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Magic Sleep Mattress Co., Inc. v. Northfield Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

May 18, 2017

MAGIC SLEEP MATTRESS CO., INC. Plaintiff,
v.
NORTHFIELD INSURANCE CO., Defendant.

          MEMORANDUM OPINION AND ORDER

          Virginia M. Kendall United States District Court Judge

         Even though at least seven of Defendant, Northfield Insurance Company's employees and the Corporation Service Company (CSC)-Northfield's Agent for Service-had notice of this lawsuit, Northfield contends that its failure to defend itself when Plaintiff Magic Sleep Mattress Company, Inc., filed its Complaint is solely Sharon Brooks's fault. Brooks is the manager of the Service of Process department of Northfield's parent company and she notified six other employees of the lawsuit and none responded to it during the time allotted and then Northfield waited two months before filing a motion to vacate the default entered against it even after receiving notice of that default and prior to the judgment being entered in a dollar amount. On February 3, 2017, the Court denied Northfield's Motion to Vacate Default Order, Default Judgment, and Judgement. [28.] Northfield now asks the Court to reconsider its decision based on both alleged legal and factual error. But nothing has changed. Northfield had the opportunity to defend itself in this action and did not have good cause for its failure to do so; the Court will not waste further judicial resources on the issue.

         BACKGROUND[1]

         Plaintiff Magic Sleep filed a Complaint on July 2016 against Northfield, its commercial property insurance carrier, alleging underpayment of purported hail damage to three of Magic Sleep's buildings. Northfield's senior administrative assistant of corporate legal, Ms. Tutewohl-Smith accepted service of process of Magic Sleep's Summons and Complaint. (Dkt. 16 at 4-5.) Tutewohl-Smith scanned the documents and sent them by attachment to a Service of Process Coordinator, a Senior Service of Process Coordinator, and Sharon Brooks, the Manager of the Service of Process Unit for Northfield's parent company. (Id.) Brooks was out of the office, so her response email directed Tutewohl-Smith to forward the email to two paralegals, which Tutewohl-Smith did. Brooks saw the email the next day and when she responded to Tutewohl-Smith's email, she hit “reply to all” and added Wilma Delgado, a litigation analyst in the Service of Process Unit. (Id.) In the “reply all” email, Brooks instructed Delgado to send the Summons and Complaint to CSC, Northfield's Service Agent, for upload. But Brooks failed to attach the Summons and Complaint to the email when she hit “reply to all.” (Id.) Delgado did not notice that the Complaint was not attached but still forwarded the email to CSC. CSC also somehow never noticed the attachment was missing, did not upload the Complaint on its document management grid, but still moved the email to a “completed” folder.

         When Northfield failed to answer or otherwise respond to Magic Sleep's Complaint, the Court entered an order of default on August 18, 2016 and Northfield failed to appear or respond to that order. On September 2, 2016, the Court granted a default judgment against Northfield in the amount of $1, 141, 424.15. On October 3, 2016, Magic Sleep faxed a letter to Northfield enclosing a copy of the judgment. In response to the fax, Northfield hired counsel and began investigating the circumstances surrounding the delay. Then, on October 14, 2016, Northfield brought a motion pursuant to Federal Rule of Civil Procedure 60(b) to vacate the Court's order of default, the default judgment, and the judgment. (Dkt. 16.)

         In reviewing Northfield's 60(b) motion, the Court held that Northfield's reason for failing to defend itself did not satisfy good cause, that Northfield's failure to respond to the default until two months after it was entered did not constitute quick action, and while Northfield contends that there was a bona fide insurance dispute, the alleged defense was not enough to excuse Northfield's actions leading to the default.

         STANDARD OF REVIEW

         Because the substance of its motion challenges the merits of this Court's decision, the motion must either fall under either Rule 59(e) or Rule 60(b). See United States v. Deutsch, 981 F.2d 299, 300 (7th Cir. 1992). Whether a motion is analyzed under Rule 59(e) or Rule 60(b) depends on the substance of the motion. See Obreicht v. Raemisch, 517 F.3d 489, 493 (7th Cir. 2008). Northfield's motion is based on alleged errors of law and fact-bases encompassed by Rule 59(e)-and the Court therefore evaluates it under Rule 59(e). See Id. at 493-94.

         To prevail on a motion for reconsideration brought pursuant to Rule 59(e) of the Federal Rules of Civil Procedure, the “movant must present either newly discovered evidence or established manifest error of law or fact.” See Oto v. Metropolitan Life Ins., 224 F.3d 601, 606 (7th Cir. 2000) (citing LB Credit Corps v. Resolution Trust Corps, 49 F.3d 1263 (7th Cir. 1995)). “Manifest error” means “the wholesale disregard, misapplication, or failure to recognize controlling precedent, ” not simply disappointment of the losing party. Id. (citing Sedrak v. Callahan, 982 F.Supp. 1063, 1069 (N.D. Ill. 1997)). The party moving for reconsideration bears the burden of establishing that the Court should reverse its prior judgment. See Caisse Nationale de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1270 (7th Cir. 1996). Rule 59 is not a tool for parties to relitigate arguments or present new evidence that could have been raised initially. See id.; Sigsworth v. City of Aurora, 487 F.3d 506, 512 (7th Cir. 2007). The decision to grant a Rule 59(e) motion lies in the sound discretion of this Court, and its ruling is reviewed deferentially and will only be disturbed upon a showing that the Court abused that discretion. See Matter of Prince, 85 F.3d 314, 324 (7th Cir. 1996); Billups v. Methodist Hosp., 922 F.2d 1300, 1305 (7th Cir. 1991).

         DISCUSSION

         Northfield does not raise any new evidence or legal arguments. Instead, Northfield brings its motion under Rule 59(e) asserting that the Court committed both legal and factual error. But Northfield does not raise any new facts the Court did not already consider in its previous Order and Northfield misunderstands the Court's application of the law to these facts.

         A. Factual Errors

         Northfield asserts that in the “background” section of its Order, the Court failed to consider certain facts. Northfield also contends that, in particular, this improperly impacted the Court's “good cause” and “quick action” analyses. See Pretzel & Stouffer v. Imperial Adjusters, 28 F.3d 42, 47 (7th Cir. 1994) (In order to have an entry of default vacated, the moving party must demonstrate good cause for the default; quick action to correct it; and a meritorious defense to the complaint.) The Court will now address these allegedly ignored facts.

         According to Northfield, the Court failed to consider its general practice and procedures, specifically that when Brooks normally hits “reply to all” after receiving a complaint, she reattaches the complaint to that email. (Dkt. 30 at 3.) It is common sense that Northfield would not have a practice of sending emails with unintentionally missing attachments. But throughout its Motion, Northfield mistakenly assumes that it is held accountable for Brooks's initial failure to attach the Complaint to her email to Delgado. Instead, the relevant failure is that of every person after her, as well as CSC, for the failure to follow up and rectify the situation. More importantly, the original email states the title of the case (Magic Sleep Mattress Company Inc v. Northfield Insurance Company) in the subject line of the email and the body of the email reads: “Attached is the Summons & Complaint regarding “Magic Sleep Mattress Company Inc. v. Northfield Insurance Company that was served today (6/21/16). Therefore, ALL individuals on the string of emails were aware that the Complaint was served on June 21, 2016 and that ...


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