Maertin v. Armstrong World Industries, Inc.
| Decision Date | 11 December 2002 |
| Docket Number | Civil No. 01-5321(JBS). |
| Citation | 241 F.Supp.2d 434 |
| Parties | Joan MAERTIN et al., Plaintiffs, v. ARMSTRONG WORLD INDUSTRIES, INC., et al., Defendant. |
| Court | U.S. District Court — District of New Jersey |
Gary D. Ginsberg, Esquire, Law Office of Gary D. Ginsberg, Mount Laurel, NJ, for Plaintiffs.
James N. Lawlor, Esquire, Adam G. Brief, Esquire, Gibbons, Del Deo, Dolan, Griffinger & Vecchione, Newark, NJ, for Defendant Armstrong World Industries, Inc.
John C. Sullivan, Esquire, Post & Schell, Esqs. Voorhees, NJ, for Defendants Liberty Mutual Insurance Co. and Michael Carroll.
Seth Goodman Park, Esquire, Siegal & Napierkowski, Cherry Hill, NJ, for Defendant Cravens, Dargan Co, Pacific Coast, as managing general agent for Central National Insurance Co. of Omaha.
Copernicus T. Gaza, Esquire, Traub, Eglin, Lieberman, Straus, Edison, NJ, for Defendant OneBeacon Insurance Co, formerly CGU Group, successor to Potomac Insurance Co.
This case involves the payment of a multi-million dollar settlement agreement to plaintiffs who were exposed to the cancercausing substance known as polychlorinated biphenyl. Plaintiffs have sought payment from defendant Armstrong World Industries, which is now a debtor in Chapter 11 Bankruptcy, and from its insurance carriers, and have alleged that Armstrong and its employee Bethann Jakoboski, and Liberty Mutual Insurance Company and its employee Michael Carroll committed fraud and bad faith in the negotiations that led up to the settlement agreement.
Three separate motions are before the Court at this time: (1) the motion of defendants Central National Insurance Co. and CGU Group to dismiss plaintiffs' complaint; (2) the motion of defendants Liberty Mutual Insurance Company and Michael Carroll to dismiss plaintiffs second amended complaint; and (3) the motion of defendants Armstrong World Industries and Bethann Jakoboski to dismiss or for summary judgment.
This Court will consider each motion in turn and will deny the motion to dismiss of defendants Central National and CGU Group, will deny in part the motion to dismiss of defendants Liberty Mutual and Michael Carroll as to the claims in Count I of plaintiffs' complaint and the fraud claims in Count II of plaintiffs' complaint but will grant it in part as to the bad faith claims in Count II of plaintiffs' complaint, and will deny the motion to dismiss of defendants Armstrong World Industries and Bethann Jakoboski but will grant the motion for summary judgment of defendants Armstrong and Jakoboski as to the bad faith and fraud claims in Count II of plaintiffs' complaint.
In a 2000 settlement agreement, Armstrong World Industries ("Armstrong") agreed to pay plaintiffs seven million dollars. The agreement settled two actions in the United States District Court for the District of New Jersey, Maertin, et al. v. Armstrong World Industries, Inc., No. 95-2849(JBS), ("Maertin I"), and Schmoll v. Armstrong World Industries, Inc., No. 99-3497(JBS),1 brought by plaintiffs who had either contracted, or feared contracting, cancer as a result of their exposure to ceiling tiles manufactured by Armstrong that had been installed in their workplace at Burlington County College. Armstrong manufactured and distributed the ceiling tiles from about August 1968 to April 1970; they were coated with a plasticizer that included the carcinogen polychlorinated biphenyl ("PCB").
The case was heavily litigated until the parties reported a settlement on September 14, 2000. This Court issued an order of dismissal and the parties entered into a "Settlement Agreement and Mutual General Release." The settlement agreement was signed by all parties on or before November 22, 2000; Armstrong signed the agreement on November 6, 2000. (11/28/2001 O'Connor Cert.) Under the terms of the agreement, Armstrong was to make the $7,000,000 payment to plaintiffs' counsel on or before January 21, 2001.2 (Def. Craven's Br. at 2.)
On September 20, 2000, Armstrong filed Armstrong World Industries, Inc. v. Central National Insurance Co. of Omaha, et al, Civil Number 00-4763, in the Eastern District of Pennsylvania against its insurance carriers seeking a declaration of coverage for the settlement amount.
On December 6, 2000, Armstrong filed bankruptcy under Chapter 11 in the District of Delaware. (Id. at 3.) Armstrong, continuing to operate its business as a debtor in possession, notified plaintiffs of the bankruptcy action and reminded them that any collection action was stayed by the Bankruptcy Code's automatic stay provision. (Id.) The Armstrong case in the Eastern District of Pennsylvania was also stayed. (Gangl Cert.¶7.)
Plaintiffs filed for relief from the automatic stay on March 29, 2001 to seek payment of the settlement amount. On November 5, 2001, the Honorable Joseph J. Farnan, United States District Judge, presided over a hearing regarding the automatic stay. (Raditz Cert., Ex. C.) Counsel for plaintiffs informed the court:
I think at this point, your Honor, what we would like the Court to do is grant relief from the automatic stay to allow the Maertin plaintiffs to go back to the District Court for the District of New Jersey, deal with whatever rights they have there, assert any action they may have there in New Jersey law against any of the insurance carriers who may have been involved ... In the event that it can't be resolved there, the Maertin plaintiffs can certainly move to intervene in the Eastern District of Pennsylvania
(Id, Tr. 33:24-34:7, 22-25.) Judge Farnan granted their application, stating from the bench on November 5, 2001, "I'll grant the application and enter an order for that tomorrow." (Id., Tr. 39:23-24.)
The proceeding then continued so the parties could clarify the effect that lifting the stay would have on litigation against Armstrong's insurance providers. Counsel for International Insurance Co. asked the Court "to be clear that you're lifting the stay as to proceeding against the debtor only and not as to any actions or direct actions against any of the insurance carriers." (Id., Tr. 40:7-10.) The Court responded that "[t]he stay only applies to the debtor." (Id. Tr. 40:11.) Counsel for plaintiffs, however, responded by stating, "I want to make sure counsel isn't indicating we may be stayed from proceeding against an insurance carrier as well." (Id., Tr. 40:24-41:1.) Counsel for International Insurance Co. responded by asking "[t]he issue is, can they institute or commence an action against insurance proceeds that are stayed," (Id., Tr. 41:6-7), and the Court answered by stating (Id,, Tr. 41:9-14).
Judge Farnan filed his memorandum order on December 10, 2001 which lifted the stay to allow plaintiffs to pursue the enforcement of the settlement agreement, stating:
NOW THEREFORE, IT IS HEREBY ORDERED that having considered the Motion for Relief from the Automatic Stay filed by the Maertin Plaintiffs in an action pending in the United States District Court for the District of New Jersey, Civil Action No. 95-CV-02849, and the responses thereto, the Motion is hereby GRANTED.
The Automatic Stay set forth in 11 U.S.C. § 362 is modified to permit the Maertin Plaintiffs to proceed with the New Jersey Action and pursue any rights that they may be permitted under applicable state and federal law in connection with that action, in state or federal court.
(12/10/01 Order of Hon. Joseph J. Farnan at 3.) Meanwhile, on November 14, 2001, before the actual written order was entered, plaintiffs filed a complaint with this Court against Armstrong, Liberty Mutual Insurance Co.,3 Central National Insurance Co. of Omaha, Certain London Market Insurance Companies, CGU Group, Equitas Reinsurance Limited, First State Insurance Co, International Insurance Co, Puritan Insurance Co, and Peter E.J. Cameron-Webb for a declaratory judgment that the insurers pay the settlement agreement amount and against Armstrong, Liberty Mutual Insurance Company, Michael Carroll, and Bethann Jakoboski for money damages for fraud, bad faith, and concealment during the settlement negotiations. ("Maertin II")(Raditz Cert, Ex. D.)
Plaintiffs also filed a Notice of Motion to Enforce Settlement as to Defendant Armstrong in Maertin I on November 30, 2001. There, the Honorable Joel B. Rosen, in a Report and Recommendation filed pursuant to 28 U.S.C. § 636(b)(1)(B), found that this Court had jurisdiction to enforce the settlement agreement, that the settlement agreement was a valid and binding agreement, and that this Court has authority to enforce the agreement even though the bankruptcy court has exclusive jurisdiction to compel the debtor's payment of the settlement amount. (Report and Recommendation.) After considering Defendant Armstrong's objections to the Report and Recommendation, on September 5, 2002 this Court affirmed Judge Rosen's Report and Recommendation and entered judgment against Defendant Armstrong in the amount of $7,000,000 so that the plaintiffs could compel payment in the United States Bankruptcy Court.
Meanwhile, before this Court in Maertin II, plaintiffs continued their action seeking payment of settlement amounts from the defendant insurers. On March 21, 2002, defendant Cravens, Dargan Co., Pacific Coast, as managing general agent for Central National Insurance Co. of Omaha, (collectively "Central National"), filed a motion to dismiss or, in the alternative, to stay the instant action. [Docket Item 17-1.] In a letter dated March 22, 2002, defendant CGU Group, now OneBeacon Insurance Co., joined and adopted Central National's motion to dismiss. (O...
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