J. Aron and Co., Inc. v. Service Transp. Co.

Decision Date11 May 1981
Docket NumberHM77-2003.,Civ. No. HM77-1542
Citation515 F. Supp. 428
PartiesJ. ARON AND COMPANY, INC., to its own use and to the use of the Home Insurance Company, Plaintiff, v. SERVICE TRANSPORTATION COMPANY, Defendant and Third-Party Plaintiff, v. FIREMAN'S FUND OF AMERICA, INC. and Paul Arnold Associates, Inc., Third-Party Defendants, Counter-Claim. PAUL ARNOLD ASSOCIATES, INC., Fourth-Party Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, Fourth-Party Defendant. FIREMAN'S FUND INSURANCE COMPANY, Plaintiff, v. SERVICE TRANSPORTATION COMPANY, Defendant and Third-Party Plaintiff, v. PAUL ARNOLD ASSOCIATES, INC., Third-Party Defendant and Fourth-Party Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, Fourth-Party Defendant.
CourtU.S. District Court — District of Maryland

Francis J. Gorman, James W. Bartlett, III, and Semmes, Bowen & Semmes, Baltimore, Md., for J. Aron & Co., Inc.

Marvin J. Land, Dana N. Pescosolido and Weinberg & Green, Baltimore, Md., and Gordon S. Freesman and Harber & Freesman, Fort Lee, N. J., for Service Transp. Co.

Donald L. Merriman, Michael B. Mann and Merriman, Crowther & Merriman, Baltimore, Md., for Fireman's Fund Ins. Co.

Louis G. Close, Jr., Larry M. Waranch, and Whiteford, Taylor, Preston, Trimble & Johnston, Baltimore, Md., for Paul Arnold Associates, Inc.

MEMORANDUM

MURRAY, District Judge.

The factual genesis of these consolidated lawsuits was the loss of four truckloads of coffee beans in a fire which occurred on June 27, 1977 at the Kresson Street terminal in Baltimore of Service Transportation Co., ("Service"), a corporation engaged in the business of transporting freight for hire as a common carrier. The owner of the coffee beans, J. Aron and Co., Inc. ("Aron"), filed suit in Civil No. 77-1542 to recover damages from Service for the fire losses, and Service impleaded its insurance carrier, Fireman's Fund Insurance Co. ("F.F.") and the insurance broker who procured and prepared the Fireman's Fund policy, Paul Arnold Associates, Inc. ("Arnold"). On May 1, 1977 F.F. had issued a policy of insurance to Service which Service claimed provided coverage for the fire loss. To resolve the issues of policy coverage, which centered around the meaning of the policy language "while in the custody or control of the insured ... in the ordinary course of transit," F.F. instituted Civil No. 77-2003, seeking a declaratory judgment that the loss was not covered by its policy issued to Service. F.F. won the declaratory judgment action when this court, by opinion of the late Judge Blair dated March 13, 1979, ruled on cross motions for summary judgment that the insurance policy covered only "in transit" losses and that the coffee, which had been under Federal customs detention at Service's Kresson Street terminal for approximately three weeks, was no longer "in transit." Fireman's Fund Ins. Co. v. Service Transportation Co., 466 F.Supp. 934 (D.Md.1979).1

In June of 1977 Judge Blair had bifurcated the trial of the main case, No. 77-1542, to consider first Aron's basic liability claim against Service and only at a later date Service's claims of contractual and tort liability against Arnold for failure to provide appropriate insurance coverage. This approach was sensible and must have appealed to Judge Blair's strong appreciation of practicality in the administration of justice; obviously if Service were to prevail against Aron on the issue of primary liability for the coffee loss, then there would be no need to proceed against Arnold for indemnity. Shortly after this bifurcation, Service filed its third-party claims against F.F. relating to the issues of coverage of alleged post-fire losses and the Motor Carrier Cargo Liability Certificate of Insurance, which the Interstate Commerce Commission required to be filed on behalf of Service pursuant to the authority of 49 U.S.C. § 10927 and 49 C.F.R. § 1043.1(b).2

Trial was held before Judge Blair in December of 1979. On February 4, 1980, 486 F.Supp. 1070 (D.Md.1980), Judge Blair ruled that Service was liable to Aron for the damage to the coffee beans; that Aron's recovery ought to be reduced by the amount of Service's counterclaim for storage charges; that post-fire loss to the coffee beans, if any, was without the coverage of the F.F. policy; and that pursuant to the I.C.C. certificate and endorsement Aron could recover $10,000 of its claim against Service from F.F. Procedurally speaking, the result was judgment for plaintiff on primary liability partially set off by a counterclaim, dismissal of Service's third-party claim against F.F.,3 and judgment for plaintiff Aron on its claim under Rule 14(a) against F.F. based on the I.C.C. endorsement attached to Service's insurance policy. Judgment was entered on February 5, 1980.

Shortly thereafter counsel for Aron, having learned that Service was closing down its operations at various locations, moved the court to certify Aron's judgment against Service under Rule 54(b) in order to protect the integrity of that judgment. The court, finding no just reason for delay in the entry of such judgment as a final judgment, so ordered on March 27, 1980.

As the trial of the remainder of this bifurcated case approaches, the court is now called upon to decide the motion by Service to amend yet again its third-party complaint in order to allege against F.F. substantially the same theory it currently alleges against Arnold. F.F. opposes the motion to amend, arguing that it has already been a third-party defendant in this case once before and that principles of res judicata should preclude Service from litigating F.F.'s liability anew. Service retorts that res judicata is inapplicable here for two reasons: first, because the doctrine applies only to final judgments and the only part of the prior judgment certified as final was Aron's judgment against Service; and second, because res judicata would only bar relitigation of the same cause of action — whereas the first third-party claim dealt with F.F.'s liability on the contract of insurance, the amended third-party claim proceeds on a theory of liability outside the contract.

At the hearing held in this matter, the court observed that it was, in a very real sense, unfair for counsel to continue to compel F.F. to keep shuttling in and out of the case. Counsel for Service took the position, however, that the liberality with which Rule 15 on amendment of pleadings is to be construed together with the absence (in his view) of res judicata as to the new claim results in an ability to keep inserting F.F. into this litigation limited solely by the imagination of counsel in formulating new causes of action. Indeed, counsel for Arnold at this same hearing advanced a new theory of liability for F.F. based on its insurance contract with Service; but if anything in this case is clear, it is that F.F.'s liability on that contract has already been adjudicated, not once but twice, and that is the law of the case as far as this court is concerned.4

The court is well aware of the ingenuity displayed by all counsel in this matter in what is transparently an effort to keep the "deep pocket" in the case. Even counsel for Aron, the judgment creditor in whose favor judgment was certified under Rule 54(b), participated in this effort when it sought, some months ago, to intervene under Rule 24 and assert a cause of action against F.F. for breach of its insurance contract with Service. In its memorandum dated January 8, 1981, this court denied Aron leave to intervene, stating:

Aron cannot come in and out of the case at will, asserting whatever claims it wishes to do depending on the posture of the case. It has no right, for example, to resuscitate a claim that Fireman's policy covers Service when the court has already fully litigated that issue and determined that the policy does not cover goods not in transit. As to Fireman's, Aron has brought to the court's attention no new issues of fact or law, and there is no justification for allowing Aron "another bite at the apple."

Memorandum and Order, Jan. 8, 1981 at 6.

I

In that same memorandum, the court denied F.F.'s motion to certify as final under Rule 54(b) its declaratory judgment of non-coverage in 77-2003 and the judgment in 77-1542 denying any claim of Service against F.F. for damage to coffee in transit following the fire and fixing F.F.'s exposure under the I.C.C. mandated endorsement at $10,000. The principal arguments in opposition to F.F.'s motion had been made by Service and by Aron, as summarized at page 7 of the Memorandum:

... Service objects on the ground that the object of Rule 54(b) is to permit a party to appeal part of a multi-party, multi-issue case only where there is no reason for delay. It accuses Fireman's of seeking to finalize a judgment in its (Fireman's) favor to force the other side (Service) to appeal while trying the remaining issues which might render the appeal moot. This, says Service, would create the possibility of several appeals going forward at the same time Service is pursuing a trial in the District Court. J. Aron joins Service in opposing Fireman's Rule 54(b) Certification request. It argues that the Rule 54(b) Certification of the final judgment in its favor against Service was entered because it appeared the defendant-debtor (Service) was going out of business. No similar basis exists for finalizing the judgments obtained by Fireman's, especially at a time, it is urged, when other claims against Fireman's may still be outstanding. (Emphasis supplied)
When ruling on the certification question, the court construed that part of the argument contained in the above-emphasized language as referring to the first Fourth-Party complaint filed by Arnold against F.F., which was in the same memorandum and order dismissed with leave to amend. The emphasized language admits of another interpretation as well, namely as a manifestation of the continued efforts by the other three parties to keep F.F. in the case. In
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