURANCE
)
COMPANY,
)
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Defendants.
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Case No. 1:15-cv-00549-TWP-DML

ENTRY ON PLAINTIFF’S MOTION TO CERTIFY INTERLOCUTORY APPEAL
This matter is before the Court on Plaintiff H.E. McGonigal, Inc.’s (“McGonigal”) Motion
to Certify Interlocutory Appeal filed pursuant to 28 U.S.C. § 1292(b) (Filing No. 84). Following
motions to dismiss filed by Defendants Harleysville Lake States Insurance Company
(“Harleysville”) and CorePointe Insurance Company (“CorePointe”), the Court dismissed
McGonigal’s claims for insurance bad faith against Harleysville and CorePointe (Filing No. 41;
Filing No. 68). The Magistrate Judge denied McGonigal’s request for leave to amend its
Complaint because of McGonigal’s lack of diligence in pursuing and pleading its bad faith claims
and the unfair prejudice that would result against Harleysville and CorePointe (Filing No. 66).
Thereafter, McGonigal asked the Court to reconsider the dismissal Orders and the Order denying
leave to amend the Complaint. However, the Court denied the motion to reconsider because
McGonigal failed to show an error of law or fact, and the Court, contrary to McGonigal’s assertion,
had not required a heightened pleading standard for McGonigal’s bad faith claim (Filing No. 82 at
6). McGonigal now asks the Court to certify an interlocutory appeal of the Order denying

reconsideration to allow immediate appellate review. For the following reasons, the Court
DENIES McGonigal’s Motion to Certify Interlocutory Appeal.
I.

BACKGROUND

The Court provides only a brief background of the case in this Order because the parties
are familiar with the background, and the issues are similar to those raised in McGonigal’s motion
to reconsider. 1
In January 2015, McGonigal brought this action against CorePointe and Harleysville,
asserting claims for breach of contract and breach of the duty of good faith and fair dealing in
connection with insurance policies sold by CorePointe and Harleysville to McGonigal. McGonigal
is an Indiana car dealership company located in Kokomo, Indiana. CorePointe is an insurance
company based in Birmingham, Michigan, and Harleysville is an insurance company based in
Harleysville, Pennsylvania. McGonigal purchased insurance policies from both CorePointe and
Harleysville to cover losses incurred in its car dealership business.
Around January 18, 2013, McGonigal learned that approximately sixteen vehicles were
fraudulently purchased with funds drawn on a McGonigal account, and McGonigal received no
compensation for the vehicles. After discovering the loss, McGonigal submitted insurance claims
to both CorePointe and Harleysville in accordance with the policies’ terms.

Even though

McGonigal allegedly complied with the terms of the policies, and despite the loss allegedly being
a loss covered by the policies, CorePointe and Harleysville denied McGonigal’s claims.
Because of the denial of the claims, McGonigal filed its Complaint, seeking coverage for
the loss and damages for the insurers’ breach of contract and failure to act in good faith. On April
13, 2015, Harleysville filed a motion to dismiss, asserting that the Complaint failed to provide any

1

This background section should look familiar to the parties because, in drafting this section, the Court borrowed
heavily from the background section of its Order on McGonigal’s Rule 54(b) motion for the sake of judicial efficiency.

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factual basis to support a claim of insurance bad faith (Filing No. 5). On October 26, 2015, the
Court granted Harleysville’s motion to dismiss the bad faith claim against Harleysville (Filing No.
41). On January 4, 2016, CorePointe filed its motion to dismiss the bad faith claim asserted against
CorePointe, asserting the same argument advanced by Harleysville—that the Complaint failed to
provide any factual basis to support a claim of insurance bad faith (Filing No. 45).
More than a month after CorePointe’s motion to dismiss was filed and almost four months
after the Court’s Order dismissing the bad faith claim against Harleysville, on February 23, 2016,
McGonigal filed a motion requesting leave to amend its Complaint regarding its bad faith claims
(Filing No. 49). This motion was filed after the deadline to amend the pleadings had expired. On
July 18, 2016, the Court denied McGonigal’s motion to amend the Complaint because of
McGonigal’s lack of diligence in pursuing and pleading its bad faith claims and the unfair
prejudice that would result against Harleysville and CorePointe (Filing No. 66). Then on August
31, 2016, the Court granted CorePointe’s motion to dismiss the bad faith claim asserted against
CorePointe (Filing No. 68). Thereafter, McGonigal filed a motion to reconsider, asking the Court
to vacate or amend the two dismissal Orders and the Order denying leave to amend the Complaint
(Filing No. 69).
On April 18, 2017, the Court denied McGonigal’s motion to reconsider, explaining that
McGonigal failed to show an error of law or fact concerning dismissal of the bad faith claim and
denial of leave to amend the Complaint (Filing No. 82). The Court further explained that, contrary
to McGonigal’s assertion, the Court had not required a heightened pleading standard for
McGonigal’s bad faith claim. Rather, McGonigal had failed to provide anything beyond a
recitation of the elements of a cause of action or mere labels for its bad faith claim, and thus, it did
not meet the pleading standard of Federal Rule of Civil Procedure 8. Id. at 5. The Court denied

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the motion to reconsider because McGonigal simply showed its disappointment in and
disagreement with the Court’s reasoning and decision. Following the denial of the motion to
reconsider, McGonigal filed its Motion to Certify Interlocutory Appeal on April 26, 2017.
II.

LEGAL STANDARD

There are four statutory criteria for the grant of a section 1292(b) petition to
guide the district court: there must be a question of law, it must be controlling, it
must be contestable, and its resolution must promise to speed up the litigation.
There is also a nonstatutory requirement: the petition must be filed in the district
court within a reasonable time after the order sought to be appealed. . . . Unless all
these criteria are satisfied, the district court may not and should not certify its order
to [the appellate court] for an immediate appeal under section 1292(b).
Ahrenholz v. Bd. of Trs., 219 F.3d 674, 675–76 (7th Cir. 2000) (emphasis in original).
III.

DISCUSSION

In its Motion to Certify Interlocutory Appeal, McGonigal argues that it meets all the criteria
for certifying an interlocutory appeal, asserting that its question is a controlling question of law—
does pleading “bad faith” in the context of a dispute between an insured and insurer require
anything more than “notice pleading?” (Filing No. 85 at 2.)
McGonigal asserts that other district courts have not required a heightened pleading
standard for asserting insurance bad faith claims and that notice pleading is the requirement.
McGonigal explains that the question of what pleading standard applies is purely a legal question
and one that has not been directly addressed by the Seventh Circuit.
Quoting Sokaogon Gaming Enter. Corp. v. Tushi-Montgomery Assoc., Inc., 86 F.3d 656,
659 (7th Cir. 1996), McGonigal asserts that its question is controlling because “its resolution is
quite likely to affect the further course of the litigation, even if not certain to do so.” McGonigal
explains that its bad faith claim is central to its “quest for complete relief,” and thus, the question
is controlling (Filing No. 85 at 3).

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McGonigal further argues that immediately litigating the insurance bad faith claim on the
merits “will certainly expedite this case. Otherwise, McGonigal will return to this forum after
what it legitimately believes will be a successful appeal on this issue. Delaying that appeal until
after conclusion of the contract claims raises the specter of serial litigation.” Id. McGonigal asserts
that the question is “contestable” because it raises an issue where there could be substantial ground
for a difference of opinion, citing 28 U.S.C. § 1292(b), and the Defendants did not “cite[] authority
specifically dealing with the appropriate standard applied to pleading a bad faith claim.” Id.
McGonigal concludes its argument by essentially rearguing its motion to reconsider regarding the
appropriate pleading standard.
Harleysville responds to McGonigal’s argument by explaining that, “[t]o demonstrate
‘substantial ground for difference of opinion,’ there must be an ‘existence of a difficult central
question of law which is not settled by controlling authority.’” (Filing No. 88 at 6 (quoting In re
Brand Name Prescription Drugs Antitrust Litigation, 878 F. Supp. 1078, 1081 (N.D. Ill. 1995).)
Harleysville explains that there is no difference of opinion or dispute regarding the controlling law
for the Court’s Orders when deciding the motions that are now raised by McGonigal. Concerning
the Order denying leave to amend the Complaint, Harleysville explains that the Order was factsensitive and cannot raise a question of law, which is required for an interlocutory appeal.
Regarding the motions to dismiss, Harleysville notes that McGonigal asserts Rule 8 applies, the
Defendants agree, and the Court applied Rule 8 and the controlling case law for Rule 8. Thus,
there are no grounds for difference of opinion—it is not “contestable.”
Harleysville additionally asserts that an immediate appeal of the Court’s Orders will not
materially advance the ultimate termination of the litigation because McGonigal’s breach of
contract claim is still pending and active. Fact discovery is closed and the claim is set for trial.

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An interlocutory appeal would delay the resolution of the only pending claim. Harleysville further
argues that McGonigal is actually attempting to certify the question surrounding dismissal of its
bad faith claim, which was dismissed by the Court on October 26, 2015, more than eighteen
months ago. Harleysville asserts that this lengthy delay clearly violates the requirement that the
motion must be filed in the district court within a reasonable time after the order sought to be
appealed was issued. See Ahrenholz, 219 F.3d at 675.
CorePointe responds to McGonigal’s argument by focusing on the time between the
Motion to Certify Interlocutory Appeal and the entry of the “order sought to be appealed,” and
argues that the delay was unreasonable. CorePointe briefly asserts that the statutory criteria for an
interlocutory appeal are not met and then incorporates and adopts Harleysville’s arguments.
Because it is dispositive of this Motion, the Court focuses first and only on the necessary
element that the question to be certified must be “contestable,” meaning there is “substantial
ground for difference of opinion” on a controlling question of law. 28 U.S.C. § 1292(b). Each of
McGonigal’s arguments focuses on the pleading standard required to assert a claim for insurance
bad faith. McGonigal complains that the Court required a heightened pleading standard instead of
the typical “notice pleading” standard. McGonigal seems to rely on Erickson v. Pardus, 551 U.S.
89 (2007), to argue that the Court erred in its analysis. McGonigal points to the following language
from Erickson to assert error: “Specific facts are not necessary; the statement need only give the
defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Id. at 93.
McGonigal appears now to inconsistently take issue with Twombly’s (Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007)) and Iqbal’s (Ashcroft v. Iqbal, 556 U.S. 662 (2009)) controlling nature;
however, McGonigal ignores the fact that the very language it quotes from the Erickson decision
is actually quoting from the Twombly decision.

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Erickson, Twombly, and Iqbal, as well as Rule 8 are the controlling law for McGonigal’s
pleadings. The parties do not contest or dispute this. The Court applied these standards. The
Court did not require a heightened pleading standard as McGonigal continues to argue ad nauseam.
As Erickson, points out, and which McGonigal focuses on, “the statement need only give the
defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Id. at 93. “And
the grounds upon which it rests” demands that some facts be pled to support the claim. McGonigal
failed to meet this standard for its bad faith claim; instead, it pled only elements of the cause of
action. The controlling law is clear, and there is no dispute concerning what that controlling law
is. The Court correctly applied the controlling law. There is no substantial ground for difference
of opinion on a controlling question of law. Thus, certification of an interlocutory appeal is not
warranted.
IV.

CONCLUSION

For the foregoing reasons, the Court DENIES McGonigal’s Motion to Certify
Interlocutory Appeal (Filing No. 84).
SO ORDERED.

Date: 6/5/2017

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DISTRIBUTION:
Joseph Andrew Samreta
SKILES DETRUDE
[e-mail]
Richard Robert Skiles
SKILES DETRUDE
[e-mail]
Briane M. House
SKILES DETRUDE
[e-mail]
Edward F. Harney, Jr.
HUME SMITH GEDDES GREEN & SIMMONS
[e-mail]
John J. Piegore
SANCHEZ DANIELS & HOFFMAN LLP
[e-mail]
Timothy V. Hoffman
SANCHEZ DANIELS & HOFFMAN LLP
[e-mail]

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