TCB Remarketing LLC v. Metro Auto Auction LLC

1 WO — 2 — — 3 — — 4 — — 5 — 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA — 8 — 9 TCB Remarketing LLC, No. CV-20-01826-PHX-MTM 10 Plaintiff, ORDER 11 v. 12 Metro Auto Auction LLC, 13 Defendant. — 14 — 15 Pending before the Court is Plaintiff TCB Remarketing, LLC’s Motion to Sever 16 Pursuant to Federal Rule of Civil Procedure 21 or, alternatively, Motion to Bifurcate 17 Pursuant to Federal Rule of Civil Procedure 42(b) (“Motion to Bifurcate”). Doc. 180. The 18 Court has considered the Motion to Bifurcate (doc. 180), Defendant/Third-Party Plaintiff 19 Metro Auto Auction, LLC’s Response (doc. 183), and Third-Party Defendants Armond 20 Verdone, Jr., and Verdone Motors, LLCs’ Response (doc. 184). For the following reasons, 21 Plaintiff TCB Remarketing, LLC’s Motion to Bifurcate (doc. 180) is granted. 22 I. BACKGROUND 23 On March 9, 2020, Plaintiff TCB Remarketing, LLC (“TCB”) filed suit against 24 Defendant/Third-Party Plaintiff Metro Auto Auction, LLC (“Metro Auto”) in the United 25 States District Court for the Eastern District of Michigan for breach of contract, breach of 26 bailment agreement, breach of fiduciary duty, unjust enrichment, and conversion, seeking 27 both compensatory and punitive damages. Doc. 1 at 6-10. Defendant/Third-Party Plaintiff 28 Metro Auto then filed a Third-Party Complaint against Third-Party Defendants Armond 1 Verdone, Jr., and Verdone Motors, LLC (“Verdone”) for implied indemnity, intentional 2 misrepresentation, and contractual indemnity. Doc. 22 at 8-12. In September 2020, the 3 action was transferred to this Court. Doc. 39. 4 On September 28, 2022, this Court granted Defendant/Third-Party Plaintiff Metro 5 Auto’s Motion for Summary Judgment (doc. 107) as to Plaintiff TCB’s claim for breach 6 of bailment agreement and as to nine of the vehicles in Plaintiff TCB’s claim for unjust 7 enrichment. Doc. 136. This Court also granted Third-Party Defendant Verdone’s Motion 8 for Summary Judgment (doc. 104) as to Defendant/Third-Party Plaintiff Metro Auto’s 9 claim for implied indemnity but denied summary judgment as to Defendant/Third-Party 10 Plaintiff Metro Auto’s claims for contractual indemnity and intentional misrepresentation. 11 Doc. 136. 12 On March 2, 2023, the Court set this matter for a jury trial to be held June 5, 2023, 13 through June 14, 2023. Doc. 172. On March 17, 2023, Plaintiff TCB filed the Motion to 14 Bifurcate. Doc. 180. Defendant/Third-Party Plaintiff Metro Auto opposes the Motion to 15 Bifurcate. Doc. 183. Third-Party Defendant Verdone takes no position on the Motion to 16 Bifurcate. Doc. 184. 17 II. LEGAL STANDARDS AND ANALYSIS 18 A. Rule 21 – Severance of Third-Party Claim 19 Plaintiff TCB first asks the Court to sever Defendant/Third-Party Plaintiff Metro 20 Auto’s third-party claims against Third-Party Defendant Verdone. Doc. 180 at 1-5. Rule 21 21 allows courts to “sever any claim against a party.” Fed. R. Civ. P. 21. District courts 22 retain “broad discretion” to sever an action. Coleman v. Quaker Oats Co., 232 F.3d 1271 , 23 1297 (9th Cir. 2000). Severance under Rule 21 is a remedy for the improper joinder of 24 parties. Visendi v. Bank of Am., N.A., 733 F.3d 863, 870-71 (9th Cir. 2013) (noting that 25 severance under Rule 21 is the appropriate remedy for the misjoinder of a party); Golden 26 Scorpio Corp. v. Steel Horse Bar & Grill, 596 F. Supp. 2d 1282, 1285-86 (D. Ariz. 2009) 27 (“Federal Rule of Civil Procedure 21 addresses misjoinder of parties and allows the Court 28 . . . to sever an action to address improper joinder.”); 7C Wright & Miller, Federal Practice 1 & Procedure § 1683 (3d ed.) (“As its caption indicates, Rule 21 is a mechanism for 2 remedying either the misjoinder or nonjoinder of parties.”). 3 Plaintiff TCB does not argue that Third-Party Verdone was improperly joined. Doc. 4 180. Rather, Plaintiff TCB argues that severance is appropriate because: (1) 5 Defendant/Third-Party Plaintiff Metro Auto’s third-party claims against Third-Party 6 Defendant Verdone “over secondary liability threatens to become a more predominant 7 issue than [Plaintiff TCB’s claims against Defendant/Third-Party Plaintiff Metro Auto] 8 over primary liability”; (2) the likelihood of prejudice to Plaintiff TCB if the third-party 9 claims are not severed; and (3) severing the third-party claims will save the Court’s time 10 and judicial resources. Doc. 180 at 3-5. Accordingly, Plaintiff’s request for severance under 11 Rule 21 is denied. See Visendi, 733 F.3d at 870-71 . 12 B. Rule 42- Separate Trials 13 Plaintiff TCB alternatively seeks a separate trial for Defendant/Third-Party Plaintiff 14 Metro Auto’s third-party claims against Third-Party Defendant Verdone. Doc. 180 at 5-8. 15 “For convenience, to avoid prejudice, or to expedite and economize, the court may order a 16 separate trial of one or more separate issues, claims, crossclaims, counterclaims, or third17 party claims.” Fed. R. Civ. P. 42(b). Whether to order separate trials is committed to the 18 district court’s sound discretion. See Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 19 998, 1021 (9th Cir. 2004). Rule 42(b) permits, but does not mandate, separate trials to avoid 20 prejudice or inconvenience. Id. The moving party must show that separate trials will 21 “promote judicial economy and avoid inconvenience or prejudice to the parties.” Spectra22 Physics Lasers, Inc. v. Uniphase Corp., 144 F.R.D. 99, 101 (N.D. Cal. 1992). 23 Plaintiff TCB maintains that separate trials are desirable because: (1) “[the] third24 party claims against [Third-Party Defendant Verdone] are entirely contingent on a finding 25 against [Defendant/Third-Party Plaintiff Metro Auto], the trial involving 26 [Defendant/Third-Party Plaintiff Metro Auto and Third-Party Defendant Verdone] may not 27 even be necessary, depending on the outcome of the trial involving [Plaintiff TCB and 28 Defendant/Third-Party Plaintiff Metro Auto]; (2) bifurcated trials will save the Court’s 1 time and judicial resources; and (3) bifurcated trials “will eliminate the . . . potential 2 prejudice to [Plaintiff TCB] by removing the very real risk that Defendant/Third-Party 3 Plaintiff will attempt to shift responsibility away from itself and blame the [Third-Party 4 Defendant Verdone] for [Plaintiff TCB’s] losses.” Doc. 108 at 6-8. 5 Defendant/Third-Party Plaintiff Metro Auto argues that bifurcation of its third-party 6 claims against Third-Party Defendant “would do nothing to further convenience, avoid 7 prejudice or promote judicial economy.” Doc. 183 at 4. Defendant/Third-Party Plaintiff 8 Metro Auto further argues that its third-party claim for intentional misrepresentation is not 9 contingent upon the outcome of the trial between it and Plaintiff TCB. Doc. 183 at 6. 10 Therefore, Defendant/Third-Party Plaintiff Metro Auto argues that a consolidated trial will 11 promote judicial economy by reducing the need to “duplicat[e] [the] efforts on the part of 12 Defendant.” Doc. 183 at 6. The Court does not agree. 13 “Rule 42(b) . . . confers broad discretion upon the district court to bifurcate a trial, 14 thereby deferring costly and possibly unnecessary proceedings pending resolution of 15 potentially dispositive preliminary issues.” Zivkovic v. S. California Edison Co., 302 F.3d 16 1080, 1088 (9th Cir. 2002); see also Jinro Am. Inc. v. Secure Invs., Inc., 266 F.3d 993 , 998 17 (9th Cir. 2001). 18 Here, separate trials under Rule 42(b) are appropriate because the final resolution 19 of Plaintiff TCB’s claims against Defendant/Third-Party Plaintiff Metro Auto affect the 20 resolution of Defendant/Third-Party Plaintiff Metro Auto’s third-party claims for 21 indemnity and intentional misrepresentation. See Zivkovic, 302 F.3d at 1080 . 22 Because “there can be no indemnity without liability,” Helferich Pat. Licensing, 23 LLC v. Legacy Partners, LLC, 917 F. Supp. 2d 985, 992 (D. Ariz. 2013), separate trials 24 could greatly expedite resolution of the case because, if it is determined that 25 Defendant/Third-Party Plaintiff Metro Auto is not liable to Plaintiff TCB, there will be no 26 need for a second trial regarding indemnity. See Corvello v. New England Gas Co., 247 27 F.R.D. 282, 285 (D.R.I. 2008) (bifurcating liability and indemnity claims). Even if 28 Defendant/Third-Party Plaintiff Metro Auto is found liable, such a finding could facilitate 1 settlement by eliminating much of the uncertainty with respect to Defendant/Third-Party 2 Plaintiff Metro Auto’s liability. The bifurcation of issues of liability and indemnity is a 3 consistent practice of federals courts. See, e.g., Corvello, 247 F.R.D. at 285; Beights v. W. 4 R. Grace & Co., 67 F.R.D. 81, 85-86 (W.D. Okla. 1975); Gabriel v. Cnty. of Herkimer, — 5 — 889 F. Supp. 2d 374, 396 (N.D.N.Y. 2012); Kosters v. Seven-Up Co., 595 F.2d 347 , 3556 56 (6th Cir. 1979); Miller v. New Jersey Transit Auth. Rail Operations, 160 F.R.D. 37 , 41 7 (D.N.J. 1995). 8 Additionally, the Court is not persuaded by Defendant/Third-Party Plaintiff Metro 9 Auto’s argument that its claim for intentional misrepresentation is not dependent upon the 10 outcome of its case with Plaintiff TCB. Doc. 183 at 6. 11 Defendant/Third-Party Plaintiff Metro Auto’s Third-Party Complaint alleges that, 12 “to the extent Plaintiff TCB can prove it owned the Subject Vehicles and was entitled to 13 payment from Metro Auto for the sale of the same . . . [Third-Party Defendant Verdone’s] 14 representation concerning the ownership of the Subject Vehicles was false.” Doc. 22 at 9. 15 Defendant/Third-Party Plaintiff Metro Auto further alleges the “misrepresentation was 16 material, such that it was sufficiently important to influence Metro Auto’s actions, and 17 indeed did influence Metro Auto’s decision to remit the proceeds for 9 of the Subject 18 Vehicles to Verdone Motors and to apply the proceeds for 5 of the Subject Vehicles to debt 19 owed by Verdone Motors and/or Mr. Verdone to Metro Auto.” Doc. 22 at 9. 20 Accordingly, by Defendant/Third-Party Plaintiff Metro Auto’s own admission, its 21 third-party claim for intentional misrepresentation is dependent upon the outcome of its 22 case with Plaintiff TCB. Doc. 22 at 9. Moreover, such conclusion is consistent with 23 Arizona law as a claim for intentional misrepresentation must allege, among other 24 elements, the claimant’s reasonable reliance on the misrepresentation and the claimant’s 25 consequent and proximate injury. See Wagner v. Casteel, 136 Ariz. 29, 31 (Ct. App. 1983); 26 Frazer v. Millennium Bank, N.A., No. 2:10-CV-01509 JWS, 2010 WL 4579799 , at *3 (D. 27 Ariz. Oct. 29, 2010). Therefore, if Defendant/Third-Party Plaintiff Metro Auto is not found 28 liable to Plaintiff TCB, Defendant/Third-Party Plaintiff Metro Auto will not be able to state □□ a claim against Third-Party Defendant Verdone because it will not be able to establish || detrimental reliance. 3 The Court finds that bifurcation is appropriate here given its potential to save 4|| litigation costs, time, and judicial resources. The need for the presentation of evidence of 5 || indemnity and intentional misrepresentation may be eliminated if the issues of liability and 6 || indemnification/intentional misrepresentation are tried separately. Accordingly, the Court || exercises its discretion under Fed. R. Civ. P. 42 to grant the Motion to Bifurcate. Doc. 180. 8 IT IS ORDERED: 9 1. Plaintiff TCB’s Motion to Sever (doc. 180) under Rule 21 is denied. Plaintiff 10 TCB’s Motion to Bifurcate (doc. 180) under Rule 42(b) is granted. 1] 2. The Trial set for June 5, 2023, will involve only Plaintiff TCB’s claims against 12 Defendant Metro Auto. Defendant Metro Auto’s third-party claims against 13 Third-Party Defendant Verdone will be tried at a later date, if necessary. — 14 — 15 Dated this 13th day of April, 2023. — 16 — 17 Marta Marrissey 18 United States Masistrate □□□□□□ — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 — -6-