Navigators Specialty Insurance Company v. Guild Associates, Inc. et al
Filing
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ORDER granting in part and denying in part 32 Motion to Consolidate Cases. The cases Guild Associates, Inc. v. Bio-Energy (Washington) LL, Case No. 2:13-cv-1041, and Navigators Specialty Insurance Company v. Guild Associates, Inc.,et al., Case No. 2:14-cv-1676 hereby will be consolidated for the purposes of discovery. Signed by Judge Algenon L. Marbley on 9/15/2015. (cw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
GUILD ASSOCIATES, INC.,
:
:
Plaintiff,
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v.
:
:
BIO-ENERGY (WASHINGTON), LLC.,
:
:
Defendant.
:
:
************************************* :
:
NAVIGATORS SPECIALTY
INSURANCE COMPANY,
:
:
Plaintiff,
:
:
v.
:
:
GUILD ASSOCIATES, INC., et al.,
:
:
Defendants.
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CASE NO.: 2:13-CV-1041
JUDGE MICHAEL H. WATSON
CASE NO. 2:14-CV-1676
JUDGE ALGENON L. MARBLEY
OPINION AND ORDER
I. INTRODUCTION
Before the Court is Plaintiff Navigators Specialty Insurance Company’s (“Plaintiff” or
“Navigators”) Motion to Consolidate (Doc. 32) seeking to consolidate Guild Associates, Inc. v.
Bio-Energy (Washington) LL, Case No. 2:13-cv-1041, with Navigators Specialty Insurance
Company v. Guild Associates, Inc.,et al., Case No. 2:14-cv-1676, pursuant to Rule 42(a) of the
Federal Rules of Civil Procedure. In response, Defendant Guild Associates, Incorporated
(“Guild”) filed a Memorandum in Partial Opposition of Navigators’ Motion to Consolidate,
(Doc. 33). Defendant Guild agrees to consolidation for purposes of discovery, but opposes
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consolidation for trial. For the reasons set forth below, Plaintiff’s Motion to Consolidate is
GRANTED in part and DENIED in part.
II. BACKGROUND
This case arises from the failure of a Nitrogen Removal Unit (“NRU”), a machine used to
purify landfill gas into pipeline quality gas. The NRU was ordered from Guild and installed by
Merichem Chemicals and Refinery Services LLC (“Merichem”) in a Bio-Energy, LLC
(Washington) (“BEW”) purification plant at the Cedar Hills Landfill in Maple Valley,
Washington. (Complaint, Doc. 1 at 3). On October 1, 2010, the NRU failed, causing the
destruction of portions of absorbent media.1 (Id. at 3-4). The failure caused dust to overwhelm
the filter system, and repairs required the system be shut down. Guild participated in the repairs
and provided replacement absorbent media to BEW at no cost. (Id.). BEW claims, however, the
damage was more extensive than originally thought. (Doc. 1, Exhibit B, at 9).
On or about March 29, 2011, an automated monitor registering levels outside normal
conditions set off alarms and required the plant to be shut down. (Id.). BEW alleges the
shutdown occurred as a result of damages not detected in the initial repair on October 5, 2010.
(Id.). BEW also alleges that Guild refused to sell BEW replacement parts to repair the new found
damage unless modifications were made to the plant system, at the expense of BEW. (Id. at 910). BEW entered into a “Repair Agreement” dated December 7, 2011. (Doc. 1 at 5). Following
modifications and repairs made pursuant to the Repair Agreement, BEW’s methane recovery at
the Cedar Hills plant dropped from 87% to 81.6%, which BEW alleges caused an estimated
$865,000 per year in lost revenue. (Id. at 5).
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Absorbent material is located within the NRU and acts as a “molecular gate” removing excess nitrogen and other
minor constituents during a 10 step process purifying landfill gas into pipeline quality gas. (See Doc. 1, Exhibit B).
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On October, 7, 2013, Guild Associates filed an action in Franklin County Common Pleas
Court, Case (the “State Action”). (Id. at 2). In the State Action, Guild alleged that BEW owed
monies to Guild pursuant to the Repair Agreement. (Id.). In response, BEW removed the case to
this Court as Guild Associates, Inc. v. Bio-Energy (Washington) LL, Case No. 2:13-cv-1041,
currently pending in front of The Honorable Michael H. Watson (the “Underlying Case”). (Id. at
3). In its Answer, BEW asserted counterclaims of breach of contract, fraud in the inducement,
and breach of the Merichem Purchase Order (the “Purchase Order”). The Purchase Order, which
Merichem assigned to BEW, allegedly obligated Guild to indemnify the NRU purchaser, and
allegedly stated that “Merichem assigned its rights to BEW for property damage arising, in any
manner, from the furnishing of goods or services thereunder or caused by defects in the goods
purchased thereunder…only to the extent caused by the negligence/gross negligence, intentional
acts, omissions, or strict liability of the seller.” (Id. at 6).
On October 21, 2013, BEW filed a Complaint for Declaratory Judgment and Specific
Performance against Guild in the Superior Court of King County in the State of Washington (the
“Washington State Case”). (Doc. 1 at 3). In the Washington State Case, BEW requested a
declaratory judgment that Guild had a contractual obligation to provide BEW with replacement
components, and an order compelling Guild to perform its obligations under the Purchase Order.
(Id.).
On September 19, 2014, Navigators, who insured Guild through a Commercial General
Liability insurance policy (“CGL Policy”), filed a Complaint for Declaratory Judgment in the
present case, Navigators Specialty Insurance Company v. Guild Associates, Inc.,et al., Case No.
2:14-cv-1676 (the “Present Case”), against Guild and BEW. (Doc. 1). Navigators asks this Court
to enter judgment declaring that Navigators does not owe indemnity to either Guild or BEW, as
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it pertains to BEW’s and Navigators’ claims in the Present Case and/or the Washington State
Case. (Id. at 18).
In their Complaint, Navigators asserts that several clauses within the CGL Policy bar or
limit Guild’s insurance coverage. (Id. at 13-17). For example, Navigators contends that BEW’s
claims against Guild for breach of contract are not covered under the policy because they do not
state a claim for property damages as a result of an “occurrence” or “accident” as those terms are
defined in the CGL Policy. (Doc. 1 at 13-14). Navigators further argues that liability is excluded
because the CGL Policy does not cover Guild’s work or work product, and excludes warranties
or representations of “fitness, quality, durability, performance, or use” of the insured’s product or
work. (Id. at 15). In addition, Navigators asserts that the “Impaired Property” exclusion
precludes Navigators from owing for “damage to impaired property or property not physically
injured” arising from defect or deficiency in Guild’s work or failure to perform a contract. (Id.).
Finally, Navigators contends that the punitive damages sought by BEW are not covered under
the CGL Policy. (Id. at 16).
On October 10, 2014, BEW filed its Answer with Jury Demand to Navigators’ Complaint
for Declaratory Judgment. (Doc. 16). In addition to its affirmative defenses, BEW’s Answer
included a prayer for dismissal with prejudice, as well as costs.
On November 10, 2014, Guild filed its Answer and Counterclaim, alleging that
Navigators has a duty under the CGL Policy to indemnify Guild for expenses incurred in the
investigation and defense against BEW, exemplary damages, and any possible monetary
judgment entered against Guild which may flow from the Underlying Case and/or Washington
Case. (Doc. 22).
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On February 26, 2015, Navigators filed this Motion to Consolidate under Rule of 42(a) of
the Federal Rules of Civil Procedure. (Doc. 32). Subsequently, Guild responded to Navigators’
motion to consolidate, agreeing to consolidate for purposes of discovery, but opposing
consolidation for purposes of trial. (Doc. 33 at 2). Guild argues that consolidation for trial may
prejudice the parties and may create evidentiary problems under Rule 411 of the Federal Rules of
Evidence. Navigators filed its Reply to Guild’s Response to Navigators Motion to Consolidate,
(Doc. 34), reasserting its arguments for consolidation and denying any prejudice to the parties.
BEW has not opposed Navigators’ Motion to Consolidate. This matter is ripe for review.
III. STANDARD OF REVIEW
Rule 42(a) of the Federal Rules of Civil Procedure authorizes consolidation of actions
that involve a common question of law or fact. Carpenter v. GAF Corp., 16 F.3d 1218, at *1 (6th
Cir. 1994) (table decision). The underlying purpose of Rule 42 is to promote economy in the
administration of justice. See MacLean v. Evans, Mechwart, Hambleton & Tilton, Inc., No. 2:09CV-521, 2009 WL 2983072, at *1 (S.D. Ohio Sept. 14, 2009) (citing Feldman v. Hanley, 49
F.R.D. 48 (S.D.N.Y.1969)). Under Rule 42(a), this Court may: (1) join for hearing or trial all
matters at issue in the action; (2) consolidate the action; or (3) issue any other orders to avoid
unnecessary cost or delay. See Fed.R.Civ.P. 42(a). A district court considering a request for
consolidation under Rule 42 should consider:
[W]hether the specific risks of prejudice and possible confusion [are] overborne
by the risk of inconsistent adjudications of common factual and legal issues, the
burden on the parties witnesses and available judicial resources posed by multiple
lawsuits, the length of time required to conclude multiple suits as against a single
one, and the relative expense to all concerned of the single-trial, multiple-trial
alternatives.
Cantrell v. GAF Corp., 999 F.2d 1007, 1011 (6th Cir. 1993). In determining whether
consolidation is appropriate under Rule 42, courts must be careful to avoid prejudice to the
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parties and jury confusion. Id.; see also MacLean, 2009 WL 2983072 at *1 (“Any savings of
litigant and judicial resources achieved by consolidation must be balanced against any prejudice
to the parties, including potential confusion of the issues, which might result from
consolidation.” (citing Arroyo v. Chardon, 90 F.R.D. 603 (D.P.R.1981)). Moreover,
consolidation under Rule 42 is a matter within the discretion of the Court and is reviewed only
for abuse of discretion. Cantrell, 999 F.2d at 1011.
IV. DISCUSSION
Navigators moves the Court to consolidate Guild Associates, Inc. v. Bio-Energy
(Washington) LLC, Case No. 2:13-cv-1041, with Navigators Specialty Insurance Company v.
Guild Associates, Inc.,et al., Case No. 2:14-cv-1676, pursuant to Rule 42(a). Navigators argues
that consolidation is proper because the two cases arise out of the same operative facts, involve
the same parties and the same insurance coverage policy, and involve similar legal issues. (Id. at
5). Navigators further contends that consolidation would promote efficiency, prevent multiple
actions, and avoid inconsistent adjudications. (Id. at 5-6).
In response, Defendant Guild concedes that consolidation for discovery would promote
efficiency, but opposes consolidation for purposes of trial. (Doc. 33 at 2). Guild argues that
consolidation at trial would “confuse and/or prejudice the jury.” (Id. at 2).
A. Consolidation for Trial
1.
Common Questions of Law or Fact
For purposes of Rule 42 consolidation, questions of law and fact need not be identical.
MacLean, 2009 WL 2983072 at *2. Rule 42 gives the Court discretion to consolidate as long as
there are some common questions of law or fact. Id. For example, consolidation may be found
when there are some common questions of fact and analysis of the complaints indicate that the
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legal issues are almost identical. See Brewer v. Republic Steel Corp., 64 F.R.D. 591, 594 (N.D.
Ohio 1974), aff’d, 513 F.2d 1222 (6th Cir. 1975).
In the present case, the cases involve the same parties: Guild, BEW, and Navigators. In
addition, the actions arise out of the same underlying series of events: both cases are connected
to the failure of the NRU at the BEW Cedar Hills Landfill in Maple Valley. Further, both the
Underlying Case and the Present Case generally involve the legal consequences of Guild’s
actions in the initial repair of the NRU and its response to the later damage to the filtration
system that led to the shutdown of the plant. (Doc. 1 at 4). In addition, judgment in the
Underlying Case may aid in the adjudication of the Present Case. Specifically, adjudication of
the Underlying Case may answer the question of whether there was an “accident” or
“occurrence” as defined by the CGL Policy, a crucial question in the Present Case.
On the other hand, however, the two cases seem to raise several differing legal questions:
the Underlying Cases requires interpretation of the Purchase Order and asks whether there was
fraud in the inducement and/or a breach of contract; the Present Case involves the interpretation
of the terms of, and obligations of the parties under, a separate, insurance contract. The two
cases seem to involve largely separate legal questions, although if the Underlying Case does
indeed answer the question of whether an “accident” or “occurrence” as defined by the CGL
Policy, there may be a risk of inconsistent adjudications if the actions are not consolidated.
With these considerations in mind, the Court turns to the question of whether specific
risks of prejudice and possible confusion are overborne by the savings of litigant and judicial
resources achieved by consolidation or the risk of inconsistent adjudications.
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2.
Efficiency versus Prejudice
Defendant contends that consolidation would lead to prejudice and “subject Guild to
needless expense.” (Doc. 33 at 2). It also references Rule 411 of the Federal Rules of Evidence
as weighing against consolidation. Although Guild fails to present a detailed argument related to
Rule 411, the implication is that including Navigators in the Underlying Case will alert the jury
of the fact of their insurance coverage, and under Rule 411, “[e]vidence that a person was or was
not insured against liability is not admissible to prove whether the person acted negligently or
otherwise wrongfully.” See Fed.R.Evid. 411.
Where there are common issues of law or fact, courts must then balance the benefit of
expedience and judicial resources against prejudice and jury confusion that may be caused by
consolidation. Cantrell, 999 F.2d at 1011. Factors that may cause prejudice and jury confusion
include complex legal theories and factual proof. See Choi v. Stevenson Co, No. 3:08-CV-0057S, 2011 WL 1625055 (W.D. Kentucky Apr. 28 2011). Absent prejudice, consolidation is usually
the most efficient method of adjudicating cases arising from common law or fact. MacLean,
2009 WL 2983072, at *1. Efficiency is determined by the need to analyze issues common to all
parties, overlap in discovery, witnesses, and evidence. Id. at 2; see also May v. U.S., 515 F. Supp.
600, 604 (S.D. Ohio 1981). Courts should be particularly cautious, however, when considering
consolidation for complex cases with complex issues in a case that will be tried to a jury.
Organic Chemicals, Inc. v. Carrol Products, Inc., 86 F.R.D. 468, 469-70 (W.D. Mich. 1980)
(“[I]n complex cases with complex issues, justice is often best served if issues are separated.”
(citing Warner v. Rossingol, 513 F.2d 678 (1st Cir. 1975)).
The present cases involve complex legal and factual issues centering on the operation and
repair of complex industrial machinery and detailed contracts. For the Underlying Case alone, it
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is likely that the jury will need to sort through complex testimony from expert witnesses, highly
technical evidence pertaining to machine functions at the BEW plant, and evidence and
testimony regarding contract clauses and sub clauses. Similarly, for the Present Case, the jury
likely will be faced with complex testimony about insurance contracts and coverage, as well as
technical evidence related to the respective businesses of BEW and Guild. Although juries are
often tasked with the resolution of complex cases, the combination of these two cases, which are
factually and legally complex, are likely to create juror confusion. Thus, this consideration
weighs against consolidation for trial.
In light of these considerations, the parties have not persuaded the Court at this stage of
the litigation that the consolidation of these two complex cases into one action for trial,
particularly where the legal questions may overlap but actually seem distinct, is the least
prejudicial and most efficient solution. For now, the Court is compelled to err on the side of
caution and refrain from allowing these actions to be consolidated for trial in light of the possible
prejudice and jury confusion. Furthermore, the Court is not convinced at this point that
consolidation is necessary or more efficient.
While these cases seem to involve interrelated parties and may include common
questions of law and fact, at this early stage of the proceedings, this Court is not convinced that
consolidation for trial is appropriate. The Court does not foreclose the possibility that it could be
so convinced in the future, after further development of the issues in these actions. Therefore,
the parties may renew their request for consolidation with additional briefing after discovery.
B. Consolidation for Discovery
Guild and Navigators both agree to consolidation for purposes of discovery. (Doc. 33 at
2). BEW has not opposed this request. Moreover, this Court agrees that consolidation for the
purpose of discovery is warranted and proper for purposes of efficiency, as there is likely to be
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extensive overlap in the document discovery and in some witnesses. See MacLean, 2009 WL
2980372 at *2. Thus, Plaintiff’s request for consolidation for the purpose of discovery is
GRANTED.
V. CONCLUSION
For the reasons set out above, Plaintiff’s Motion is GRANTED in part and DENIED in
in part. The cases Guild Associates, Inc. v. Bio-Energy (Washington) LL, Case No. 2:13-cv1041, and Navigators Specialty Insurance Company v. Guild Associates, Inc.,et al., Case No.
2:14-cv-1676 hereby will be consolidated for the purposes of discovery.
IT IS SO ORDERED.
DATED: September 15, 2015
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s/ Algenon L. Marbley
ALGENON L. MARBLEY
United States District Judge
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