Florists' Mut. Ins. v. Ludy Greenhouse Mfg., 3:05cv369.
| Decision Date | 30 September 2007 |
| Docket Number | No. 3:05cv369.,3:05cv369. |
| Citation | 521 F.Supp.2d 661 |
| Parties | FLORISTS' MUTUAL INSURANCE COMPANY, Plaintiff, v. LUDY GREENHOUSE MANUFACTURING CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
Laura M. Faust, Ronald B. Lee, Roetzel & Andress, Akron, OH, for Plaintiff.
Colleen Marie Blandford, Kohnen & Patton, LLP, Cincinnati, OH, Nancy Jean Manougian, Bailey Cavalieri LLC, Columbus, OH, for Defendants.
OPINION, DECISION AND ENTRY SUSTAINING CROSS-DEFENDANT FEDERAL INSURANCE COMPANY'S MOTION TO DISMISS CROSSCLAIM (DOC. # 28); DECISION AND ENTRY OVERRULING CROSS-DEFENDANT FEDERAL INSURANCE COMPANY'S MOTION TO STRIKE AFFIDAVIT, BUT SUSTAINING MOTION TO FILE SURREPLY BRIEF (Doc. # 43); DECISION AND ENTRY OVERRULING CROSS-PLAINTIFF LUDY GREENHOUSE MANUFACTURING CORPORATION'S MOTION FOR PARTIAL SUMMARY JUDGMENT (DOC. # 36); DECISION AND ENTRY OVERRULING, IN PART, AND SUSTAINING, IN PART, PLAINTIFF FLORISTS' MUTUAL INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT (DOC. # 41); DECISION AND ENTRY OVERRULING, IN PART, AND SUSTAINING, IN PART, DEFENDANT LUDY GREENHOUSE MANUFACTURING CORPORATION'S MOTION FOR SUMMARY JUDGMENT (DOC. # 45); DIRECTIONS TO COUNSEL; JUDGMENT TO ENTER ACCORDINGLY; TERMINATION ENTRY
This action involves one insured, two insurers and three insurance policies.1 Ludy Greenhouse Manufacturing Corporation ("Ludy") is the named insured of all three policies. Florists' Mutual Insurance Company ("Florists")2 is the insurer of a Business Package Policy ("Florists Policy").3 Doe. # 2 Attachs. ## 1-14. Federal Insurance Company ("Federal") is the insurer of two insurance policies ("Federal Policies") — a Commercial Umbrella Policy ("Federal Umbrella Policy")4 and a ForeFront Portfolio Policy ("Federal ForeFront Policy")5. Doc. # 18 Attachs. ## 1-3 (ForeFront Policy), Attach. # 4 (Umbrella Policy). All policies were in effect on the dates pertinent to the happenings described herein.
The facts that necessitated the claims made by Ludy, under the three policies, are undisputed. In short, Ludy hired a third party, Payroll Data Service, Inc. ("Payroll Data"), to process its payroll and prepare and file certain forms and sums with the Internal Revenue Service ("IRS"). Doc. # 18 ¶¶ 15.24. Payroll Data prepared accurate financial forms, which it transmitted to Ludy, causing Ludy to transfer appropriate amounts to Payroll Data, for what Ludy thought was ultimate transmission to the IRS. Id. Instead, Payroll Data intentionally filed inaccurate forms with the IRS, understating the amounts owed by Ludy, transmitted significantly smaller sums to the IRS than Ludy owed (and which Ludy had transferred to Payroll Data) and kept the rest. Id. The IRS eventually investigated and determined that incorrect returns were intentionally and fraudulently filed by Payroll Data, on behalf of Ludy. Id. As a result, Ludy had to pay $380,322, which represented the amount of the original obligations, as well as interest in the amount of $45,108, for a total of $425,430. Id. It is this sum that Ludy attempts to claim under the three policies in question.
Florists originally brought suit for declaratory judgment, under 28 U.S.C. §§ 2201, 2202, naming Ludy as the Defendant and seeking a declaration of the two parties' rights and obligations, under the Florists Policy. Doc. # 2. Florists subsequently filed an Amended Complaint, again seeking a declaration of the rights and obligations, under the Florists Policy. Doc. # 18. In its Amended Complaint, Florists also added Federal, as a party Defendant, and asked the Court to determine that the Federal Policies provide coverage to Ludy, which is primary to any deemed coverage by Florists, and, thus, entitling Florists to contribution and/or indemnification from Federal. Id. Florists eventually voluntarily dismissed its claims against Federal (Doc. # 29), but not before Ludy asserted both a counterclaim against Florists and a cross-claim against Federal. Doc. # 24. Ludy's counterclaim seeks a determination that Florists is obligated to pay Ludy's claims, under the Florists Policy, while Ludy's cross-claim seeks a ruling that Federal is obligated to pay Ludy's claims, under both Federal Policies and also asks the Court to determine that Federal breached its duty of good faith and fair dealing. Id.
Presently before the Court are a Motion to Strike Affidavit, a Motion to Dismiss and various Motions for Summary Judgment. Specifically, Federal has moved the Court to dismiss Ludy's cross-claim (Doc. # 28), as well as to Strike the Affidavit of Stephan A. Scantland or, in the alternative, for leave to File a Surreply Brief (Doc. # 43). Ludy has moved for partial summary judgment on its cross-claim against Federal (Doc. # 36), Florists has moved for summary judgment against Ludy (Doc. # 41) and Ludy has moved for summary judgment against Florists (Doc. # 45). The Court will first address the motions pending between Florists and Ludy and will then turn to the motions pending between Federal and Ludy.
Federal also moves the Court to strike the affidavit of Stephan A. Scantland (Doc. # 42 Ex. # 1) or, in the alternative, to file a surreply brief. Doc. # 43. In support of its motion to strike, Federal cites Local Rule 7.2(d), which provides as follows: "When proof of facts not already of record is necessary to support or oppose a motion, all evidence then available shall be discussed in, and submitted no later than, the primary memorandum of the party relying upon such evidence." S.D. Ohio R. 7.2(d) (2006). Federal asserts that the affidavit should be stricken, because it was not submitted with the requisite memorandum of record.
Courts have noted that the purpose of Rule 7.2(d) is to "prevent the moving party from springing new facts on the nonmoving party when it is too late to contest them." Owner-Operator Indep. Drivers Ass'n v. Arctic Express, Inc., 288 F.Supp.2d 895, 903 (S.D.Ohio 2003) () (citing Peters v. Lincoln Elec. Co., 285 F.3d 456, 476 (6th Cir.2002)). If a party is not harmed by the filing of evidence outside of the time frame established by Rule 7.2(d), a Court should not strike the evidence. Ferron v. VC E-Commerce Solutions, Inc., 2007 WL 295455, 2007 U.S. Dist. LEXIS 6177 (S.D.Ohio Jan. 29, 2007) ().
In this case, while Ludy has not timely filed the subject affidavit, Federal will have suffered no harm, if the Court sustains its alternative motion to file a surreply brief. Thus, the Court OVERRULES Federal's Motion to Strike the Affidavit of Stephan A. Scantland, but SUSTAINS Federal's alternative Motion for Leave to File a Surreply Brief. Doc. # 42 Ex. # 1 (Scantland Aff.); Doc. # 43 (Motion to Strike/File Surreply Brief) (attaching Surreply Brief, as Attachment # 1).
In 1996, Ludy entered into a Client Payroll Processing Agreement, with Payroll Data. Doc. # 24 (Ludy Am. Ans.) at 3, ¶ 16. Pursuant to this agreement, Payroll Data prepared and filed Ludy's Forms 941 ("Employer's Quarterly Federal Tax Return"), with the IRS, and also remitted the attendant payments. Id. ¶ 17. The payments included those required by the Federal Insurance Contribution Act and Federal Unemployment Tax Act, as well as Federal, State and local income taxes. Doc. # 42 Ex. # 1 (Scantland Aff.) ¶ 4.
As part of this process, Payroll Data prepared and submitted, for Ludy's review, properly prepared Forms 941. Doc. # 24 (Ludy Am. Ans.) at 4, ¶ 20. Ludy then deposited the required amount, to cover the related obligations, into an account at a local banking institution, to which Payroll Data had access to pay the tax obligations. Id. ¶ 18. Rather than filing the properly prepared Forms and associated obligations with the IRS, however, Payroll Data submitted different Forms to the taxing authorities and paid different tax amounts, significantly understating and underpaying the amount of taxes due and keeping the rest.7 Id. ¶¶ 20-21.
In 2003, the IRS notified Ludy of the irregularities in the preparation of its Forms 941 and payment of the accompanying tax obligations. Id. ¶¶ 19-21. Ultimately, Ludy had to pay the IRS a total of $425,430, for past taxes due and interest. Id. ¶ 24. It is this sum that Ludy is attempting to claim, under the subject insurance policies.
In considering a Rule 12(b)(6) motion to dismiss, a court should not dismiss a complaint "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Lillard v. Shelby County Bd. of Educ., 76 F.3d 1716, 724 (6th Cir.1996). Further, court must "construe the complaint liberally in the plaintiffs favor and accept as true all factual allegations and permissible inferences therein." Lillard, 76 F.3d at 724 (quoting Cheriee Gazette v. City of Pontiac, 41 F.3d 1061, 1064 (6th Cir.1994)).
While the complaint need not specify every detail of a plaintiffs claim, it must give the defendant "fair notice of what the plaintiffs claim is and the grounds upon which it rests." Gazette, 41 F.3d at 1064. While liberal, this standard of review does require more than the "bare assertion of legal conclusions and it must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Hughes v. Sanders, 469 F.3d 475, 477 (6th Cir.2006) (quotations omitted),
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