CONMED Corp. v. Fed. Ins. Co.

1

CONMED CORPORATION, Plaintiff, v. FEDERAL INSURANCE COMPANY, Defendant.

No. 6:23-CV-766 (MAD/ML)

United States District Court, N.D. New York

June 13, 2024

APPEARANCES:

DLA PIPER LLC

Attorney for Plaintiff

OF COUNSEL:

DANIEL S. JONAS, ESQ.

ERICA LYNN VISOKEY, ESQ.

JOHN G. POWERS, ESQ.

MARY L. D'AGOSTINO, ESQ.

HANCOCK ESTABROOK, LLP

Attorneys for Plaintiff

COHEN ZIFFER FRENCHMAN & MCKENNA LLP

DAVID J. MATULEWICZ, ESQ.

MEREDITH ELKINS, ESQ.

ROBIN L. COHEN, ESQ.

Attorneys for Plaintiff

HANGLEY ARONCHICK SEGAL PUDLIN & SCHILLER

RONALD P. SCHILLER, ESQ.

BONNIE M. HOFFMAN, ESQ.

ELIZABETH C. DOLCE, ESQ.

Attorneys for Defendant

MEMORANDUM-DECISION AND ORDER

MAE A. D'AGOSTINO, U.S. DISTRICT JUDGE:

I. INTRODUCTION

Plaintiff, CONMED Corporation, initiated this lawsuit against Defendant, Federal Insurance Company, on June 23, 2023. See Dkt. No. 1. Plaintiff is a global medical technology company that operates a distribution warehouse which distributes sterilized medical requirement. See id. at ¶¶ 5-6. "For over a decade, [Plaintiff] has purchased insurance policies from [Defendant Federal Insurance Company] that provide[s] coverage for defense costs, indemnification obligations, and other losses resulting from bodily injury." Id. at ¶ 12. Plaintiff filed a prior lawsuit against Defendant in this Court on July 26, 2021, alleging that Defendant breached the terms of their insurance contract by failing to defend Plaintiff's distribution warehouse landlord in a state court action. See CONMED Corp. v. Fed. Ins. Co., 621 F.Supp.3d 278, 280 (N.D.N.Y. 2022). In that lawsuit, the parties cross moved for judgment on the pleadings. See id. The Court granted Plaintiff's motion for judgment on the pleadings and denied Defendant's motion for judgment on the pleadings, concluding that Defendant had a duty to defend Plaintiff's landlord in the state court action. See id. at 284-87. Defendant appealed the decision, but later dismissed it pursuant to a settlement agreement. See Dkt. No. 37. The parties now dispute the contents of that settlement agreement. Presently before the Court is Defendant's motion to dismiss, see Dkt. No. 33, Plaintiff's motion for partial^[1] summary judgment, see Dkt. No. 38, and the parties' responses and replies. See Dkt. Nos. 45, 50.

II. BACKGROUND

Defendant moved to dismiss Plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6); therefore, its statement of facts accompanying the motion relies on the allegations in Plaintiff's complaint. See Dkt. No. 33-1 at 2-5;^[2] see also Morris v. Haas, No. 1:17-CV-00371, 2018 WL 5017742, *2 (N.D.N.Y. Oct. 16, 2018) (quotation omitted) ("When deciding a motion to dismiss, a court's review is ordinarily limited to 'the facts as asserted within the four corners of the complaint, the documents attached to the complaint as exhibits, and any documents incorporated in the complaint by reference'"). Plaintiff moved for partial summary judgment and submitted a statement of material facts as required by Local Rule 56.1, as well as additional documentary evidence. See Dkt. Nos. 38-3-38-10; see also N.D.N.Y. L.R. 56.1(a). Defendant submitted a Response to Plaintiff's Statement of Material Facts as required by the Local Rules. See Dkt. No. 45-2; see also N.D.N.Y. L.R. 56.1(b).

The factual background in this case is largely undisputed. There is essentially only one dispute: the interpretation of a clause related to attorneys' fees in the parties' settlement agreement. Although Defendant filed a motion to dismiss, it had the opportunity to respond to Plaintiff's motion for partial summary judgment, and the Court will derive the relevant factual background from the parties' statement of material facts and response thereto.

The equipment that Plaintiff distributes is sterilized with Ethylene Oxide. See Dkt. No. 45-2 at ¶ 2. One of Plaintiff's facilities is in Lithia Springs, Georgia where Plaintiff leases the facility to a landlord entity that in turn retained companies to perform management activities (the "landlords"). See id. at ¶¶ 2-4. In April 2021, current and former employees of Plaintiff sued the landlords for allegedly being exposed to unsafe levels of Ethylene Oxide. See id. at ¶¶ 5-6. The landlords sought indemnification from Plaintiff and Plaintiff notified its own insurer: Defendant. See id. at ¶¶ 7-8. Plaintiff hired DLA Piper, LLP to defend the landlords. See id. at ¶ 20. Plaintiff agreed to pay DLA Piper's attorneys rates ranging from $459 to $1,066 per hour. See id. Defendant initially refused to indemnify Plaintiff and Plaintiff brought the first case in this Court. See id. at ¶ 22. The Court awarded judgment in Plaintiff's favor. See CONMED Corp., 621 F.Supp.3d at 287. Defendant appealed the Court's decision. See Dkt. No. 45-2 at ¶ 26.

On January 3, 2023, Plaintiff and Defendant executed an agreement titled the "Going Forward Defense Agreement" which contemplated dismissal of Defendant's appeal and resolved outstanding disputes over the defense and indemnification of the state court landlord action. Dkt. No. 37. The Agreement states, in relevant part, as follows:

WHEREAS, the Parties desire to compromise and settle their differences regarding the Sterigenics Coverage Action and appeal and Landlord Coverage Action and appeal;

WHEREFORE, in reliance on the foregoing recitals which are incorporated herein, and in consideration of the promises, covenants, and obligations contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties agree as follows: . . .

3. Defense of Landlord and Related Entities in the Alexander/Landlord Action.

a) Federal does not agree to pay the rates that ConMed agreed to pay DLA Piper in the Alexander/Landlord Action. Federal has the right and will propose what it considers reasonable rates to DLA Piper as of January 1, 2023.

b) In the event that DLA Piper will not agree to Federal's proposed reasonable rates, (i) ConMed can pay the difference between the reasonable rates offered by Federal and what DLA Piper demands or (ii) Federal will replace DLA Piper with alternative counsel so long as Federal's selection of such counsel is reasonable. c) In the event Federal replaces DLA Piper, Federal will work with DLA Piper on a reasonable transition period to new counsel.

Dkt. No. 37 at 3-5. The Agreement was signed by both parties. See id. at 9. Defendant proposed a rate of $300 per hour for DLA Piper's partners. See Dkt. No. 45-2 at ¶ 34. Plaintiff did not accept the proposed rate. See id. at ¶¶ 35-49.^[3]

In Plaintiff's motion for partial summary judgment, Plaintiff contends that "[t]he Going Forward Defense Agreement plainly obligates [Defendant] to pay 'reasonable rates' for the ongoing defense of the Landlord Action." Dkt. No. 38-11 at 11. Plaintiff argues that $300 per hour is unreasonable given "[w]hile the Going Forward Defense Agreement contemplates some discount on DLA's rates, it nonetheless requires [Defendant] to propose 'reasonable' rates that account for the complexity of the action, the skill and experience of DLA's attorneys, and the market for prevailing legal fees in Georgia, where the Landlord Action is pending." Id. at 17.

Defendant argues that "the language of Section 3(a) of the Agreement as written is clear and unambiguous[] with respect to [its] obligation: [Defendant] will propose rates to DLA Piper that it-[Defendant]-considers reasonable." Dkt. No. 33-1 at 8 (footnote omitted). It also avers that "the Agreement explicitly dictates what happens if DLA Piper does not agree to [Defendant's] proposed reasonable rates." Id. at 9 (emphasis omitted). Defendant therefore argues that it fulfilled its obligations as set forth in the Agreement because it proposed the $300 rate which it believed to be reasonable. See Dkt. No. 45 at 9-10.

III. DISCUSSION

A. Legal Standards

1. Motion to Dismiss

A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the party's claim for relief. See Patane v. Clark, 508 F.3d 106, 111-12 (2d Cir. 2007) (citation omitted). In considering the legal sufficiency, a court must accept as true all well-pleaded facts in the pleading and draw all reasonable inferences in the pleader's favor. See ATSI Commc'ns, Inc. v. Shar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (citation omitted). This presumption of truth, however, does not extend to legal conclusions. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).

To survive a motion to dismiss, a party need only plead "a short and plain statement of the claim," see FED. R. CIV. P. 8(A)(2), With sufficient factual "heft to 'sho[w] that the pleader is entitled to relief. '" Bell Atl. Corp. v. Twombly, 550 U.S 544, 557 (2007) (quotation omitted). Under this standard, the pleading's "[f]actual allegations must be enough to raise a right of relief above the speculative level," See id. at 555 (citation omitted), and present claims that are "plausible on [their] face," id. at 570. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (citation omitted). "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of "entitlement of relief."'" Id. (quoting Twombly, 550 U.S. at 557). Ultimately, "when the allegations in a complaint, however true, could not raise a claim of entitlement to relief," Twombly, 550 U.S. at 558, or where a plaintiff has "not nudged [its] claims across the line from conceivable...