Emerson Hall Associates, L.P. v. Travelers Casualty Insurance Company of America

Filing 33

ORDER granting 28 Motion to Amend Answer and Leave to File by Defendant Travelers Casualty Insurance Company of America; granting 12 Motion to Intervene by Intervenor Plaintiff Sid Grinker Restoration, Inc. Signed by District Judge James D. Peterson on 1/15/2016. (arw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

EMERSON HALL ASSOCIATES, L.P.,
OPINION & ORDER
Plaintiff,
v.

15-cv-447-jdp

TRAVELERS CASUALTY INSURANCE
COMPANY OF AMERICA,
Defendant.

This is an insurance dispute between plaintiff Emerson Hall Associates, L.P., and its
insurer, defendant Travelers Casualty Insurance Company of America. The dispute arose out
of damage to Emerson Hall’s building and Travelers’s refusal to pay the full amount of
Emerson Hall’s insurance claim. There are two motions before the court.1 First, Sid Grinker
Restoration, Inc. (Grinker) has moved to intervene in this action, pursuant to Federal Rule of
Civil Procedure 24. Dkt. 12. Grinker proposes to assert a claim against Emerson Hall,
alleging that Emerson Hall failed to pay Grinker for its restoration services. Second, Travelers
has moved to amend its answer to add a counterclaim against Emerson Hall for breach of
contract. Dkt. 28. The court will grant both motions.

BACKGROUND
In September 2013, a fire broke out in a building that Emerson Hall owns, causing
damage. A few months later, the same building suffered water damage when a pipe burst.

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Also pending is Emerson Hall’s counsel’s motion to withdraw. Dkt. 26. Magistrate Judge
Crocker addressed that motion during an ex parte hearing on January 14, 2016, and he will
resolve the issue.

Emerson Hall eventually submitted a claim to its insurer, Travelers, which determined that
both the fire damage and the water damage were covered under Emerson Hall’s insurance
policy. But Travelers paid only part of Emerson Hall’s claim, refusing to reimburse the full
amount of Emerson Hall’s lost business income, expenses for demolition and consulting, and
depreciation.
Emerson Hall hired Grinker to provide restoration services and repair the building.
The contract provided for a contingent payment structure: Emerson Hall agreed to pay
Grinker the greater of $400,000 or the total of seven installments. For the installment
option, the amount of the seventh installment depended on how much money Travelers paid
Emerson Hall on its insurance claim. The rest of the installments were for fixed amounts.
Emerson paid some of the fixed installments, but it did not pay the seventh installment.
According to Grinker, Emerson Hall refused to pay because Travelers had not paid the full
amount of Emerson Hall’s insurance claim. Grinker alleges that Emerson Hall currently owes
just over $200,000 in unpaid invoices.
Emerson Hall sued in Wisconsin state court on June 29, 2015, alleging state law
claims against Travelers for breach of contract and bad faith. Travelers removed the case to
federal court on the basis of diversity. Grinker moved to intervene on November 3, 2015.

ANALYSIS
A. Grinker’s motion to intervene
Grinker moves to intervene as of right, under Rule 24(a)(2). In the alternative,
Grinker moves for permissive intervention, under Rule 24(b). Permissive intervention is

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appropriate in this case, and so the court will not address whether Grinker may intervene as
of right. Emerson Hall consents to intervention; Travelers opposes it.
“Permissive intervention is within the discretion of the district court where the
applicant’s claim and the main action share common issues of law or fact and where there is
independent jurisdiction.” Ligas ex rel. Foster v. Maram, 478 F.3d 771, 775 (7th Cir. 2007).
Rule 24(b)(3) also requires district courts to consider whether intervention will unduly delay
the case or prejudice the existing parties. These considerations recognize that “Rule 24(b) is
just about economy in litigation.” City of Chicago v. Fed. Emergency Mgmt. Agency, 660 F.3d
980, 987 (7th Cir. 2011).
As to jurisdiction, Grinker is a Wisconsin corporation with its principal place of
business in Wisconsin. Dkt. 12-3, ¶ 1. Emerson Hall is a citizen of Illinois, Maryland, and
Florida, Dkt. 25, and Travelers is a citizen of Connecticut, Dkt. 23, ¶ 11. Thus, permitting
Grinker to intervene will not destroy diversity, and the court would have jurisdiction over
Grinker’s claim under 28 U.S.C. § 1332.
Grinker’s claim also shares common issues of fact with Emerson Hall’s claims, so
permitting the company to intervene will not disrupt the case or prejudice the existing
parties. Grinker contends that its proposed claim in this case—which would be against
Emerson Hall—“relate[s] to the very same work and unpaid invoices for which Emerson
[Hall] seeks to recover from Travelers.” Dkt. 13, at 6. Indeed, Emerson Hall’s contract with
Grinker provides that the amount of the seventh installment payment depends on the
amount that Travelers eventually pays on Emerson Hall’s insurance claim. Dkt. 12-3, at 14.
Emerson Hall’s complaint against Travelers specifically alleges that “Travelers has refused to
reimburse Emerson Hall approximately $170,650 in recoverable depreciation related to work

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completed by Sid Grinker Restoration, Inc., despite being provided with an invoice showing
the same.” Dkt. 23-1, at 5. Thus, the services that Grinker provided are already at issue in
this case.
Travelers opposes Grinker’s intervention principally because Grinker’s entitlement to
relief will require the court to address legal issues that would not otherwise be in the case. 2 In
particular, Travelers argues that Grinker’s claim relies on an entirely different contractual
relationship, one to which Travelers was not a party. Travelers also argues that Grinker’s
claim may be moot because of payments that Emerson Hall has already made, or because of
mortgages that Emerson Hall issued. But even if the legal questions that Grinker’s claim will
present do not align perfectly with the legal questions pertaining to the underlying action, the
interests of judicial economy weigh in favor of letting these parties resolve the entire dispute
in one case.
It does not appear that permitting Grinker to intervene will delay this case or cause
prejudice to the existing parties. As Grinker points out, the company was likely going to be
involved in the litigation anyway, to attest to the necessity and cost of the work that it
performed. Dkt. 13, at 6. Travelers does not dispute this point. Moreover, Grinker is not
asserting any claims against Travelers, only a claim against Emerson Hall. Emerson Hall does
not oppose Grinker’s intervention. Dkt. 17. Most important, Grinker represents that there
will be no need to change the existing schedule in this case, Dkt. 13, at 7, which is a promise
that the court will expect Grinker to keep.

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Travelers does not dispute that Grinker’s motion to intervene is timely. See Dkt. 15.

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The court will grant Grinker’s motion to intervene. Grinker should promptly file and
serve its proposed complaint as a separate docket entry, and the parties should include
Grinker as an intervening plaintiff in the captions for all future filings.
B. Travelers’s motion to amend its answer
Travelers moves to amend its answer to assert a counterclaim against Emerson Hall
for breach of contract. The court did not invite briefing on the motion, but neither Emerson
Hall nor Grinker sought to oppose it. Travelers contends that its motion to amend is
appropriate because there was no undue delay, none of the parties will suffer prejudice from
its amendment, and the proposed counterclaim is not futile. The court agrees and will
therefore grant Travelers’s motion to amend.
Courts typically review motions to amend pleadings under Rule 15(a)(2), which
authorizes leave to amend “when justice so requires.” But the Preliminary Pretrial Conference
Order in this case required the parties to amend their pleadings by October 1, 2015. Dkt. 5,
at 1. Thus, the court must consider whether Travelers meets the heightened good-cause
standard for amending a scheduling order under Rule 16(b)(4) before considering whether
Travelers satisfies the requirements of Rule 15(a)(2). See Alioto v. Town of Lisbon, 651 F.3d
715, 719 (7th Cir. 2011); Lands’ End, Inc. v. Genesys Software Sys., Inc., No. 13-cv-38, 2014
WL 1315561, at *1 (W.D. Wis. Apr. 1, 2014). The good-cause inquiry under Rule 16(b)
turns on the diligence of the party moving to amend. Alioto, 651 F.3d at 720.
The proposed counterclaim alleges that Emerson Hall made several misrepresentations
before, during, and after submitting a claim to Travelers. Dkt. 30-2, ¶¶ 66-142. Travelers
alleges that these misrepresentations violated Emerson Hall’s duty to cooperate with its
insurer in good faith, as well as voided Emerson Hall’s coverage under its policy. Id. These

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allegations arise out of other litigation between Emerson Hall and Beloit College in 2013.
Relying on Emerson Hall’s pleadings in that case, Travelers now contests the veracity of
Emerson Hall’s statements concerning lost business income and actual repair expenses that it
incurred. Travelers contends that it did not learn about the earlier litigation until recently,
while discussing Grinker’s motion to intervene with Grinker’s counsel. Dkt. 30, ¶ 12. Once
Travelers learned about the possible misrepresentations, it promptly obtained key documents
from the other case, contacted government agencies that might have relevant information,
and served third-party subpoenas. Based on this record, the court finds that Travelers has
acted diligently in seeking to amend its pleadings. Thus, good cause exists to amend the
scheduling order, pursuant to Rule 16(b).
For the same reasons, Travelers has also established that leave to amend is proper
under Rule 15(a)(2). “[L]eave [to amend] is inappropriate where there is undue delay, bad
faith, dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of
allowance of the amendment, or futility of the amendment.” Villa v. City of Chicago, 924 F.2d
629, 632 (7th Cir. 1991). Travelers promptly moved to amend once it uncovered a factual
basis for its counterclaim, and there is no evidence of dilatory motive. Emerson Hall will not
suffer undue prejudice as this case is still in its early stages—dispositive motions are not due
until June 10, 2016, and discovery will not close until about the same time. And Emerson
Hall should already have most of the factual information relevant to Travelers’s counterclaim
because it concerns conversations or events to which Emerson Hall was a party. Finally,
Travelers’s detailed allegations demonstrate that its proposed counterclaim is not futile.

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Travelers has shown good cause to amend the scheduling order and shown that the
interests of justice support permitting it to allege a counterclaim against Emerson Hall. The
court will therefore grant Travelers’s motion to amend its answer. Travelers should file its
proposed amended answer as a separate docket entry.

ORDER
IT IS ORDERED that:
1. Intervening plaintiff Sid Grinker Restoration, Inc.’s motion to intervene, Dkt. 12,
is GRANTED. Grinker should file and serve its proposed complaint as a separate
docket entry and all future filings should include Grinker in the caption.
2. Defendant Travelers Casualty Insurance Company of America’s motion to amend
answer and leave to file, Dkt. 28, is GRANTED. Travelers should file its proposed
amended answer as a separate docket entry.
Entered January 15, 2016.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge

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