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Federal-Mogul Corp. v. Insurance Co. of State of Pennsylvania

United States District Court, E.D. Michigan, Southern Division

May 25, 2017

FEDERAL-MOGUL CORPORATION, Plaintiff,
v.
INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, Defendant.

          OPINION AND ORDER ACCEPTING IN PART AND REJECTING IN PART PLAINTIFF'S PROPOSED FORM OF FINAL JUDGMENT [139]

          Nancy G. Edmunds United States District Judge.

         This case involves an insurance dispute between Plaintiff Federal-Mogul Corporation and Defendant Insurance Company of the State of Pennsylvania. The question now before the Court is whether to accept Plaintiff's proposed form of final judgment, and it arises under unusual circumstances. On October 8, 2015, this Court issued an opinion and order granting partial summary judgment in Plaintiff's favor. (Dkt. 102.) Sixteen months later, the parties determined that they shared an interest in appealing that opinion immediately and avoiding the expenses of trial. Accordingly, the parties consented on February 16, 2017 to the filing of an Amended Complaint that mooted the only issue remaining in this case. (See Dkt. 136.) The parties also reported an intent to stipulate to a proposed final judgment. (Id.) Based on those submissions, the Court permitted the filing of an Amended Complaint and directed the parties to submit a proposed final judgment. (Dkt. 137.) Since then, the parties' nascent harmony has dissolved, and no stipulated judgment was ever filed.

         Instead, Plaintiff has filed a proposed judgment, and Defendant has objected on two grounds, both of which relate to Plaintiff's ability to recover prejudgment interest. (Dkt. 139; Dkt. 140.) Defendant first objects that Plaintiff may not collect prejudgment "penalty" interest under Michigan Compiled Laws (M.C.L.) § 500.2006(4). Second, Defendant objects that Plaintiff is not entitled to prejudgment interest of any kind after October 8, 2015, the date this Court granted partial summary judgment in Plaintiff's favor. For the reasons that follow, the Court OVERRULES Defendant's first objection and SUSTAINS the second objection. As a result, the Court ACCEPTS IN PART and REJECTS IN PART Plaintiff's proposed judgment.

         I. Background

         The facts related to Plaintiff's entitlement to prejudgment interest span a labyrinthine procedural history. Plaintiff's claims date back to 2011, when a flood caused significant losses at Plaintiff's Rojana Industrial Park (the Rojana Facility), which Defendant insured. The alleged losses included both "Property Damage Loss" (damage to tangible property) and "Time Element Loss" (loss incurred due to a break in operations). According to the Amended Complaint, Plaintiff submitted an initial claim for partial payment of $25 million, and Defendant paid that entire claim on February 15, 2012. (Dkt. 138 at ¶ 16.) Then, on February 23, 2012, Plaintiff requested another payment of $18 million. (Id. at ¶ 17.) Defendant responded to Plaintiff's second claim in April 2012, refusing to pay more than $5 million and arguing that a High Hazard Flood Sublimit of $30 million limited the coverage for both "Property Damage Loss" and "Time Element Loss." (Id. at ¶¶ 18-19.) Plaintiff disagreed and filed suit, alleging that Defendant was in breach of contract.

         Plaintiff filed its initial Complaint on May 5, 2012. The Complaint estimated that the losses related to the flood totaled $88 million. (Dkt. 1 at ¶¶ 12-15.) It did not mention prejudgment penalty interest under M.C.L. § 500.2006(4), but it did pray for "all other just and proper relief." (Id. at ¶ 80.)

         Around a year later, in July 2013, the parties filed cross-motions for summary judgment. (Dkt. 20; Dkt. 31.) Defendant argued, inter alia, that: (1) the $30 million sublimit applied because the Rojana Facility was within a 100-year floodplain; and (2) this sublimit applied to Plaintiff's Time Element Loss (as opposed to simply the Property Damage Loss). (Dkt. 31, at 12, 16.) On December 10, 2013, this Court granted summary judgment in Plaintiff's favor, finding that Defendant had not established that the Rojana Facility was within a 100-year floodplain. (Dkt. 63.) As a result, the Court did not reach the issue of whether the sublimit applied to Plaintiff's Time Element Loss. In conjunction with that decision, the Court entered a judgment dismissing the case. (Dkt. 64.)

         Three months after that, on March 4, 2014, the Court entered a Corrected and Stipulated Form of Amended Judgment. (Dkt. 77.) Therein, the parties stipulated that Plaintiff's Time Element Loss was $25, 093, 533 and that the Property Damage Loss was $39, 406, 467, totaling $64, 500, 000. (Id.) The Court then entered judgment in favor of Plaintiff in the amount of $34, 500, 000 because Defendant had already paid Plaintiff $30, 000, 000. (Id.) The Amended Judgment also stated that Plaintiff was "entitled to prejudgment interest in the amount of $1, 219, 407.39." (Id.) The Amended Judgment did not mention penalty interest.

         Defendant then appealed, and the Sixth Circuit reversed and remanded on May 18, 2015. Federal-Mogul Corp. v. Insurance Co. of the State of Penn., 612 F.App'x 325 (6th Cir. 2015). The Sixth Circuit held that this Court applied the incorrect standard when determining whether the Rojana Facility was located within a 100-year floodplain, and it provided instructions for reconsidering the issue. Id. at 329. The Sixth Circuit declined to address whether the $30 million sublimit applied to Plaintiff's Time Element Loss. Id.

         Following the reversal and remand, Plaintiff sought permission to file a second motion for summary judgment as to whether the $30 million sublimit applied to Plaintiff's Time Element Loss. (Dkt. 87.) Plaintiff also proposed a schedule for considering the remaining issues in a piecemeal, sequential fashion. (Id.) The Court permitted Plaintiff to file the second motion for summary judgment and adopted the proposed schedule, finding that it would advance this litigation in an orderly fashion. The parties then supplied briefing and oral argument regarding whether the sublimit applied to Plaintiff's Time Element Loss.

         Then, on October 8, 2015, this Court issued an opinion and order granting partial summary judgment in Plaintiff's favor, holding that the sublimit did not apply to Plaintiff's Time Element Loss.[1] (Dkt. 102.) This order also stated that Plaintiff was entitled to $25, 093, 533, the amount of Time Element Loss stipulated by the parties. (Id.) As a result of that decision, the parties' dispute narrowed to the $9, 406, 467 of unpaid Property Damage Loss, the recovery of which depended on whether the Rojana Facility was located within a 100-year floodplain. Because that issue remained unresolved, the Court's October 8, 2015 decision did not dispose of the case, was not accompanied by a judgment, and did not mention prejudgment interest. Since then, the Court has ruled on motions to exclude expert testimony and set the case for trial on April 4, 2017.

         Then, in February 2017, two months before trial was set to begin, Plaintiff filed an unopposed motion seeking leave to file an amended and supplemental complaint "to moot the only remaining issue [whether the Rojana Facility was located in a 100-year floodplain] in this case by voluntarily limiting the relief Plaintiff seeks, thus allowing an appeal and hopefully saving the parties the expense and delay of a trial." (Dkt. 134, at 6.) Plaintiff offered to "relinquish, with prejudice, its loss amount of $9, 406, 467 attributable to unpaid property damage if [Plaintiff] is able to thereby moot the need for the expense of trial."[2] (Id. at 7.) Six days later, the parties filed a stipulation consenting to the filing of an Amended Complaint that mooted the only issue remaining in this case. (See Dkt. 136.) The parties also reported an intent to stipulate to a proposed final judgment. (Id.)

         Based on those submissions, on February 16, 2017, the Court granted Plaintiff leave to file an Amended Complaint and directed the parties to submit a proposed final judgment. (Dkt. 137.) Plaintiff immediately filed its Amended Complaint, which reiterates the original Complaint's prayer for all "just and proper relief" and does not explicitly seek penalty interest. (Dkt. 138.) The Court never received any stipulated final judgment, however, because the parties could not resolve a dispute over Plaintiff's entitlement to prejudgment interest. (See Dkt. 139; Dkt. 140.)

         Around a month later, on March 10, 2017, Plaintiff filed its Proposed Form of Final Judgment. (Dkt. 139-2.) Therein, Plaintiff seeks an award of penalty interest under M.C.L. § 500.2006(4) in the amount of $5, 710, 483.23, as well as prejudgment interest under M.C.L. § 600.6013(8) in the amount of $2, 927, 192.07. (Id.) Plaintiff calculates the § 500.2006(4) penalty interest from May 3, 2014 (60 days after this Court entered its Corrected and Stipulated Form of Amended Judgment with the stipulated amount of Time Element Loss) until March 15, 2017 (the date Plaintiff estimated this Court would enter final judgment).[3] Plaintiff calculates its § 600.6013(8) prejudgment interest from May 3, 2012 (the day Plaintiff filed its initial Complaint) until March 15, 2017.

         Plaintiff also filed an Alternative Proposed Final Judgment that seeks penalty interest under § 500.2006(4) and prejudgment interest § 600.6013(8) "in amounts to be determined." (Dkt. 139-3.) Defendant objects to both of Plaintiff's proposals. (Dkt. 140.)

         II. Analysis

         Defendant objects to two aspects of Plaintiff's proposed forms of final judgment. Defendant first argues that Plaintiff may not collect any prejudgment "penalty" interest under M.C.L. § 500.2006(4). Second, Defendant argues that Plaintiff is not entitled to prejudgment interest of any kind after October 8, 2015, the date this Court granted partial summary judgment to Plaintiff on the issue of Time ...


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