McGrath v. Everest Nat. Ins. Co.
| Decision Date | 23 September 2009 |
| Docket Number | Case No. 2:07 cv 34. |
| Citation | 668 F.Supp.2d 1085 |
| Parties | Roseland McGRATH, Plaintiff v. EVEREST NATIONAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
Donald W. Wruck, III, Jason J. Paupore, Wruck Paupore LLC, Dyer, IN, for Plaintiff.
Edward W. Hearn, Johnson & Bell Ltd., Merrillville, IN, William K. McVisk, Johnson & Bell Ltd., Chicago, IL, for Defendant.
This matter is before the court on the Motion for Partial Judgment on the Pleadings, or Alternatively, Partial Summary Judgment [DE 145] filed by the plaintiff, Roseland McGrath, on September 15, 2008; Everest National Insurance Company's Motion to Strike Portions of Plaintiff's Statement of Material Facts [DE 162] filed on October 20, 2008; and the Motion to Strike Everest's "Reply" Brief or, Alternatively, to File Response [DE 179] filed by McGrath on November 24, 2008. For the following reasons, the Motion to Strike Portions of Plaintiff's Statement of Material Facts [DE 162] is DENIED, the Motion to Strike Everest's "Reply" Brief [DE 179] is GRANTED, and the Motion for Partial Judgment on the Pleadings, or alternatively, Partial Summary Judgment [DE 145] is addressed as a Motion for Partial Summary Judgment and is GRANTED IN PART and DENIED IN PART.
On February 11, 2005, the plaintiff, Roseland McGrath, fell as she was using the front door of Eli's Pub in Hammond, Indiana. At the time of McGrath's fall, Eli's Pub was a named insured on a Commercial General Liability Policy of Insurance maintained with Everest National Insurance Company. McGrath's counsel advised Randy Godshalk, the principal member of the company operating Eli's Pub, Aidan Alan, LLC d/b/a Eli's Pub, of her claim against the pub. Godshalk, in turn, reported her claim to Everest and its third party administrator, Risk Control Associates ("RCA"). Godshalk also is an attorney licensed to practice law in Indiana.
On September 5, 2006, McGrath, filed a complaint against "Eli's Pub" in the Lake County Superior Court. Service of this state court complaint was made on Godshalk. Godshalk also was the managing or principal member of Randall Neely, LLC, which owned the building and leased that property to Eli's Pub. The complaint was sent by certified mail to Eli's Pub, and plaintiff's counsel also sent a copy of the complaint to Peter Buthmann, a representative from RCA who had investigated the claim for the insurer.
On September 8, 2006, an Everest manager contacted Stephen Kolodziej, an attorney at the law firm of Brenner, Ford, Monroe & Scott ("Brenner Ford"), and Kolodziej advised Everest that Brenner Ford employed a licensed Indiana attorney who could appear for and defend the interests of Everest's insureds in the state court action. On this basis, Everest retained Brenner Ford.
On September 18, 2006, in a letter from RCA to "Aidan Allen LLC t/a Eli's Bar, Randall Neely, LLC" (hereafter, "the insureds"), RCA indicated that it was "in receipt of a summons and complaint" in the state court action and had retained the firm to defend the insureds in the matter. This letter contained explicit instructions to the insureds to cooperate fully in the defense and investigation of the claim, instructions repeated in another letter the next day.
No appearance was entered by any attorney from Brenner Ford in the state court matter, and on October 4, 2006, an order of default was entered against Eli's Pub. A hearing on McGrath's damages was set for November 29, 2006. In the interim, Kolodziej corresponded with McGrath's counsel, Donald Wruck, on several occasions. In a letter dated October 13, 2006, Kolodziej informed Wruck that Eli's Pub, the defendant named in the complaint, was "merely a name, and not a legal entity amenable to suit." (Pltf. Mot. Ex. 11) Kolodziej suggested the misnomer, but he kept the insureds' identity undisclosed and ignored return communications asking for accurate information to amend the complaint. This notion of an error in identity was repeated in a November 16, 2006 letter from Kolodziej to Godshalk, wherein Kolodziej explained that his research confirmed that because the named defendant was not an existing legal entity, the lawsuit was a nullity under Indiana law. (Pltf. Mot. Ex. 10) Kolodziej described his strategy to Godshalk:
We are therefore taking no action with respect to that lawsuit, and will not file an appearance or any other pleading with the court until and unless plaintiff amends her complaint to name a real person or corporation amenable to suit, [sic] and properly serves that defendant with summons. Hopefully, plaintiff will fail to do this prior to the expiration of the statute of limitations in February, 2007.
Wruck, alerted by Kolodziej's evasive correspondence and failure to provide subsequent answers, searched state records in an effort to identify the proper legal entity to be sued. The records of the Indiana Alcohol and Tobacco Commission revealed the defendant's full name designation as "Aidan Alan, LLC d/b/a Eli's Pub." With this information in hand, Wruck obtained an order from the state court correcting the misnomer of the defendant. The same day that the order correcting the defendant's name was entered, Kolodziej sent Wruck another letter, this time advising of his firm's representation of Aidan Allen, LLC1 and its intention to enter an appearance and file a motion to vacate the order of default entered against Eli's Pub.
On November 27, 2006, Brenner Ford attempted to enter the appearance of Kolodziej and K. Amy Lemon on behalf of the insureds and filed an emergency motion to vacate the default order. At that time, however, Lemon was suspended from the practice of law in Indiana for nonpayment of dues. Kolodziej had petitioned the court to appear pro hac vice, relying on Lemon as local co-counsel. Both applications for appearance were denied—Lemon's due to her suspension and Kolodziej's as defective. Lemon was able to reinstate her Indiana license on the morning of the hearing, and she alone appeared before Judge Robert Pete for the damages hearing. Lemon presented Kolodziej's pro hac vice motion once again, which Judge Pete again denied as defective.2 The court also heard argument on the motion to vacate the entry of default, denied the motion twice on the record, then proceeded to conduct the scheduled hearing on McGrath's damages.
Lemon, sole counsel appearing for the insureds, was unprepared to participate in the damages hearing. Although Kolodziej's application to appear listed good cause for admittance "due to the attorney-client relationship that has remained for an extended period of time[,]" Lemon stammered a stream of reasons why the hearing on damages should not proceed, including the fact that "[her] office has not even had a chance to meet with the client yet." (Pltf. Ex. 15, Transcript of Hearing on Damages, Nov. 29, 2006, p. 8) McGrath called witnesses concerning damages, but Lemon failed to conduct any cross-examination, each time professing her lack of preparation. At the close of this hearing, the court foreclosed any further discussion on the entry of judgment on liability, but allowed another setting for the defendants to provide evidence on damages.
After this initial hearing, Kolodziej reported the case's "unbelievable turn of events" in a letter to Buthmann at RCA.3 Among other things, this letter distorted the nature of the strategy that Kolodziej had chosen to pursue by identifying Godshalk, the representative of the insureds, as an Indiana attorney and using the plural pronoun "we" in describing the choice neither to enter an appearance nor to answer the complaint.
The hearing on damages proceeded on December 11, 2006, but counsel for the insureds failed to present any evidence on the issue of damages. At the close of the hearing, the court permitted damage briefs rather than argument, and McGrath submitted her Brief on Damages requesting an award of economic and non-economic damages in a maximum sum of $15,825,024, plus any punitive damages the court deemed appropriate. Counsel for the insureds never filed a brief on damages nor contested McGrath's calculations.
Just days after the close of the damages hearing, counsel for the insureds filed a Motion to Reconsider in an effort to be relieved of the default, but no hearing ever was held to address it. Unfortunately, in March 2007, Judge Pete unexpectedly died, and the issue of damages was unresolved. The judge temporarily assigned to Judge Pete's court entered an order on April 11, 2007, denying McGrath's Motion for Determination of the Damages On Submission Without Further Hearing, stating that without such a stipulation of the parties, a hearing should be held on the matter.
McGrath initiated this federal cause of action in February 2007, originally asserting claims against Godshalk, Randall Neely, LLC, and Everest. McGrath's federal complaint alleged that Aidan Alan, LLC was insured under a policy with Everest separately from Randall Neely, LLC. She alleged a count in negligence against Godshalk directly, another count in negligence against "Eli's Pub" as a sole proprietorship of Godshalk, and a count in negligence against Randall Neely, LLC. McGrath further sought two counts seeking declaratory judgment: the first, alleging that Godshalk was the alter ego of both LLCs, and the second, seeking declaration that independent acts of negligence committed by the defendants Godshalk and Randall Neely, LLC were separate "occurrences" according to the terms of the Everest policy.
In response to the federal lawsuit, Everest informed Godshalk that "it was [its] position that there may not be coverage for this matter under the Everest policy[,]...
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