American Guar. & Liability Ins. Co. v. Fojanini

• Decision Date: 22 May 2000
• Docket Number: No. Civ.A.98-4984.,Civ.A.98-4984.
• Parties: AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Plaintiff, v. Marco FOJANINI, Armando Ferroni Europe Invest, S.R.L., Nouveau International, Inc. Gary W. Black, Sr., Gary W. Black, Jr., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

Page 558

99 F.Supp.2d 558

AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Plaintiff, v. Marco FOJANINI, Armando Ferroni Europe Invest, S.R.L., Nouveau International, Inc. Gary W. Black, Sr., Gary W. Black, Jr., Defendants.

No. Civ.A.98-4984.

United States District Court, E.D. Pennsylvania.

May 22, 2000.

Thomas B.K. Ringe, III, Duane, Morris & Heckscher, Philadelphia, PA, Michael Horowitz, Thomas Dillon, Gilroy, Downes, Horowitz and Goldstein, New York City, John L. Aris, Duane, Morris & Heckscher LLP, Philadelphia, PA, for American Guarantee and Liability Insurance Company, Plaintiff.

Jeffrey W. Golan, Barrack, Rodos & Bacine, Philadelphia, PA, for Marco Fojanini, Defendant.

Gary W. Black, Jr., Norristown, PA, Defendant, pro se.

MEMORANDUM

LOWELL A. REED, Jr., Senior District Judge.

In this action, plaintiff American Guarantee and Liability Insurance Co. ("American Guarantee") seeks a declaration that it owes no coverage and has no duty to defend defendants Gary Black, Sr., and Gary Black, Jr., in an underlying action, pursuant to exclusions in a directors and officers liability policy issued by a subsidiary of American Guarantee. In the underlying action, the Blacks and their corporation, Nouveau International, Inc. ("Nouveau"), have been sued by defendants Marco Fojanini, Armando Ferroni, and Europe Invest, S.R.L., for fraud and misrepresentation related to a failed business venture involving robotic pizza vending machines.

In an opinion dated March 14, 2000, this Court ruled on the parties' cross-motions for summary judgment. See American Guarantee Liability and Ins. Co. v. Fojanini, 90 F.Supp.2d 615 (E.D.Pa. 2000). The facts of the case are recited in great detail in that decision, and there is no need to recount them here. The Court denied the motion of plaintiff as to all issues, granted the motion of defendants Fojanini, Ferroni, and Europe Invest, as to two issues, and denied the motions of defendants as to two issues. Thus, after summary judgment, at least two (now, three) factual issues remain to be tried. Plaintiff has filed a motion for reconsideration and a motion to stay this action pending the outcome of the underlying proceeding. Defendants have filed a motion for entry of judgment. For the reasons set forth below, the respective motions will be denied, except plaintiff's motion to preserve for trial the issue of whether Gary W. Black, Jr., is an insured person under the policy will be granted.

1. Motion to Stay Proceedings

American Guarantee asks this Court to stay these proceedings pending the outcome of the underlying action, Fojanini v. Nouveau International, Civil Action No. 97-3188, which was filed in this district and is currently before Judge Norma Shapiro. That action was placed in civil suspense in April 1998 pending the outcome of Nouveau's bankruptcy proceedings, and has remained in suspense pending the outcome of the instant action. American Guarantee contends that because there are factual issues remaining in this action, the Court should stay this proceeding pending the resolution of such factual issues in the underlying action.

There are three problems with such an approach. First, the factual issues in this case concerning coverage would not necessarily be resolved in the underlying action. The major issues remaining in this case include (1) whether or not wrongful acts constituting a loss (as defined by the insurance policy held by the Blacks) took place or were alleged to have taken place during the policy period and (2) whether there was a demand made on Nouveau and the Blacks by Fojanini and Ferroni prior to the pending date of the policy. There appear to be no time limitations in the underlying action, and thus the trier of fact in the underlying action could make a determination concerning the Blacks' liability without pinpointing whether wrongful acts took place during the policy period. Similarly, because the insurance policy is not at issue in the underlying action, the question of whether or not Fojanini and Ferroni made a prior demand on Nouveau or the Blacks as defined in the policy will not be presented to the trier of fact in the underlying action. Thus, a trial in the underlying action will not certainly resolve the major issues in the case.

Second, the parties have largely agreed that the vitality of the underlying action turns on the outcome of this case. Because of the financial circumstances of Nouveau and the Blacks, the plaintiff's only hope for recovery in the underlying case is the insurance coverage provided by American Guarantee. Quite simply, the "dough" in this pizza-related case is in this declaratory judgment action, not in the underlying action. Fojanini and Ferroni have informed the Court, through counsel, that they will not, in all likelihood, pursue the underlying case if it is determined that American Guarantee owes no coverage to the Blacks under the directors and officers liability policy. The need for a trial on the underlying action may be obviated by the outcome of this case, and it is wiser and far more efficient to proceed with this action and resolve the limited question of coverage before proceeding with a case that may be irrelevant in the absence of coverage.

Third, American Guarantee's motion to stay proceedings strikes the Court as slightly disingenuous. Indeed, plaintiff's request to stay the very proceeding it initiated raises this judicial eyebrow. American Guarantee brought this declaratory judgment action after the underlying action was filed, and pursued this action vigorously while the underlying suit languished in administrative suspense. Suddenly, in the wake of summary judgment, American Guarantee seeks to stay this proceeding and shows a sudden interest in the underlying action it chose to short-circuit by filing this action. I find this reversal curious. A stay of proceedings in this action would delay the very clarification of coverage responsibilities that American Guarantee sought in bringing this suit. Perhaps American Guarantee prefers to delay such a determination because the ruling on summary judgment failed to produce the outcome it desired in this action; an insufficient reason to stay an entire proceeding. Upon consideration of plaintiff's motion to stay, I conclude that there are good reasons to deny the motion.

As noted by plaintiff, this Court has great discretion in deciding whether to exercise jurisdiction over a declaratory judgment action. However, the Court of Appeals for the Third Circuit recently sounded a cautionary note in this context, observing, "Although a court has discretion to decline to adjudicate a declaratory judgment action over which it has jurisdiction, a court should only exercise such discretion if it determines that issuing a declaratory judgment would serve no useful purpose." Aluminum Company of America v. Beazer E., Inc., 124 F.3d 551, 560 (3d Cir.1997) (citing Wilton v. Seven Falls Co., 515 U.S. 277, 287-88, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995); United States v. Commonwealth of Pennsylvania, 923 F.2d 1071 (3d Cir.1991); Edwin Borchard, Declaratory Judgments 313 (2d ed.1941)). For the reasons set forth in this memorandum, I conclude that a useful purpose will be served by adjudicating the instant declaratory judgment action, and therefore the motion to stay will be denied.

2. Motion for Reconsideration

Typically, a motion for reconsideration is decided under Federal Rule of Civil Procedure 59(e) or 60(b). See Dayoub v. Penn-Del Directory Co., 90 F.Supp.2d 636, 638 (E.D.Pa. 2000). However, neither Rule 59(e) nor 60(b) applies here because the order American Guarantee seeks to have reconsidered is not a final judgment or order but rather an interlocutory decision. See id. (citing Davidson v. United States, No. 95-1506, 1998 WL 314706, 1998 U.S. Dist. LEXIS 8708, at *5-6 (E.D. Pa. June 15, 1998) (denial of partial motion for summary judgment is not a final judgment, order, or proceeding within Rule 60(b) but rather an interlocutory decision); 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure, § 2715, at 264 (3d ed.1998) ("the denial of a Rule 56 motion is an interlocutory order from which no appeal [to the court of appeals] is available until the entry of judgment following the trial on the merits")).

A federal district court has the inherent power to reconsider interlocutory orders "when it is `consonant with justice to do so.'" Walker by Walker v. Pearl S. Buck Foundation, Inc., No. 94-1503, 1996 WL 706714, 1996 U.S. Dist. LEXIS 17927, at *6 (E.D.Pa. Dec. 3, 1996) (quoting United States v. Jerry, 487 F.2d 600, 605 (3d Cir.1973)). "`The purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence.'" Confer v. Custom Eng'r Co. Employee Health Benefit Plan, 760 F.Supp. 75, 77 (W.D.Pa.) (quoting Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir.1985), aff'd in part on other grounds and dismissed in part on other grounds, 952 F.2d 41 (3d Cir.1991)). Because of the interest in finality, however, courts should grant motions for reconsideration sparingly. Rottmund v. Continental Assurance Co., 813 F.Supp. 1104, 1107 (E.D.Pa.1992).

a. Role of Defendant Gary Black, Jr., in the Corporation

American Guarantee first contends that the Court erred in granting defendants' motion for summary judgment on the issue of coverage owed to Gary Black, Jr. This Court concluded on the cross-motions for summary judgment that plaintiff had produced insufficient evidence to convince a reasonable jury that Black Jr. was not an officer or director of Nouveau, and therefore not an "Insured Person" under the policy. See Fojanini, 90 F.Supp.2d 615, 626. Plaintiff suggests that the Court overlooked an admission in the answer of Black Jr. to the complaint in this action, in which he admitted that he was never an officer of Nouveau International. (Complaint, at ¶ 37; Answer of Gary...