Home Indem. Co. v. Farm House Foods Corp., Civ. A. No. 90-C-559.

• Decision Date: 30 July 1991
• Docket Number: Civ. A. No. 90-C-559.
• Citation: 770 F. Supp. 1339
• Parties: The HOME INDEMNITY COMPANY, a New Hampshire corporation, Plaintiff, v. FARM HOUSE FOODS CORPORATION, a Wisconsin corporation, and the Diana Corporation, a Delaware corporation, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

770 F. Supp. 1339

The HOME INDEMNITY COMPANY, a New Hampshire corporation, Plaintiff, v. FARM HOUSE FOODS CORPORATION, a Wisconsin corporation, and the Diana Corporation, a Delaware corporation, Defendants.

Civ. A. No. 90-C-559.

United States District Court, E.D. Wisconsin.

July 30, 1991.

Gary P. Lantzy, Kohner, Mann & Kailas, Milwaukee, Wis., for Home Indem. Co.

W. Stuart Parsons and Susan LaCava, Quarles & Brady, Milwaukee, Wis., for Diana Corp.

Michael J. McDonagh, Farm House Foods Corp., Milwaukee, Wis., for Farm House Foods Corp.

DECISION AND ORDER

REYNOLDS, Senior District Judge.

BACKGROUND

On June 8, 1990, plaintiff Home Indemnity Company ("Home Indemnity") commenced an action in this court against defendants Farm House Foods Corporation ("Farm House") and Diana Corporation ("Diana") alleging that they had breached a contract they entered into with Home Indemnity by not paying Home Indemnity $629,935.02 in premiums due on insurance policies for the period April 1, 1988 to April 1, 1989. Home Indemnity is incorporated in New Hampshire and has its principal place of business in New York (Complaint ¶ 1). Farm House is incorporated in Wisconsin with its principal place of business in Wisconsin (Farm House Answer ¶ 2). Diana is incorporated in Delaware with its principal place of business in Wisconsin (Diana Answer ¶ 3). Thus, this court has subject matter jurisdiction to adjudicate this dispute pursuant to Title 28 United States Code § 1332(a)(1).

On July 3, 1990, Diana answered Home Indemnity's complaint. Diana admits that it was a named insured on the insurance policies issued by Home Indemnity, but denies that it is liable for any premiums owed to Home Indemnity (Answer ¶¶ 5-6, 11, 18). Diana, however, admits that Farm House owes premiums to Home Indemnity (Answer ¶ 6). On October 2, 1990, Farm House filed an amended answer in which it admits that it is liable to Home Indemnity for unpaid premiums (Answer ¶ 6). Farm House, however, denies that the amount it owes Home Indemnity is $629,935.02 (Id.).

On February 28, 1991, Diana moved this court to enter an order prohibiting Home Indemnity from offering at trial the expert legal testimony of University of Wisconsin Law School Professor, Kenneth B. Davis, Jr. ("Davis"). Diana argues that Home Indemnity should be prohibited from having Davis testify at trial on his opinions concerning the question of law as to whether or not Diana's corporate veil should be pierced. On April 15, 1991, Home Indemnity opposed Diana's motion. Home Indemnity argues that the question of piercing a corporate veil is extremely complex and that the jury would benefit from Davis' expert testimony on this question.

On March 1, 1991, Diana moved this court for partial summary judgment. Diana requests this court to find that (1) the contract creating the obligation to pay premiums was solely between Home Indemnity and Farm House and (2) Home Indemnity is estopped from piercing Diana's corporate veil. On April 15, 1991, Home Indemnity opposed Diana's motion and moved this court to enter summary judgment against Farm House/Diana finding that both defendants are liable for the premiums owed on the insurance policies. Home Indemnity argues that in addition to defendant Farm House being liable for the premiums, defendant Diana also is liable because: (1) Diana was a named insured; (2) there was a de facto merger between Diana and Farm House; and (3) Diana is a mere continuation of Farm House. In addition, Home Indemnity claims that there is no dispute as to the amount owed under the policies by Farm House/Diana. On May 3, 1991, Diana opposed Home Indemnity's motion for summary judgment.

Farm House did not file a brief in opposition to Home Indemnity's motion for summary judgment. However, on April 8, 1991, Farm House moved this court to appoint a special master to determine the amount of money which was due on the insurance premiums. Farm House argues that (1) the $629,935.01 in premiums claimed by Home Indemnity is grossly overstated and (2) that reference to a special master is necessary because the premium in question is a retrospective insurance premium whose calculation is an extremely technical and complex factual question. On April 23, 1991, Home Indemnity opposed Farm House's motion for reference to a special master and argued that calculating a retrospective premium is not a complicated matter.

On May 3, 1991, Diana moved this court for a continuance of the discovery deadline to enable it to conduct additional discovery on the question of the amount of premiums due under the policies. On May 16, 1991, Home Indemnity opposed Diana's motion on the ground that there is no genuine issue as to any material fact as to the amount of insurance premiums due to Home Indemnity from Farm House/Diana.

On May 29, 1991, Farm House moved this court to strike various portions of Home Indemnity's reply brief relating to Home Indemnity's motion for summary judgment. Farm House requests this court to strike those portions of Home Indemnity's brief which request this court to enter summary judgment against Farm House on the ground that Farm House failed to file a brief in opposition to Home Indemnity's summary judgment motion. Farm House argues that it was not required to file a responsive brief because Home Indemnity's motion was directed at a non-party: "Farm House Foods Corporation/Diana Corporation." On June 7, 1991, Home Indemnity opposed Farm House's motion, and on June 25, 1991, Home Indemnity filed with this court copies of documents generated by the insurance coordinator of Farm House, Sandra Woodley ("Woodley"), which refers to "Farm House Foods Corporation/Diana Corporation."

On July 18, 1991, Farm House sent to this court a letter in which it requested an adjournment of the September 10, 1991 trial date in this action because Farm House's general counsel had a scheduling conflict.

This court: (1) denies Diana's motion for partial summary judgment; (2) grants partial summary judgment in favor of Home Indemnity holding Farm House and Diana liable for the premiums owed on insurance policies WC-K98 54 34, BA-K98 80 59, and GL-K98 71 46; (3) denies Home Indemnity's motion for summary judgment on the amount of premiums it is entitled to under the policies; (4) denies as moot Diana's motion in limine regarding the expert testimony of Davis; (5) denies Farm House's motion for reference to a special master; (6) grants Diana's motion for a continuance of the discovery deadline to permit them to conduct additional discovery on the issue of the amount of premiums Home Indemnity is entitled to; (7) denies Farm House's motion to strike; and (8) denies Farm House's motion for an adjournment of the trial date.

FACTS

In December of 1987, Farm House was the parent of Diana and owned approximately 56% of Diana's stock (Feb. 28, 1991 Woodley Aff. ¶ 2; Apr. 15, 1991 Lantzy Aff. Exh. 240 at 17). During December 1987, the board of directors for Diana approved a tender offer for the stock of its parent, Farm House (Woodley Aff. ¶ 3). The tender offer was made on March 3, 1988, and involved an exchange of three shares of Farm House stock for one share of Diana stock (Mar. 1, 1991 Diana Brief Exh. 37 at 1). The purpose of the tender offer was to have Diana acquire ownership of more than 50% of the Farm House shares, thereby giving Diana the power to exercise absolute control over Farm House and its operating subsidiaries (Id. at 4).

The tender offer was successful, and as a result of the stock exchange in April 1988 Diana's ownership in Farm House increased from approximately 22% to approximately 93%, and Farm House's ownership in Diana was reduced from approximately 56% to approximately 36% (Lantzy Aff. Exh. 240 at 17). In addition, in April 1988, Farm House sold to Diana its entire holding of Diana stock for an $18,549,000 promissory note of Diana bearing interest at 12.5% per annum (Id.). This note was subsequently paid off by Diana (Id.).

In December 1987, Farm House was interested in purchasing workers' compensation, general liability, and auto/fleet insurance for itself and its subsidiaries for the period April 1, 1988 to April 1, 1989 (Woodley Aff. ¶¶ 1-4). Farm House's insurance coordinator and the person responsible for coordinating the purchase of the insurance policies in question in this action was Sandra Woodley (Id.).

On January 29, 1988, Woodley met with Home Indemnity account executive Mark Hilgart ("Hilgart") to discuss Farm House's insurance needs (Id. at ¶ 5). Woodley informed Hilgart at this time that Diana was in the process of preparing a tender offer for Farm House whereby Diana would become Farm House's parent (Id.). Farm House selected Home Indemnity as its insurer, and the policies whose premiums are in dispute in this action, WC-K98 54 34, BA-K98 80 59, and GL-K98 71 46, became effective on April 1, 1988 (Id. at ¶ 10). Diana was a named insured for these policies (Apr. 12, 1991 Hilgart Aff. Exhs. 1 & 2).

On October 10, 1988, Woodley, on behalf of Farm House, entered into a "Premium Agreement (Incurred Loss Retrospective Plan)" ("the Agreement") with Home Indemnity which set forth the formula for calculating the retrospective premiums for the insurance policies in question (Woodley Aff. ¶ 14; Exh. 23). Neither Farm House nor Diana has paid Home Indemnity the retrospective premiums which Home Indemnity claims it is entitled to for insurance policies WC-K98 54 34, BA-K98 80 59, and GL-K98 71 46 (Complaint ¶ 5; Diana Answer ¶ 6; Farm House Answer ¶ 6).

ANALYSIS

I. Summary Judgment

Rule 56(c) of the Federal Rules of Civil Procedure provides that a federal district court shall grant a motion for summary judgment if the pleadings, depositions, answers to interrogatories, admissions, and affidavits indicate that no material facts are in dispute and that the moving party is entitled to judgment as a matter of law. Howland v. Kilquist, 833 F.2d 639, 642 (7th Cir.1987)....