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BASF AG v. Great American Assurance Co.

October 3, 2006

BASF AG, PLAINTIFF,
v.
GREAT AMERICAN ASSURANCE COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Defendants' motions for judgment as a matter of law, motions to vacate, and motions in the alternative for a new trial. This matter is also before the court on Defendants' joint motion for credit on the judgment. For the reasons stated below we deny all of the motions.

BACKGROUND

Boots Pharmaceuticals, Inc. ("Boots") was a pharmaceutical company that manufactured the drug known as Synthroid. Plaintiff BASF AG ("BASF") alleges that International Insurance Company ("International") issued three consecutive insurance policies to Boots from 1989 to 1992 ("Westchester Policies"), and that Defendant Westchester Fire Insurance Company ("Westchester") assumed the obligations of the policies. BASF also alleges that Agricultural Insurance Company ("Agricultural"), the predecessor of Defendant Great American Assurance Company ("Great American"), issued an insurance policy to Boots for the period between April 1, 1992, and September 30, 1993 ("Great American Policy"). BASF also alleges that Defendant Federal Insurance Company ("Federal") issued two insurance policies to Boots for the period between September 30, 1993, and June 30, 1995 ("Federal Policies"). According to BASF, Boots also purchased insurance policies ("Primary Policies") with separate primary insurers ("Primary Insurers") and the Westchester Policies, Great American Policy, and Federal Policies were additional umbrella policies. In 1995, Boots' parent company sold all shares in its United States subsidiaries, including Boots, to Knoll Pharmaceutical Company ("Knoll") and afterwards Boots was merged into Knoll and did not have a separate corporate existence.

BASF alleges that Knoll, as the successor to Boots, was sued in a nationwide class action complaint for alleged advertising campaigns and public statements that Boots made in scientific, regulatory, and medical communities between 1989 and 1995 ("Synthroid Litigation"). The plaintiffs in the Synthroid Litigation claimed that Boots had concealed medical information that showed that Synthroid was equivalent to other cheaper drugs and that Synthroid had bioequivalents. The plaintiffs in the Synthroid Litigation contended that Boots' misrepresentations caused them to purchase Synthroid rather than the cheaper bioequivalent drugs.

BASF claims that Knoll requested that the Primary Insurers defend Knoll in the Synthroid Litigation and that the Primary Insurers refused. BASF also claims that Knoll requested that Defendants defend Knoll in the Synthroid Litigation and Defendants refused. BASF claims that in 1997, Knoll ultimately paid tens of millions of dollars in defense costs and settled the matter for over $130 million. BASF claims that Knoll filed an action in federal court against the Primary Insurers and the federal district court ruled that the Primary Insurers breached their duty to defend and were estopped from disputing coverage ("Primary Insurers Action"). According to BASF, in March 2001, BASF, which is Knoll's parent company, sold Knoll, but the sales agreement provided that all rights to insurance claims relating to the Synthroid Litigation were retained by BASF. BASF brought the instant action and included in its complaint a claim seeking a declaratory judgment stating that Defendants had a duty to defend and indemnify Knoll in the Synthroid Litigation (Count I), a breach of contract claim (Count II), and a claim seeking attorney's fees and costs pursuant to 215 ILCS 5/155 ("Section 5/155")(Count III).

On May 8, 2006, we ruled that as a matter of law Defendants had wrongfully denied coverage to Knoll. We granted BASF's motion for summary judgment on the breach of contract and indemnity claims, and denied Defendants' motions for summary judgment on those claims. We also denied BASF's motion for summary judgment on the Section 5/155 claims, and granted the motions for summary judgment brought by Defendants on the Section 5/155 claims. On May 30, 2006, a jury trial commenced to address the remaining damages issues in this case, and on June 1, 2006, the jury returned a verdict awarding BASF damages for the cost of the settlement in the underlying class action and damages for defense costs in the underlying class action. BASF was also awarded prejudgment interest by the court. Defendants now move for a vacation of the jury verdict. Defendants also move for the entry of judgment as a matter of law in their favor and move in the alternative for a new trial.

LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 50(b) ("Rule 50(b)") a party who moved for judgment as a matter of law at close of evidence at trial can renew its request after a verdict was returned in favor of the party's opponent. Fed. R. Civ. P. 50(b). The standard for evaluating a Rule 50(b) motion "mirrors that employed in evaluating a summary judgment motion." Appelbaum v. Milwaukee Metropolitan Sewerage Dist., 340 F.3d 573, 578-79 (7th Cir. 2003). For a Rule 50(b) motion, a court should determine "'whether the evidence presented, combined with all reasonable inferences permissibly drawn therefrom, is sufficient to support the verdict when viewed in the light most favorable to the party against whom the motion is directed.'" See Mack v. Great Dane Trailers, 308 F.3d 776, 780 (7th Cir. 2002)(quoting Tapia v. City of Greenwood, 965 F.2d 336, 338 (7th Cir. 1992)); see also Appelbaum, 340 F.3d at 578-79 (stating that a court must consider the evidence and "ask whether any reasonable jury could have found" in favor of the movant's opponent and that the court "must construe the evidentiary record in [the opponent's] favor, drawing all reasonable inferences in her favor and resisting temptation to weigh the evidence or to make [the court's] own credibility determinations"); Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 721 (7th Cir. 2003)(stating that a court should view the evidence in a light that is most favorable to the opponent of the movant and the court should "not second-guess the jury's view of the contested evidence"); Zelinski v. Columbia 300, Inc., 335 F.3d 633, 638 (7th Cir. 2003)(stating that "[w]hen reviewing a jury verdict, 'the question is not whether the jury believed the right people, but only whether it was presented with a legally sufficient amount of evidence from which it could reasonably derive its verdict'")(quoting in part Massey v. Blue Cross-Blue Shield of Ill., 226 F.3d 922, 924 (7th Cir. 2000)).

Federal Rule of Civil Procedure 59(a) ("Rule 59(a)") permits a party to file, within ten days of the entry of a judgment, a motion for a new trial. Fed. R. Civ. P. 59(a). In ruling on a Rule 59(a) motion a court must determine whether "'the verdict is against the weight of the evidence . . . the damages are excessive, or . . . for other reasons, the trial was not fair to the party moving.'" Kapelanski v. Johnson, 390 F.3d 525, 530 (7th Cir. 2004)(quoting General Foam Fabricators, Inc. v. Tenneco Chems., Inc., 695 F.2d 281, 288 (7th Cir. 1982)). A court should not set aside a jury verdict and order a new trial unless, when "viewing the evidence in the light most favorable to the prevailing party, and leaving issues of credibility and weight of evidence to the jury," there was no "reasonable basis . . . in the record to support the verdict." Kapelanski, 390 F.3d at 530; see also ABM Marking, Inc. v. Zanasi Fratelli, S.R.L., 353 F.3d 541, 543-44 (7th Cir. 2003)(stating that "one situation calling for a new trial is when 'a jury returns a factually inconsistent general verdict'")(quoting Turyna v. Martam Constr. Co., 83 F.3d 178, 181 (7th Cir. 1996)).

Federal Rule of Civil Procedure 59(e) ("Rule 59(e)") permits parties to file, within ten days of the entry of a judgment, a motion to alter or amend the judgment. Fed. R. Civ. P. 59(e). Rule 59(e) motions do not give a party the opportunity to rehash old arguments or to present new arguments or evidence "that could and should have been presented to the district court prior to the judgment." Moro v. Shell Oil Co., 91 F.3d 872, 876 (7th Cir. 1996)(citing LB Credit Corp. v. Resolution Trust Corp., 49 F.3d 1263, 1267 (7th Cir. 1995)). Rather, in a Rule 59(e) motion, the movant "must clearly establish either a manifest error of law or fact or must present newly discovered evidence" in order to be successful. LB Credit Corp., 49 F.3d at 1267 (quoting Federal Deposit Ins. Corp. v. Meyer, 781 F.2d 1260, 1268 (7th Cir. 1986)). The decision of whether to grant or deny a motion brought pursuant to Rule 59(e) "is entrusted to the sound judgment of the district court . . . ." In re Prince, 85 F.3d 314, 324 (7th Cir. 1996).

DISCUSSION

We first note that Defendants have each filed separate motions for judgment as a matter of law, motions for a new trial, and motions to vacate. However, the motions contain many of the same arguments and each of the Defendants' motions cross references the motions filed by the other Defendants. Therefore, in the interest of judicial efficiency, we collectively address all of the arguments presented by Defendants in their various motions that are now before this court.

I. Motions For Judgment as a Matter of Law

Defendants move for judgment as a matter of law pursuant to Rule 50(b).

A. Waiver of Motions

BASF argues that Defendants waived their right to file motions for judgment as a matter of law at this juncture. If a party does not seek to renew its motion for judgment as a matter of law at the close of all the evidence presented at trial the right to pursue such a motion is deemed waived. See Eastern Natural Gas Corp. v. Aluminum Co. of Am., 126 F.3d 996, 1000 (7th Cir. 1997)(indicating that "in order to preserve a motion for judgment as a matter of law which was not granted by the trial court, the motion must be renewed at the close of all the evidence"). In the instant action, Great American claims that "[a]t the close of the trial on June 1, 2006, defendants moved for a judgment as a matter of law." (G. Mem. 1). However, Defendants actually moved for summary judgment during the trial on May 31, 2006. Federal even admits that Defendants moved on May 31, 2006, stating that "[a]t the close of evidence on May 31, 2006, the defendants made Motions for Directed Verdict." (F. Mem. 6). On June 1, 2006, stipulated evidence was read into the record, the parties then indicated that they completely rested, and Defendants made no motion for a judgment as a matter of law at that time. (TR 362-63). Since Defendants failed to make a motion on June 1, 2006, after the close of all the evidence, Defendants waived their right to file the instant motion for judgment as a matter of law. In addition, as will be explained below, even if Defendants had not waived their right to file the instant motions, their motions lack any merit.

B. Defendants' Motion to Dismiss and Motion to Strike

Defendants argue that they are entitled to a judgment as a matter of law because the court erred when it denied Defendants' motion to dismiss and motion to strike on September 7, 2005. However, Defendants fail to explain why Defendants believe that the court's ruling was made in error. Federal provides a few cursory sentences indicating that BASF lacks standing in the instant action, that Knoll is an indispensable party, and that this court lacks diversity subject matter jurisdiction in this action. However, Federal fails to provide any specific reasons showing why the court erred in concluding otherwise. (F. Mem. 2). Westchester and Great American provide even less information in their motions stating only that, they incorporate in their motions the cursory statement made by Federal. (W. Mem. 2)(G. Mem. 1). We provided a detailed analysis in our September 7, 2005 ruling concerning BASF's standing and subject matter jurisdiction in this action. Defendants have thus failed to show that the court erred in any way in its September 7, 2005 ruling.

C. Duty to Defend and Indemnify

Defendants argue that the court erred in its May 8, 2006 ruling, granting BASF's motion for summary judgment on the breach of contract and indemnity claims, and denying Defendants' motions for summary judgment on those claims because there was insufficient evidence that showed that Defendants had a duty to defend or duty to indemnify Knoll.

1. Claims Brought Against Federal

Federal argues that it had no duty to defend BASF under the Federal Policies because the Synthroid Litigation was not covered under the Federal Policies. However, we have already rejected these arguments and we explained in our May 8, 2006 ruling that Defendants are estopped from contesting coverage at this juncture. Federal has thus not shown that any of the court's rulings concerning such issues were erroneous.

2. Claims Brought Against Westchester

Westchester argues that it had no duty to defend or indemnify BASF under the Coverage A section of the 1989-1990 and 1990-1991 Westchester Policies until the Primary Policies' limits were exhausted. Westchester also argues that it had a duty to defend BASF under Coverage B of the 1989-1990 Westchester Policies where the Primary Policies did not apply. Westchester also makes other arguments such as that Westchester cannot be estopped from denying that it had a duty to defend and that Westchester did not have a duty to defend BASF because the Synthroid Litigation was not covered under the Westchester Policies. However, Westchester's arguments are merely a reiteration of the arguments already presented to the court in support of Westchester's motion for summary judgment. Westchester fails to address the court's ruling issued on May 8, 2006, and fails to provide any arguments explaining why Westchester believes that the court's denial of Westchester's motion for summary judgment was erroneous. In the May 8, 2006 ruling, the ...


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