Greenway Center, Inc. v. Essex Ins. Co.

• Decision Date: 30 January 2007
• Docket Number: No. 05-3782.,05-3782.
• Citation: 475 F.3d 139
• Parties: GREENWAY CENTER, INC. v. ESSEX INSURANCE COMPANY, Appellant. Annette Maione, Individually and as Administrator of the Estate of Mark Willet.
• Court: U.S. Court of Appeals — Third Circuit

475 F.3d 139

GREENWAY CENTER, INC. v. ESSEX INSURANCE COMPANY, Appellant.

Annette Maione, Individually and as Administrator of the Estate of Mark Willet.

No. 05-3782.

United States Court of Appeals, Third Circuit.

Argued on November 27, 2006.

Opinion Filed January 30, 2007.

Richard D. Picini, Esq., (argued), Jennifer L. Casatelli, Esq., Picillo Caruso O'Toole, P.C., Nutley, NJ, for Appellant Essex Insurance Company.

Ronald V. Santora, Esq., (argued), Bresset & Santora, LLC, Forty Fort, PA, for Appellee Greenway Center, Inc.

Joseph P. Hanyon, Esq., (argued), Michael B. Kaspszyk, Esq., Merwine, Hanyon, Kaspszyk, LLP, Pocono Summit, PA, for Appellee Annette Maione.

Before FUENTES and GARTH, Circuit Judges, and POLLAK, District Judge.¹

GARTH, Circuit Judge.

This appeal requires us to decide whether the district court properly held that it was foreclosed by the doctrine of issue preclusion from making an independent determination whether appellee Greenway Center, Inc. ("GCI") is a successor in interest to Winco Acquisitions, Inc. ("Winco") — a company which was insured by appellant Essex Insurance Company ("Essex"). The district court found that a state court had already decided the issue — i.e., that GCI is a successor in interest to Winco, and therefore held that Essex is obligated to defend and indemnify GCI in the state court action brought by appellee Annette Maione against GCI. Because we find that the requirements for the application of issue preclusion have not been met, we vacate the judgment in favor of GCI and remand to the district court for an independent determination, on the merits, of whether GCI is a successor in interest to Winco.

I.

In 1996, Winco, a Pennsylvania Corporation, began operating a substance abuse detoxification center named Greenway Center ("Greenway") in Henryville, Pennsylvania.² On June 16, 1997, Winco filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Middle District of Pennsylvania. Approximately one week later, on June 23, 1997, Mark Willet was admitted for treatment at Greenway. The following morning, June 24, 1997, Willet was found dead, giving rise to a wrongful death action brought in the Pennsylvania Court of Common Pleas by Annette Maione, Willet's wife and administratrix. As a result of this incident, the Pennsylvania Department of Health revoked Winco's license to operate Greenway, and Greenway temporarily ceased operations in November 1997.

In March 1998, while Winco was still in bankruptcy, Greenway was reopened by an entity named Healthcare Management Associates, Inc. ("HMA"), which was authorized by the Bankruptcy Court to operate the facility as an agent for Winco. In September 1998, GCI, plaintiff-appellee in the present case, was incorporated in Pennsylvania by the owners of HMA. On October 16, 1998, HMA submitted to the Bankruptcy Court on behalf of Winco a Debtor's Plan of Reorganization and a Debtor's Disclosure Statement.³ On September 7, 1999, the Bankruptcy Court entered an order confirming the plan. After the plan was confirmed, HMA continued to operate Greenway until the Pennsylvania Department of Health license was transferred to GCI in January 2002. GCI then began operating Greenway.

Beginning at least as early as February 3, 1997, Essex issued a general liability insurance policy covering certain liabilities arising from the operation of Greenway. The named insured on the policy was "Winco Acquisition, Inc. d/b/a Greenway Center." The policy contained a non-assignability clause, which states: "Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured."

II.

On June 23, 1999, appellee Annette Maione, Mark Willet's wife and the administratrix of his estate, filed a wrongful death action in the Court of Common Pleas of Monroe County (the "state court action"). Maione named as defendant in the action only GCI and not Winco. GCI was not a named insured on Essex's policy.

Essex initially engaged attorney Frank Baker to represent GCI in the state court action. However, at some point Essex came to the conclusion that GCI was not insured under its policy and, on December 28, 1999, Essex sent GCI a letter formally denying coverage in the state court action. On or about March 30, 2000, Baker formally withdrew from representing GCI.

Because GCI did not come into existence until a year after Willet's death and Winco's bankruptcy, that entity — GCI — could only be held liable for the death if it were found to be a successor in interest to Winco. Thus, by filing her action against GCI, Maione had named the wrong defendant.

On July 21, 2000, in an effort to remedy her error, Maione filed a second wrongful death action in the Court of Common Pleas of Monroe County — this action named Winco as defendant. Essex retained counsel to defend Winco, its named insured, in this second action. On December 31, 2001, this second action was dismissed on the grounds that Willett had died in 1997 and thus the two-year statute of limitations had expired.

III.

On June 3, 2002, Maione filed a Motion to Correct Name of Defendant in the state court action. The motion sought an order "allowing [Maione] to amend the caption so as to name the defendant as `Winco Acquisition, Inc. d/b/a Greenway Center' or `Greenway Center, Inc. as successor in interest to Winco Acquisition, Inc.'" In support of this motion, Maione asserted that:

On the date that the subject writ of summons was served, both Greenway Center, Inc. and Winco Acquisition, Inc. d/b/a Greenway Center operated under the identical name, "Greenway Center", operated the identical business at the identical mailing address and at the identical location where the death of plaintiff's decedent occurred.

. . . .

Allowing a correction of the name of the defendant will allow the court to secure a determination of this case based upon the merits rather than a mere technicality.

App. at 106-7.

Essex engaged Frank Baker (the same attorney it had retained to defend Winco in the second wrongful death action, which had been dismissed) to file on behalf of Winco⁴ a Petition to Intervene to oppose Maione's motion to amend. In the Petition, Winco asserted that "the plaintiff's motion is an improper attempt to join Winco well after the expiration of the statute of limitations." Together with the Petition to Intervene, Winco also filed an Answer to Plaintiff's Motion to Correct Name of Defendant. In the Answer, Winco stated that GCI "has never been, nor is now, a partner with Winco Acquisition, Inc." Winco further argued that "Winco Acquisition, Inc. is an entirely separate and distinct legal entity from Greenway Center, Inc.," and that "the plaintiff's attempt to improperly substitute or add Winco to this case beyond the expiration of the statute of limitations would be highly prejudicial to Winco." An evidentiary hearing on the motion was held on September 17, 2002.

IV.

On October 9, 2002, the state court, per Judge Peter J. O'Brien, Pennsylvania Court of Common Pleas, issued a decision and order granting Maione's motion to the extent of amending the caption in the state court action to rename the defendant as "Greenway Center, Inc. as successor in interest to Winco Acquisitions, Inc." Because the crucial issue presented in the present appeal is the effect of this decision on the issue raised in this action — i.e., whether, under Pennsylvania law, GCI is a successor in interest to Winco and therefore responsible for its liabilities and entitled to rights under its insurance contract, Judge O'Brien's decision merits a detailed discussion.

In the "Findings of Fact" section of his opinion, Judge O'Brien stated that the facility to which Willet was admitted was, "both prior to the admission of Plaintiff's decedent and through the current date ... identified and operated as `Greenway Center.'" He further found that, in the fall of 1998, Winco submitted a Debtor's Plan of Reorganization to the United States Bankruptcy Court for the Middle District of Pennsylvania. The opinion then quotes the following provision contained in the Plan, adding emphasis as below:

Class 5 — Equity Security Holders. An Equity Security Holder is a party which has equity or an investment interest in the Debtor. With respect to the herein Chapter 11 case, the Equity Security Holders are the shareholders. This class is impaired, and shall surrender ownership in the debtor corporation upon confirmation. THIS PLAN WILL NOT VIOLATE THE ABSOLUTE PRIORITY RULE BECAUSE THE SHAREHOLDERS ARE NOT RETAINING THEIR STOCK AND ALL STOCK SHALL BE VESTED IN GREENWAY CENTER, INC. See 11 U.S.C. Section 1129(b).

Judge O'Brien also found that the attorney who had executed the Debtor's Plan of Reorganization on behalf of Winco had specifically represented to the Bankruptcy Court that all of the stock of Winco Acquisition, Inc. would be vested in Greenway Center, Inc. Apparently based upon the foregoing, Judge O'Brien concluded that "Greenway Center, Inc. was set up to assume the stock from Winco Acquisition, Inc. when the bankruptcy was closed, and to act as its successor in operating the facility in Henryville."

The "Discussion" portion of Judge O'Brien's decision consists, in pertinent part, of the following:

In the case at bar, it is apparent that Greenway Center, Inc. is the successor in interest to Winco Acquisition, Inc. by virtue of the Reorganization Plan confirmed by the Bankruptcy Court. It is further evident that the initial process was served on the appropriate representative of either or both corporate entities and there is no prejudice to any party in allowing this action to continue. As the Supreme Court observed in Paulish v. Bakaitis, supra:

Since from the record it is clear that the same Bertocci business enterprise was involved throughout, there is here no substitution of parties, but the correction of the designation under which the...