Balt. Scrap Corp. v. RLI Ins. Co.

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Citation493 F.Supp.3d 433
Docket NumberCivil Action No. ELH-18-2743
Parties BALTIMORE SCRAP CORP., Plaintiff v. RLI INSURANCE CO., Defendant.
Decision Date09 October 2020

Angela Davis Pallozzi, Veronica K. Yu, Offit Kurman P.A., Baltimore, MD, for Plaintiff.

John L. Doran, Pessin Katz Law, PA, Towson, MD, Paul McDermott Finamore, Pessin Katz Law, P.A., Columbia, MD, for Defendant.


Ellen L. Hollander, United States District Judge

In this insurance dispute, plaintiff Baltimore Scrap Corporation ("Baltimore Scrap"), a scrap metal recycling business, filed suit against Executive Risk Specialty Insurance Company ("Executive Risk") and RLI Insurance Company ("RLI") on September 5, 2018, alleging breach of contract under all-risk insurance policies. ECF 1 (the "Complaint"). The Complaint asserts claims that RLI (Count I) and Executive Risk (Count II) wrongfully denied coverage "for a series of thefts" that occurred in one of plaintiff's scrap yards. Id. ¶¶ 31-44.1

RLI answered the suit on March 7, 2019. ECF 24. Executive Risk moved to dismiss the suit pursuant to Fed. R. Civ. P. 12(b)(6), alleging that the suit was untimely under Maryland's three-year statute of limitations, set forth in Md. Code (2013 Repl. Vol., 2018 Supp.), § 5-101 of the Courts and Judicial Proceedings Article ("C.J."). ECF 16. By Memorandum Opinion and Order of April 26, 2019, the Court dismissed the suit as to Executive Risk. ECF 26; ECF 27.

Now pending is plaintiff's "Motion for Partial Summary Judgment." ECF 46 (the "Baltimore Scrap Motion"). It is supported by seven exhibits. ECF 46-2 to ECF 46-8. RLI opposes the Baltimore Scrap Motion and has filed a cross-motion for summary judgment. ECF 48. That motion is supported by a memorandum of law (ECF 48-1) (collectively, the "RLI Motion") and five exhibits. ECF 48-3 to ECF 48-7. Baltimore Scrap filed a combined opposition to the RLI Motion and a reply in support of its own summary judgment motion. ECF 51 ("Baltimore Scrap Reply"). It also filed eight additional exhibits. ECF 51-1 to ECF 51-8. RLI has replied. ECF 52 ("RLI Reply").

The motions are fully briefed, and no hearing is necessary to resolve them. See Local Rule 105.6. For the reasons that follow, I shall deny the Baltimore Scrap Motion and grant the RLI Motion.

I. Factual Background2
A. Procedural Background

The Court issued a Scheduling Order on May 23, 2019. ECF 29. Among other things, it set a discovery deadline of December 2, 2019, and a deadline of January 6, 2020, for dispositive pretrial motions. Id. at 1.

On October 21, 2019, well before the discovery deadline set in the Scheduling Order (ECF 29), Baltimore Scrap filed a motion for partial summary judgment as to RLI. See ECF 35. RLI did not timely respond. See Docket. However, months later, on March 11, 2020, RLI sought leave to file an opposition as well as a cross-motion for summary judgment. ECF 37. It also filed a "Consent Motion to Modify/Reset the Scheduling Order." ECF 38. In ECF 38, RLI asked for additional time to respond to plaintiff's summary judgment motion and to "conduct limited discovery of the Plaintiff." Id. ¶ 9. By Order of March 12, 2020 (ECF 39), I denied as premature plaintiff's motion for partial summary judgment (ECF 35). And, I denied as moot RLI's motion for leave to file an opposition (ECF 37) and granted what I thought was a consent motion to modify the schedule (ECF 38).

Plaintiff subsequently filed a "Motion for Reconsideration." ECF 40. It expressed opposition to the scheduling motion (ECF 38) and disputed that it had ever consented, despite the representation of RLI in ECF 38. Id. Accordingly, I issued an Order on April 29, 2020 (ECF 42), directing RLI to respond to ECF 40 by May 28, 2020. RLI failed to do so. See Docket. Accordingly, I issued another set of deadlines for discovery and the filing of dispositive motions. ECF 45. The Baltimore Scrap Motion followed on July 8, 2020. ECF 46.

B. The Theft Scheme

The material facts of the case are largely undisputed. See ECF 46 at 2-5 ("Undisputed Material Facts"); ECF 48-1 at 7-9 ("Statement of Undisputed Facts").

Baltimore Scrap is a scrap metal recycling company with locations throughout Maryland. ECF 1, ¶ 7. It "purchases scrap metal from industry, government, auto salvage yards, demolition contractors, and farms, as well as from the general public." Id. According to James Burnett, plaintiff's Chief Financial Officer ("CFO"), the company's Baltimore facility buys both "ferrous metal and material that contains both ferrous and non-ferrous metal." ECF 51-7 (Declaration of James Burnett); but see ECF 48-5 (Civil Trial Transcript, dated March 4, 2016) at 4, Tr. 21-22 (James Ross, scrap purchasing manager for Baltimore Scrap, explaining that the company only deals with ferrous metals).

Baltimore Scrap purchases scrap from customers in various ways. According to Baltimore Scrap, one method involves a customer driving into the facility, where his or her vehicle is weighed. The customer then unloads the metal at a particular site in the scrap yard, for purchase by plaintiff. ECF 51-1 (Initial Claim Email of 2/2/2015) at 4; ECF 48-4 at 20, Tr. 1-12. Then, the customer returns to the scale, where his vehicle is weighed without the material on it. Id. The customer receives a ticket with a value that is based on the type of material in the load and the weight difference of the vehicle. Id. The customer then signs one part of the ticket and gives it back to the Baltimore Scrap employee at the scale and scans the other part of the ticket at an ATM on the site, where a cash payment is dispensed. Id.

On October 24, 2014, a Baltimore Scrap employee discovered that Kenneth Grimes, "a regular customer," ECF 46 at 2, was "pretending to sell scrap metal" to plaintiff and then collecting payment "from an un-manned ATM" located on plaintiff's premises, "without actually providing any scrap metal." ECF 46-2 (RLI's Declination Letter) at 2. In particular, Grimes falsely represented that he was selling metal at Baltimore Scrap's main facility on Vera Street in Baltimore. ECF 51-1 at 3-4; ECF 46-2 at 1.

Grimes, an employee of Otis Elevator ("Otis")3 from 2011 through 2014 (ECF 48-5 at 3, Tr. 19-20), "would arrive at the Baltimore Scrap Corporation location with a truckload of metal," i.e. , elevator counter-weights, and he "went through the process to weigh his truck and load, left the premises and dropped of[f] the counter-weights at another location, returned with an empty truck to be weighed, and then collected money from the un-manned Baltimore Scrap Corporation ATM for the weight of the metal that he pretended to provide." ECF 46-2 at 2-3. At the end of each transaction, Grimes would sign the ticket that he scanned at the ATM ostensibly on behalf of his employer, Otis. ECF 51-1 at 2. And, he made it appear as if he had deposited the load of scrap in the yard when, in actuality, he had left it elsewhere. Id.

After the Baltimore Scrap employee discovered the incident, Baltimore Scrap reviewed its security footage from a security camera that was installed in July 2014. ECF 46-2 at 3; ECF 51-1 at 4; ECF 51-4 at 1-2. The footage for a four-month period revealed that Grimes had committed the same act 23 times between July 30, 2014 and October 23, 2014. Id. In each video, Grimes was observed being weighed with a load of metal and then driving off the property with the material still in his vehicle. Id. Grimes obtained $23,013 in that period of time. ECF 46-2 at 3.

Baltimore Scrap also reviewed its transaction history with Otis from January 2005 and identified all the tickets signed by Grimes. ECF 51-1 at 5-14. The tickets revealed that Grimes had been bringing scrap metal to the Baltimore Scrap facility since March 2011 and had obtained about $240,000 over the four-year period. Id. at 2; ECF 48-4 at 47, Tr. 14-17; ECF 48-6 (Baltimore Scrap's Responses to RLI Requests for Admissions), ¶ 2. Yet, according to Baltimore Scrap, Grimes never delivered any scrap material during this period. ECF 48-4 at 47, Tr. 20-21.

In response to inquiries from Baltimore Scrap about these incidents, Otis indicated that it only received the cash for one ticket from Baltimore Scrap in 2014 and it was not one of the tickets that was signed by Grimes. ECF 51-1 at 2; ECF 48-4 at 48, Tr. 15-19. Moreover, Otis maintained that it never authorized Grimes to scrap any material and never received any payment from Grimes for the money that Grimes received from Baltimore Scrap. ECF 48-6, ¶¶ 4-5. Nor did Otis believe that any of its counter-weights were missing. ECF 48-4 at 15, Tr. 13-20.

On December 5, 2014, the State of Maryland charged Grimes with theft of $23,013 for the 23 incidents that were captured on the security footage from July 30, 2014 to October 24, 2014. See ECF 46-3 (Certified Copy of the Docket for the criminal conviction); State of Maryland v. Kenneth Grimes , 5B02279247 (Dist. Ct. Md. Balt. Cty.); ECF 46-2 at 3; ECF 48-4 at 47, Tr. 11-13. Grimes was subsequently convicted and, as part of his sentence, the court ordered him to pay restitution. Id. The restitution has since been paid and the amount is not part of plaintiff's claim to RLI. ECF 1, ¶ 12; ECF 48-4 (Testimony of James D. Burnett) at 26, Tr. 3-5; ECF 46-2 at 3.

Baltimore Scrap also brought a civil suit in State court against Grimes on May 19, 2015, alleging fraud, and seeking to recover for the incidents that occurred before July 2014. See ECF 46-4 (Docket, Complaint, and Judgment for the civil case); Baltimore Scrap v. Grimes , 24-C-15002598 (Circ. Ct. Balt. Cty.). At trial, Grimes admitted that after the initial weigh in, he would unload his truck somewhere else, then come back to Baltimore Scrap to have his truck weighed again to generate a sales ticket, with the goal of obtaining money from Baltimore Scrap without leaving any scrap metal at the yard. ECF 48-7 (Civil Trial transcript, dated March 7, 2016) at 3, Tr. 9-20. Other evidence established...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT