United States District Court, D. Massachusetts
AMENDED MEMORANDUM AND ORDER ON DEFEND ANTS'
MOTION FOR JUDGMENT ON THE PLEADINGS (DOCKET NO. 32) AND
PLAINTIFF'S CROSS-MOTION FOR JUDGMENT ON THE PLEADINGS
(DOCKET NO. 36)
TIMOTHY S. HILLMAN DISTRICT JUDGE.
a dispute over an insurer's duty to defend in litigation
brought against the insured by a third party. As explained
below, I find that the insured has met its burden of showing
that the underlying complaint alleged potentially covered
property damage caused by an occurrence, as those terms are
defined in the parties' commercial general liability
policy and under applicable law. I further find that the
insurer has not met its burden of showing that three of the
policy's exclusionary provisions would apply to bar
coverage. Accordingly, the insurer had a duty to defend the
insured, and the insured is entitled to judgment on the
pleadings on Count I of the complaint. Defendant's motion
for judgment on the pleadings (Docket No. 32) is
denied, and Plaintiffs cross-motion for judgment on
the pleadings (Docket No. 36) is granted.
following facts are taken from the parties' pleadings and
assumed true for the purposes of these motions. Innovative
Mold Solutions, Inc. (IMS or Plaintiff) is an engineering and
manufacturing company. All America Insurance Company, Inc.
and Central Mutual Insurance Company, Inc. (collectively, All
America or Defendants) are property and casualty insurance
companies. All America issued consecutive commercial
general liability (CGL) policies to IMS, effective January 1,
2007 through December 31, 2010 (the Policies). The Policies
provided coverage for "property damage" caused by
an "occurrence, " as those terms were defined in
the Policies and under Massachusetts law, subject to certain
exclusions. The Policies further provided that All America
would defend IMS in any suit in which a third party sought to
recover damages for covered property damage or bodily injury.
February 15, 2012, IMS was served with a complaint, filed in
the United States District Court in Connecticut. The action
was a qui tarn False Claims Act (FCA) suit, brought
against FMS and others by a relator, Michael Ladas, on behalf
of the United States (the Ladas action). The complaint
alleged that IMS and other defendants had violated the FCA by
manufacturing contractually noncompliant and defective
components of ______, which were provided to the United
States for use by ______. IMS notified All America of the
claim and requested that All America provide and pay for
IMS's defense, but All America denied having a duty to
defend or indemnify under the facts as alleged in the Ladas
facts pled in the Ladas complaint are as follows. In 2005,
the United States Army Corporation a ______ contract ______
Before the was the proposed product went through a rigorous
electrical power is supplied through a power supply case of
mechanically rigid plastic. The case has a plated metal
surface that serves as the contact area for inputting power
into the tube assembly.________.
Power Solutions, a subsidiary of ITT Corporation, designed
and manufactured the _______. ITT Power IMS to manufacture
the molded components of the power supply assembly. Prior to
2007, the power supplies sold under the contract were plated
using the processes and materials that had been qualified by
ITT, as required under the contract. During November of 2007,
however, IMS changed the way that it manufactured the power
supply case in two important ways. First, IMS changed the
process for applying the silver epoxy material onto the power
supply case _______. Second, IMS changed the composition of
the silver epoxy material. This new process was not approved
by the qualification procedures.
point, ITT Power Solutions employees began to notice that
defective power supply cases were being shipped from IMS. The
defects included bubbling, flaking, and "burn"
marks on the plating of the cases._____.IMS initially
withheld the unauthorized process change from ITT Power
Solutions, but at some point ITT personnel became aware of
the change and did not take action to correct it.
ITT Power Solutions admitted to having knowledge of the
manufacturing process changes. Thereafter, a struggle ensued
between the quality control personnel at ITT Power Solutions,
who wanted to disclose the manufacturing change and subject
it to testing and qualification, and other high-level ITT
personnel who did not wish to disclose the full nature of the
problem. In March of 2010, ITT Power Solutions terminated its
Director of Quality, Michael Ladas, who filed the Ladas
action that underlies the instant insurance dispute.
the government continued to order ______, and ITT's
quality assurance personnel continued to observe that the
power supply cases were peeling and had other irregularities,
total, approximately ______ were sold to the United States
government from November of 2007 to the spring of 2011 with
power supplies produced under the changed process and
materials. Ladas alleged that, through the date of the
complaint in late 2013, ITT Corporation and ITT Power
Solutions continued to conceal the nature of the process
Ladas complaint contained three counts: violation of the FCA,
31 U.S.C. § 3729(a)(1)(A) (count I); violation of the
FCA, 31 U.S.C. § 3729(a)(1)(B) (count II); and
conspiracy to violate the FCA, 31 U.S.C. § 3729(a)(1)(C)
(count III). Ladas sought the following relief: enjoin the
defendants from continuing to violate the FCA; order a
recommended inspection of all ______ manufactured from
September of 2007 through April of 2011, ______; enter
judgment defendants in the amount of three times the actual
damages sustained by the United States because of the
defendants' actions, plus a civil penalty for each
violation; and award the relator a share of the damages, plus
September of 2014, after IMS had spent more than $400, 000 on
legal fees in defense of these allegations, the Connecticut
District Court dismissed the Ladas action on the grounds that
(1) Ladas did not have standing to bring an FCA claim because
of a release that he had executed, and (2) the complaint was
not pled with sufficient particularly per Federal Rule of
Civil Procedure 9(b). Ladas appealed this decision to the
Second Circuit, which held oral arguments in May of 2015. At
some point in 2015, IMS paid Ladas $25, 000 to settle the
suit, and Ladas withdrew his appeal as to IMS.
brought this suit against All America on January 9, 2015,
seeking a declaratory judgment that All America had a duty to
defend FMS in the Ladas action (count I). IMS also alleges
breach of contract (count II); breach of implied covenant of
good faith and fair dealing (count III); and violation of
Chapter 93 A (count IV). IMS seeks to recover the fees it
paid for its defense in the Ladas action, as well as its fees
for bringing the instant action, with treble damages and
interest. All America moved for judgment on the pleadings
(Docket No. 32), and IMS filed a "cross-motion for
judgment on the pleadings or for summary judgment."
(Docket No. 36.) In their filings, the parties address only
the declaratory judgment count regarding the duty to defend.
In November of 2015, this Court granted the parties'
joint request to file their motions under seal, with redacted
copies added to the public docket.
to Rule 12(c) of the Federal Rules of Civil Procedure, a
party may move for judgment on the pleadings "[a]fter
the pleadings are closed-but early enough not to delay
trial." This Court reviews motions for judgment on the
pleadings under a standard that is essentially the same as
that for a motion to dismiss under Fed.R.Civ.P. 12(b)(6),
except that "[a] Rule 12(c) motion, unlike a Rule
12(b)(6) motion, implicates the pleadings as a whole."
Aponte-Torres v. Univ. o/P.R, 445 F.3d 50, 54-55
(1st Cir. 2006). Facts contained in the pleadings are viewed
in the light most favorable to the nonmovant, and all
reasonable inferences are drawn in his or her favor.
Zipperer v. Raytheon Co., 493 F.3d 50, 53 (1st Cir.
2007). Judgment on the pleadings is appropriate "only if
the uncontested and properly considered facts conclusively
establish the movant's entitlement to a favorable
judgment." Id. (quoting Aponte-Torres,
445 F.3d at 54).
reviewing a motion under Rule 12(c), the court "may
consider 'documents the authenticity of which are not
disputed by the parties; . . . documents central to
plaintiffs' claim; [and] documents sufficiently referred
to in the complaint.'" Curran v. Cousins,
509 F.3d 36, 44 (1st Cir. 2007) (quoting Watterson v.
Page, 987 F.2d 1, 3 (1st Cir. 1993)). When the court is
confronted with cross-motions for judgment on the pleadings,
the pertinent inquiry is "whether either of the parties
deserves judgment as a matter of law on facts that are not
disputed." Id. (quoting Barnes v. Fleet
Natl Bank, N.A., 370 F.3d 164, 170 (1st Cir. 2004)).