Paternostro v. Choice Hotel Int'l Servs. Corp.

ANGELA PATERNOSTRO, ET AL. v. CHOICE HOTEL INTERNATIONAL SERVICES CORP.,D/B/A/ CLARION INN AND SUITES, ET AL.

CIVIL ACTION NO. 13-0662 SECTION "L" (5)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

February 4, 2015

ORDER & REASONS

Before the Court are eight motions¹ filed in connection with the Court's November 17, 2014 Order and Reasons (hereinafter, "Order and Reasons"). (Rec. Docs. 304, 343, 427, 435, 436, 437, 438, 443). The motions include several motions to reconsider, motions for partial judgment, and other motions relating to the Order and Reasons. Having considered the parties' memoranda and the applicable law, the Court now issues this order.

I. BACKGROUND

A. Procedural Background

This action arises out of the alleged presence of Legionella and Pseudomonas aeruginosa (that is, the causative agent of Legionnaires' disease) at the Clarion Inn and Suites Hotel ("the Hotel") in Covington, Louisiana. Plaintiffs allege that Defendant Choice Hotels International ("Choice") was the franchisor of the Hotel, and Defendant Century Wilshire ("CWI")² was the franchisee, owner, and operator of the Hotel. Initially, several Plaintiffs brought this action in state court, both as individuals and as surviving heirs, alleging that on December 4, 2012,decedent Russell Paternostro was exposed to Legionella while attending a Rotary Club meeting at the Clarion Inn and Suites Conference Center ("Clarion"). CWI removed to this Court on the basis of diversity jurisdiction. Thereafter, this Court consolidated the case with several other related cases which alleged similar factual allegations. Plaintiffs then filed an amended complaint against the original Defendants and various insurers, incorporating therein class allegations, (Rec. Doc. 94). Defendants filed amended answers (Rec. Docs. 95, 98, 110, 140, 165, 177, 179, 200). Choice also filed crossclaims against CWI and various insurers. (Rec. Docs. 182, 183, 185, 331). CWI filed a crossclaim of its own against an insurer. (Rec. Doc. 293). Several insurers filed crossclaims of their own. (Rec. Doc. 208, 291, 292).

B. Factual Background

Plaintiffs include: (1) surviving relatives of the decedent, Russell Paternostro, specifically his widow Angela Paternostro, and his children Robyn Ortego and Mercedes Paternostro; (2) Gwen Newberry and Robert Newberry; (3) Marie Heeser; and (4) Jason Beleto. (Rec. Doc. 94). Plaintiffs, individually and as class representatives, allege that they suffered injury because of negligence of Defendants between December 1, 2011 and January 28, 2013. Putative class representatives allege that they were registered guests and/or invitees at the Hotel between January 2011 and December 2012 and that Defendants' negligence caused Plaintiffs personal injuries and medical treatment. Plaintiffs further alleged that this negligence caused or substantially contributed to the death of Russell Paternostro.

According to Plaintiffs, Choice entered into a plan with CWI in December 2010 to provide a proper dehumidification system to the Hotel's hot tub and spa area. However, Plaintiffs say that Choice granted continuous waivers to CWI so that the dehumidification requirement went unsatisfied, in spite of multiple inspections. Plaintiffs also allege that Choice and CWIfailed to properly disinfect the hot tub/spa system with a biocide. According to Plaintiffs, this negligent maintenance and operation resulted in the amplified presence of Legionella and Pseudomonas aeruginosa in the Hotel's hot tub/spa system and thereafter spread through the Hotel, causing injury to Plaintiffs and putative class members. Plaintiffs allege that Louisiana state public health officials on January 22, 2013 warned Defendants that hot tub samples from the Hotel demonstrated a high risk of Legionnaires disease.

Choice and CWI deny liability, including causation. (Rec. Docs. 95, 110). Choice further argues, inter alia, that it was the franchisor only for the Clarion Inn & Suites brand and did not own or operate the Hotel. It also states that it had no involvement in the use, opening, or closing of the hot tub/spa. Choice moved for dismissal of all claims against it on the grounds of insufficient control. After oral argument, the Court dismissed Plaintiffs' vicarious liability and apparent agency claims against Choice but denied summary judgment on the issue of Choice's independent liability. (Rec. Doc. 471).

As part of this litigation, Plaintiffs sued various insurers of Choice and CWI, pursuant to the Louisiana Direct Action Statute. Both primary and excess liability insurers have been made a part of this litigation.

C. November 17 Order and Reasons on Preliminary, Dispositive Motions

On November 17, 2014, the Court issued its Order and Reasons on twenty preliminary dispositive motions. (Rec. Doc. 422). In pertinent part, the Court ruled that (1) at this stage, it would not dismiss the Beleto claims for prescription; (2) some of the insurance policies unambiguously excluded coverage for bacteria such as Legionella and Pseudomonas aeruginosa, while other policies, at this stage, did not unambiguously exclude coverage; (3) the communicable disease exclusion of the Merchants Policy did not, at this stage, unambiguouslyexclude coverage; and (4) Louisiana law generally recognizes a broad duty to defend and the Court declined to dismiss crossclaims against Allied World based on Allied's duty to defend arguments.

II. PRESENT MOTIONS

A. Allied World's Motion to Reconsider

Allied World moves that the Court reconsider a discrete issue in its November 17, 2014 Order and Reasons.³ (Rec. Doc. 427). Specifically, Allied World argues that the Court's Order and Reasons was unclear as to when its duty to defend would commence. Allied World notes that the Court stated that Allied World "presently" has a duty to defend, which appears to conflict with other language in the Order and Reasons regarding the duty to defend.

Choice responds in opposition to Allied World's motion to reconsider. (Rec. Doc. 441). Choice argues that there is no reason to revisit the issue of the duty to defend absent exhaustion. Century Surety also responds in opposition to Allied World's motion to reconsider. (Rec. Doc. 450). In pertinent part, Century Surety argues that Allied World has a duty to defend because only one of the prongs of the Allied World defense provision requires exhaustion.

B. Motions to Reconsider of CWI and Choice

CWI moves for reconsideration in that it seeks clarification regarding the Order and Reasons.⁴ (Rec. Doc. 435). Specifically, CWI argues that the Court did not address its argument that the bacteria exclusion in the First Allied Policy was only related to clean-up and/or abatement, thus the exclusion's language is vague and ambiguous and the Court should not havefound coverage excluded under the First Allied Policy. CWI also argues that the Lexington policy exclusion is vague and ambiguous, thus should not have been found to exclude coverage.

Allied World responds in opposition to CWI's motion to reconsider. (Rec. Doc. 446). In pertinent part, Allied World argues that that CWI is merely re-asserting the same arguments and that the Court already considered its arguments.

C. Scottsdale's Motion to Reconsider

Scottsdale moves that the Court reconsider, (Rec. Doc. 437), the Order and Reasons regarding a general "duty to defend" of the insurers under the Scottsdale Policy Group. (See Rec. Doc. 422 at 29). Scottsdale notes that no party asked the Court to decide such an issue generally and asserts that the Court did not examine the Scottsdale policy in full.

Century Surety responds in opposition to reconsideration. (Rec. Doc. 450). In pertinent part, Century Surety argues that the mere fact that Scottsdale chose not to file a motion to dismiss does not mean that the Court cannot rule on the issue. Century Surety further argues that it was incumbent on Scottsdale to raise such arguments at the appropriate time, a time which has passed now that the Court issued its Order and Reasons.

Choice also responds. (Rec. Doc. 451). Choice acknowledges that no party filed a motion regarding a coverage determination of the Scottsdale policies issued to Choice. Choice argues, however, that the ruling is binding in regards to the other policies analyzed in the Order and Reasons. Choice further recognizes that Scottsdale reserves some of its rights for a later date.

D. Two Additional Preliminary Dispositive Motions

Two parties filed preliminary, dispositive motions that were filed too late to be considered at the October 22, 2014 oral argument, thus are now before the Court.

1. Century Surety's motion to dismiss crossclaim/counterclaim

First, Century Surety moves to dismiss the crossclaim/counterclaim of CWI.⁵ (Rec. Doc. 304). Century Surety argues that the Century Surety Policy does not provide coverage, and on this basis the bad faith claims of CWI should be dismissed.

CWI responds, arguing that its crossclaim/counterclaim should not be dismissed, incorporating by reference its arguments already made regarding coverage. (Rec. Doc. 390).

By leave of Court, Century Surety replies, in rebuttal. (Rec. Doc. 406).

2. Allied World's motion to dismiss crossclaim

Second, Allied World moves to dismiss the cross-claims of CWI, arguing that it has not breached any duty to CWI. (Rec. Doc. 343). Specifically, Allied World argues that (1) its policies expressly exclude for bacteria, (2) the underlying insurance has not been exhausted, thus Allied World's excess policy is not triggered, and (3) Allied World has acted in good faith and has not denied coverage to CWI.

CWI responds, arguing that its crossclaim against Allied World should not be dismissed. (Rec. Doc. 388). CWI argues that coverage exists and that Allied World's motion is premature. In arguing that the motion is premature, CWI asserts that the Court must make specific factual findings regarding bad faith before addressing the issue.

E. Motions for Partial Judgment und...