Court Opinion

ID: 9944444
Source: CourtListenerOpinion
Date Created: 2024-02-26 17:04:23.889688+00
Date Added: 2024-06-11T13:59:25.746104
License: Public Domain

IN THE

            Court of Appeals of Indiana
                          Starr Indemnity & Liability Co., et al.,
                                         Appellant-Defendant
                                                                             FILED
                                                    v.                  Feb 26 2024, 10:03 am

                                                                             CLERK
                                                                         Indiana Supreme Court
                                                                            Court of Appeals
                                           NIBCO INC.,                        and Tax Court

                                           Appellee-Plaintiff

                                          February 26, 2024
                                     Court of Appeals Case No.
                                           23A-PL-1343
                             Appeal from the Elkhart Superior Court
                         The Honorable Christopher J. Spataro, Judge
                                        Trial Court Cause No.
                                         20D05-1708-PL-178

                             Opinion by Chief Judge Altice
                        Judges Weissmann and Kenworthy concur.

Altice, Chief Judge.

Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024   Page 1 of 14
      Case Summary
[1]   NIBCO, Inc.’s declaratory judgment action was dismissed for failure to

      prosecute. Two years later, the trial court, despite rejecting NIBCO’s claim that

      it was entitled to reinstatement under Ind. Trial Rule 60(B), reinstated the

      action. The trial court reasoned that it was required to reinstate the action

      because it failed to hold an Ind. Trial Rule 41(E) hearing before the dismissal.

      As the only vehicle for reinstatement in this case was T.R. 60(B), we conclude

      that the trial court erred by reinstating the action.

[2]   We reverse.

      Facts & Procedural History
[3]   NIBCO filed this action in 2017 against twenty-two of its commercial insurers

      seeking a declaration regarding coverage issues in connection with two

      underlying class actions against NIBCO for product liability related to

      NIBCO’s PEX 1006 plumbing components. Following mediation, the majority

      of the insurance-company defendants reached agreements with NIBCO and

      were dismissed from this action in June 2019 and April 2020. The six

      defendants that remained in the action are the appellants here – Starr Indemnity

      & Liability Company, Starr Surplus Lines Insurance Company, Liberty Mutual

      Fire Insurance Company, The Ohio Casualty Insurance Company, Mt. Hawley

      Insurance Company, and National Fire & Marine Insurance Company

      (collectively, Insurers).

      Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024     Page 2 of 14
[4]   For nearly nine months after the April 2020 dismissals, nothing occurred on the

      trial court’s docket involving Insurers, except for the granting of a motion to

      withdraw the appearance of an attorney in August 2020. In the meantime, the

      trial judge, Charles Cater Wicks, retired and Christopher J. Spataro took over

      the case in January 2021.

[5]   On February 8, 2021, Judge Spataro, sua sponte, issued an order for hearing for

      the purpose of dismissing the case pursuant to T.R. 41(E). In that order, the

      court scheduled the T.R. 41(E) hearing for March 19, 2021, at 11:00 A.M. and

      directed that an order of dismissal would be entered if “the plaintiff shall not

      show sufficient cause why this case should not be dismissed at or before such

      hearing.” Appellants’ Appendix at 124. The hearing order was served by email to

      John A. Conway (Attorney Conway), one of the three attorneys with

      SouthBank Legal who entered appearances in this case for NIBCO. 1 Insurers

      were not served with the hearing order.

[6]   Thereafter, NIBCO did not attempt to show cause why the case should not be

      dismissed and did not appear on the date of the hearing or seek to have the

      hearing rescheduled. On March 25, 2021, the trial court dismissed the case

      1
       NIBCO was separately represented by attorneys with K&L Gates (Coverage Counsel), who did not enter
      appearances in this action but “took the lead on insurance coverage strategy [and] settlement and insurer
      communications.” Id. at 128. Coverage Counsel’s mediation resulted in settlements of the underlying class
      actions and with insurance-company defendants exclusive of Insurers. Thereafter, Coverage Counsel
      continued to hold periodic conference calls with Insurers to provide updates on other pending PEX 1006
      product liability claims. We will refer to these calls as Update Calls.

      Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                         Page 3 of 14
      with prejudice under T.R. 41(E). Like the order setting the hearing, the order of

      dismissal was served by email and only to Attorney Conway.

[7]   On December 7, 2022, more than twenty months after the dismissal, NIBCO

      filed a motion for relief from judgment seeking reinstatement of its action

      against Insurers under T.R. 60(B)(8). NIBCO argued that “equitable

      considerations” weighed in favor of granting relief, including that the hearing

      and dismissal orders had been sent only to one attorney of record, there was no

      evidence that a T.R. 41(E) hearing had been held, NIBCO had a good-faith

      belief that the case was still active, Insurers would not be prejudiced by

      reinstatement of the action, and Indiana’s strong preference for deciding cases

      on the merits. Appellants’ Appendix at 126.

[8]   NIBCO claimed that it did not become “actually aware” of the dismissal until

      November 21, 2022, when counsel for Starr Indemnity & Liability Company

      and Starr Surplus Lines Insurance Company (collectively, Starr) referenced the

      dismissal during an Update Call. 2 Appellants’ Appendix at 127. In a reservation

      of rights letter to Coverage Counsel dated June 6, 2022, however, Starr’s

      counsel had already expressly noted the dismissal. 3 And a reservation of rights

      2
       After the March 2021 dismissal, Coverage Counsel had three Update Calls with Insurers. These were in
      April and October 2021 and then more than a year later in November 2022.
      3
          On the second page of this letter, Starr’s counsel wrote:
               NIBCO filed a declaratory judgment action against Starr, as well as its other primary, excess
               and umbrella insurers that issued policies to NIBCO between 2006 and 2017, seeking coverage
               for certain of the PEX Lawsuits, captioned NIBCO, Inc. v. Zurich American Insurance Company, et
               al., Case No. 20D05-1708-PL000178, Elkhart Superior Court, Indiana (“Coverage Lawsuit”).
               Starr has filed responsive pleadings in the Coverage Lawsuit. On March 25, 2021, the Coverage

      Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                             Page 4 of 14
       letter from another Insurer, sent on July 12, 2022, similarly referenced the

       dismissal order. 4

[9]    Insurers opposed NIBCO’s request for relief from judgment and argued that

       NIBCO had not satisfied the requirements of T.R. 60(B)(8). Insurers claimed,

       among other things, that NIBCO failed to show circumstances beyond simple

       neglect/mistake by Attorney Conway, who was served with the hearing order

       and the dismissal order on behalf of NIBCO, that NIBCO failed to establish

       exceptional circumstances warranting relief, and that NIBCO failed to seek

       relief from judgment within a reasonable time.

[10]   The trial court held oral argument on NIBCO’s T.R. 60(B)(8) motion. At the

       hearing on February 7, 2023, Attorney Conway acknowledged that he had

       received the orders in question and that there was “nothing excusable about [his

       failure to attend to them].” Transcript at 11. But he noted that the two other

               Lawsuit was dismissed with prejudice for lack of progress. Accordingly, the Coverage Lawsuit
               was resolved in favor of the primary, excess and umbrella insurers involved in that lawsuit,
               including Starr, with respect to coverage for the PEX Lawsuits.
       Appellee’s Appendix at 11.
       4
           This letter provided in relevant part:

               We note as an initial or threshold matter that, aside from the express provisions in the Liberty
               Mutual Policies, coverage thereunder for the Blappert Action is precluded by the fact that
               NIBCO’s declaratory judgment action against its insurers, including Liberty Mutual, was
               dismissed with prejudice on March 25, 2021. See Order Dismissing Case Pursuant to T.R.
               41(E), NIBCO Inc. v. Zurich Am. Ins. Co., et al., Case No. 20D05-1708-PL-000178 (Elkhart Sup.
               Ct., Ind.) (case “dismissed with prejudice”). NIBCO’s Complaint for Declaratory Judgment
               sought a declaration as to whether it was entitled to coverage for “PEX lawsuits throughout the
               country.” The Court’s March 2021 dismissal with prejudice is fully dispositive of NIBCO’s
               coverage action, which cannot be relitigated.
       Appellee’s Appendix at 43.

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                              Page 5 of 14
       attorneys on the case were not served with the orders and that Coverage

       Counsel was separately handling the underlying claims with SouthBank Legal

       “kind of in standby capacity in the event that [] the litigation [] heated up”

       against Insurers. Id. at 9. Attorney Conway explained that there was “kind of a

       wait and see approach” by Insurers as other PEX 1006 cases continued to

       develop and as Coverage Counsel and Insurers periodically communicated

       about the pending claims. 5 Id. at 13. Under the circumstances, he claimed that

       there “wasn’t a need to be checking the docket, because things weren’t … really

       going on.” Id. at 24. Ultimately, NIBCO’s claim of exceptional circumstances

       was based on there being “some … issues … with the service and then the

       conduct of the parties.” Id. at 51.

[11]   The trial court took the matter under advisement and then issued its order on

       March 31, 2023. Despite expressly concluding that NIBCO was not entitled to

       relief under T.R. 60(B)(8), the trial court determined that it was required to

       reinstate the case because the scheduled T.R. 41(E) hearing had not actually

       been held. Appellants’ Appendix at 119 (“Because the record does not reflect that

       an actual [T.R.] 41(E) hearing was conducted, and because the undersigned

       knows that no [such] hearings were conducted during (at least) the first half of

       5
        Attorney Conway acknowledged that the Update Calls did not amount to ongoing litigation activity in this
       case. See id. at 50 (indicating with respect to the Update Calls that he was “not trying to imply at all that we
       were litigating” and that he “[c]ertainly, [didn’t] want to leave that implication”).

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                               Page 6 of 14
       2021, the Court finds that it is required to reinstate the case and hereby does

       so.”).

[12]   Insurers filed a motion to correct error in which they argued that T.R. 41(E)’s

       hearing requirement was satisfied because “[a] hearing was set, scheduled,

       notice was provided, and NIBCO did not attend or respond in any way, despite

       having a full and fair opportunity to do so.” Appellants’ Appendix at 177. In

       essence, Insurers’ argument assumed that the hearing was not held because

       NIBCO did not attend.

[13]   In denying Insurers’ motion to correct error, the trial court clarified that it did

       not reinstate the case because NIBCO failed to respond or appear at a duly

       noticed hearing but because of the court’s own failure to conduct a hearing. In

       its order, the trial court discussed several cases and then concluded:

                Indiana law requires that if a court dismisses a case under Trial
                Rule 41(E), it must both schedule and conduct a hearing before
                entering an order of dismissal. There is no dispute here that the
                Court did not conduct a hearing before dismissing NIBCO’s
                claims and that NIBCO did not demonstrate sufficient good
                cause for the delay before the scheduled hearing. Therefore, the
                Court correctly reinstated NIBCO’s case on March 31, 2023.

       Id. at 122.

[14]   Insurers appeal from the reinstatement of the declaratory judgment action.

       Additional information will be provided as needed below.

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024        Page 7 of 14
       Discussion & Decision
[15]   T.R. 41(E) provides:

               Whenever there has been a failure to comply with these rules or
               when no action has been taken in a civil case for a period of sixty
               [60] days, the court, on motion of a party or on its own motion shall
               order a hearing for the purpose of dismissing such case. The court shall
               enter an order of dismissal at plaintiff’s costs if the plaintiff shall not show
               sufficient cause at or before such hearing. Dismissal may be withheld
               or reinstatement of dismissal may be made subject to the
               condition that the plaintiff comply with these rules and diligently
               prosecute the action and upon such terms that the court in its
               discretion determines to be necessary to assure such diligent
               prosecution.

       (Emphasis supplied.)

[16]   As the trial court observed in this case, a court is required to hold a hearing

       prior to dismissing a case for failure to prosecute. See, e.g., Rumfelt v. Himes, 438

       N.E.2d 980, 984 (Ind. 1982) (“Trial Rule 41(E) clearly requires a hearing on a

       motion to dismiss[.]”); Caruthers v. State, 58 N.E.3d 207, 214 (Ind. Ct. App.

       2016) (holding that T.R. 41(E) requires a trial court to hold a hearing, not just

       schedule one, before dismissing a case). Judgments of dismissal entered

       without such a hearing are prone to reversal. See generally Rumfelt, 438 N.E.2d

       980; Smith v. State, 90 N.E.3d 691 (Ind. Ct. App. 2017), trans. denied; Caruthers,

       58 N.E.3d 207. The Caruthers court recognized that “there may be

       circumstances where a trial court’s dismissal of an action without first holding a

       hearing will not constitute reversible error” but did not elaborate further, as it

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                 Page 8 of 14
       determined that strict compliance with the hearing requirement was warranted

       in that case. 58 N.E.3d at 214 n.7.

[17]   In this appeal, the parties spill much ink debating whether a hearing was in fact

       held – though they agree that none of the parties attended – and if a hearing was

       not held, whether the circumstances of this case would warrant reversal of the

       judgment of dismissal. On the latter point, Insurers contend that a hearing was

       scheduled, and NIBCO was duly served with notice of the hearing but did not

       attempt to attend or reschedule the hearing or otherwise respond to the hearing

       notice. Insurers argue that under these circumstances a trial court should not

       have to commence a hearing simply to go on the record to note the plaintiff’s

       non-attendance.

[18]   These disputes are beside the point, however, because, unlike the cases cited

       above and relied upon by the trial court, this case does not involve an appeal

       from the judgment of dismissal. NIBCO missed that opportunity. Thus,

       pursuant to T.R. 41(F), its only recourse was to seek reinstatement of the

       declaratory judgment action via T.R. 60(B). See T.R. 41(F) (providing for

       reinstatement following a dismissal with prejudice “for the grounds and in

       accordance with the provisions of Rule 60(B)”); see also Baker & Daniels, LLP v.

       Coachmen Indus., Inc., 924 N.E.2d 130, 137 n.6 (Ind. Ct. App. 2010) (“Rule

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024    Page 9 of 14
       41(F) plainly states that reinstatement of claims dismissed with prejudice must

       be in accordance with Rule 60(B).”), trans. denied. 6

[19]   Due to the belated filing of its T.R. 60(B) motion twenty months after the

       dismissal, NIBCO’s options were even more limited, which is reflected by the

       fact that NIBCO sought reinstatement only pursuant to T.R. 60(B)(8). T.R.

       60(B)(8) is a catch-all provision that permits the trial court to grant relief for

       “any reason justifying relief from the operation of the judgment, other than

       those reasons set forth in sub-paragraphs (1), (2), (3), and (4).” It provides the

       trial court with broad equitable power and imposes a time limit based only on

       reasonableness. Baker & Daniels, 924 N.E.2d at 140. Nevertheless, “subsection

       (8) may only be invoked upon a showing of exceptional circumstances

       justifying extraordinary relief[,]” which requires more than a showing that a

       party’s failure to act was merely due to mistake, surprise, or excusable neglect –

       the reasons set out in subsection (1) that are subject to a one-year time limit. Id.

[20]   Here, the trial court expressly determined that NIBCO was not entitled to relief

       under T.R. 60(B)(8) because (1) NIBCO did not seek relief within a reasonable

       6
         The Baker & Daniels case involved the reinstatement of an action dismissed for failure to prosecute. On
       appeal, this court observed that a T.R. 41(E) hearing had been scheduled but not held (as neither party
       responded to the hearing notice) and that this “may have been a procedural flaw.” Baker & Daniels, 924
       N.E.2d at 137. In this regard, we noted our Supreme Court’s emphasis on the importance of the rule’s
       hearing requirement and observed that “judgments of dismissal entered without such a hearing are subject to
       reversal.” Id. Nevertheless, presumably because this was an appeal of a reinstatement order rather than a
       dismissal order, we proceeded with determining the propriety of the reinstatement pursuant to T.R. 60(B).
       Id. at 138-43.

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                         Page 10 of 14
       time and (2) NIBCO had not shown exceptional circumstances justifying relief. 7

       The trial court explained:

                It is an attorney’s duty to stay apprised of the status of pending
                matters before the court. That duty includes the due diligence of
                regularly checking court records for the status of pending cases.
                Given this duty, the Court finds that 20 months, nearly two
                years, after the dismissal order was entered is an unreasonable
                amount of time to elapse before a motion to vacate the judgment
                was filed. The Court further finds that service on one of three
                attorneys for NIBCO is not an exceptional circumstance that
                justifies relief from the Dismissal Order.

       Appellants’ Appendix at 118 (citations omitted).

[21]   NIBCO observes that the decision of whether to reinstate the case under T.R.

       60(B)(8) was within the trial court’s discretion. Indeed, we review a trial court’s

       decision in this regard for an abuse of discretion, “which occurs only when the

       trial court’s decision is clearly against the logic and effect of the facts and

       circumstances before it or if the court has misinterpreted the law.” Baker &

       Daniels, 924 N.E.2d at 136. What NIBCO ignores is that the trial court

       exercised its discretion and determined that NIBCO was not entitled to relief

       under T.R. 60(B)(8). NIBCO seems to ask us to consider the issue anew rather

       than review for an abuse of discretion. That would be improper.

       7
          T.R. 60(B)(8) also requires that the movant allege a meritorious claim. The trial court did not make a
       finding against NIBCO on this basis.

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                            Page 11 of 14
[22]   The trial court’s determination that NIBCO did not file its motion within a

       reasonable time was not clearly against the logic and effect of the facts and

       circumstances before it. “Determining what is a reasonable time period

       depends on the circumstances of each case, as well as the potential prejudice to

       the party opposing the motion and the basis for the moving party’s delay.”

       State v. Collier, 61 N.E.3d 265, 268 (Ind. 2016).

[23]   It is undisputed that NIBCO was actually served with the hearing and dismissal

       orders through Attorney Conway 8 and that those orders were also reflected on

       the CCS for more than twenty months before NIBCO sought reinstatement.

       Attorney Conway, by his own admission, inexcusably disregarded the orders,

       and he and the two other attorneys in his firm who appeared for NIBCO also

       failed to monitor the CCS for nearly two years. See Baker & Daniels, 924 N.E.2d

       at 140-41 (observing that attorneys have a duty to keep apprised of the status of

       matters before the court).

[24]   Moreover, NIBCO’s suggestion that “litigation proceeded after dismissal” is

       belied by the record. Appellee’s Brief at 27. The Update Calls, which Attorney

       Conway acknowledged were not litigation activity, did not take place between

       October 2021 and November 2022. And to the extent there was other

       communication between Coverage Counsel and Insurers during that time, such

       8
        NIBCO suggests in passing that service on only one of its three attorneys constituted “[d]efective service”
       and that this combined with the court’s failure to serve Insurers with the hearing order made the resulting
       dismissal order void. Appellee’s Brief at 26. Aside from not being supported by cogent argument on appeal,
       we observe that this argument, presumably based on T.R. (60)(B)(6), was not presented below.

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                            Page 12 of 14
       included two letters from Insurers in June and July 2022 that should have made

       NIBCO aware of the March 2021 dismissal order.

[25]   Despite clearly and definitively rejecting reinstatement on T.R. 60(B) grounds,

       the trial court reinstated the action only because it had not held a T.R. 41(E)

       hearing. In essence, the trial court applied a per se rule of reinstatement making

       dismissals subject to reinstatement indefinitely – that is, beyond a reasonable

       time – in any case where the trial court failed to hold a T.R. 41(E) hearing.

       This was clearly erroneous. Relief from the judgment of dismissal was

       available to NIBCO only under T.R. 60(B). 9 Because it failed to act within the

       time permitted by the rule, NIBCO was not entitled to reinstatement.

[26]   Judgment reversed.

       Weissmann, J. and Kenworthy, J., concur.

       9
         We recognize that in Somerville Auto Transp. Serv., Inc. v. Auto. Fin. Corp., 12 N.E.3d 955, 962 (Ind. Ct. App.
       2014), trans. denied, this court affirmed a trial court’s reinstatement of an action that was based on T.R. 60(A).
       There, the trial court sua sponte reinstated the action eight days after dismissal because it had not held the
       scheduled T.R. 41(E) hearing due to a mistaken belief that counsel had not appeared for the hearing. In fact,
       counsel had appeared to show cause at the hearing, but court staff advised that the judge was not available
       and directed counsel to submit a written response, which was done that same day but not seen by the court
       until days later. In affirming the reinstatement, we concluded that the trial court had discretion to promptly
       correct this error via T.R. 60(A), rather than T.R. 60(B), because it was “more akin to a mechanical mistake
       than a substantive mistake in character” and because the trial court still retained power and control over the
       judgment under Ind. Code § 33-23-2-4. Somerville, 12 N.E.3d at 964. Among other things, the twenty-month
       delay in this case clearly takes it out of the Somerville realm.

       Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024                               Page 13 of 14
ATTORNEYS FOR APPELLANTS
James P. Strenski
Carmel, Indiana

Matthew O. Sitzer
David E. Schoenfeld
Kathleen M. Ryan
Chicago, Illinois

Michael D. Prough
Walnut Creek, California

Daniel P. Johnston
Chicago. Illinois

Jeffrey C. Gerish
Bloomfield Hills, Michigan

James W. Riley, Jr.
Indianapolis, Indiana

James M. Weck
Michigan City, Indiana

ATTORNEYS FOR APPELLEE
John A. Conway
John D. LaDue
Erin Linder Hanig
Tiernan B. Kane
South Bend, Indiana

Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024   Page 14 of 14