Great American Insurance Company of New York v. Lowry Development, LLC

Filing 396

ORDER denying 387 Motion for Reconsideration re Order on Motion to Stay Case, 385 Order on Motion to Strike, Order on Motion to Clarify,,,,,,,, ; denying 387 Motion ; denying 387 Motion to Amend/Correct Signed by Chief District Judge Louis Guirola, Jr on 06/09/2011 (Guirola, Louis)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
GREAT AMERICAN INSURANCE
COMPANY OF NEW YORK
v.
LOWRY DEVELOPMENT, LLC

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PLAINTIFF
Civil Action No. 1:06cv97-LG-RHW
DEFENDANT

CONSOLIDATED WITH
LOWRY DEVELOPMENT, LLC
v.
GREAT AMERICAN INSURANCE
COMPANY OF NEW YORK and
GROVES & ASSOCIATES
INSURANCE, INC.

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PLAINTIFF
Civil Action No. 1:06cv412-LG-RHW

DEFENDANTS

MEMORANDUM OPINION AND ORDER DENYING
GROVES’ MOTION TO RECONSIDER, ALTER,
OR AMEND MEMORANDUM OPINION AND ORDER [385]
BEFORE THE COURT is the Motion [387] to Reconsider, Alter, or Amend
Memorandum Opinion and Order [385] that was filed by Groves & Associates
Insurance, Inc. Upon reviewing the submissions of the parties and the applicable law,
the Court finds that the Motion should be denied.
FACTS AND PROCEDURAL HISTORY
Lowry purchased two builder’s risk policies from Great American Insurance
Company for the construction of a two-condominium project in Gulfport, Mississippi.
It obtained both policies through Lowry’s insurance agent, Groves. The first policy
insured Tuscan Villas Building 1, and it contained a wind exclusion. Coverage for
damage caused by wind was obtained separately through the Mississippi Windstorm

Underwriting Association (“the Mississippi Wind Pool”). The second policy insured
Tuscan Villas Building 2, and it originally provided coverage for wind damage, despite
the fact that the quote and binder both provided that wind damage would be excluded.
Great American claimed that the failure to include a wind exclusion was a clerical
mistake. It later sent a wind exclusion endorsement to Groves that stated that there
was no change in premium but the wind exclusion was added pursuant to the quote.
No coverage was obtained from the Mississippi Wind Pool for Tuscan Villas Building
2. Multiple coverage extensions were obtained for the Great American policy, because
construction of Tuscan Villas Building 2 was not completed each time that the policy
was scheduled to expire. Hurricane Katrina struck the Mississippi Gulf Coast before
construction was completed, and Tuscan Villas Building 2 suffered wind damage.
Lowry filed a claim under the policy, and Great American filed this lawsuit,
seeking a declaratory judgment that the policy did not cover wind damage. Lowry also
filed a lawsuit in state court against Great American, Groves, and Crump Insurance
Services of Memphis, Inc. Lowry asserted that it was entitled to coverage for wind
damage under the policy, or in the alternative, it argued that Groves and Crump had
negligently failed to procure coverage for wind damage. Lowry’s lawsuit was removed
to this Court, and the two cases were consolidated. Both of the cases were assigned to
Senior District Judge L.T. Senter, Jr.
Great American and Lowry both filed motions for summary judgment. Lowry
argued that the wind exclusion endorsement was ineffective, because the policy was
changed without consideration or proper notice. Great American argued that the wind
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exclusion endorsement precluded coverage, and in the alternative, that the wind
exclusion was initially included in the policy due to a mutual mistake such that the
policy should be reformed to represent the true intentions of the parties. Lowry agreed
to dismiss its claims against Crump before the Motions for Summary Judgment were
decided.
When ruling on the Motions for Summary Judgment, Judge Senter agreed with
Lowry and held that the wind exclusion endorsement was ineffective. The remaining
issue of mutual mistake was presented to a jury. Groves and Great American were the
primary participants in the trial, with Groves arguing there was no mutual mistake
and Great American arguing that there was in fact a mutual mistake.
At an evidentiary hearing prior to trial, counsel for Groves had made the
following representation to the Court concerning the manner in which the trial would
proceed:
Because my client [Groves] has admitted from day one that he believed
he had wind coverage, that he wanted wind coverage, he believes he got
him [Lowry] wind coverage, and if he thought he hadn’t got him wind
coverage, he would have gotten it elsewhere, and that he was supposed
to get it. So if it is determined that he [Lowry] doesn’t have it [wind
coverage], we are going to have to say it was because of us [Groves].
[Doc. 380-2 at 127]. At the same hearing, counsel for Lowry stated: “The issue in that
phase one [of the trial] would be either we do have coverage and they didn’t properly
reform it, or we don’t and we should have had. And if we should have had, that would
fall on Mr. Groves.” (Id. at 127-28). Counsel for Lowry later stated, “The truth of the
matter is, I am not in the first phase . . . . [I]t doesn’t matter to me whether the jury

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decides that I had coverage and now we talk damages, or I should have had coverage
and now we talk damages . . . .” (Id. at 130).
After a six day trial, the jury provided the following answer to a special
interrogatory:
QUESTION: Has Great American proven by a preponderance of the
evidence that both parties, acting through their agents, understood that
wind damage coverage would be excluded from Great American’s original
policy on Tuscan Villas Building Two?
Yes __________

Or

No

X

After the jury returned its verdict, Great American and Lowry stipulated that
Lowry’s damages were $1,525,000.00, but Great American reserved the right to file an
appeal. As a result, Judge Senter entered a Judgment on January 2, 2008, that
ordered and adjudged that Lowry was entitled to recover $1,525,000.00 from Great
American. Judge Senter further ordered that Lowry’s claim against Groves was
dismissed with prejudice. Groves was dismissed, because Judge Senter had held that
there was wind coverage under the policy and the jury had held that there was no
mutual mistake in the policy. Since these two determinations meant that Lowry had
wind coverage, this inevitably meant that Lowry had no claim against Groves for
failing to procure wind coverage.
Lowry did not appeal the dismissal of its claims against Groves. However, Great
American appealed the Judgment against it, and the Fifth Circuit reversed and
remanded the case. The Fifth Circuit found that it was unnecessary to address the
mutual mistake issue, because it found that the Great American policy did not provide

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coverage for wind damage. Great Am. Ins. Co. v. Lowry Dev., LLC, 576 F.3d 251, 254
(5th Cir. 2009). Thus, it overturned the decision granting summary judgment in favor
of Lowry as to the issue of whether wind damage was ever properly excluded from
coverage. See Lowry, 576 F.3d at 254. In its opinion, the Fifth Circuit noted that the
“professional negligence claim against Groves was never resolved.” Id.
After the case was remanded to this Court, Lowry filed a motion seeking
clarification as to whether it could proceed with its claims against Groves, due to the
fact that the dismissal of Groves was based on the finding of coverage under the Great
American policy. Lowry argued that it should be able to pursue its claim against
Groves, since the Fifth Circuit has now held that Lowry was not entitled to wind
coverage. Judge Senter granted Lowry’s motion, which he construed as a Rule 60(b)(5)
and (6) motion, and he provided Lowry relief from the judgment dismissing Lowry’s
claims against Groves. Groves has now filed the present Motion [387] to Reconsider,
Alter, or Amend the Memorandum Opinion and Order [385] that permitted Lowry to
pursue its claims against Groves. After the parties finished briefing the Motion to
Reconsider, the case was reassigned to the undersigned.
DISCUSSION
Pursuant to Fed. R. Civ. P. 59(e), a motion for reconsideration may only be
granted if (1) there is a need to correct a manifest error in law or fact; (2) the movant
uncovered new evidence that was reasonably unknown prior to entry of the judgment
or order in question; or (3) an intervening change in controlling law occurred. Schiller
v. Physicians Res. Grp., Inc., 342 F.3d 563, 567 (5th Cir. 2003). A Rule 59(e) Motion
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should not be used to relitigate matters that should have been argued earlier, or that
simply were not resolved to the movant’s satisfaction. Mongrue v. Monsanto Co., 249
F.3d 422, 427 (5th Cir. 2001); Simon v. United States, 891 F.2d 1154, 1159 (5th Cir.
1990). “These motions cannot be used to raise arguments which could, and should,
have been made before the judgment issued. Moreover, they cannot be used to argue
a case under a new legal theory.” Ross v. Mitchell, 426 F.3d 745, 763 (5th Cir. 2005).
Judge Senter determined that Lowry is entitled to relief from the judgment of
dismissal in favor of Groves pursuant to Fed. R. Civ. P. 60(b). The Fifth Circuit has
explained:
The purpose of Rule 60(b) is to delineate the circumstances under which
relief may be obtained from the operation of final judgments . . . . By its
very nature, the rule seeks to strike a delicate balance between two
countervailing impulses: the desire to preserve the finality of judgments
and the “incessant command of the court’s conscience that justice be done
in light of all the facts.”
Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 401 (5th Cir. 1981) (quoting Bankers
Mortg. Co. v. United States, 423 F.2d 73, 77 (5th Cir.), cert. denied, 399 U.S. 927
(1970)). Thus, Rule 60(b) should be “liberally construed in order to do substantial
justice.” Seven Elves, 635 F.2d at 401. This means that “although the desideratum of
finality is an important goal, the justice-function of the courts demands that it must
yield, in appropriate circumstances, to the equities of the particular case in order that
the judgment might reflect the true merits of the cause.” Id. Nevertheless, “final
judgments should not be lightly reopened,” and a Rule 60(b) motion should not be used
as a substitute for appeal. Id. at 401, 402.
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A district court can consider whether a party is entitled to Rule 60(b) relief upon
a party’s motion or sua sponte. Baum v. Blue Moon Ventures, LLC, 513 F.3d 181, 190
(5th Cir. 2008). Rule 60(b)(5) allows a court to relieve a party from a final judgment
when “the judgment has been satisfied, released or discharged; it is based on an earlier
judgment that has been reversed or vacated; or applying it prospectively is no longer
equitable.” Fed. R. Civ. P. 60(b)(5). “[A] decision is ‘based on’ a prior judgment when
it is ‘a necessary element of the decision, giving rise, for example, to the cause of action
or a successful defense.’” Flowers v. S. Reg’l Physician Servs., 286 F.3d 798, 801 (5th
Cir. 2002) (quoting Bailey v. Ryan Stevedoring Co., 894 F.2d 157, 160 (5th Cir. 1990)).
Rule 60(b)(6) permits a court to relieve a party from a final judgment for any other
reason that justifies relief. The Fifth Circuit has described Rule 60(b)(6) as “a grand
reservoir of equitable power to do justice in a particular case when relief is not
warranted by the preceding clauses, [but] we have also narrowly circumscribed its
availability, holding that Rule 60(b)(6) relief will be granted only if extraordinary
circumstances are present.” Batts v. Tow-Motor Forklift Co., 66 F.3d 743, 747 (5th Cir.
1995). Rule 60(c)(1) requires that Rule 60(b)(5) and 60(b)(6) motions be made in a
reasonable time. Fed. R. Civ. P. 60(c)(1). The determination as to “[w]hat constitutes
a reasonable time under Rule 60(b) depends on the particular facts of the case in
question.” McCorvey v. Hill, 385 F.3d 846, 849 n.4 (5th Cir. 2004).
In support of its Motion to Reconsider, Groves argues that “[w]hile the question
presented to the jury dealt with whether there was a mutual mistake between Great
American and Lowry and/or Groves, the resolution of that issue, by necessity, also
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determined whether Groves had in fact procured coverage for the peril of wind.”
(Groves Mem. [388] at 3). Groves asserts that the jury found that Groves had procured
wind coverage for Lowry, and that the Fifth Circuit has not overturned the jury’s
verdict but only overturned the prior partial summary judgment granted in favor of
Lowry. Groves also argues that Lowry’s Motion should not have been reclassified as
a Rule 60(b) Motion by the Court, that the Motion was untimely, that the Motion was
an improper substitute for the filing of an appeal, and that the Court’s Order
overturning the prior judgment “does great violence to the principles favoring finality
of judgments, due process, res judicata, and/or collateral estoppel.” (Id. at 18).
First, it was permissible for the Court to construe Lowry’s Motion to Clarify as
a Rule 60 Motion, since a Court can grant Rule 60 relief sua sponte, and Groves has
now had the opportunity to fully brief the issue of whether Rule 60 relief was properly
granted. In addition, Lowry’s Motion was not untimely. The judgment was overturned
by the Fifth Circuit on July 17, 2009. Lowry filed a pleading [364] in which it sought
to reinstate its claims against Groves on August 31, 2009, before the original judgment
was even vacated. Lowry also filed a Motion for Leave to File a Motion for Summary
Judgment against Groves on January 29, 2010. Following a status conference, Lowry’s
Motion for Leave to File a Motion for Summary Judgment was mooted, and he was
instructed to file a Motion to Clarify by the Court. As a result, Lowry filed his request
to proceed against Groves within a reasonable time, and it diligently pursued its
request.
Contrary to Groves’ assertions, Lowry’s present Motion is not a substitute for an
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appeal, since Lowry is not attacking the legal reasoning underlying the original
judgment in favor of Groves. Furthermore, the jury verdict was not the sole basis for
the judgment in favor of Groves. At the trial, the jury merely found that Great
American had not proved by a preponderance of the evidence that “both parties, acting
through their agents, understood that wind damage coverage would be excluded from
Great American’s original policy on Tuscan Villas Building Two.” (Doc. 329). Groves
argues that, in making that decision, the jury held that Groves procured wind coverage
for Lowry. However, the Fifth Circuit has now held that wind coverage was not
procured. Furthermore, the jury’s determination that Groves and/or Lowry did not
understand that wind coverage would be excluded does not necessarily mean, in and
of itself, that coverage was in fact procured or that Groves did not commit negligence.
The judgment in favor of Groves was based not only on the jury’s verdict but also on
the partial summary judgment in favor of Lowry. That partial summary judgment has
been overturned, and the jury’s verdict has been mooted by the Fifth Circuit’s
determination that no wind coverage was provided by the policy.
Groves’ argument that it has been denied due process is also without merit,
since it will be permitted to present its case and defenses to a jury. As explained
supra, the particular issue of whether Groves was negligent has not been previously
submitted to a jury. Finally, it should be noted that the Fifth Circuit did not reverse
and render this case, but reversed and remanded the case for further proceedings, and
it clearly viewed Lowry’s claims against Groves as unresolved. For all of these reasons,
the Court finds that Groves’ Motion to Reconsider should be denied.
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The Court also finds that Groves’ alternative request for permission to file an
interlocutory appeal should be denied. Pursuant to 28 U.S.C. § 1292(b), a district court
may certify an order not otherwise appealable where such order (1) involves a
controlling question of law, (2) as to which there is substantial ground for difference
of opinion, and (3) an immediate appeal may materially advance the ultimate
termination of the litigation. An immediate appeal would not materially advance the
termination of this litigation. This case was filed in February of 2006 and has recently
returned from the Fifth Circuit.

An interlocutory appeal at this stage of the

proceedings would only cause additional delay in the resolution of this lawsuit.
IT THEREFORE ORDERED AND ADJUDGED that the Motion [387] to
Reconsider, Alter, or Amend Memorandum Opinion and Order [385] that was filed by
Groves & Associates Insurance, Inc., is DENIED.
IT IS FURTHER ORDERED AND ADJUDGED that the stay entered in this
matter on May 13, 2011, is lifted.
SO ORDERED AND ADJUDGED this the 9th day of June, 2011.

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

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