VENTRICE et al v. LEXINGTON INSURANCE COMPANY et al
Filing
101
OPINION. Signed by Judge Claire C. Cecchi on 10/1/18. (th, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
RAYMOND VENTRICE, et al.,
Civil Action No.: 2:16-cv-00660
Plaintiffs,
v.
OPINION
LEXINGTON INSURANCE COMPANY, et al.,
Defendants.
CECCHI, District Judge.
I.
INTRODUCTION
This matter comes before the Court on four motions: (1) Plaintiffs Raymond Ventrice and
Kevin Ventrice’s (“Plaintiffs”) motion to confirm the arbitration award in this matter, (ECF No.
27); (2) Plaintiffs’ motion to dismiss Defendant Lexington Insurance Company’s (“Defendant”)
counterclaim and to strike Defendant’s affirmative defense, (ECF No. 31); (3) Defendant’s motion
for judgment on the pleadings, (ECF No. 50); and (4) Defendant’s motion to bifurcate trial and
discovery. (ECF No. 78). The Court has given careful consideration to the submissions from each
party. On July 16, 2018, the Court held oral argument. For the reasons that follow, Plaintiffs’
motion to confirm the arbitration award is administratively terminated without prejudice;
Plaintiffs’ motion to dismiss Defendant’s counterclaim and to strike Defendant’s affirmative
defense is denied; Defendant’s motion for judgment on the pleadings is denied; and Defendant’s
motion to bifurcate trial and discovery is denied.
II.
BACKGROUND
In 2008, Plaintiffs brought a cause of action against Moore Stephens P.C. (“Moore
Stephens”), a certified public accounting firm, alleging claims of malpractice “arising from tax
and estate planning advice they received from Moore Stephens.” (ECF No. 50-1 at 1, 4-5). Prior
to the lawsuit, Moore Stephens purchased from Defendant “a LexAssure Professional Liability
Insurance Policy No. 1225115 (the “Policy”).
2008[.]” (ECF No. 25
.
.
for the policy period of June 1, 2007 to June 1,
¶ 14).
According to Defendant, Moore Stephens notified Defendant of the cause of action brought
against it and sought “defense under the Policy.” (ECF No. 50-1 at 5). Defendant avers that it
“first acknowledged receipt of the claim in its May 27, 2008 letter to Moore Stephens” and that it
“agreed to provide a defense for Moore Stephens.
.
.
and to indemnify those claims by [Plaintiffs]
that properly fell within the Policy coverage.” (Id.). Moreover, Defendant claims that “[t]he May
27, 2008 Letter also described the [lawsuit], identified relevant Policy provisions, reserved rights,
and disclaimed indemnification for claims arising out of legal services subject to [an exclusion in
the Policy].” (Id.).
Thereafter, Defendant contends that it “paid for the entire defense of Moore Stephens.
after the exhaustion of the Policy’s Self Insured Retention” and that it “made its first payment for
the defense of Moore Stephens, after the Self Insured Retention had been exhausted, on September
20, 2012.” (Id. at 7). On November 12, 2012, Defendant alleges that it sent another letter to Moore
Stephens, in which it “reiterated its coverage position” and “incorporated the May 27, 200$ Letter
by reference.” (Id.). According to Defendant, Moore Stephens, in a December 17, 2013 letter to
Defendant, “acknowledged [Defendant] ‘s coverage position,” “stated its disagreement with
[Defendant]’ s interpretation of the legal services exclusion,” and “directed [Defendant] to continue
providing a defense for all claims against Moore Stephens directly and [through] vicarious
liability, and acknowledged its duty to cooperate and assist [Defendant] and defense counsel.” (Id.
at 8). On January 31, 2014, Defendant maintains that it sent another letter to Moore Stephens
“reiterat[ating] its previously stated coverage position, and incorporat[ing] its prior letters by
reference.” (Id. at 9).
2
On Apr11 30, 2014, the case brought by Plaintiffs against Moore Stephens went to trial.
(Id.). That day, Plaintiffs and Moore Stephens settled certain of Plaintiffs’ claims. (Id.). “Pursuant
to the Settlement, [Plaintiffs] released [certain claims against Moore Stephens] for $805,000,
which included (i) an assignment of Moore Stephens’ rights under the Policy against [Defendant],
and (ii) a payment of $25,000 from Moore Stephens to [Plaintiffs].” (Id. at 9-10). “Moore
Stephens and [Plaintiffs] agreed to resolve the remaining accounting claims through arbitration at
a later date,” and Plaintiffs “agreed ‘not to seek recovery of any further monies or compensation
from Moore Stephens, but to seek recovery for such additional monies and compensation from
[Defendant]
.
.
.
.“
(Id. at 10 (citations omitted)).
Soon afier learning of the Settlement between Plaintiffs and Moore Stephens:
[Defendant] commenced a [Judicial Arbitration and Mediation Services (“JAMS”)]
Arbitration against Moore Stephens, seeking declarations that: (1) [Defendant] is
not obligated to indemnify Moore Stephens in connection with any claim that is
based upon or arises out of any legal advice or services; (2) Moore Stephens
breached the terms and conditions of the Policy by settling certain claims; and (3)
Moore Stephens improperly assigned its interests under the Policy to [Plaintiffs].
(Id.). On January 22, 2016, before the JAMS Arbitration took place, Plaintiffs “filed the instant
Action.... [which] allege[s] two claims: (i) breach of the implied warranty of good faith and fair
dealing and (ii) bad faith arising from [Defendant] ‘s handling of [Plaintiffs’] insurance claim.”
(Id.). The instant matter was then stayed pending a decision from the JAMS Arbitration Panel.
(Id. at 10-11).
On January 31, 2017, the JAMS Arbitration Panel issued a final award,
“conclud[ing] that the ‘legal services’ exclusion of the Policy [did] not apply to the settlement for
which Moore Stephens [sought] indemnity, and therefore [did] not bar indemnity for that
settlement.” (Id. at 11). The JAMS Arbitration Panel declined to rule on the following issues: “(a)
coverage defenses raised by [Defendant] relating to Moore Stephen[s’] failure to obtain consent to
settlement of the underlying actions; the unreasonableness of the settlement, and the lack of
3
authority for Moore Stephens to assign the Policy; and (b) Moore Stephen[s’] bad faith and
fiduciary claims.” (Id.).
Thereafter, Plaintiffs filed a first amended complaint, and Defendant filed an answer,
counterclaims, and affirmative defenses. (ECF Nos. 25; 26). One of Defendant’s counterclaims
seeks a “declaration that.
.
.
tDefendant] is relieved from any further obligation under the Policy
resulting from Moore Stephens’[] failure to seek or obtain [Defendant]’s consent to enter into the
Settlement[.]” (ECF No. 50-1 at 11).’ According to Defendant, such relief is warranted because:
(1) “[t]he Policy prohibits Moore Stephens from settling a claim without {Defendant]’s consent;”
and (2) “[t]he Policy also contains a cooperation clause.
.
.
[which] state[s] that ‘the Insured and
[Defendant] shall cooperate in the defense or settlement of [any] Claim,’ and ‘the Insured shall
take no action or agree to any settlement.. without the prior written consent of [Defendant.]”
.
(Id. at 4 (citations omitted)).
III.
LEGAL STANDARD
A.
Motion to Confirm Arbitration Award
“It is rare.
.
.
to disturb an arbitration award.” Freeman v. Pittsburgh Glass Works, LLC,
709 F.3d 240, 251 (3d Cir. 2013). “Indeed, ‘[t]here is a strong presumption under the Federal
Arbitration Act [(the “fAA”)], 9 U.S.C.
§ 1 et seq., in favor of enforcing arbitration awards.”
Benhenni v. Bayesian Efficient Strategic Trading, LLC, No. 15-85 11, 2016 WL 5660461, at *5
1
One of Defendant’s counterclaims also sought a declaration that Defendant “is relieved from any
further obligation under the Policy resulting from Moore Stephens’[] assignment of its interest in
the Policy to [Plaintiffs].” (ECF No. 50-1 at 11-12). During oral argument, Defendant agreed,
with Plaintiffs’ consent, to withdraw such counterclaim with prejudice. Accordingly, the Court
will not address Defendant’s counterclaim or Defendant’s corresponding affirmative defense in
this Opinion.
4
(D.N.J. Sept. 29, 2016) (alteration in original) (citations omitted), aff’d, 692 F. App’x 94 (3d Cir.
2017).
“So, ‘mindful of the strong federal policy in favor of commercial arbitration, [the Third
Circuit] begin[s] with the presumption that the award is enforceable.” Id. (alterations in original)
(citations omitted). “If a dispute-resolution mechanism indeed constitutes arbitration under the
FAA, then a district court may vacate it only under exceedingly narrow circumstances.” Dtuhos
v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003) (citing 9 U.S.C.
§ 10). “Specifically, under Section
10 of the FAA, a district court can vacate an award only under one of.
.
.
four narrow grounds,”
Benhenni, 2016 WL 5660461, at *6, which include:
(1) [W]here the award was procured by corruption, fraud, or undue means; (2)
where there was evident partiality or corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the
hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior by which the rights of any
party have been prejudiced; or (4) where the arbitrators exceeded their powers, or
so imperfectly executed them that a mutual, final, and definite award upon the
subject matter submitted was not made.
9 U.S.C.
§ 10(a). “Thus, ‘[t]he party seeking to overturn an award bears a heavy burden’ given
the ‘exceptional deference’ conferred to arbitration decisions and the ‘exceedingly narrow
circumstances’ provided under Section 10 of the FAA.” Benhenni, 2016 WL 5660461, at *6
(alteration in original) (citations omitted).
B.
Motion to Dismiss and Motion to Strike
For a complaint to survive dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6),
it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Att. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). In evaluating the sufficiency of a complaint, the Court must accept all
well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in favor
5
of the non-moving party. See Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008).
“Factual allegations must be enough to raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555. Furthermore, “[a] pleading that offers ‘labels and conclusions’
‘will not do.’ Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further
factual enhancement.” Iqbal, 556 U.S. at 678 (citations omitted).
“Under Rule 12(f) a party may move to ‘strike from a pleading an insufficient defense or
any redundant, immaterial, impertinent, or scandalous matter.’ A court has considerable discretion
in deciding a motion to strike.” Kongtcheu v. Secaucus Healthcare Ctr., LLC, No. 13-1856, 2014
WL 2435999, at *3 (D.N.J. May 30, 2014) (citations omitted). “Motions to strike are disfavored
and will be denied ‘unless the allegations have no possible relation to the controversy and may
cause prejudice to one of the parties, or if the allegations confuse the issues in the case.” Id.
(citations omitted).
C.
Motion for Judgment on the Pleadings
“A motion for judgment on the pleadings ‘will not be granted unless the movant clearly
establishes that no material issue of fact remains to be resolved and that he is entitled to a judgment
as amatter of law.” Robertson v. Enhanced Recovery Co., LLC, No. 15-1970, 2017 WL 5951584,
at *1 (D.N.J. Nov. 30, 2017) (citations omitted). “The Court must ‘view the facts presented in the
pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving
party.” Id. (citations omitted).
D.
Motion to Bifurcate Trial and Discovery
“Bifurcation is permitted by Federal Rule of Civil Procedure 42(b).” Eizen Fineburg &
McCarthy, P.C. v. Ironshore Specialty Ins. Co., 319 F.R.D. 209, 211 (E.D. Pa. 2017). Federal
Rule of Civil Procedure 42(b) states that: “[f]or convenience, to avoid prejudice, or to expedite
6
and economize, the court may order a separate trial of one or more separate issues, claims,
crossclaims, counterclaims, or third-party claims. When ordering a separate trial, the court must
preserve any federal right to a jury trial.” Fed. R. Civ. P. 42(b).
“The decision to bifurcate, or separate, claims ‘is a matter to be decided on a case-by-case
basis and must be subject to an informed discretion by the trial [court] in each instance.” Eizen
Fineburg, 319 F.R.D. at 211 (alteration in original) (citations omitted). “A court’s ruling on
whether to bifurcate ‘requires balancing.
.
.
several considerations, including the convenience of
the parties, avoidance of prejudice to either party, and promotion of the expeditious resolution of
the litigation.” Id. (citations omitted). “The moving party bears the burden of proving that
bifurcation is warranted.” Id.
IV.
DISCUSSION
A.
Motion to Confirm Arbitration Award
As discussed above, on January 31, 2017, a JAMS Arbitration Panel issued a final award
relating to this matter, “conclud[ing] that the ‘legal services’ exclusion ofthe Policy [did] not apply
to the settlement for which Moore Stephens [sought] indemnity, and therefore [did] not bar
indemnity for that settlement.” (ECF No. 50-1 at 11). On February 21, 2017, Plaintiffs filed a
motion requesting that this Court confirm such award, (ECF No. 27), on the basis that Defendant
did not allege that any of the circumstances set forth in 9 U.S.C.
§
10(a) (corruption, fraud, or
undue means; evident partiality or corruption in the arbitrators; the arbitrators were guilty of
misconduct or of any other misbehavior; or the arbitrators exceeded their powers) applied in this
matter.
In opposition to Plaintiffs’ motion, Defendant does not maintain that any of the
circumstances set forth in 9 U.S.C.
§
10(a) are present here. Rather, Defendant avers that the
7
JAMS Arbitration Award should not be confirmed at this time because resolution of Defendant’s
counterclaim will relieve Defendant of any further obligations under the Policy and render the
Arbitration Award findings moot. (ECF No. 36 at 7-1 1).
“Under the Federal Arbitration Act, 9 U.S.C.A.
§ 1—16, a district court with jurisdiction
over an arbitration award must confirm the award when asked to do so,’ ‘unless the award is
vacated, modified, or corrected.” Stone v. Bear, Stearns & Co., 872 F. Supp. 2d 435, 457 (E.D.
Pa. 2012), aff’d, 538 F. App’x 169 (3d Cir. 2013). Whether the Court will vacate, modify, or
correct the award is dependent on whether Plaintiffs are entitled to coverage under the Policy,
which is currently an issue pending before the Court. (See ECF No. 27-3 at 27 (“The Arbitration
Panel
.
.
.
is not ruling on all of the issues necessary for a determination of coverage.”); see also
infra Section W.D (concluding that the issue of whether Plaintiffs are entitled to coverage remains
before the Court)). Accordingly, the Court will administratively terminate Plaintiffs’ motion
without prejudice pending the resolution of whether Plaintiffs are entitled to coverage under the
Policy, upon which, if appropriate, Plaintiffs may refile their motion.
B.
Motion to Dismiss and Motion to Strike
Plaintiffs move to dismiss one of Defendant’s counterclaims, which seeks relief from any
further obligations under the Policy as a result of Moore Stephens’ failure to obtain Defendant’s
consent before entering into the Settlement Agreement. (ECF No. 26 at 13-14).
Plaintiffs first argue that Defendant’s counterclaim should be dismissed because “neither
the.
.
.
Policy nor applicable law substantiate [Defendant]’s claim that [Moore Stephens’] alleged
violations of the Settlement.
.
.
provisions of the.
.
.
Policy void all of [Defendant]’s obligations
under the Policy.” (ECF No. 31-1 at 7). In other words, Plaintiffs contend that because the Policy
8
does not state that it terminates upon a breach by Moore Stephens, Defendant fails to state a claim
upon which relief may be granted.
The Court disagrees. “A material breach of a contract relieves an aggrieved party of its
obligations under the contract.” Vosough v. Kierce, 97 A.3d 1150, 1165 (N.J. Super. Ct. App. Div.
2014). Whether a contract provides for termination or not, “[a] material breach of contract on the
part of one party entitles the other party to terminate it. If the breach is material
.
.
.
the non-
breaching party may treat the contract as terminated and refuse to render continued performance.”
In re Nickels Midway Pier, LLC, 372 B.R. 218, 223 (D.N.J. 2007) (emphasis in original) (citations
omitted).
Here, although the Policy does not provide for termination upon Moore Stephens’ breach,
New Jersey law affords the election of such a remedy if Moore Stephens’ breach was material.2
“Whether an act or course of conduct amounts to a material breach is usually a question of fact to
be submitted to the jury.” Luma Enters., L.L. C. v. Hunter Homes & Remodeling, L.L. C., No. A6094-1 1T3, 2013 WL 3284130, at *4 (N.J. Super. Ct. App. Div. July 1, 2013). Accordingly, the
Court finds that at this stage of the litigation, Defendant states a claim upon which relief may be
granted.3
Plaintiffs also maintain that Defendant’s counterclaim that the Policy is void because
Moore Stephens entered into a Settlement with Plaintiffs in contravention of the Policy should be
dismissed because Defendant “is Barred from Asserting its ‘Wrongful Settlement’ Counterclaim.
2
Accordingly, Plaintiffs’ contention that they “have found no case law which supports the
proposition that a breach of a settlement provision
voids or vitiates all of an insurer’s
obligations under a liability insurance policy,” (ECF No. 31-1 at 8), is without merit.
The Court does not opine on whether Plaintiffs in fact breached the Policy, whether such alleged
breach was material, or whether Plaintiffs have any valid defenses to such alleged breach
questions of fact which will be addressed at a later stage of this litigation.
9
.
.
.
—
•
.
Before [Defendant] Proves [Defendant] is not in Breach of any of its Obligations to [Moore
Stephens.]” (ECF No. 31-1 at 12). In support of this contention, Plaintiffs rely on Fireman ‘s Fund
Insurance Company v. Security Insurance Company of Hartford, 367 A.2d $64 (N.J. 1976), for
the proposition that “[a]s a matter of law, before such allegations may be asserted, [Defendant] has
the threshold burden of proving that it was not in breach of any of its fiduciary obligations to
[Moore Stephens] in the handling of the relevant insurance claim for coverage respecting” Moore
Stephens’ claims. (ECF No. 31-1 at 12).
Plaintiffs’ argument misconstrues the fundamental holding of Fireman ‘s Fitnd, which did
not address pleading standards at the motion to dismiss stage. Rather, the decision in Fireman ‘s
Fund was rendered with respect to a matter in which judgment had already been entered. See 367
A.2d at $66. Accordingly, Plaintiffs’ argument is without merit.
Even under Plaintiffs’ construction of the applicable pleading standards at this stage of the
matter, Defendant states a claim upon which relief may be granted. Plaintiffs contend that
Defendant’s counterclaim “fails to allege that [Defendant] fulfilled all of its obligations to [Moore
Stephens] before it alleged that [Moore Stephens] breached the settlement provisions of the
policy.” (ECF No. 31-1 at 13). Defendant’s counterclaim, however, states that: “Moore Stephens
tendered [Plaintiffs’] Claim to [Defendant] for defense and indemnification under the Policy.
Subject to a reservation of rights, [Defendant] provided a complete defense for Moore Stephens in
[Plaintiffs’] Suit and agreed to indemnify those claims by [Plaintiffs] that properly fell within the
Policy coverage.” (ECF No. 26 at 10). Accordingly, Plaintiffs’ averment similarly lacks merit.
The remainder of Plaintiffs’ motion to dismiss argues that Defendant’s reservation ofrights
under the Policy was untimely and invalid, and that Defendant wrongfully denied Moore Stephens
coverage. (ECF No. 31-1 at 13-19). Such arguments “rely on factual material which, to be
10
considered, would require the Court to convert [Plaintiffs’] Motion to Dismiss into a Motion for
Summary Judgment.” Smith v. Church St. Corp., No. 06-966, 2006 WI 1307714, at *2 (D.N.J.
May 8, 2006). For example, Plaintiffs contend that Defendant’s reservation of rights under the
Policy was untimely, and that it was invalid because it was not subject to a non-waiver agreement.
(ECF No. 31-1 at 15-18). In support of this contention, Plaintiffs cite to the November 12, 2012
letter sent from Defendant to Moore Stephens.
(Id.).
Again, “[t]o consider this argument,
however, would require the Court to consider additional factual material and arguments that are
more appropriate for a Motion for Summary Judgment than a Motion to Dismiss.”4 Smith, 2006
WI 1307714, at *2. Accordingly, the Court will deny Plaintiffs’ motion to dismiss on this ground,
but notes that, if appropriate, Plaintiffs may renew such argument in a motion for summary
judgment after the completion of discovery. Based on the foregoing, Plaintiffs’ motion to dismiss
is denied.
As to Plaintiffs’ motion to strike one of Defendant’s affirmative defenses, Plaintiffs set
forth the same arguments in support of striking Defendant’s affirmative defense as they do in
support of dismissing Defendant’s counterclaim. The Court does not find that such arguments
demonstrate that “Defendant’s [affirmative defense is] irrelevant, cause[s] prejudice, or confuse[s]
Plaintiffs appear to recognize that many ofthe arguments in their motion to dismiss rely on factual
allegations that the Court may not consider at this procedural posture. (See ECF No. 31-1 at 14
n.4 (“It is expected that the precise timing of when [Defendant] actually took an active part in
defending andlor in paying for [Moore Stephens’] defense of [its claims] will be found in the
[Defendant] claims files and related materials.”); Id. at 18 (“[Defendant] cannot prove that a 51
month delay in the submission of its reservation of rights letter was not unreasonable. Neither can
[Defendant] demonstrate that the [November 12, 2012] letter constituted a valid non-waiver
agreement pursuant to” case law) (emphasis added); ECF No. 45 at 10 n.6 (“It is the position of
[Plaintiffs] that should the Court deem that there is insufficient information in the pleadings to
grant the Plaintiffs’ Motion regarding [Defendant] ‘s settlement defense, that discovery will reveal
information which further supports [Plaintiffs’] contention that [Defendant] acted in bad faith and
breached its fiduciary obligations of good faith and fair dealing.”)).
11
the issues in this case.” Kongtcheu, 2014 WL 2435999, at *4 Thus, Plaintiffs’ motion to strike
is denied.
C.
Motion for Judgment on the Pleadings
Having denied Plaintiffs’ motion to dismiss Defendant’s counterclaim and to strike
Defendant’s affirmative defense, the Court must now turn to Defendant’s motion for judgment on
the pleadings. Defendant avers that it is entitled to judgment on the pleadings with respect to the
following counterclaim: “[Defendant] Is Relieved From Any Further Obligations Under The
Policy Resulting From Moore Stephens’[] Failure To Seek Or Obtain [Defendant]’s Consent To
Enter Into The Settlement Agreement[.]” (ECF No. 26 at 13-14). Defendant contends that such
relief is proper because “[t]he Policy expressly prohibits Moore Stephens from.
.
.
settling claims
without the participation or consent of [Defendant.]” (ECF No. 50-1 at 12).
Defendant maintains that Moore Stephens forfeited coverage when it breached the Policy
by failing to obtain Defendant’s consent to settle. (Id. at 13-17). In support of this contention,
Defendant cites to New Jersey Eye Center, P.A. v. Princeton Insurance Company, 928 A.2d 25
(N.J. Super. CL App. Div. 2007), “for the very proposition that an insured is not permitted to settle
claims without the participation and consent of the insurer where the insurer is providing a defense,
even under a reservation of rights.” (ECF No. 50-1 at 14). To demonstrate that Defendant’s
“defense was always provided under a reservation of rights,” Defendant points to three separate
letters in which Defendant contends that “Moore Stephens [was] continually made aware of
[Defendant] ‘s position while [Defendant] continued to provide a defense,” (id. at 15), and that
Moore Stephens “acknowledged the same in its December 17, 2013 Letter to [Defendant].” (Id.).
In response, Plaintiffs maintain that a genuine issue of material fact exists as to whether
Defendant timely and validly reserved its rights under the Policy. (ECF No. 79 at 16). In support
12
of such argument, Plaintiffs contend, through a sworn certification, that Defendant waited 51
months from the filing of Plaintiffs’ first amended complaint against Moore Stephens to reserve
its rights, (ECF No. 31-2 at 5), and that the letter in which Defendant reserved its rights did “not
offer [Moore Stephens] the opportunity to accept or reject [Defendant]’ s intention to defend the
claim under a reservation of rights to disclaim coverage.” (Id. at 6).
Based on the foregoing, the Court finds that a genuine issue of material fact exists as to
whether Defendant timely and validly reserved its rights under the Policy.
Accordingly,
Defendant’s motion for judgment on the pleadings will be denied. See Robertson, 2017 WL
5951584, at *1 (“A motion for judgment on the pleadings ‘will not be granted unless the movant
clearly establishes that no material issue of fact remains to be resolved and that he is entitled to a
judgment as a matter of law.”) (citations omitted).
D.
Motion to Bifurcate Trial and Discovery
Finally, Defendant argues that bifurcation oftrial and discovery is appropriate in this matter
because “the issue of ‘bad faith’ cannot be addressed until there has been a finding that Moore
Stephens is entitled to coverage under the Policy.” (ECF No. 78-1 at 10-11). Moreover, Defendant
avers that bifurcation is proper because it would promote “judicial economy and efficiency,” (Id.
at 11), because “the issue of coverage is distinct and separate from that of bad faith,” (Id. at 12),
and because Plaintiffs “will not be prejudiced if the issue of bad faith is bifurcated and proceeds
only after the predicate coverage issued is resolved.” (Id. at 12-13).
In response, Plaintiffs aver that the issue of coverage has already been decided by the JAMS
Arbitration Panel, and that the only issues that remain for resolution by this Court involve post
breach-of-contract conduct that relates to Plaintiffs’ claims of bad faith and breach of fiduciary
duty. (ECF No. 82 at 8-14). In other words, Plaintiffs appear to contend that Defendant’s motion
13
for bifurcation is moot, as the issue of coverage has already been decided and the only issue that
remains before the Court is bad faith.
The Court disagrees with Plaintiffs. Although the JAMS Arbitration Panel determined
“that the ‘legal services’ exclusion of the Policy [did] not apply to the settlement for which Moore
Stephens [sought] indemnity, and therefore [did] not bar indemnity for that settlement,” (ECF No.
50-1 at 11), the Panel “unanimously decline[d] to rule on the remaining issues raised by the
parties,” including “those coverage defenses raised by [Defendant] relating to the alleged failure
of [Moore Stephens] to obtain consent to the settlement of the underlying matter, the alleged
unreasonableness of the underlying settlement[,] and the alleged absence of any authority for
[Moore Stephens] to assign the Policyt.]” (ECF No. 27-3 at 20-21 (emphasis added)). In fact, the
JAMS Arbitration Panel explicitly stated that “it [was] not ruling on all of the issues necessary for
a determination of coverage.” (Id. at 27 (emphasis added)).
Based on the foregoing, the Court concludes that the issue of whether Plaintiffs are entitled
to coverage under the Policy properly remains before the Court. Nonetheless, the Court has
weighed the considerations relevant to Defendant’s motion for bifurcation and finds that
bifurcation is not appropriate in this case. “In determining whether bifurcation under Rule 42(b)
is proper, ‘courts should consider whether bifurcation will avoid prejudice, conserve judicial
resources, and enhance juror comprehension of the issues presented in the case.” Nat’l Union
Fire Ins. Co. ofPittsburgh, PA. v. Becton, Dickinson & Co., No. 14-43 18, 2018 WL 627378, at *6
(D.N.J. Jan. 30, 2018) (citations omitted).
Here, such considerations are not advanced by bifurcation, as this case: (1) was filed over
two-and-a-half years ago; (2) will not be disposed of on the pleadings, (see supra Sections IV.B
C); and (3) requires additional discovery to move on to the next stage of the litigation. “While
14
some cases may indeed be simplified and expedited by holding bad faith discovery in abeyance
pending a determination of coverage, it has become exceedingly clear that this case is not one of
them.” Nat ‘1 Union fire Ins. Co., 2018 WL 62737$, at *6 (holding that bifurcation of coverage
and bad faith claims was not appropriate where case was pending for over three years, the case
would not be disposed of on the pleadings, and discovery remained). Accordingly, Defendant’s
motion to bifurcate trial and discovery is denied.5
V.
CONCLUSION
Based on the foregoing, Plaintiffs’ motion to confirm the arbitration award is
administratively terminated without prejudice; Plaintiffs’ motion to dismiss Defendant’s
counterclaim and to strike Defendant’s affirmative defense is denied; Defendant’s motion for
judgment on the pleadings is denied; and Defendant’s motion to bifurcate trial and discovery is
denied. An appropriate Order accompanies this Opinion.
DATED:
CLAIREC. CECCHI, U.S.D.J.
Therefore, Defendant’s request that a protective order be issued holding discovery on the bad
faith claim in abeyance, (ECF No. 78-1 at 13-14), is denied as moot.
15
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