Grecian Delight Foods v. Great American Ins. Co.

• Decision Date: 15 February 2019
• Docket Number: No. 18 C 6310,18 C 6310
• Citation: 365 F.Supp.3d 948
• Parties: GRECIAN DELIGHT FOODS, INC., Plaintiff, v. GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, GM Consultant – USA LLC, Daniel Moore and Raymond Pawlak, Defendants.
• Court: U.S. District Court — Northern District of Illinois

365 F.Supp.3d 948

GRECIAN DELIGHT FOODS, INC., Plaintiff,

v.GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, GM Consultant – USA LLC, Daniel Moore and Raymond Pawlak, Defendants.

No. 18 C 6310

United States District Court, N.D. Illinois, Eastern Division.

Signed February 15, 2019

John Stanley Vishneski, Adrienne Kitchen, Jessica Elizabeth Brown, Stanley C. Nardoni, Reed Smith LLP, Chicago, IL, for Plaintiff.

Christopher Mark Henry Snow, Matthew S. Ponzi, Foran Glennon Palandech Ponzi & Rudloff PC, Chicago, IL, for Defendants.

OPINION AND ORDER

SARA L. ELLIS, United States District JudgeAfter an explosion at its factory in July 2017, Plaintiff Grecian Delight Foods, Inc. ("Grecian") turned to its insurer, Defendant Great American Insurance Company of New York ("Great American"), for coverage. Great American used GM Consultant – USA LLC ("GMC"), and its chief executive officer, Raymond Pawlak, to help it in adjusting Grecian's claims. Having reached an impasse with respect to coverage determinations, Grecian filed this suit in state court against Defendants Great American, GMC, Pawlak, and Great American's adjuster assigned to the Grecian claim, Daniel Moore. Grecian brings claims for breach of contract, declaratory judgment, tortious interference, and bad faith against Great American. Grecian names the other defendants—GMC, Moore, and Pawlak—in claims asserting tortious interference with the insurance policy and Grecian's contract with a third party.

Great American removed the case to this Court based on the Court's diversity jurisdiction. While admitting that the joinder of GMC and Pawlak destroys diversity, Great American argued that Grecian fraudulently joined these parties solely to destroy diversity. Grecian now moves to remand the case, claiming that Great American cannot establish fraudulent joinder. Because Great American has not met the high burden required to show that Grecian's claims against GMC and Pawlak have no chance of success, the Court cannot find that Grecian fraudulently joined these defendants and so remands the case to the Circuit Court of Cook County because it lacks jurisdiction over the case.

BACKGROUND

Grecian, a Delaware corporation with its principal place of business in Elk Grove Village, Illinois, manufactures Mediterranean food products. Great American, with which Grecian has an insurance policy, is a New York corporation with its principal place of business in Cincinnati, Ohio. GMC is a Delaware limited liability company, made up of members who are citizens of Illinois, New York, and France. Pawlak, one of GMC's members and its chief executive officer, is a citizen of Illinois. Moore, an executive general adjuster for Great American, is a citizen of Ohio.

Grecian had a commercial property policy with Great American for the period from July 1, 2017 to July 1, 2018. The policy provides that Great American "will pay for direct physical loss of or damage to Covered Property shown in the Declarations caused by or resulting from any Covered Cause of Loss." Doc. 1-1 ¶ 39. The policy also provides that Great American "will pay for the actual loss of Business Income you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration,’ " id. ¶ 43, and extra necessary expenses incurred to avoid or minimize the suspension of business and continue operations.

On July 7, 2017, ammonia began leaking from the ammonia tank into the mechanical room at Grecian's Elk Grove Village facility. An individual detected the ammonia smell and reported it to Grecian management. Management evacuated the facility and called 911. About ten minutes later, an explosion occurred. No one was injured, but the facility suffered extensive damage. The explosion destroyed the facility's ammonia cooling system, which functioned as Grecian's central source of refrigeration and freezing. Grecian had to destroy any in-process products for food safety concerns and shut down production for approximately a week.

Grecian notified Great American of the explosion the day it occurred. The following day, Dale Vesta of Crawford & Company, a Great American investigator, visited the facility and obtained information about the explosion. Great American then replaced Vesta with GMC and Pawlak. On July 10, Moore and Pawlak instructed Grecian not to disturb the accident scene until a Great American representative inspected the facility, causing Great American to only begin restoration efforts on July 18. On July 12, during a visit to the facility, Moore requested extensive information from Grecian and informed Steve Dimakos of Quantum Global Advisors LLC ("Quantum"), whom Grecian hired as its business income consultant, that Quantum would be on a "short leash." Id. ¶ 52. Moore and Pawlak also made clear that Great American might not cover expenses Quantum incurred to prepare Grecian's claims.

To continue operations, Grecian engaged with Aggreko LLC ("Aggreko"), which supplies temporary power generation and temperature control equipment, to use Aggreko's temporary refrigeration units while making permanent repairs to the cooling system. Aggreko evaluated Grecian's needs on July 7 and began staging and installing equipment on July 11. During the July 12 meeting, Moore and Pawlak met Aggreko representatives and became fully apprised of Aggreko's services and challenges it faced. Grecian then signed a good faith agreement with Aggreko on July 17 and a more detailed agreement on July 19 for use of the equipment. Great American did not assist Grecian in negotiating the contract. Grecian sent the contract to Moore and Pawlak on August 4. Neither objected to the contract's terms. But on October 23, 2017, Great American informed Grecian it believed Aggreko was overcharging Grecian by $ 200,000 and that Grecian lacked industry knowledge to make a fair contract. GMC and Pawlak acted to induce Great American not to pay the costs Grecian incurred and sought to unilaterally renegotiate the contract through audits of the contract. Grecian then requested additional information from Great American to understand its issues with Aggreko. Great American did not respond, while Grecian's payments to Aggreko accumulated. On December 15, Aggreko required Grecian to commit to paying $ 1,510,645.15 by December 29. A few days later, Aggreko threatened to pull its units for nonpayment if it did not receive payment for overdue charges by December 22 at 5 p.m. Grecian notified Great American of these threats and asked for immediate assistance. Great American sent a $ 1 million payment as a courtesy, with Grecian having to borrow money to pay the remainder. In January, with more overdue payments having accrued, Aggreko told Grecian it could pull the equipment at any time. Grecian again had to borrow money to pay Aggreko the January outstanding balance of $ 1.2 million.

On January 18, Great American, Grecian, and Aggreko met to discuss Aggreko's invoices. Moore asked Grecian and Aggreko to sign one-day nondisclosure agreements, but neither party did so. Great American reiterated its belief that Aggreko's services were overpriced, but Aggreko declined to renegotiate. Great American also refused to pay for any Aggreko invoices after December 29, 2017, which it considers the date the restoration period ended. Aggreko invoiced a total of $ 5,502,765.82 for providing cooling equipment to Grecian from July 2017 until its new ammonia system was functioning in February 2018. Great American only paid $ 3,099,199.84 of this amount. In July 2018, Great American demanded an appraisal of the extra expense loss Grecian incurred for Aggreko's services.

Aside from the Aggreko contract, Grecian incurred additional losses and submitted extensive documentation and partial proofs of loss to Great American. Instead of covering Grecian's entire requests, Great American only paid small amounts of the requested sums. Great American also provided working statements of loss to Grecian, setting forth its position as to the covered claims under the policy. By February 8, 2018, Grecian completed replacement of the ammonia system. It submitted proofs of loss through July 2018. As of July 25, 2018, Grecian had documented the following breakdown of its total $ 26,764,620 loss: $ 8,983,003 in business income loss; $ 10,711,535 in extra expense loss; $ 6,671,582 in building and personal property loss; and $ 398,500 in loss data preparation costs. Great American had advanced $ 11,505,278.02. Combined with a payment Grecian received on a policy it had with Travelers Property and Casualty Insurance Company, $ 12,669,506.98 of Grecian's claimed loss remained unpaid by Great American. Grecian believes the difference between its proof of loss and the paid amount can be attributed to: (1) deductions to the amount owed to Aggreko based on Great American's audit of the contract between Grecian and Aggreko; (2) deductions to costs based on Great American's application of the pollution exclusion of the policy; (3) deductions based on Great American's application of sublimits of liability; (4) deductions based on Great American's refusal to pay to replace damaged and inoperable ammonia piping; (5) Great American's refusal to pay claim preparation costs; and (6) deductions based on Great American's calculation of business income and its reduction of the restoration period.

LEGAL STANDARD

A defendant may remove a case filed in state court that could have been filed originally in federal court. 28 U.S.C. § 1441 ; Tylka v. Gerber Prods. Co. , 211 F.3d 445, 448 (7th Cir. 2000). The removing party bears the burden of demonstrating the propriety of removal, and any doubt regarding jurisdiction should be resolved in favor of remand. Schur v. L.A. Weight Loss Ctrs., Inc. , 577 F.3d 752, 758 (7th Cir. 2009). The Court may remand a case for lack of subject matter jurisdiction or, if timely raised, for failure to comply with the removal statutes. 28 U.S.C. §§ 1446, 1447(c) ; GE Betz, Inc. v. Zee Co. , 718...