Claims and Bad Faith Law Blog

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IT'S NOT THE LAWYERS SO MUCH AS RELIEF THEY REQUEST.

I was wondering how the plaintiffs got rulings so promptly in two cases recently, one in the Sixth Circuit Court of Appeals and the other in the Northern District of Texas.  In both cases, the plaintiffs were challenging federal laws that benefitted other groups of people to which they did not belong; the plaintiffs wanted federal money to go to them.

          They got quick rulings on their requests.  I was wondering about that, as I say.  I do not think it was necessarily because they had better lawyers, as much as it was about the kind of relief they requested.

          The plaintiffs requested preliminary injunctions.  Requesting that kind of relief ordinarily galvanizes a judge into action.  This is in contrast to, say, trying to get a court to enforce a Congressional subpoena, which as we have seen can take years, and it is in contrast to attempting to have a judge apply either of the emoluments clauses of the United States Constitution, which as we have seen may never happen at all.

          These two cases are not the end of plaintiffs challenging federal laws and policies in Courts; they are the beginning.  If the current administration including the current justice department is going to stop losing, they are going to have to be strategic.

          First, they must consider going on the offensive and file suit, whenever the opportunity arises, to enforce the laws instead of waiting for laws to be challenged.

          They should also consider the relief they request, and how long it will take to achieve their purpose in filing suit.  Let the plaintiffs in these cases be guides if not mentors, exactly; is there an opening to file suits to request preliminary injunctive relief?

          Say requesting a preliminary injunction to stop a fraudit from using actual ballots cast in federal elections, which as I understand it is against the law during this short timeframe since the November 2020 election?

          If someone wants to be more successful in litigation, be more strategic.  Your probable adversaries will be more strategic in filing lawsuits.  To that end, expect more lawsuits to be filed in the Northern District of Texas.  Be ready, by filing first in a forum which you, not they, select.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

WITHHOLDING EQUALITY WHILE DEFENDING MAJORITY RULE. OF ECONOMICS, THAT IS.

The American Rescue Plan Act provides a limited amount of money for restaurants to recover from losses they suffered from COVID-19.  The money that the Act provides to get restaurants back on their feet has been called a restaurant revitalization fund.

          Yes, I know, the 'company line' is that the American Rescue Plan Act involves a lot of money, and it does.  In the case of aid to recovering restaurants, however, the funds provided  in the Act are limited and, some say, too small to meet the needs.

          In May, five federal judges considered complaints from a couple of businesses that claimed they were discriminated against.  They claimed that they suffered from discrimination under the American Rescue Plan Act because the Small Business Administration (SBA) paid out the available revitalization funds first to so-called "priority" restaurants whereas they themselves were "non-priority" for the money that the Act makes available.

          "Priority" restaurants under the Act are owned by women, by veterans, or by "socially and economically disadvantaged" people.  The plaintiffs claimed that they were discriminated against because they are not women and not socially or economically disadvantaged, i.e., because they are White males who are socially or economically advantaged, in other words.  It is unclear, frankly, whether any of the plaintiffs are or have ever been veterans.

          The problem at the center of both of their two cases was the same:  Under the American Rescue Plan Act, the restaurant revitalization funds were supposed to be released for the first 21 days only to restaurants owned by women, by veterans, or by people who are socially or economically disadvantaged.  After that, the Act provided that all the applicants could receive the money whether they were prioritized for the first 21 days or not.  This was the problem at the center of the plaintiffs' arguments in both cases to all five judges:  The plaintiffs were afraid that they would not get money.

          Whatever you may end up thinking about the merits of these decisions, one way or the other, remember what the cases were about:  The plaintiffs were afraid that they would not get their money.  All the idealistic-sounding pronouncements that will certainly come from the winning parties cannot obscure that central fact:  They sued because they wanted to get their money.

          That shouldn't obscure how close a thing it was, either.  The same people who want to pose as nothing but idealists did not win by much at all.  Five federal judges considered these complaints.  Three liked the complaints, and thought that they were good.  Two did not.

          Three to two.  That's how the judges lined up their votes on the matter in two separate cases.

          What's more, you will almost certainly hear that these decisions should be seen as a triumph for even-handed justice.  Except it seems that the thing was not handled very evenly in either case.  In both of these cases, the opinion blocking the SBA from carrying out the restaurant revitalization fund written in the Act, was in turn written by a person who was either on or, in at least one case, led a central committee for the political party that opposed the American Rescue Plan Act in the first place. 

          It is also important to put the rulings in their proper context to know more about at least one of the judges.  The judge in the Texas case is named Reed O'Connor.  You may remember his name from his opinion that has received heavy criticism for its logic, or absence of it some say, in ruling that the Affordable Care Act is unconstitutional because it imposes no penalties.

          In addition, it is worth noting that the plaintiffs in both cases challenging the SBA are represented by, among others, an interesting cast of characters.  The plaintiff in one case is from Tennessee and is represented in part by an organization from Wisconsin which exists for the purpose of pushing litigation against the interests of people like women and in general against people who are socially or economically disadvantaged -- the very people involved here.

          In the other lawsuit, the one filed in Texas, the plaintiffs are represented by among others, America First Legal Foundation.  The founders of the foundation in this case are one Stephen Miller and several other departed -- or so we thought -- former officials of the prior regime.

          In short, maintaining power by claiming the idealism of disinterested equality in an overwhelming victory, that's how the story will be sold.  How in character for these men (and they are all men, did you notice?).

          Now you and I both know the real story of these two lawsuits.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

STOPPING LOW-INCOME ACCESS TO BROADBAND: THIS CANNOT WAIT.

In New York St. Telecomm's Ass'n v. James, No. 2:21-cv-2389 (DRH) (AKT), 2021 WL 2401338 (E.D.N.Y. June 11, 2021), a Senior District Judge brought minorities' broadband access to an abrupt halt.  He ruled before the merits and entered a preliminary injunction blocking enforcement of a New York State law.

          The New York Affordable Broadband Act would have required the plaintiffs on "June 15, 2021 to offer qualifying low-income costumers [sic] high-speed broadband service at or below certain price ceilings."  Telecomm's Ass'ns, 2021 WL 2401338, at *1.  The Judge's preliminary injunction on June 11, 2021 came just in time for the plaintiffs.

          The plaintiffs could not tolerate offering qualifying low-income customers high-speed broadband service at or below certain price ceilings.  Even during a plague.  Perhaps especially during the COVID plague.

          The plaintiffs are "a group of trade associations whose members provide broadband internet service to New Yorkers[.]"  Telecomm's Ass'ns, 2021 WL 2401338, at *1. 

          The Court ruled that the New York State law is preempted by federal law which regulates the rates the plaintiffs charge.  This is the filed rate doctrine in new clothes.  This ruling means that, having regulated the rates of broadband internet service, only the federal government can act to require that any low-income customers be offered broadband service at any other rate.

          From the perspective of the telecommunications industry, this preliminary injunction could not wait.  From the perspective of this author, this article could not wait and that is why it is posted on an unusual day for publication on this blog, a Tuesday.  Reasonable accommodations are often a requirement of living.

          And of the law. 

The filed rate doctrine is discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:26 (3d ed. West Publishing Co., 2021 Supps.).

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

WHO, EXACTLY, DOES JUSTICE REPRESENT? PART TWO

A POSTSCRIPT:  The rest of the story.  Part of the rest, anyway.

Rights and Responsibilities.  (Florida Dep't of Agriculture & Consumer Services /  Gridview_imagefull)

The Federal Judge presiding over the Sweet v. DeVos case in the Northern District of California has held that Ms. DeVos has to sit for a deposition. 

          The Judge based his ruling at least in part on the bad faith of the government in disrupting the processing of claims to student debt relief:    "U.S. District Judge William Alsup found evidence of bad faith in the agency’s stated reasons for an 18-month halt in processing debt relief claims [which], among other factors, creates an extraordinary circumstance that warrants making DeVos sit down for a three-hour deposition."  Nicholas Iovino, Betsy DeVos Ordered to Testify in Student Borrower Class Action, COURTHOUSE NEWS, online May 20, 2021.

          Updating my article that posted this morning, "[o]n February 8, 2021 -- 19 days after the Inauguration of President Joe Biden -- Brian M. Boynton filed a motion to quash a subpoena for the deposition of Betsy DeVos."  Mr. Boynton is a new hire helping to run the Biden Justice Department under Merrick Garland.

          And, to say again, Mr. Boynton filed a motion to quash the deposition of the former regime's Betsy DeVos.

          He lost.  The motion was denied.  Absent Mr. Boynton's anticipated appeal on behalf of Ms. DeVos, she will have to sit for her deposition, under oath.  So far, Justice has prevailed in this case, but the department of justice has not.

Thanks to Margaret O'Grady, Esquire at Harvard who is a counsel of record in the Sweet v. DeVos case, and to Ms. Katie Ward of CTPBoston, for the linked Courthouse News Service reporting.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

WHO, EXACTLY, DOES JUSTICE REPRESENT?

Rights and Responsibilities.  (Florida Dep't of Agriculture & Consumer Services /  Gridview_imagefull)

On February 8, 2021 -- 19 days after the Inauguration of President Joe Biden -- Brian M. Boynton filed a motion to quash a subpoena for the deposition of Betsy DeVos.

           Mr. Boynton filed his motion in the Southern District of Florida, where DeVos was then "a part-time resident."  That was one of the places where, arguably, venue was proper for Boynton's motion to quash.  The case in which Betsy DeVos was subpoenaed for deposition is pending in the Northern District of California.

           Parenthetically, I cannot find an order granting or denying the motion, and I cannot find any evidence that Ms. DeVos has  been deposed.  I have today emailed the lead attorney who requested this deposition, Margaret E. O'Grady, Esquire and if and when I receive her Reply, I will write about it here.

          Back to Mr. Boynton.  More recently, on June 7, 2021 Brian Boynton filed a reply brief for the United States to intervene for the former guy in his appeal from an order allowing E. Jean Carroll's defamation lawsuit to go forward in New York State Court.  Her defamation lawsuit had been pending in state court before the former guy's Barr removed the case to federal court.

          Mr. Boynton was reportedly hired away from a large law firm with experience in representing corporate clients, in order to assist Merrick Garland in running the Justice Department.

          The actions discussed here, and other actions known and unknown, raise urgent questions.  First:  Who, exactly, does Justice represent?

          Next, why is it in the interest of the United States not to have the testimony of Betsy DeVos under oath?

          How is it that any lawyer can argue, without consequence, that denying a rape and demeaning the victim is a part of the official duties of a President of the United States?

          I did not expect to be asking any of these questions with Merrick Garland replacing Bill Barr and Joe Biden replacing the former guy. 

          Did you?

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

COURTS WRITE LAW, OVERRIDE CONSTITUTION, FOR "SENSITIVE BUSINESS INFORMATION."

(NASA)

Courts are tending to keep documents and testimony a secret just so long as the parties claim it is "sensitive business information."  See, e.g., M3 USA Corp. v. Summer Qamoum, No. 20-2903 (RDM), 2021 WL 2324753, at *7 (D.C.D.C. June 7, 2021) ("The Court also entered a stipulated protective order, permitting the parties to safeguard their sensitive business information. Dkt. 20.").

          When entering a secrecy order, i.e., a protective order such as under Federal Rule of Civil Procedure 26(c), Courts have wide discretion.  However they do not have discretion to override the presumption of public access to Court records at will.

          Courts have to accommodate that presumption, to recognize it and to apply certain safeguards when the interests are balanced in favor of secrecy, including to limit disclosure rather than to bar disclosure entirely unless the case is so unique that no disclosure is required.  The presumption of public access to Court records is a presumption which comes from both the United States Constitution and common law (even though, in the federal system, there is not supposed to be such a thing as common law).

          Keeping "sensitive business information" confidential is really a creation of the lawyers for large corporations which want to keep such information a secret from the public.  Large corporations would face a risk of losing business otherwise.  Needless to say, "sensitive business information" is not protected from disclosure either by the Constitution or by Rules of Procedure; rather, it is protected from disclosure by a swiftly growing number of Courts and stipulations, as in this case. 

          For recent restrictions on secrecy orders, see for example the articles posted here on May 24 and on May 26, 2021.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"A MULTITUDE OF CASES" DETERMINES COVID COVERAGE IN CASE.

In HT-Seattle Owner LLC v. Am. Guar. & Liab. Ins. Co., NO. 2:21-cv-00048-BJR, 2021 WL 2206480 (W.D. Wash. June 1, 2021), policyholders argued that coverages aside from those that had been litigated in Washington State potentially provided insurance coverage to COVID-related losses.   The District Judge handling all these cases disagreed:

These provisions, however, all require direct physical loss or damage to covered property to trigger coverage. See Compl., Ex. A, Dkt. No. 1-1 at 41 (Insurance Agreement), 47 (Property Damage), 51(Time Element), 53 (Extra Expenses), 85 (Covered Cause of Loss). Therefore, given the Court's conclusion that COVID-19 does not cause physical loss or damage, these provisions fail to provide coverage.

HT-Seattle, 2021 WL 2206480, at *1 (citations omitted).

          The Court pointed out that this case "is one amongst a multitude of cases across the United States in which a business seeks coverage for income lost due to the COVID-19 pandemic from their insurance company."  HT-Seattle, 2021 WL 2206480, at *1.  The Western District of Washington assigned all such insurance coverage cases to the District Judge who decided this case.  She, in turn, "consolidated the earliest of these actions into ten cases."  She reached the same ruling in all those cases because they all had the same policy language in their Insuring Agreements, i.e., in their coverage grants:

This Court recently published an Order in those cases holding there was no coverage for losses due to COVID-19. See Nguyen, et al. v. Travelers Cas. Ins. Co., et al., No. 20-cv-00597, 2021 WL 2184878 (W.D. Wash. May 28, 2021). The Court held that in all of the relevant policies “direct physical loss of or damage to” covered property was required to trigger coverage and COVID-19 did not cause physical loss or damage. Id. at *9–*13. Additionally, the Court held that the plaintiffs’ Extra-Contractual Claims should be dismissed along with their Contractual Claims where they failed to identify independent grounds apart from unreasonable denial of coverage. Id. at *13–*14.

HT-Seattle, 2021 WL 2206480, at *1 (footnote omitted).   

          Once again, the Court also ruled that because there was no viable coverage claim, there was no cognizable claim for insurer bad faith, either.  HT-Seattle, 2021 WL 2206480, at *2.

Cases involving the dismissal of bad faith claims in COVID coverage cases after a holding that there is no coverage for COVID-related losses, are reviewed in Volume 2 of Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 9:14 (3d ed. Thomson Reuters West, 2021 Supplements forthcoming).  See in addition 2 id. §  9:31 (discussing basic coverage issues common to Chinese Drywall, COVID, and other property insurance cases).

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

NO DISPUTE, CASE OR CONTROVERSY? NO BLANKET PROTECTIVE ORDER, EITHER.

In an article on May 24, a seminal decision on blanket protective orders was discussed here in terms of the Court's rulings on secrecy and the presumption of public access.  The case is AgJunction LLC v. Ag Leader Tech., Inc., No. CV-20-02204-PHX-SPL, 2021 WL 1969523 (D. Ariz. March 9, 2021).

    The Court in this case also raised the possibility of an argument that Federal Courts lack the jurisdiction to enter blanket protective orders in the absence of a case or controversy.  Here's why it did.

    The lawyers of record wrote a proposed order in that case that was so comprehensive it would have rewritten the Federal Rules of Civil Procedure, in effect.  The proposed order contained provisions keeping a litany of things secret:

Here, the Proposed Protective Order defines “confidential” material as “any information, document, or thing, or portion of any document or thing that contains: (1) trade secrets; (2) confidential business information, including contracts or license agreements with a third party where disclosure would violate a contractual obligation of confidentiality; (3) personal identifying information, such as a Social Security number; or (4) personal health information protected by the Health Insurance Portability and Accountability Act, of the Party or a Non-Party to whom the Party or Non-Party reasonably believes it owes an obligation of confidentiality with respect to such documents, information, or material.” (Doc. 15-2 at 2). This does not meet Rule 26(c)’s threshold.

AgJunction, 2021 WL 1969523, at *1.

    The parties agreed to this multi-faceted definition of "confidential;" the lawyers stipulated to it and proposed it to a Federal District Judge.  Their problem, however, was not in their language but two-fold, first in their lack of good cause for protection, as was discussed in the previous article here and mentioned in the above quotation.

    Their problem continued with their lack of a dispute, the lack of a case or controversy that cried out for the protection of a Federal Court.  Nothing in that case had yet reached the point of a request for production, a deposition question, an interrogatory, or any objections.  There was, to say again, no case or controversy to activate the Federal Court's Article III jurisdiction.  There was only the lawyers' proposed protective order in case there would be a case or controversy over discovery or evidence later in the case, but there was not a case or controversy at the time of this decision.  Their attempt to manage the possibilities in the case was no substitute for the reality that there was no present, actual, tangible case or controversy:

    Further, no party has shown that there is an actual dispute that commands Court intervention and protection. See Fed. R. Civ. P. 26(c)(1); LRCiv 7.2. The parties remain free to mutually enter into a written agreement to facilitate the exchange of confidential disclosures without court approval or supervision. And, in the event discovery mandates disclosure of specific, harmful, confidential material, the parties will not be precluded from presenting a request to the Court at that time in a manner tailored to protect the particular interests at hand. [Citation omitted.]      Accordingly,

    IT IS ORDERED that the parties’ Joint Motion to Stay (Doc. 15) is granted in part and denied in part. The Motion to Stay is granted and the Motion for Protective Order is denied.

 

AgJunction, 2021 WL 1969523, at*2 (emphasis by the Court).

    The Court in this case did not use the words, but there was no case or controversy over the stipulated proposal for a protective order.  There was no basis for a Federal Court to act.  Federal Courts are prohibited from giving advisory opinions, there is no doubt about that.  Blanket protective orders in the absence of a dispute over discovery or the production of evidence are nothing short of mere advisory opinions, there ought to be no doubt now about that.

 

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

 

 

BLANKET PROTECTIVE ORDERS vs. BLANKET SECRECY CONTRACTS.

The difference to the parties may be compelling someone else to keep a secret (stipulated blanket protective orders entered by a Court) versus entering into written agreements enforceable as contracts to keep the same secrets (contracts).

          But to a Federal Court sitting within the boundaries of the Ninth Circuit, blanket protective orders are not particularized in that they are not directed to a particular document or to particular information for which a party pleads protection from disclosure.  They do not show any specific harm that would result if the material in question were to be disclosed.

          Since they are not particularized, i.e., not directed to particular material, they fail to show good cause for Court-ordered protection of that particular material and so they fail to meet the requirements for a protective order signed by a Court within the Ninth Circuit.   AgJunction LLC v. Ag Leader Tech., Inc., No. CV-20-02204-PHX-SPL, 2021 WL 1969523, at *1-*2 (D. Ariz. March 9, 2021).

            The Court in this case also raised the possibility of an argument that Federal Courts lack the jurisdiction to enter blanket protective orders in the absence of a case or controversy ....

To be continued ....  Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

WHO SIGNED THAT SECRET ORDER? SHH! IT'S A SECRET? WHY?

Who signed the secret order?  Is that a secret too?  Well, it is a secret, so far.  Why?  It was the official act of a person holding a judicial office in the United States District Court for the District of Columbia, and we pay that person's salary.  Comments are open.  Let's identify the official so that the public will know better who and what we are dealing with.

Image on the United States Magistrate Judge Consent Program portal on the website of the U.S. District Court for the Central District of California.

The following article is reprinted from Claims and Issues Blog, where it was originally published on Thursday, May 20, 2021.

The former justice department reportedly used a grand jury subpoena to Twitter to try to identify who was criticizing Devin Nunes on Twitter.  See Charlie Savage, Trump Justice Dept. Tried to Use Grand Jury to Identify Nunes Critic on Twitter, New York Times, online Monday, May 17, 2021.

    In response to this revelation, Washington informants tell the newspapers that the former justice department really tried to use a grand jury subpoena instead to go after critics of Mitch McConnell.

    Regardless of who they were going after in the former regime -- and we can expect many, many more stories of subpoenas and other things to come out as time goes by -- I want to take a look at the secrecy Order that a United States Magistrate Judge apparently signed giving her or his "okay" to using a grand jury subpoena without telling anyone about it.

    A little background for people who may not be familiar with the Courts.   A U.S. Magistrate Judge is not a judge.  She or he is chosen by actual Judges to help them.  Think of a U.S. Magistrate Judge as a kind of Assistant Judge.  Among other things, they review subpoenas.

    Back to the secrecy Order in this case.   I wrote that the U.S. Magistrate Judge "apparently signed" it.  The only copy we have so far is not signed.  Her or his identity is a secret.  Perhaps they are ashamed.  But in any event, their identity is a secret, so far.  Ironic, when you think that the reason for the Order itself is secrecy.

    When this unknown, unidentified Magistrate was presented with a request from the former regime to keep the subpoena a secret, the Magistrate not only granted their request but ordered Twitter "not to notify any other person of the existence" of the subpoena.

    That is why we only recently found out about the existence of the subpoena, and about the existence of the secrecy Order as well.  Not even people trying to take over the justice department for their own interests could have hidden that better.

    Oh, wait ....  Here is the Order:  Download UNSIGNED SECRET TW O.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

BAD FAITH IN PANDEMIC: CRUELTY IS NEVER GOOD, ESPECIALLY NOW.

The Federal Reserve's annual report on the Economic Well-Being of U.S. households has been released.  It is no surprise that the report documents the inequality of economic experiences during the pandemic shutdown for the past year.  See Jeanna Smialek, "Survey Finds Federal Aid Blunted Financial Fallout," New York Times, Tuesday, May 18, 2021, at B4.

          The response of a handful of states, 16 so far, has been to agitate for cutting pandemic-related unemployment benefits.  Those are federally funded benefits that the states will not pay a dime for.  Of course, the state legislators that are against providing pandemic-related unemployment benefits come from a class which knows no-one who needs those benefits.

  Food Pantry.  (Desiree Rios / New York Times)  The people who would be cut from pandemic-related unemployment benefits are of course the ones who need those benefits.  They are unknown to the state legislators who do not need them.  It is easier to be cruel when you do not even know the people who are affected by your behavior.

          It bears repeating here that their cruelty is not our policy.  THE 21% SOLUTION DOES NOT MAKE POLICY FOR US.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

SOCIAL SECURITY DISABILITY INSURANCE, SUPPLEMENTAL SECURITY INCOME, AND MENTAL HEALTH.

In Pelkey v. Comm'r of Soc. Sec. Admin., No. 1:19-cv-11479-IT, 2021 WL 1940621 (D. Mass. May 14, 2021), the District Judge adopted and affirmed a Magistrate Judge's Report and Recommendations regarding Scott Pelkey's claims.  Pelkey claimed Social Security Disability Insurance benefits and Supplement Security Income.  Both claims were denied by the Social Security Administration for lack of evidence in the administrative record.

          Pelkey asked for permission to put recent reports of his treating physicians in the record that supported his claims of mental impairments and mental health conditions that qualified him for SSDI and SSI.  The Magistrate Judge reported that Mr. Pelkey showed "good cause" for his request and recommended that Pelkey's motion to supplement the record be granted.

          The District Judge agreed, based on what was already in the administrative record in this case.  The Court pointed out that while the Commissioner of the Social Security Administration speculated that Mr. Pelkey could have easily obtained the reports of his treating physicians earlier than he did, and put them in the record below, it was just as easy -- and just as irrelevant, ultimately -- to speculate that Pelkey did not obtain the reports confirming his mental impairments earlier than he did, for the very reason that he suffered from the mental impairments he claimed:

Speculation either way is of little import, however, where the Reports were obtained from Plaintiff's treating physicians, without any suggestion of gamesmanship, following further medical examination of an individual with ongoing mental health issues.

Pelkey, 2021 WL 1940621, at *4.

          Sometimes giving people the benefit of the doubt is good law as well as a good practice for living.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

GOT AN INSURABLE INTEREST? DOESN'T MEAN YOU HAVE POLICY RIGHTS.

 

Flying on the Fourth.  (Photo ©Dennis J. Wall)

Florida has an insurable interest statute.  Fla. Stat. § 627.405.  It provides that you have an insurable interest in property whenever you have "any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage or impairment." 

          Seems clear, doesn't it?  Seems strong, too, right?

          In fact, it used to be the law that the statute provided the holder of an insurable interest the right to sue under her homeowner's policy.  Not any more.

          In Reconco v. Integon Nat'l Ins. Co., 312 So. 3d 914 (Fla. 4th DCA 2021), an intermediate appellate court in Florida held that the only thing that counts any more to claim rights under the policy -- in that case, a homeowner with an insurable interest in her home was claiming the right to arbitration under the force-placed insurance policy -- is the policy itself.  Force-placed insurance policies often provide that the homeowner is not insured, just like the policy at issue in this case.

          Since the homeowner is not an insured under the force-placed insurance policy, the homeowner may have an insurable interest in her home but the homeowner has no rights under the force-placed insurance policy.  Only the money lender has rights under the force-placed insurance policy.  Reconco, 312 So. 3d at 917-18.

          Think that force-placed insurance issues are a thing of the past, a relic of the 2008-2009 Great Recession?  Think again.  The opinion does not give us a date of when the premiums and the policy were placed by force on the homeowner who legally could never complain, but that does not obscure the fact that the issues are recent and not a thing of the past at all.  The premiums and the policy in this case were force-placed after the homeowner bought the property in 2013, and before 2017 when Hurricane Irma struck her house.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

GOOD HEAVENS, BEING A CAPTIVE DOES NOT MEAN BAD FAITH!

In  Episcopal Church in S.C. v. Church Ins. Co. of Vt., ___ F.3d ___, No. 20-1143, 2021 WL 1823279 (4th Cir. May 7, 2021), the Fourth Circuit Court of Appeals affirmed a District Court's ruling rejecting the standing of the Episcopal Church to sue its captive insurance company.

  Central to this decision is the Court's clear definition of "captive insurance companies":

Captive insurance companies operate just like ordinary insurers in nearly every respect. However, their distinguishing feature—what makes them “captive”—is that they may only cover the risks of their parent companies and related entities.

Episcopal South Carolina Church, 2021 WL 1823279, at *1.

Church Insurance Company of Vermont is the captive insurance company of the Mother Episcopal Church and it provides coverage for a number of parishes that broke away and formed their own, new Episcopal Diocese of South Carolina (known to the Court in this case as "the Disassociated Parishes").  This insurance company  is "wholly owned by the Church Pension Fund, a freestanding nonprofit affiliated with the Mother Church."  Episcopal South Carolina Church, 2021 WL 1823279, at *1.

         As a result of its coverage duties to the breakaway Episcopalian parishes who held certificates, i.e., policies of insurance which the Church Insurance Company had issued, the Church Insurance Company reimbursed some of the defense fees of the breakaway Episcopalians.  Since it was doing its duties under the policies (certificates) of insurance it issued including to the breakaways, the Mother Church (the original Episcopal Diocese of South Carolina) has no standing to sue the carrier for the claims it alleged against the carrier for breach of contract, bad faith and unfair dealing, or breach of fiduciary duty and aiding and abetting breach of fiduciary duty, the Federal Courts in South Carolina held.

    Sometimes it pays for a captive to be independent, after all.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

COVID, IN SICKNESS, IN DEATH ... AND IN BAD FAITH?

At least some health insurance companies began charging their policyholders the full amount of their deductibles, copays, and coinsurance.   Other carriers are joining them, even as a pandemic continues to ravage their policyholders with illness and, in some cases, death.

          When the pandemic began a year ago, these same health insurance carriers voluntarily waived all deductibles, copays, and other costs because people who fell ill with Covid-19 had enough to deal with, what with hospitalizations, doctor visits, medications, and other treatments.  Then, it was good public relations for these carriers to waive what they call "cost sharing."

"Cost sharing."  What a polite way of saying "You caught Covid, now pay for it."  What was put into place with great fanfare is now done in silence.  Most if not all of these health insurance carriers are secretly ending their voluntary waivers of cost sharing, and many have already done so.  What was good public relations in the sunshine, is taken back in the dark.

          Except for Covid tests and vaccinations.  They should still be free to people, because the federal government requires that these costs be free.

          Some people think it's wrong to make a profit off of other people's misery.  The insurance companies' profits are going through the roof since the pandemic began.  They can afford to pay for Covid treatments; Covid patients, not so much.

          Still think insurance is boring?  Get Covid?  Pay for the full treatment on top of being hospitalized and treated for Covid?   People can EMail, write and telephone their own state's Insurance Commissioners.  Let them know that you know what's going on in the dark, and let them know if you don't like it. 

          Let them and your federal Representatives and Senators know, too, if you want the federal government to require the costs of treatment to be paid by you or by your insurer, or if you want the costs of treatment for Covid to be treated (pun intended) like the costs of testing for Covid.

Image of Insurance Policy for Warwick, a Slave, courtesy of New York Public Library Rare Photograph Collection.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved. 

The Second Part: LENDER FORCE-PLACED INSURANCE PRACTICES: UNFAIR TRADE PRACTICES.

This is the second of two parts.  The first part of this article was published on Wednesday, April 28, 2021, LENDER FORCE-PLACED INSURANCE PRACTICES:  RESPA AND UNFAIR TRADE PRACTICES.

In a decision that was just published on Westlaw, a federal judge in the U.S. District Court for the District of South Carolina decided that Mary Beth Jeffords plausibly stated both a state unfair trade practice claim, and a federal RESPA or Real Estate Settlement Procedures Act claim.  Ms. Jeffords's claims arose over the forced placement of insurance.  The federal judge's decision in her case is now published in Jeffords v. U.S. Bank National Association.[1]

          Ms. Jeffords sued U.S. Bank "as servicer of her federally-related mortgage loan[.]"[2]  She alleged that U.S. Bank "failed to pay her insurance premium from her escrow account as it became due," that her insurance policy lapsed as a result, that U.S. Bank force-placed insurance on the property, that she was charged the premium for the force-placed insurance, that she also had to obtain a replacement policy for the one that had lapsed (for which she obviously had to pay another premium), and that she incurred a loss from water damage that the replacement policy did not cover.[3]

---------------------------------------------------------------------------------------------------           

         As to the SCUTPA claim, U.S. Bank's line of attack was to argue for dismissal on the ground that Jeffords failed to allege an injury to the public interest as distinct from a merely private dispute, which is a requirement of the SCUTPA cause of action.[1]  The Court again disagreed with U.S. Bank and denied the bank's motion to dismiss the SCUTPA claim:

Plaintiff alleges that she met this low bar by alleging that “Defendant has an established and documented pattern of repetition (including previously unfairly assessing force place[sic] insurance against 139,000 members of the public).” Am. Compl. at ¶ 58.  The court agrees with Plaintiff.[2]

The Court denied the bank's motion to dismiss on this ground, and on one other:

And second, Plaintiff alleges that “Defendant profits ... for assessing forced place[sic] premiums” and “has an established and documented pattern of repetition” of this process. [Am. Compl.] at ¶ 58. Taken together, these allegations are more than mere conclusory allegations that this court customarily finds insufficient to support the third [or public interest] element of a SCUTPA claim.^{3] 

To put it in the affirmative, these allegations are legally sufficient to support an unfair trade practice claim, in the eyes of this federal judge in South Carolina.

Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

 

(Photo of Litigation and Prevention of Insurer Bad Faith volumes courtesy of Thomson Reuters West Publishing.  Photo of Lender Force-Placed Insurance Practices book ©Donna M. Bruno and Dennis J. Wall.)

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

[1] Jeffords, 2020 WL 9348167, at *2 n.3.

[2] Jeffords, 2020 WL 9348167, at *2.

[3] Jeffords, 2020 WL 9348167, at *2.

LENDER FORCE-PLACED INSURANCE PRACTICES: RESPA AND UNFAIR TRADE PRACTICES.

 

In a decision that was just published on Westlaw, a federal judge in the U.S. District Court for the District of South Carolina decided that Mary Beth Jeffords plausibly stated both a state unfair trade practice claim, and a federal RESPA or Real Estate Settlement Procedures Act claim.  Ms. Jeffords's claims arose over the forced placement of insurance.  The federal judge's decision in her case is now published in Jeffords v. U.S. Bank National Association.[1]

          Ms. Jeffords sued U.S. Bank "as servicer of her federally-related mortgage loan[.]"[2]  She alleged that U.S. Bank "failed to pay her insurance premium from her escrow account as it became due," that her insurance policy lapsed as a result, that U.S. Bank force-placed insurance on the property, that she was charged the premium for the force-placed insurance, that she also had to obtain a replacement policy for the one that had lapsed (for which she obviously had to pay another premium), and that she incurred a loss from water damage that the replacement policy did not cover.[3]

          Her amended complaint survived the bank's motion to dismiss her RESPA claim, which the bank seems to have filed on one ground:  that Ms. Jeffords "failed to allege any damages tied to U.S. Bank's actions[.]"  The District Judge disagreed:  "The court finds that Plaintiff adequately pleaded damages sufficient to survive dismissal."[4]

          More specifically, the Court listed some six allegations or groups of allegations of damages, "at least some" of which which the Court in this case held "alleged a plausible connection [with] U.S. Bank's alleged failure to pay the insurance premium when due":

1. lost insurance benefits which her prior insurance policy would have provided, "'including but not limited to the cost of repairs less her deductible';"
2. delay damages from the time it took to effectuate repairs;
3. an apparently higher premium for the replacement policy than she paid for her original policy;
4. the bank's charge for force-placing insurance;
5. "'miscellaneous costs including postage expenses and lost time';" and
6. emotional distress damages apparently including but not limited to "'worry, anxiety, frustration and lost time.'"[5]

As noted, the allegation of these damages alleged "a plausible connection between U.S. Bank's alleged failure to pay the insurance premium when due and at least some of the above-listed actual damages alleged by Plaintiff in her pleading.  U.S. Bank's motion to dismiss the RESPA claim is denied."[6]

To be continued ....  Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

To be continued ....  Force-placed insurance cases including the Jeffords case are discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:33 - 9:35 (West 3d ed., 2021 Supplements in process), and in Dennis J. Wall, Lender Force-Placed Insurance Practices, published by American Bar Association Publishing.  A frequently refreshed selection of Chapters and Sections from these and other books is freely accessible at www.dennisjwall.com.

 

(Photo of Litigation and Prevention of Insurer Bad Faith volumes courtesy of Thomson Reuters West Publishing.  Photo of Lender Force-Placed Insurance Practices book ©Donna M. Bruno and Dennis J. Wall.)

 

[1] Jeffords v. U.S. Bank Nat'l Ass'n, No. 3:20-cv-00393-SAL, 2020 WL 9348167 (D.S.C. Oct. 13, 2020).

[2] Jeffords, 2020 WL 9348167, at *1.

[3] Jeffords, 2020 WL 9348167, at *1.

[4] Jeffords, 2020 WL 9348167, at *2.

[5] Jeffords, 2020 WL 9348167, at *2.

[6] Jeffords, 2020 WL 9348167, at *2.

CLAIM FILE DISCOVERY AND THE WORK PRODUCT DOCTRINE

.

The Iowa Supreme Court summarized the law in this area in the context of a first-party bad faith case, Villareal v. United Fire & Cas. Co., 873 N.W.2d 714, 727 (Iowa 2016):

This means that claim files are not covered by the work product doctrine except insofar as they contain documents that would not have been prepared but for anticipated litigation. See Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 12:5 (3rd ed. 2011) (“Where the insured's complaint states a cause of action for first-party bad faith, the claims adjuster's files can generally be discovered. Work product objections will lie in particular cases.”).

          Unlike third-party bad faith cases, a first-party bad faith case does not provide any assistance by the nature of the bad faith claim either that the discovering party cannot obtain the substantial equivalent by other means, or that the discovering party cannot do without the requested materials in the preparation of its case without undue hardship.

As the Iowa Supreme Court noted, Discovery of Claim Files in first-party cases is discussed in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 12:5 (West 3d ed. 2011; 2021 Supplements in process).  Discovery of Claim Files in third-party bad faith cases is discussed in 1 id., § 8:5.  Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

INDIANA SUPREME COURT HOLDS COMPUTER HACKING RANSOM COVERED BY INSURANCE.

Recently, the Indiana Supreme Court was called upon to interpret the phrase, "resulting directly from the use of a computer," in an insurance policy providing Commercial Crime Coverage with a Computer Fraud provision.  The policyholder, G&G Oil, paid ransom demanded by a computer hacker in that case.  G&G's claim was denied by its insurance carrier, Continental Western.

          The Supreme Court held that the ransom payment was a covered loss:

    Analyzing G&G Oil's actions in this case, its transfer of Bitcoin was nearly the immediate result—without significant deviation—from the use of a computer. Though certainly G&G Oil's transfer was voluntary, it was made only after consulting with the FBI and other computer tech services. The designated evidence indicates G&G Oil's operations were shut down, and without access to its computer files, it is reasonable to assume G&G Oil would have incurred even greater loss to its business and profitability. These payments were “voluntary” only in the sense G&G Oil consciously made the payment. To us, however, the payment more closely resembled one made under duress. Under those circumstances, the “voluntary” payment was not so remote that it broke the causal chain. Therefore, we find that G&G Oil's losses “resulted directly from the use of a computer.”

G&G Oil Co. of Ind. Inc. v. Continental W. Ins. Co., 165 N.E.3d 82 (Ind. 2021) (quotation follows Headnote 16 in the Westlaw version; pinpoint page numbers not available at this time.)

          The Indiana Supreme Court decided this issue after the trial court entered summary judgment for the insurance company and the intermediate appellate court affirmed.  The  Supreme Court reversed and remanded with instructions that neither the policyholder nor the insurance company was entitled to summary judgment on the record before it.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

THE REAL SECRET ABOUT NONDISCLOSURE AGREEMENTS.

Trying to Control the Means of Communication, books, articles, cases. computers, and cd's.  (Dennis J. Wall)

The real secret about Nondisclosure Agreements is that they don't actually keep all their secrets.  See Ifeoma Ozoma, A Nondisclosure Agreement Didn't Silence Me, New York Times, Wed., April 14, 2021, at A27, https://www.nytimes.com/2021/04/13/opinion/nda-work-discrimination.html?searchResultPosition=1.

Please read the disclaimer.  ©2021 by Dennis J. Wall.  All rights reserved.

P.S. TO "BIG LAW JOINS FIGHT TO PROTECT VOTING RIGHTS": HOW EXACTLY?

P.S.

The NYT online headline and subhead give a more accurate introduction to the story.  Kudos to the online editor who wrote the online headline and subhead; she almost makes up for the print editor in this case (almost): 

Defying Republicans, Big Companies Keep the Focus on Voting Rights / A coalition of law firms has joined business leaders in wanting to use their clout to oppose state legislation that would make it harder to vote.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"BIG LAW JOINS FIGHT TO PROTECT VOTING RIGHTS": HOW, EXACTLY?

 

Georgia Recount, November, 2020 (John Amis / Atlanta Journal-Constitution)

It may be a story with substance to it yet:  Big Law Joins Fight to Protect Voting Rights, by David Gelles and Andrew Ross Sorkin, The New York Times, Tuesday, April 13, 2021, at B1.  As published, however, this NYT story was a bust.  This particular reporting did not fulfill the headline that someone besides the reporters wrote for it.  (Reporters rarely write the headlines for their own stories.  However, they almost always know what the headline is going to be on their story.) 

          I would like to say at the beginning that this is no criticism of the people whose bylines are on this story.  They are two of the more respected journalists at The New York Times.  They have earned that respect.  However, everyone has a bad day and this was just one of theirs.    If you want to be impressed with the knowledge that no-one is perfect, you can ask anyone who is a parent.

         The NYT reporters on this story did not feel the need to beef up their reporting to match the headline.  They mentioned once or twice that law firms have "formed a coalition" to challenge voter suppression laws, but that was all.  No details, no specifics, no facts.  Perhaps there was really nothing yet to report when this story was reported in the NYT.

         News stories are breaking slowly on other outlets.  For example, NBC News reports that 65 law firms are signing a letter to tell government officials to respect voting rights.  A much smaller number of law firms, apparently something on the order of 16 law firms, are 'committing' in some way to defend voting rights.  The NBC News story is here: https://www.nbcnews.com/politics/elections/top-private-law-firms-plan-swat-teams-fight-voting-laws-n1263891.

          I confess to a healthy skepticism of how far this story goes.  Let me explain.

          My skepticism comes from experience.  I have known lawyers for all of my professional life.  I am a lawyer.  It is hard to imagine lawyers working together on the same side amicably, suppressing their individual egos for the greater good, unless they are all paid by the same person or corporation.  But I have constantly been surprised in my life, and I am open to surprise now -- in fact, in this case, I am hoping for it.  These could be the people we have been waiting for, as the saying goes, and in the end they could be the ones who end up doing things that need to be done.

          So far, there's lots of noise frankly, and little action.  It's probably too soon to see the end of this or where it may go.  Time will tell ....

          But let's please get some facts in the meantime.  Or to borrow a phrase, this is a tale full of sound and fury, signifying nothing.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"TOO SMART BY HALF": THE TRUE STORY OF FORBIDDEN CONVERSATIONS.

Judge's Gavel.  (Sun Sentinel)

We have been looking lately at four cases of Stipulated Protective Orders, each one decided on the same day two weeks ago as these words are written.

          The lesson to be learned here is that these four SPOs are not simply typical of each other; they are typical of SPOs in thousands of cases in all types of litigation in the 21st Century.

          One of the more chilling provisions that lawyers have written into their SPOs concerns what they call "SCOPE."  This is the provision in which they say how far they intend their order to reach.  In that paragraph, the lawyers have all agreed that the Protective Order they are proposing will cover any "conversations" that they may have "that reveal Protected Material."

         In some cases, such as Premier Valley Bank in the Eastern District of California, the lawyers have agreed that "Protected Material" is what they say it is; when they have written "CONFIDENTIAL--ATTORNEYS' EYES ONLY" on disclosure or discovery material, then it is protected from public view.  Premier Valley Bank, 2021 WL 1164684, ¶ 2.11, at *2.  In other cases, including in the Central District of California, recent provisions have lowered the bar for recognizing "Protected Material" to material on which the lawyers have written, simply, "CONFIDENTIAL."  E.g., Diarian, 2021 WL 1163962, ¶ 2.13, at *3; Ramos, 2021 WL 1163575, ¶ 2.14, at *2; Orellana, 2021 WL 1163234, ¶ 2.14, at *3.  In all these cases as in most SPOs if not every SPO, the lawyers prevent material from being disclosed because they say it should not be disclosed.

         This may prove to be "too clever by half," as they say.   If "conversations" about confidential material disclosed or discovered in one case are prohibited in other cases, then the lawyers who wrote these agreements seem to have prohibited themselves  from representing the same clients on the same issues in future cases.  This can have real and not simply theoretical consequences, of course.

         For example, the defendant in the Orellana case is Target.  It is reasonably foreseeable that Target will be accused in other cases -- including in future cases -- of many of the same things that Target is accused of in the pending Orellana case.  If that ever happens, then the same lawyers may be prohibited from having "conversations" necessary to defend their client, Target, in any of those cases.

         This provision has echoes of the record in a recent Nondisclosure Agreement or NDA case in the Southern District of New York.  The record in that case reflects that the political campaign that wrote the NDA in that case, also attempted to enforce it in an earlier proceeding by alleging that a former campaign employee violated the NDA "'when she and her attorneys made statements about her lawsuit ....'"  Denson v. Donald J. Trump For President, Inc., No. 20 Civ. 4737 (PGG), 2021 WL 1198666, at *6 (S.D.N.Y. March 30, 2021) (emphasis added).  The Court ruled that the threatened enforcement of this sort of contract that restricts speech, 2021 WL 1198666, at *10, was invalid and unenforceable.

         The SDNY Court's reasoning concerning a Campaign's NDA is instructive concerning SPOs which have similar secrecy provisions.  "As to the scope of the [nondisclosure] provision" in that case, "it is -- as a practical matter -- unlimited."  It was unlimited in its vagueness, 2021 WL 1198666, at *14, just as the SPOs are equally unlimited in their own vagueness.

         Further, the New York Federal Court ruled, "[w]hether the scope of the restrictions in the non-disclosure provision is reasonable must be considered in light of what the Campaign contends are the 'legitimate interests' protected by this provision."  2021 WL 1198666, at *15.  "But even with respect to those categories the terms are not defined," and people purportedly bound by the secrecy provision are left with no idea how to comply with it. 

         "The non-disclosure provision's vague, overbroad, and undefined terms also render it unduly burdensome."  In short, because the effect of these burdens "is to chill the speech" of Campaign workers "about matters of public interest, the non-disclosure provision is harmful not only to them but also to the general public."  2021 WL 1198666, at *15.

         The same could be said of the Stipulated Protective Orders' "vague, overbroad, and undefined" terms such as "Protected Material" marked as 'Confidential' or 'Confidential-Attorney's Eyes Only' by the pens of lawyers, and such as undefined "conversations" that somehow "reveal Protected Material."

         One further thought, which the Federal Judge expressed in the case in the Southern District of New York.  Even if the Court were to set aside other standards of analysis in that case, "the non-disclosure provision is unenforceable under basic principles of contract law."  2021 WL 1198666, at *16.  It is impossible for a person "to know what speech she has agreed to forego" under such provisions, so that the supposed contract simply does not exist, there being "no possibility of mutual assent."  2021 WL 1198666, at *16.

         It seems equally impossible for a person to know what kind of speech she or he has agreed to forego in the stipulations quoted in the series of articles under discussion here.  If it is impossible for a person to know what "conversations" or speech she or he has agreed to forego under such provisions, the supposed stipulation is similarly void for vagueness, ineffective as a contract and unenforceable.  Submitting such provisions to a Federal Judge or Magistrate should not turn them into gold by some judicial alchemy; unenforceable provisions do not become enforceable simply because they have been signed by a judge.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.   

TO WHOM IT MAY CONCERN: QUESTIONS ABOUT YOUR SECRECY AGREEMENTS.

There is just enough time for a few questions in this special Thursday edition of Insurance Claims and Bad Faith Blog.                                                                                                                                                                                                                                                         

1. How did it happen that so many lawyers in so many cases used the same language for their Stipulated Protective Orders?  The lawyers in these and other cases used much the same language when they drew up their Stipulated Protective Orders.  Some of that language has already been quoted in past articles posted here.

          At the moment, I have been addressing three unrelated cases from the Central District of California because they were all decided on the same day.  The lawyers in these cases all used the same or substantially similar language when they wrote and signed the proposed orders they sent to the Courts in their separate cases.

         I cannot find a Model Protective Order in the Local Rules of the Central District of California and these stipulations did not reference any.  So where did this same language come from, to which each of these lawyers had the same access?  If any readers know the answer to this question, or if any reader knows of a Model Protective Order, please let me know.  I gratefully appreciate the information in advance.

2. Who drew up these stipulations for protective orders in these cases?  In many cases it is impossible to tell who drew up the Stipulated Protective Orders that somehow find their way to Judges and Magistrates, who sign them.  In most cases, the dockets just do not reveal how these proposed orders got to there in the first place.

          In at least one of these three cases, on the other hand, the docket reveals who filed the proposed order.  Clearly, the party that files the proposed order is the party that wants it the most.  It is reasonable to assume of course that the party that wants it the most is also the party that wrote it.  In the Orellana case, it was Target, the main defendant, that filed the proposed Stipulated Protective Order.   Orellana v. Target Corp., DE 30, proposed Stipulated Protective Order (C.D. Cal. Case No. 2:20-cv-06665 SVW (KSx)). 

3. What do they mean when they say "return or destroy" any material in "any format reproducing or capturing any of the Protected Material"?  In basic terms, a "return or destroy" provision requires that a person bound by the Protective Order shall either return what all the lawyers call "Protected Material" in all these cases, or destroy it.  The Premier Valley Bank stipulation in a fourth case is typical.  The Premier Valley Bank case was also decided on March 26, 2021, but in the Eastern and not the Central District of California.  It is typical in this regard not only among the subset of what has now become four cases, but it is also typical of the SPO case law at large.

         The Premier Valley Bank stipulation contains the requirement in its "return or destroy" provision that "'all Protected Material' includes all copies, abstracts, compilations, summaries, and any other format reproducing or capturing any of the Protected Material."  Premier Valley Bank v. Nguyen, No. 1:20-CV-00900-NONE-EPG, 2021 WL 1164684, ¶ 13,  at *7 (E.D. Cal. March 26, 2021) (emphasis added).  What does this mean?  Each of the three Central District cases contains the identical language that has been quoted here.  However, none of these cases offers much if any insight into what this language means.

         In particular, the reach of this provision to "any other format" "capturing any of the Protected Material" is vague.  It is also overly broad.  A Nondisclosure Agreement purporting to keep matters from being disclosed was recently held void for vagueness and overbreadth in Denton v. Donald J. Trump for President, Inc., No. 20 Civ. 4737 (PGG), 2021 WL 1198666 (S.D.N.Y. March 30, 2021).  If the same reasoning is applied to the language quoted here, it too should be held "invalid and unenforceable" for the same reasons.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

(Image = Editing,  LexisNexis.)

THREE FROM THE C.D.: "GOOD CAUSE STATEMENT" IN ALL OF THEM.

(Editing.  Lexis/Nexis)

Continuing our look at the three cases decided by Magistrates in the Central District of California on the same day (March 26, 2021), each of the three contained orders with this same language in the lawyers' "Good Cause Statement":

This action is likely to involve ... private information for which special protection from public disclosure and from use for any purpose other than prosecution of this action is warranted.

(Italics and boldface added.)¹

          In each case, this is the opening statement of the lawyers' Good Cause Statement, their lede if these were journalists writing a report for a newspaper, presenting their Statement of Good Cause to the Judge so that she or he will enter this protective order.

          The first question that arises from this single sentence is what exactly is the "private information" the lawyers had in mind?  Presumably, the rest of their Good Cause Statement will tell you, their reader, all they want you to know.  You be the judge.  Whether what the lawyers tell you is enough for you to know what they are talking about when they say, "private information," is up to you just as it will be up to their judge.

          A second question concerns when and whether "special protection from public disclosure" is "warranted."  In the past, Courts in the Ninth Circuit where these orders were entered have struck down so-called "confidentiality" provisions based on a statement that the lawyers would only designate things as "confidential" when they had a "good faith belief" that the things were in fact confidential.

         In each of these cases decided on March 26th, "good cause" was mentioned exactly once after the title.  Lawyers who practice in Federal Court know that they can only obtain a protective order for "good cause shown" to the Federal Court.  After the title of their Good Faith Statement in these three cases, the lawyers wrote a long paragraph without ever referring to "good cause," until they reached the end.  Then they declared that they would designate information "confidential" only when they had a "good faith belief" that the information they designate "confidential" is, in fact, confidential and that there is "good cause" to seal it from public view.  The reason that the old language was rejected by the Courts in the Ninth Circuit (and by many Courts in other Circuits) is because it gave too much power to the vague "good faith beliefs" of lawyers.

          Unfortunately, this present language is not an improvement over the past.  It is nondisclosure in a new shroud.  The new suffers from the same illness as the old.

          Last but far from least is the most important thought of all behind the Stipulated Protective Order.  The lawyers declare that they all seek special protection from public disclosure in their unique cases -- so unique that the same exact words are used by every lawyer in three separate cases -- "from use for any purpose other than prosecution of this action."

          I have been involved in trials since the 1970s.  I know enough  about trials to wonder what information is EVER used exclusively for "prosecution of this action," such that you would want to bar its use "for any purpose other than prosecution of this action."  I can't think of any.  Do you think otherwise?

          The real purpose comes clear now.  The real purpose is to prevent the use of information concealed by the lawyers in one case ever to be used in any other case "other than prosecution of this action."

To be continued ....

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

¹I do not like ellipses much.  Those are the three periods (...) that indicate that what we are reading is not the full quote.  As noted, the opening words of the Good Cause Statement are substantively identical in each of the "three cases from C.D.," with a few variations on the words chosen by the different lawyers in the different cases.  Here then is the statement in full:

This action is likely to involve commercial, financial, proprietary, and/or other private information for which special protection from public disclosure and from use for any purpose other than prosecution of this action is warranted.

This or very similar language is found in Diarian, 2021 WL 1163962, at *1; Orellana, 2021 WL 1163234, at *1 (which adds the words that this action is likely to involve "trade secrets, pricing lists and other valuable research, development" and "technical"), and Ramos, 2021 WL 1163575, at *1 (which substitutes the word, "confidential," for "commercial" in the above-quoted provision).

CAN THERE BE BAD FAITH OFF-SHORING TAX LIABILITY?

 

(Photograph courtesy of NASA)

Jesse Drucker has written an informative investigative report about off-shoring activities designed to reduce tax liabilities.  Apparently, if a corporation large enough to move certain financial activities off-shore -- such as Bristol Myers in this article -- and if that corporation retains its own accountants and lawyers to give it opinions that the off-shoring activity is "legitimate," "that can protect the company from accusations that it deliberately broke the law."  (Apparently, we only know about this particular activity because reporters were able to pierce the redactions in a report which the I.R.S. posted a year ago in April, 2020 about the Bristol Myers activity which actually took place in 2012-2013.)   Jesse Drucker, Slip-up Bared Tax Trick Used by Drug Giant / Bristol Myers Disputes $1 Billion I.R.S. Bill, New York Times, Friday, April 2, 2021, at A1.

          This possibility of legalized chicanery, if you will, raised some questions about Bad Faith in my mind that went beyond what was reported here.  Is there immunity "from accusations that it deliberately broke the law" if, hypothetically, a company deliberately hires accountants and lawyers for the purpose of giving it bogus opinions so that the company can shield itself from liability?

           If there is a "bad faith" exception to this kind of immunity, what would it look like?  Barring authorities on point, resort to general principles of good faith law like the principles governing insurance companies might well provide the answers.

           In the interim, if anyone knows what provisions of statutes or regulations confer the kind of immunity at issue in the Tax Trick article, supra, please leave a Comment below or send me an EMail via my website and let me know.  I have researched them myself, including via Westlaw, and I have come up empty so far.  Thank you for any help you can give.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

PUMPING OUT PROPOSED SECRECY ORDERS, GOOD CAUSE IN HIDING.

(Image via Central District of California website)

In three cases decided on the same day, three different U.S. Magistrate Judges in the Central District of California granted three of the same Stipulated Protective Orders, without saying why.

          Each of the three Stipulated Protective Orders said the same thing, except in one case the parties added the additional words I have [bracketed] in the quotation below:

[Disclosure and discovery activity] Discovery in this action [are] is likely to involve production of confidential, proprietary, or private information for which special protection from public disclosure and from use for any purpose other than prosecuting this litigation may be warranted. Accordingly, the parties hereby stipulate to and petition the Court to entire the following Stipulated Protective Order.

          We may never know why any of these three actions actually required "special protection from public disclosure" and "from use" beyond use in the lawsuit.  Not a single one of the three proposed Stipulated Protective Orders said what the case was about.

          Neither did the Magistrate Judges say what any of the cases was about in any of these three orders.

          Each of the three Magistrate Judges said that they entered the Stipulated Protective Orders because the parties in the case showed "good cause," but we will never know what the good cause shown may have been because none of the three said in any of the three cases what was shown or by whom or when, at least before they entered their orders.

          These are the three cases:  

Diarian v. First Transit, Inc., No. 2:20-cv-02957-FMO (AFMx), 2021 WL 1163962 (C.D. Cal. March 26, 2021) (Alexander F. MacKinnon, USMJ);

Orellana v. Target Corp., No. 2:20-cv-06665 SVW(KSx), 2021 WL 1163234 (C.D. Cal. March 26, 2021) (Karen L. Stevenson, USMJ), and

Ramos v. FCA US LLC, No: 2:20-cv-10440-DMG-AGR, 2021 WL 1163575 (C.D. Cal. filed March 26, 2021) (Alicia G. Rosenberg, USMJ).

We are not done.  To be continued ....

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"NOTICE-PREJUDICE RULE" NOT FOR CLAIMS-MADE POLICIES IN KENTUCKY.

In Darwin Nat'l Assur. Co. a/k/a Allied World Specialty Ins. Co. v. Kentucky St. Univ., ___ S.W.3d ___, No. 2019-CA-1811-MR, 2021 WL 1045716 (Ky. Ct. App. March 19, 2021) (stated not final), the Kentucky Court of Appeals faced a question of first impression.

    "The issue is whether the notice-prejudice rule applies entitling KSU to coverage under a claims-made-and-reported policy after providing notice of the claim to Allied World three days late."  Darwin, 2021 WL 1045716, at *1.  "KSU" is short for Kentucky State University, which is the policyholder in this case.

    Darwin a/k/a Allied World issued a "claims-made-and-reported" professional liability policy to KSU.  After a time, KSU was confronted with claims of wrongful discharge and intentional infliction of emotional distress.  Darwin, 2021 WL 1045716, at *1. 

   
(Blizzard; Image courtesy of NASA)

Darwin-Allied contended that KSU reported the claims late under the policy;

 

(Florida; Image courtesy of Dennis J. Wall)

KSU contended that Darwin-Allied had to prove that it was prejudiced by the allegedly late notice, and KSU argued that the carrier was not prejudiced.

    To resolve this open question in Kentucky, the Court of Appeals turned to among other sources the Restatement of Liability Insurance (Am. Law Inst. 2019) and concluded that KSU failed to satisfy the "claims-reporting condition of the policy" after consulting the Restatement.  Darwin, 2021 WL 1045716, at *5. 

    Further, on the facts including the parties' negotiations surrounding the insurance policy at issue in this case, the Court rejected "application of the notice-prejudice rule to claims-made policies."  Darwin, 2021 WL 1045716, at *6.

    Open questions make new law, one way or another; sometimes broad questions depend for their resolution on the facts of particular cases and policies.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved. 

HOW ESTOPPEL LIVES IN TEXAS IN THE 21st CENTURY.

Editing.  (LexisNexis)

"It is well established that as an equitable doctrine, estoppel requires that one who comes into equity must come with clean hands. If not, the doors of equity are closed to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief, however improper the behavior of the other party may have been."   Nasser v. Fin. of Am. Reverse LLC, NO. 4:18-CV-4695, 2021 WL 966007, at *3 (S.D. Tex. March 15, 2021) (emphasis added).

           That said, the federal judge denied a motion to strike a new or amended complaint because of the strange and convoluted history of amendments and complaints and orders involved in that case.  The denial was without prejudice and the judge specifically wrote that if the motion was brought up again, it could be ruled on at trial.

           Unresolved intimations of bad faith in the eyes of that judge, it seems.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

IT MIGHT ABUSE DISCRETION, BUT HAPPY ST. PATRICK'S DAY ANYWAY!

 

(Photo by Dennis Wall)

"The district court abused its discretion in permitting Defendants and the DEA to file their pleadings under seal."  In re:  Nat'l Prescrip. Opiate Litig. (HD Media Co. v. U.S. Dep't of Justice), 927 F.3d 919, 939 (6th Cir. June 20, 2019).

           The appellate panel followed this reasoning tree. First, there is a distinction in the Sixth Circuit (as in many courts) "between secrecy in the context of discovery," which is subject to a "good cause" showing, "and secrecy in the context of adjudication, which is generally impermissible due to the 'strong presumption of openness' of court records."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 938-39 (emphasis added).  The line of demarcation between discovery and adjudication is crossed when the material in question is put in the court file.  At that point, the public presumptively has access to it.  See In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

           This "strong presumption in favor of openness" can be overcome and documents can be sealed from public view when, first, the party seeking to seal the information shows a compelling reason to seal them and, second, the seal is "'narrowly tailored to serve that reason.'"  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939 (citations omitted).

           This case dealt with the issue of sealing or redacting "pleadings, briefs, or other documents that the parties have filed with the court, as well as any reports or exhibits that accompanied those filings[.]"  In other words, it was not merely the sealing of "pleadings and briefs" filed in the court file that was at issue in this case.  Also at issue was the sealing of "any reports or exhibits" attached to them and therefore also "filed with the court[.]"  These are all "the sort of records" subject to the presumption of public access and therefore subject to the compelling-reasons-and-narrowly-tailored standard before such records may be sealed away from public view.  See In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

           In this case, these documents also merited a further, stronger presumption "in favor of openness, ... given the paramount importance of the litigation's subject matter."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

            Following this reasoning tree to the end, a two-judge majority on the appellate panel held that "[t]he district court abused its discretion in permitting Defendants and the DEA to file their pleadings under seal."  In re:  Nat'l Prescrip. Opiate Litig., 927 F.3d at 939.

The panel's ruling has never been appealed.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.