United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION FOR
CLARIFICATION AND/OR RECONSIDERATION AND DEFENDANTS'
MOTION FOR JUDGMENT ON PARTIAL FINDINGS
Dennis Saylor IV United States District Judge
an insurance coverage dispute involving whether an insurer
was obligated to defend an investment fund accused of
mismanagement and self-dealing. Wellesley Advisors Funds was
an investment advisor for the investment fund WARF Realty
Fund I, LLC (“WARF”), in which the Plumbers and
Pipefitters Local 51 Pension and Annuity Funds (the
“Pension Funds”) had invested. Defendants Timothy
Byrne and Robert Bolton are co-chairs of the Board of
Trustees of the Pension Funds.
purchased an insurance policy on behalf of WARF from
plaintiff Scottsdale Insurance Company. WARF's alleged
mismanagement and self-dealing precipitated a lawsuit
alleging negligence and an ERISA violation. Scottsdale
declined to defend WARF, citing various coverage exclusions.
WARF then went into receivership and did not defend the suit,
leading to a default judgment against it for $5, 005, 422.12.
action, Scottsdale sought a declaratory judgment stating that
it had no duty to defend or indemnify WARF, and defendants
counterclaimed for the amount of the default judgment,
alleging breach of contract, breach of the implied covenant
of good faith and fair dealing, and violation of the
Massachusetts consumer protection statute, Mass. Gen. Laws
ch. 93A. Scottsdale moved for summary judgment, and
defendants cross-moved for partial summary judgment on their
breach of contract counterclaims.
March 1, 2018, the Court granted defendants' motion for
partial summary judgment and denied Scottsdale's motion
for summary judgment, finding that Scottsdale breached the
insurance contract by refusing to defend WARF. In its
memorandum and order, the Court suggested that it would award
defendants the amount of the coverage limit ($3, 000, 000)
and directed the parties to file motions “concerning
the form of judgment” by March 15, 2018.
has now moved for clarification and/or reconsideration of the
memorandum and order. In support of its motion, Scottsdale
contends that the Court failed to address the substance of
defendants' bad-faith claims, and that because those
claims remain outstanding, judgment cannot issue. Defendants
have also moved for Scottsdale to pay the entire judgment in
the underlying action. For the reasons set forth below, the
Court will grant Scottsdale's motion for reconsideration
and deny defendants' motion for payment of the entire
Motion for Reconsideration
courts have “substantial discretion and broad
authority” to grant a motion for reconsideration
pursuant to Fed.R.Civ.P. 59(e). Ruiz Rivera v. Pfizer
Pharms., LLC, 521 F.3d 76, 81 (1st Cir. 2008). A motion
for reconsideration will be granted upon a showing of (1) a
“manifest error of law, ” (2) new evidence, or
(3) a misunderstanding or other error “not of reasoning
but apprehension.” Id. at 82. Rule 59(e)
motions cannot be used to “advance a new argument that
could (and should) have been presented prior to the district
court's original ruling.” Cochran v. Quest
Software, Inc., 328 F.3d 1, 11 (1st Cir. 2003). Nor is a
Rule 59(e) motion an appropriate means to “repeat old
arguments previously considered and rejected.”
Nat'l Metal Finishing Co., Inc. v. Barclays
American/Commercial, Inc., 899 F.2d 119, 123 (1st Cir.
correctly notes that the Court's memorandum and order
only granted partial summary judgment to defendants on Counts
1 and 2 of their counterclaims. Accordingly, defendants'
bad-faith claims (Counts 3-6) remain outstanding, and entry
of final judgment is inappropriate until those claims are
resolved. See Fed. R. Civ. P. 54(b). The Court erred
in failing to address the bad-faith claims, and
reconsideration is therefore warranted.
3 and 4 allege breach of the implied covenant of good faith
and fair dealing. (Ans. ¶¶ 37-46). Under
Massachusetts law, a covenant of good faith and fair dealing
is implied in every contract. UNO Restaurants, Inc. v.
Boston Kenmore Realty Corp., 441 Mass. 376, 385 (2004).
The covenant provides that “neither party shall do
anything that will have the effect of destroying or injuring
the rights of the other party to receive the fruits of the
contract.” Anthony's Pier Four, Inc. v. HBC
Assocs., 411 Mass. 451, 471 (1991). The implied covenant
may not, however, be invoked to create rights and duties not
contemplated by the provisions of the contract or the
contractual relationship. UNO Restaurants, 441 Mass.
at 385; AccuSoft Corp. v. Palo, 237 F.3d 31, 45 (1st
5 and 6 allege unfair and deceptive conduct in violation of
Mass. Gen. Laws ch. 93A. (Ans. ¶¶ 47-62).
“Conduct is unfair or deceptive if it is ‘within
at least the penumbra of some common-law, statutory, or other
established concept of unfairness' or ‘immoral,
unethical, oppressive, or unscrupulous.'”
Cummings v. HPG Int'l Inc., 244 F.3d 16, 25 (1st
Cir. 2001) (quoting PMP Assoc. Inc. v. Globe Newspaper
Co., 366 Mass. 593, 596 (1975)). In addition, the
plaintiff must show “an injury or loss” and a
“causal connection between the defendant's
deceptive act or practice and the plaintiff's
injury.” Gorbey ex rel. Maddox v. Am. Journal of
Obstetrics and Gynecology, 849 F.Supp.2d 162, 165 (D.
their summary judgment briefs, the parties agreed that the
disposition of the bad-faith claims turned on whether
plaintiff's conduct in declining to defend WARF in the
underlying litigation and subsequent refusal to pay on the
policy was based on a “reasonable or plausible
interpretation of the policy.” Peterborough Oil
Co., Inc. v. Great Am. Ins. Co., 397 F.Supp.2d 230, 244
(D. Mass. 2005). Here, plaintiff's interpretation of the
applicable exclusions was ultimately incorrect, but it was
not unreasonable. For example, a letter mailed to WARF's
counsel on December 30, 2014, parsed the policy language and
provided relevant case law in an effort to ...