Nat'l Cas. Co. v. American Safety Cas. Ins. Co.

• Decision Date: 23 August 2011
• Docket Number: No. 10 Civ. 2820(JSR).,10 Civ. 2820(JSR).
• Citation: Nat'l Cas. Co. v. American Safety Cas. Ins. Co., 812 F.Supp.2d 505 (S.D. N.Y. 2011)
• Parties: NATIONAL CASUALTY COMPANY, Plaintiff, v. AMERICAN SAFETY CASUALTY INSURANCE COMPANY, City Waste Services of New York, Inc., and Joel Lopez, Defendants.
• Court: U.S. District Court — Southern District of New York

812 F.Supp.2d 505

NATIONAL CASUALTY COMPANY, Plaintiff,

v.AMERICAN SAFETY CASUALTY INSURANCE COMPANY, City Waste Services of New York, Inc., and Joel Lopez, Defendants.

No. 10 Civ. 2820(JSR).

United States District Court, S.D. New York.

Aug. 23, 2011.

Ann M. Odelson, Jonathan A. Messier, Carroll, McNulty & Kull, New York, NY, for Plaintiff.

Meryl R. Lieberman, Eric David Suben, Traub Lieberman Straus & Shrewsberry LLP, Hawthorne, NY, for Defendants.

MEMORANDUM ORDER

JED S. RAKOFF, District Judge.

On November 29, 2010, the Court granted a motion for default judgment filed by plaintiff National Casualty Company (“National Casualty”) against defendants Joel Lopez and City Waste Services of New York, Inc. (“City Waste”). On May 25, 2011, counsel for City Waste convened a joint conference call to Chambers and requested permission to file a motion to vacate the default judgment. The Court granted the request. City Waste filed moving papers on June 10, 2011; National Casualty filed opposition papers on July 1, 2011; and City Waste filed reply papers on July 11, 2011. After careful consideration and for the reasons stated in this Memorandum Order, City Waste's motion to vacate the default judgment is hereby denied.

The above-captioned insurance coverage dispute arises out of an underlying personal injury action filed in the Supreme Court of New York, Bronx County, on November 7, 2008. See Salva v. City Waste Services of New York, Inc., No. 08–309214 (N.Y.Sup.Ct.) (the “ Salva Action”). The verified complaint filed in that action alleges that Joel Lopez, then an employee of City Waste, “cut off” plaintiff Hector Salva while driving on the Major Deegan Expressway at or near the West 230th Street entrance ramp. Lopez and Salva subsequently drove to 5987–A Broadway in the Bronx, where both men exited their vehicles and became involved in a verbal altercation. Salva alleges that at some point during this altercation, Lopez struck him on the head with a metal pole, causing him severe injury.

At the time of the altercation, City Waste was covered by two insurance policies: a Commercial Auto Policy issued by National Casualty and a Commercial General Liability Policy issued by American Safety Casualty Insurance Company (“American Safety”). In December 2008, City Waste sent a notice of claim to its insurance broker John A. Rocco Company, which then forwarded the notice to National Casualty. See Declaration of James Tesi, dated June 6, 2011 (“Tesi Decl.”) ¶ 2. Upon being informed of the lawsuit, National Casualty advised City Waste and Lopez that it would provide a defense subject to a complete reservation of rights. See Am. Compl. ¶¶ 25–26. National Casualty retained the law firm of Ahmuty, Demers & McManus (the “Ahmuty law firm”) to represent City Waste and Lopez in the Salva Action; according to City Waste, the Ahmuty law firm did in fact provide such representation in the ongoing Salva Action until March of 2011. See Tesi Decl. ¶ 2.

Meanwhile, on March 31, 2010, National Casualty filed in this Court a “Complaint for Declaratory Relief” under 28 U.S.C § 2201 against American Safety, City Waste, and Lopez seeking, inter alia, a declaratory judgment that National Casualty had no obligation to defend or indemnify City Waste or Lopez in the Salva Action. See Compl. ¶ 39(a), (b). On April 6, 2010, National Casualty served a copy of the complaint on City Waste at its place of business in Jamaica, New York; service was accepted by Milton Little, a “maintenance supervisor” employed by City Waste. See Affidavit of Juan Pereira, dated June 1, 2011 (“Pereira Aff.”); Docket No. 5 under 10 Civ. 2820.¹

On May 5, 2011, American Safety moved to dismiss the complaint. Following full briefing and oral argument, the Court granted American Safety's motion to dismiss, without prejudice to National Casualty's filing an amended complaint by no later than July 21, 2010. See 07/09/10 Order. The Court ordered that if American Safety moved to dismiss the amended complaint, oral argument would be heard on September 1, 2010. The Court's Order further indicated that “[d]efendants City Waste Services and Joel Lopez, who have not yet appeared in this action, must also appear at the September 1 conference and must also answer or move against the amended complaint by September 1, 2010, failing which they will be deemed in default.” Id.

On July 21, 2010, National Casualty filed an amended complaint again seeking, among other things, “a declaration that the Plaintiff National Casualty has no obligation to provide a defense or indemnification to City Service and/or Lopez for the claims asserted against them in the Underlying Action.” Am. Compl. ¶ 53(a). National Casualty served a copy of the amended complaint on City Waste at its place of business on August 5, 2010; service was accepted by John Perrino. See Declaration of Ann M. Odelson, dated July 1, 2011 (“07/01/11 Odelson Decl.”), Ex. D. Proof of service was filed with the Clerk of the Court. ² Id. National Casualty also served a copy of the Amended Complaint on the New York Secretary of State. See 07/05/11 Odelson Decl. Ex. C. Further, by correspondence dated July 30, 2010, counsel for National Casualty informed City Waste that it was required to appear in Court for the September 1, 2010 conference, and that failure to answer the amended complaint by that date would result in default. See Declaration of Ann Odelson, dated November 5, 2010 (“11/05/11 Odelson Decl.”) Ex. F. The letter attached a copy of the Court's July 9, 2010 Order. Id. The conference was subsequently adjourned to October 13, 2010. City Waste failed to answer the complaint by September 1, 2010 and failed to appear at the October 13, 2010 conference.³

On November 9, 2010, National Casualty filed a motion for default judgment against City Waste returnable on November 29, 2010. See Docket Nos. 34–36. A copy of National Casualty's Motion for a Default Judgment was served on City Waste and accepted by John Perrino on November 5, 2010. See Docket No. 32. City Waste failed to oppose the motion or to appear in Court on the November 29, 2010 return date. Accordingly, on November 29, 2010, the Court granted National Casualty's motion for a default judgment. See Docket No. 37. ⁴

A copy of the default judgment was served on City Waste and accepted by Dino Murphy on December 10, 2010. See Docket No. 40. On February 4, 2011, National Casualty sent a letter to City Waste stating that it would no longer pay for City Waste's defense in the Salva Action. See 07/01/1 Odelson Decl., Ex. F. By letter dated March 22, 2011, the Ahmuty law firm informed City Waste that it had received an order permitting it to withdraw as counsel in the Salva Action. Tesi Decl. ¶ 3. After receiving this letter, City Waste endeavored during the month of April to obtain counsel, eventually retaining the law firm of Trivella, Forte & Smith, LLP (“Trivella”) to represent it in this matter. Id. On May 25, 2011, roughly fourteen months after the filing of National Casualty's initial complaint in this case and six months after the entry of default judgment, City Waste's newly retained counsel requested permission to file the instant motion to vacate the default judgment.

City Waste's motion is premised upon Rule 60(b)(1) of the Federal Rules of Civil Procedure, which provides that “the court may relieve a party or its legal representative from a final judgment, order, or proceeding for ... mistake, inadvertence, surprise, or excusable neglect.” Fed.R.Civ.P. Rule 60(b)(1). In applying Rule 60(b)(1) in the context of default judgments, “courts have gone beyond the bare wording of the rule and established certain criteria which should be considered in deciding whether the designated standards have been satisfied.” Davis v. Musler, 713 F.2d 907, 915 (2d Cir.1983). These criteria include “(1) whether the default was willful; (2) whether defendant has a meritorious defense; and (3) the level of prejudice that may occur to the non-defaulting party if relief is granted.” Id.⁵

Applying this three-part test, the Court finds that all three factors weigh against granting City Waste relief from the default judgment in this case. Although willfulness in the context of a judgment by default requires “something more than mere negligence,” the “degree of negligence in precipitating a default is a relevant factor to be considered.” American Alliance Ins. Co. v. Eagle Ins. Co., 92 F.3d 57 (2d Cir.N.Y.1996). See also New York v. Green, 420 F.3d 99, 108 (2d Cir.N.Y.2005) (internal quotation marks and citations omitted). “[G]ross negligence can weigh against the party seeking relief from a default judgment,” though it does not necessarily preclude relief. American Alliance, 92 F.3d at 61. For the reasons explained below, there is no doubt that City Waste's failure to take any action whatsoever in this matter for over a year was grossly negligent at best and very likely “egregious and deliberate,” id., at worst.

In defense of its inaction, City Waste first offers two technical arguments, neither of which is remotely persuasive. First, City Waste argues that National Casualty did not serve the complaint and amended complaint in accordance with Rule 4(h) of the Federal Rules of Civil Procedure. See Memorandum of Law in Support of Defendant City Waste Services of New York, Inc.'s Application to Vacate a Default Judgment (“City Waste Mem.”) at 4. Rule 4(h)(1) provides that service upon a corporation may be made “in the manner prescribed for individuals by subdivision (e)(1).” Fed.R.Civ.P.R. 4(h)(1). Rule 4(e)(1), in turn, provides that service may be made “pursuant to the law of the state in which the district court is located, or in which service is effected.” Fed R. Civ. P.R. 4(e)(1). The applicable New York provision, Section 311(a)(1) of the New York Civil Practice Law and Rules, provides that personal service may be effected by delivery of the documents to “an officer, director,...