Septicairaid LLC v. Holt

Filing 29

DECISION AND ORDER signed by Judge Lynn Adelman on 1/12/15 granting 16 Motion to Bifurcate, Intervene and Stay; granting 26 Motion to Intervene, Bifurcate and Stay. The Clerk shall docket the intervenor complaints at ECF No. 16-1 and ECF No. 26-1; and all proceedings not necessary to resolve insurance coverage issues, including the pending motion to dismiss 8 , are stayed pending a determination of insurance coverage. (cc: all counsel) (dm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
_____________________________________________________________________
SEPTICAIRAID LLC,
Plaintiff,
v.

Case No. 14-cv-0172

KARL HOLT,
Defendant.
_____________________________________________________________________
DECISION AND ORDER
Plaintiff SepticairAID LLC (“Septicair”) filed a complaint alleging trademark
infringement, unfair competition, and cybersquatting claims under the Lanham Act. The
parties have fully briefed a motion to dismiss; however, also before me are two motions to
intervene, bifurcate, and stay by two insurance companies: Employers Mutual Casualty
Company (“EMC”), which insured defendant’s company Engineered Solutions, Inc., and
Pekin Insurance Company, which insured defendant’s company Aero-Stream, LLC.
Neither party opposes intervention. I conclude that both intervenors may intervene
as a matter of right under Fed. R. Civ. P. 24(a) because (1) their motions to intervene were
timely; (2) they have an interest in this action, namely that defendant has tendered defense
of plaintiff’s claims to intervenors, and intervenors are obligated to defend if the claims fall
within the relevant insurance policy; (3) disposition of this case without intervention may
impede or impair intervenors’ ability to protect that interest; and (4) the intervenors’
interests are not adequately represented because both intervenors assert that they have
no duty to defend against plaintiffs’ claims. See Sec. Ins. Co. of Hartford v. Schipporeit,
Inc., 69 F.3d 1377, 1380 (7th Cir. 1980). I also conclude that I have supplemental
jurisdiction over intervenors’ claims under 28 U.S.C. § 1367(a) because the claim is part

of the same case or controversy as the other claims in this action. Section 1367(b)
prohibits a federal court from exercising supplemental jurisdiction in diversity cases over
claims by persons “seeking to intervene as plaintiffs under Rule 24,” but intervenors are
intervening as defendants. See 16 James Wm. Moore, et al., Moore’s Federal Practice
§ 106.46 (3d Ed.) (“[N]on-plaintiff intervenors entitled to the exercise of supplemental
jurisdiction for their claims are those who must intervene to defend or protect interests put
at issue by the original action.”). Therefore, I will grant the motion to intervene.
EMC and Pekin also move to bifurcate and stay proceedings on the merits of
plaintiff’s claims until I resolve coverage issues. Defendant opposes EMC’s motion to
bifurcate and stay but filed no response to Pekin’s subsequent motion to bifurcate and
stay. Fed. R. Civ. P. 42(b) gives me authority to bifurcate the proceedings in a case if it
would “prevent prejudice to a party or promote judicial economy.” Chlopek v. Fed. Ins. Co.,
499 F.3d 692, 700 (7th Cir. 2007). Further, Wisconsin courts encourage the practice of
resolving coverage issues before proceeding to the merits of a case. Elliott v. Donahue,
169 Wis. 2d 310, 317–18 (1992) (encouraging “the resolution of the coverage issue” before
“the trial on liability”); see also Bradley Corp. v. Zurich Ins. Co., 984 F. Supp. 1193, 1198
(stating that “Wisconsin law favors a procedure by which” the liability and coverage issues
are bifurcated and liability proceedings are stayed until coverage is resolved).
First, bifurcating and staying proceedings on the merits until coverage issues have
been resolved will prevent prejudice to the intervenors, who otherwise may be forced to
incur unnecessary legal fees in defending defendant. Second, bifurcating and staying
proceedings on the merits will not upset the efficiency of the underlying action because this

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case is in its early stages; defendant has not yet answered and discovery has not begun.
Third, defendant will not be unduly prejudiced. Contrary to defendant’s assertion,
a determination on coverage issues is not likely to require a decision on the merits. See
Delta Grp., Inc. v. DBI, Inc., 204 Wis. 2d 515, 522 (Ct. App. 1996) (“The duty of defense
depends on the nature of the claim, not the merits.”) Further, coverage determinations
usually involve comparing policy provisions to the claims asserted and thus do not require
much discovery. Estate of Sustache v. Am. Family Mut. Ins. Co., 311 Wis. 2d 548, 560
(2008). Therefore bifurcating and staying proceedings on the merits is not likely to
prejudice defendant by delaying discovery on the merits indefinitely. Finally, defendant did
not respond to Pekin’s motion to bifurcate and stay, so I will grant its motion as unopposed.
Although defendant opposes EMC’s motion to bifurcate and stay, defendant is unlikely to
be prejudiced by bifurcating and staying proceedings on the merits pending resolution of
EMC’s coverage issues when the case will already be bifurcated and stayed pending
resolution of Pekin’s coverage issues. Thus, I will grant both intervenors’ motions to
bifurcate and stay.
Because I have granted intervenors’ motions to stay proceedings on the merits, I
will not decide defendant’s pending motion to dismiss at this time.
THEREFORE, IT IS ORDERED that Employers Mutual Casualty Company’s motion
to intervene, bifurcate, and stay (ECF No. 16) and Pekin Insurance Company’s motion to
intervene, bifurcate, and stay (ECF No. 26) are GRANTED.
(a)

The Clerk shall docket the intervenor complaints at ECF No. 16-1 and ECF
No. 26-1;

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(b)

All proceedings not necessary to resolve insurance coverage issues,
including the pending motion to dismiss (ECF No. 8), are stayed pending a
determination of insurance coverage.

Dated at Milwaukee, Wisconsin, this 12th day of January, 2015.

s/ Lynn Adelman
__________________________
LYNN ADELMAN
District Judge

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