Claims and Bad Faith Law Blog

MORE ON "COMPUTER MODELLING MAKES FOOLS OF US ALL."

For years I have been writing about the use of computer modelling to predict damages from hurricanes. No, not simply using computers to predict hurricanes, but using computers to predict and process damages claims from hurricanes without investigating and evaluating the claims that are actually made after a hurricane has passed through.

Perhaps the approach of Hurricane Dorian is on my mind. We are sitting in the middle of its latest predicted path. We will know shortly if that prediction holds.

Courts have begun to address the use of computer models to predict and process other types of damages claims and found it to be an actionable abuse of computer models. In a recent case, a State court certified a class of GEICO policyholders who alleged that GEICO filtered their PIP claims through computer models instead of investigating and evaluating their PIP claims based on investigation. The case is Green v. GEICO General Ins. Co., No.: N17C-03-242 EMD CCLD, 2019 WL 4039609 (Del. Super. Ct. August 27, 2019) (stated UNPUBLISHED OPINION. CHECK COURT RULES BEFORE CITING).

Computer modelling makes fools of us all: Predicting damages using computer models instead of paying adjusters to adjust claims is not just a continuing practice. It has actually expanded, for example, from hurricanes to PIP injuries, as in this case.

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THE SHAME OF THE UNBALANCED BUDGET.

Trump Administration Will Divert Disaster Relief Funds to U.S.-Mexico Border Enforcement, Prompting Outcry From Democrats, WASHINGTON POST online Tuesday, August 27, 2019.

This is what comes of not putting limitations on your budget vote.

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Download 08.29.19.

 

TWO FOR THE INSURANCE COVERAGE BOOKS OF BUSINESS.

Two recently published articles will appeal to everyone concerned with insurance policy interpretation and to insurance coverage lawyers in particular. One article addresses general principles that apply to all insurance coverage cases. The other addresses a specialized niche. Both are available on Westlaw.

The first is by the estimable Kenneth S. Abraham, and the title of the article is self-explanatory. It will find a ready audience among insurance coverage lawyers generally: Plain Meaning, Extrinsic Evidence, and Ambiguity: Myth and Reality in Insurance Policy Interpretation, 25 CONN. INS. L.J. 329 (Spring 2019).

The other is addressed to a specialized niche of insurance coverage issues involving many insurance policies, many parties, and likely a lot of corporate money at stake. It is by James M. Fischer, Understanding the "Exhaustion of Coverage" Doctrine in the Context of Continuous Trigger Coverage, 25 CONN. INS. L.J. 263 (Spring 2019).

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PRIVATELY FUNDED PROTECTIVE ORDERS ARE THE LAW OF THE CASE.

The following language is typical. The following case is typical. That is not to say that either one is good or bad. It is to say that it is typical, meaning only that it is the way things are done more often than not:

    On July 2, 2018, the parties filed a stipulated protective order, which was entered by the court on July 11, 2018. [Docket Nos. 27 (“Protective Order”), 28.] The Protective Order permits the parties to designate certain materials produced during discovery as confidential in order to prevent their public disclosure. It states that a party “may challenge a designation of confidentiality at any time,” by initiating a dispute resolution process and “providing written notice of each designation it is challenging and describing the basis for each challenge.” Protective Order ¶¶ 6.1, 6.2. The Protective Order also states that if the parties cannot resolve a challenge through the meet and confer process, the designating party must file and serve a motion to retain confidentiality. Id. ¶ 6.3.

Economus v. City and County of San Francisco, No. 18-cv-01071-HSG (DMR), 2019 WL 3842008, at *1 (N.D. Cal. August 15, 2019) (Ryu, USMJ).

After an exhaustive review of many factors that the Magistrate Judge wrote should be taken into account in any secrecy equation in the Ninth Circuit, the Magistrate Judge in this case granted the defendants' motion to retain confidentiality of certain documents. The defendants in the case had marked the documents confidential under the Stipulated Protective Order even as they were submitted as part of the reason for the defendants' motion for summary judgment.

In other words, the defendants submitted evidence which they argued was in favor of their summary judgment, and which they also marked "confidential" and so not available to the public to see.

Seven pages later, the Magistrate Judge announced a ruling to keep the materials under seal because the plaintiff did not follow the Stipulated Protective Order to challenge the defendants' confidentiality designations:

    As Economus did not properly challenge the confidentiality designation of these documents pursuant to the terms of the Protective Order, that issue is not presently before the court. Accordingly, the court declines to lift the confidentiality designations on those documents.

III. CONCLUSION

For the reasons stated above, the court grants Defendants’ motion to retain confidentiality. The documents identified by Bates numbers CCSF_ECONOMUS 000837-841, 00117, and 002262-2267 shall remain confidential pursuant to the terms of the Protective Order entered in this case.

Economus, 2019 WL 3842008, at *8.

In other words, the plaintiff Economus did not follow the Stipulated Protective Order in this case, the defendants did, and so the evidence marked "confidential" by the defendants and filed under seal had to remain under seal.

Do you think that the real issue was whether either party followed the Federal Rules of Civil Procedure and in particular Rule 26?

Not now, not in this typical case. Parties are urged to follow not only the actual Rules of Civil Procedure in most federal courts but also to follow the terms of any Stipulated Protective Order which they have filed in their particular case -- just in case of a decision like this whether in the Ninth Circuit or not.

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BAD FAITH BEGINS WHEN THE NOTICE IS ELECTRONICALLY FILED.

A panel of Florida's Second District Court of Appeal, an intermediate appellate court, recently resolved the question: When does the statutory cure period of 60 days begin under Florida's so-called "Bad Faith Statute," Fla. Stat. § 624.155?

The statutory cure period is the period during which the accused carrier can "cure" the bad faith alleged in a Civil Remedy Notice filed under the statute. That makes the start-time question a big deal especially for carriers who want all the time they can get to cure the alleged bad faith -- and so not be sued under Florida's statute.

The appellate court held that the time starts when the Civil Remedy Notice (CRN) is electronically filed with the Department of Financial Services which houses the Florida Office of Insurance Regulation, i.e., the Florida Insurance Commissioner:

Therefore, we hold that the sixty-day cure period under section 624.155 begins when the CRN is electronically filed with the Department, and to avoid a bad faith action, the insurer must pay the claim or take corrective action within sixty days from the date the CRN is electronically filed.

Harper v. GEICO General Ins. Co., 272 So. 3d 448 (Fla. 2d DCA 2019) (page numbers unavailable at time of this publication).

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A PLEASANT SURPRISE FROM S.D. FLA.

A U.S. Magistrate Judge's opinion in a case in the Southern District of Florida is as worthwhile quoting as it is surprising. As one of many reasons, the Magistrate Judge ordered discovery of a settlement agreement entered into between the plaintiffs and a couple of the defendants in a case involving other defendants.

The Magistrate Judge wrote:

    In addition to the findings and analysis made previously in this Order, the Court additionally finds as follows. First, merely because settling parties label a settlement agreement as “confidential” and agree to confidentiality terms amongst themselves, does not mean that a federal court cannot order such settlement agreement produced in discovery if it is relevant and proportional under Rule 26(b)(1). “There is nothing magical about a settlement agreement.” Jen Weld Inc. [v. Nebula Glass Int'l, Inc.], 2007 WL 1526649 at *3 [(S.D. Fla. May 22, 2007)]. Secrecy is disfavored in our federal courts. Parties cannot insulate a document from discovery merely because they decide to label it as confidential; the federal courts are to decide such issue, not the parties.

Kadiyala, individually, and as assignee of Credit Union Mortgage Utility Banc, Inc. v. Pupke, No. 17-80732-CIV-Marra/Matthewman, 2019 WL 3752654, at *4 (S.D. Fla. August 8, 2019) (Matthewman, U.S.M.J.) (emphasis added).

It sounds like the presumption of public access may be alive and well in this case.

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COVERAGE FOR EL PASO AND DAYTON CARNAGE.

There may be coverage for the terrorism-produced carnage in El Paso and Dayton under a recent ruling in a bad faith and coverage case by a federal appeals court. In Universal Cable Prod's, LLC v. Atlantic Spec. Ins. Co., 929 F.3d 1143 (9th Cir. 2019), the federal appellate court held that covered terrorism under an insurance policy was not excluded by a "war actions" exclusion.  The appellate court remanded to the trial court for proceedings on the coverage claims and on the bad faith claims at bar.

More precisely as to the main coverage issue, the court held that an organization known for its violence was not a sovereign state the warlike actions of which would be excluded under an exclusion for "'warlike action by a military force' by a 'government, sovereign, or other authority.'” Instead the terrorist's actions were covered terrorism under the liability insurance policy at bar.

The appellate court applied California law to interpret the insurance policy at issue but relied on federal decisions from New York to reach this ruling. As California and New York go, so goes the coverage nation?

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HELL IN A HELOC.

Dolores Zirbser and Bruce Jon Spalla made a loan agreement for a home equity line of credit ("HELOC"). The loan originated with Wachovia Bank. Wachovia sold the loan to Wells Fargo.

Zirbser and Spalla sued Wells Fargo in December 2018 over billing them for allegedly "erroneous fees" and taking other payments that were not authorized by the loan contract. Wells successfully argued for dismissal of five of the six counts of the complaint on the basis of the statute of limitations, i.e., that the allegedly "illegal charges" were time-barred because they took place too long ago to sue on now.

Except for three charges that were within the time to sue on them. The federal judge denied Wells's motion to dismiss the last remaining count, which is alleged for breach of the implied covenant of good faith and fair dealing under New Jersey law. In New Jersey,

[t]o show a breach of the covenant of good faith and fair dealing, a plaintiff must show “(1) the defendant act[ed] in bad faith or with a malicious motive, (2) to deny the plaintiff some benefit of the bargain originally intended by the parties, even if that benefit was not an express provision of the contract.” [Citation omitted.] Proof of a party’s “bad motive” or “intention” must support a claim of breach of contract grounded on an alleged breach of the implied covenant of good faith and fair dealing.

Zirbser v. Wells Fargo Bank, N.A., No.: 19-cv-01099-RBK-KMW, 2019 WL 3244621, at *4 (D.N.J. July 19, 2019).

In this case, the federal judge held that the plaintiffs adequately alleged a breach of the good faith covenant that was implied in their loan agreement as to those unauthorized charges that were not excluded by the statute of limitations:

... Plaintiffs sufficiently allege bad faith because they state that the Defendant knowingly charged them for three fees outside the express terms of the contract. (Compl. at ¶¶ 21–22.) Defendant did so intentionally and therefore acted “in bad faith, dishonestly, or with improper motive” and “destroy[ed] or injure[d] the right of the [Plaintiffs] to receive the benefits or reasonable expectations of the contract.” (Id. at ¶ 129). Taking all inferences in the Plaintiffs’ favor, Plaintiffs were denied the benefit of their bargain because they contracted to pay for only those fees permitted by the agreement, not any others. (Id.)

Zirbser v. Wells Fargo Bank, N.A., No.: 19-cv-01099-RBK-KMW, 2019 WL 3244621, at *4 (D.N.J. July 19, 2019).

Alleged bad faith in a HELOC. If proven, that means hell in a HELOC. So wait for it: This case will settle now.

Download IBF 08.06.19.

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INSURANCE BAD FAITH LAW APPLIED TO WORKER’S COMPENSATION CLAIM.

In Ball v. Federal Ins. Co., 4:18-CV-04008-KES, 2019 WL 3393166 (D.S.D. July 26, 2019), the federal court applied a merger of insurance bad faith law with the handling of a worker’s compensation claim:

    The first element of a bad faith claim requires an absence of a reasonable basis for denying the benefits of the policy. Hein, [2007 S.D. 40, 731 N.W.2d 231 (S.D. 2007], 731 N.W.2d at 236 (citing Champion, [399 N.W.2d 320 (S.D. 1987)], 399 N.W.2d at 324). “Insurers are entitled to challenge fairly debatable claims.” Id. at 237 (citing Zuke, [1999 S.D. 31, 589 N.W.2d 925 (S.D. 1999)], 589 N.W.2d at 930). “Because any injury in a workers’ compensation bad faith claim stems from the insurer’s denial, not the insurer’s conduct alone, a central element of the cause of action is whether there has been a wrongful denial of benefits.” Id. (citing Champion, 399 N.W.2d at 324).

Ball v. Federal Ins. Co., 4:18-CV-04008-KES, 2019 WL 3393166, at *4 (D.S.D. July 26, 2019). The federal court ultimately denied the worker’s compensation carrier’s motion for summary judgment in that case.

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HOW WE GOT TO SEE THE OPIOID DATABASE, Continued.

Part two of two.

It was a near thing. We got to see the opioid database because two judges voted for us to see it. They also voted for us to see the documents related to it.

In a 2-to-1 decision, the majority on a panel of the Sixth Circuit held that the trial judge’s decision to conceal the opioid information was “bizarre” and “irrational.” In re: National Prescription Opiate Litigation, 927 F.3d 919, 932 (6th Cir. 2019). The trial judge previously ruled simultaneously that keeping the opioid information secret was not important and also that it was important to keep the opioid documents – and the opioid database – secret.

Corporate media accounts have generally been outstanding in their reporting on this issue but many nonetheless seem to say, erroneously, that the trial judge’s ruling in this litigation made the opioid database and the documents available to the public. See, e.g., Jan Hoffman, Katie Thomas and Danny Hakim, 3,271 Pill Bottles, a Town of 2,831: Court Filings Say Corporations Fed Opioid Epidemic, NEW YORK TIMES, Saturday, July 20, 2019, p. A1 (online July 19, 2019; the New York Times may charge to view online). The District judge in this case has been shown in something of a favorable light in the corporate media generally, and generally deservedly so. See, e.g., Jan Hoffman, Groundwork is Laid For Opioids Settlement That Would Touch Every Corner of U.S., NEW YORK TIMES online June 14, 2019 (New York Times may charge for online access).

However, in this case the trial judge did not make the database or the documents available to the public. To the contrary, the trial judge ruled to make the opioid documents and the opioid database unavailable to the public.

It was the Sixth Circuit panel of appellate judges that ruled in favor of the importance of public access guaranteed by the First Amendment to the U.S. Constitution. Actually, the ruling was made by two of those judges. Their names? Eric L. Clay, who wrote the opinion, and Robert A. Griffin, who concurred in the opinion completely.

To say again, it was a near thing.

Download IBF 07.25.19.

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HOW WE GOT TO SEE THE HIDDEN OPIOID DATABASE.

Part one of two.

The people of the United States have only recently been allowed to see a database maintained with their money by the federal Drug Enforcement Administration. It is a database at the heart of the opioid epidemic in the United States.

The database tracks every last pain pill sold in the United States, from manufacturers to distributors to your local pharmacy where it is eventually sold to the people in every large city down to the smallest town. The Washington Post has broken down 380 million of these transactions between 2006 and 2012 into usable form. During that time 100,000 people reportedly died from opioid abuse.

Thanks to the Post’s breakdown, the information stored in the database is no longer secret or remote, but accessible. Americans can use the information stored in their database to see things like which pharmacies sold the most drugs and how much they sold. Our family has already done that search. Has yours? Here is a link to the Post’s portal into the people’s database which the people did not previously know they owned: Drilling Into the DEA’s Pain Pill Database, Washington Post online Updated Sunday, July 21, 2019.

The Washington Post’s work on making the database usable is exceptional. The Post has earned the American people’s gratitude, and the Post deserves it. However, the database and documents surrounding it would never have become known to the public if it had not been for two judges in Ohio.
This long but amazing story continues in our next article.

Download IBF 07.23.19.

 

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BAD FAITH CLAIMS DEPENDED ON EVIDENCE. ANYTHING LESS DIDN’T COUNT.

There are two types of insurer bad faith claims under Ohio law, the federal judge ruled in a case involving coverage and bad faith claims under an insurance policy for losses from fire. The case is Jordan v. Liberty Mut. Fire Ins. Co., NO. 4:19CV0093, 2019 WL 3082304 (N.D. Ohio July 15, 2019), and the judge’s ruling applies at least in a first-party case subject to Ohio law like this case:

There are two types of bad faith claims that can be asserted: (1) when the insurer had no lawful basis for its refusal of the claim or (2) when the insurer failed to determine whether there was a lawful basis for the refusal. [Citations omitted.] This principle would appear to remain intact even after Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552[, 644 N.E. 2d 397] (1994)[, cert. denied, ___ U.S. ___, 116 S. Ct. 56 (1995)], overruled the portions of these decisions inserting an intent element. [Citations omitted.] The first type involves the merits of the contract claim. Therefore, in this type of bad faith claim, the success of the tort claim hinges on the success of the contract claim. [Citations omitted.]

Jordan v. Liberty Mut. Fire Ins. Co., NO. 4:19CV0093, 2019 WL 3082304, at *4 (N.D. Ohio July 15, 2019).
The second type of bad faith claim recognized under Ohio law, according to the federal court in this case, is predicated on an insurance carrier’s failure to determine a legitimate basis to deny the claim before it denies the claim. “A bad faith claim based on failure to determine whether there was a lawful basis to deny coverage is not tied to the underlying merits of the decision to grant or deny coverage.” Jordan v. Liberty Mut. Fire Ins. Co., NO. 4:19CV0093, 2019 WL 3082304, at *4 (N.D. Ohio July 15, 2019).
The federal court ruled that the plaintiff’s allegations in this case triggered both types of bad faith claims. The court denied the carrier’s motion for judgment on the pleadings, which was based on an argument that the contractual limitations period was exceeded as a matter of law when applied to the allegations in the complaint in this particular case.
Evidence is necessary in this case, not judgment on the pleadings, the federal judge ruled.

Download IBF 07.18.19.
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HAMAS IS NOT AT WAR FOR INSURANCE, NINTH CIRCUIT SAYS.

“In late June and through July of 2014, Hamas fired rockets from Gaza into Israel. Because of these hostilities, the plaintiffs, Universal Cable Productions, LLC, and Northern Entertainment Productions, LLC (collectively “Universal”), moved the production of their television series Dig out of Jerusalem. Universal incurred significant expenses during this move and filed an insurance claim for coverage of those costs under a television production insurance policy (the “Policy”).” Universal Cable Prod’s, LLC v. Atlantic Spec. Ins. Co., No. 17-56672, 2019 WL 3049034, at *1 (9th Cir. July 12, 2019).

Atlantic Specialty Insurance Company is Universal’s carrier. It denied the claim on the basis of “war exclusions” in its policy. Atlantic Specialty Insurance acknowledged that the policy covered acts of terrorism, but argued that the actions of Hamas constituted acts of war and so the resulting losses embedded in Universal’s claim were excluded because the losses resulted from “war,” “warlike action by a military force,” or “insurrection, rebellion, [or] revolution.” Universal Cable Productions, 2019 WL 3049034, at *2.
Who says federal judges cannot make their own foreign policy? In this case, the Ninth Circuit disagreed with Atlantic Specialty. These were not acts of “war,” the federal judges said. For “war” exclusions in an insurance policy to bar coverage, they said, they had to apply a specialized meaning that applies to insurance policies under California law, which they said governed this case. “Under that specialized meaning, both “war” and “warlike action by a military force” require hostilities between either de jure or de facto sovereigns, and Hamas constitutes neither.” Universal Cable Productions, 2019 WL 3049034, at *2.
The appellate panel reversed the trial court’s grant of summary judgment to the carrier on the coverage claim. It also reversed the trial court’s grant of summary judgment on Universal’s bad faith claim because the trial court had applied the plain meaning of “war” to the carrier’s war exclusions in this case when, the appellate panel said, the trial court should have applied the specialized meaning of “war” instead.
Thus the Ninth Circuit made its own foreign policy. Who among us can see the farthest reach of federal judges’ powers.
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"MOST INELIGIBLES LIVE IN SMALL HOUSEHOLDS THAT COULD NOT EASILY SEPARATE."

HUD said that in 2019.

Tomorrow at the close of day, Tuesday, July 9, 2019, the Comment period will end for HUD to accept Comments to the proposed Mixed Status Families rules changes. The changes, proposed by Mr. Stephen Miller, are worth a look and so are the Comments.

Comments on proposed rules changes are easy to make. Just go to www.regulations.gov and input the Docket Number or RIN (or both, in an abundance of caution). That information is included in my own Comments, below, which I left on Monday, July 8, 2019.

July 8, 2019
BY POSTING TO FEDERAL eRULEMAKING PORTAL
IN WORD AND pdf

Federal eRulemaking Portal: www.regulations.gov.
Regulations Division
Office of General Counsel
Department of Housing and Urban Development
451 7th Street SW, Room 10267
Washington, DC 20410-0500
Re: HUD Docket No. FR-6124-P-01. RIN 2501-AD89.

To the Department of Housing and Urban Development:

These Comments concern changes to Mixed Status Families Rules proposed by HUD. My Comments break down into a number of concrete areas, identified below.

    1. The origin of your proposed Rules changes is irrational. I understand that HUD’s
proposed Mixed Status Families Rules changes were not written or researched by HUD. They were written by a current employee of the White House, Mr. Stephen Miller, who has parenthetically not been appointed to any position in the federal government. Mr. Miller’s proposals were shown to HUD Secretary Benjamin Carson, who I understand did not like them but neither did he oppose them.
    The origin story of these changes exponentially increases the chances that a Court will find the changes irrational. As noted below, there are other reasons that your proposed changes are irrational. My first point is that, whether taken separately or together with the other reasons discussed below, a Court is more likely than not to hold that your proposed changes are irrational and even “contrived,” to borrow a word from Chief Justice Robert’s recent opinion on proposed rules changes to the United States Census.

    2. Millions of dollars will be lost to HUD if your proposed Rules changes are finalized
because undocumented immigrants are among the most reliable tenants HUD has. The current status of the law is that so long as one member of a family is a citizen of the United States, the family is entitled to HUD housing as I understand it. Your proposed Rules changes would stand the law on its head. Mr. Miller’s proposal would be to deny HUD housing to anyone in a family who is not a citizen or is an undocumented immigrant, leaving behind the person(s) in that family who are U.S. citizens, mostly children.
    “The primary cost would be the economic costs of moving.” HUD’s Regulatory Impact Analysis (“RIA”) of these proposed rules changes, Docket No. FR-6124-P-01, at 13 (April 15, 2019). HUD’s Regulatory Impact Analysis does not come out and say so, but the moving costs estimated by HUD at between $9,500,000 and $13,000,000 would be borne by the mixed families assuming that they could come up with that amount of money.
    A secondary but inevitable cost would be formal eviction. HUD would bear the costs of formal eviction. HUD estimates its costs for formally evicting families under the proposed Mixed Status Families rules as between $3,300,000 and $4,400,000, or between $3.3 Million and $4.4 Million. RIA, Docket No. FR-6124-P-01, at 4 and 15 (April 15, 2019).
    Any parent knows that most children will follow their evicted parents. As HUD’s own Regulatory Impact Analysis crudely put it, “Most ineligibles live in small households that could not easily separate.” RIA, Docket No. FR-6124-P-01, at 16 (April 15, 2019).
    That means that inevitably HUD will lose these people as tenants. Putting to one side the moral and ethical failures of such changes, the loss of these families as tenants would be an economic catastrophe.
    Undocumented immigrants are among the most reliable tenants that HUD has. They do not want to attract the attention that would come their way if they do not pay their rent on time. It would be irrational to evict them or otherwise force them to move out of the HUD housing on which they currently and faithfully pay rent. Their rent payments total millions of dollars, all of which would be lost to HUD and the federal taxpayer. This result is not rational. The proposed changes under consideration do not serve any other purpose which is itself either rational or desirable.

    3. Replacing these mixed immigration households that would be displaced if the Rules
changes are finalized would cost HUD millions of dollars excluding even lost rental monies. HUD would be required to pay full subsidies for each resident that would be left in a household in subsidized public housing. Under the law, the amount of subsidies is prorated according to the number of undocumented immigrants (no subsidy) vs. the number of legal residents (subsidized). If these proposed changes were made, the costs to HUD would then be in the millions of dollars because HUD would be paying direct subsidies calculated by each individual person that remains in HUD housing. There would be no prorating HUD’s payments then.
    HUD published its own “Summary of Transfers” Table to show the total estimated costs of replacing mixed status families currently receiving HUD housing assistance (subsidies), with households in which every single individual is eligible for HUD housing assistance, at $372 Million “annually” (without saying for how long these “annual” costs would continue) as a “Low Estimate,” and $437 Million “annual” costs as a “High Estimate.” In other words, in just the first year the costs of these proposed Rules changes are estimated by HUD to run between $372 Million and $437 Million. HUD RIA, Docket No. FR-6124-P-01, at 11 (April 15, 2019).
    No telling how many years such “annual” costs or any “annual” costs like them would continue if the proposed Mixed Status Families rules changes are finalized and adopted.
    And for what return on this expense? This too is another reason that the proposed Rules changes are irrational. They are almost certain to be found irrational by a Court as soon as they are challenged in litigation. Knowing that up front, so to speak, what reason can HUD give for pursuing these proposed changes and incurring these certain expenses?
    If there is a good reason, I have not heard it.

Conclusion

The fact that HUD did not write or research the proposed rules changes in question is an untreatable wound to the viability of the Mixed Status Families rules changes. The fact that these proposals were presented to HUD by political employee(s) without HUD’s involvement and without HUD’s intervention, but only with HUD’s acquiescence in their false presentation of “contrived” reasons for their adoption, is fatal to their implementation as law in the United States.
    Further, finalization and adoption of these proposals will result in the loss of millions of dollars of rental payments to HUD with no offsetting benefits whatsoever.
    Finally, additional “annual” costs will accrue to HUD by HUD’s own best estimates over an unstated period of time, if these proposed Rules changes are finalized and adopted, somewhere between $372 Million and $437 Million a year.
    Whether these considerations are taken separately or together, they require HUD to withdraw the proposed Mixed Status Families rules changes or suffer certain judicial rulings striking them down as what they are, “contrived.”
    Instead, HUD itself has proposed alternatives. Some of them are rational. See RIA, Docket No. FR-6124-P-01, at 17, in paragraph titled, “Alternatives” (April 15, 2019). Consider them instead, even as you withdraw the current proposed rules changes.
    Thank you for your consideration.

Download HUD'S MIXED STATUS FAMILIES RULE COMMENTS.07.08.19.

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KATE BAILEY, YOU JUST LEARNED A HARSH LESSON: CLIENT CONTROL.

In hindsight, you should have seen it coming.

They left it to Kate Bailey, Trial Attorney in the Civil Division of the current justice department, to represent to the Court in Washington, D.C. that the current federal government had backed down. She represented to the judge in the citizenship case pending in the District that the federal government had abandoned its position in the litigation. From now on, she wrote, the federal government would not seek to add a citizenship question to the 2020 Census.

Kate Bailey wrote that down. In a letter to the lawyers in the case. And she represented that to the judge in the case.

And that was the current federal government's new position, that they would no longer defend contest that litigation with its previous position that they wanted to add a citizenship question to the 2020 census. That was their new position.

Until it wasn't.

See Noah Bierman and David G. Savage, Citizen Question May Be Back On 2020 Census As Trump Administration Reverses Course Again, Los Angeles Times online Wednesday, July 3, 2019 (the Los Angeles Times may charge for online access).

By tweet, the department of justice pulled the rug out from under Kate Bailey. They shredded her reputation with the Court. They took away her credibility as a lawyer.

They changed their new position, which became their old position, and in their new-new position they told the judge at a telephone hearing the day before the Fourth of July that they 'might' change their position back to their original position. They were "looking into it," they told the judge.

Then they asked for more time until Monday to think it over.

The judge said "no." One word in response to that request: "No."

He set a hearing for today at 2:00 P.M. for the current federal government to make its mind up and, one way or the other, litigate the case or withdraw its defense of the case. Either present a plan to litigate or stipulate that the citizenship question is withdrawn and will not be printed on the 2020 Census forms.

Do you think Kate Bailey will be in attendance at today's hearing?

Don't hold your breath if you don't like the color blue, as the saying goes.

Ms. Bailey, you don't have to work for these people who humiliate you. You can enter private practice. At least then you could file a motion for leave to withdraw. The judge may not let you out of the case, but at least then you would have a chance.

Not like now, when they won't give you a chance. Instead they will pull the rug out from underneath your credibility whenever it suits their purpose. If you did not know beforehand that these are the kind of people you chose to work for, you know now.

Talk about bad faith.

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Download IBF 07.05.19.

Postscript on Saturday, July 6, 2019:

I checked out the case on PACER (Public Access to [Federal] Court Electronic Records) yesterday.  The case is Kravitz v. U.S. Department of Commerce, (D. Md. Case No. 8:18-cv-01041).  Kate Bailey, Esquire is not a counsel of record in that case.  So why was it left to her to make an announcement that the current federal government was no longer defending the case?  The justice department filed a new pleading yesterday with a "Plan A" and a "Plan B."  The government's Plan A was convoluted and it is best if you try to read it for yourself.  The case information for PACER is provided above.  The government's Plan B is that it agreed with the plaintiffs' proposed order for discovery deadlines in the case if the judge was going to proceed.  The judge is going to proceed.  The judge  entered the scheduling order proposed by the plaintiffs  -- and joined as noted by the government -- to set discovery deadlines in the case.

SO THIS IS HOW YOU CELEBRATE THE FOURTH OF JULY.

See Ledyard King, Sarah Elbeshbishi, and Jason Lalljee, What to Expect at the Washington DC 4th of July: Army Tanks, A Burning Flag and Baby Trump, USA TODAY online July 2, 2019 (USA Today may charge for online access).

   Photo - Getty Images.

God Bless Us All!  Happy Fourth of July!  Please Read The Disclaimer. ©2019 Dennis J. Wall.  All Rights Reserved.

DESPITE STIPULATED PROTECTIVE ORDER, SEAL SUBJECT TO GOOD CAUSE SHOWING.

In Karrani v. JetBlue Airways Corp., No. C18-1510 RSM, 2019 WL 2724046 (W.D. Wash. June 28, 2019), the Court applied the Federal Rules of Civil Procedure and the Local Rules of Court to a motion to seal evidence.  The motion to seal already followed after a designation of the evidence as "confidential" pursuant to a Stipulated Protective Order previously approved by the Court in that case.

Despite that, the Court ruled that Federal Rules and Local Rules trump a Stipulated Protective Order when it comes to sealing evidence in the Court file:

Accordingly, a “good cause” showing under Rule 26(c) may suffice to keep under seal documents attached to non-dispositive motions. Id. Rule 26, which gives district courts flexibility in balancing and protecting the interests of private parties, states that “good cause” is shown where forbidding disclosure or discovery would “protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense ….” Fed. R. Civ. P. 26(c).

    The Court’s Local Rules explicitly instruct parties to present legal and evidentiary support in a motion to seal. Normally that motion must include “a specific statement of the applicable legal standard and the reasons for keeping a document under seal, with evidentiary support from declarations where necessary.” Local Rules W.D. Wash. LCR 5(g)(3)(B).

Karrani v. JetBlue Airways Corp., No. C18-1510 RSM, 2019 WL 2724046, at *1 (W.D. Wash. June 28, 2019).

Lesson learned here:  Stipulated Protective Orders are not enough standing alone to provide a basis for sealing evidence in a Federal Court's file.  Federal Rules and Local Rules govern that decision, as in this case, where the Court denied both of the two motions to seal filed by the plaintiff even as the Court directed further compliance with the Stipulated Protective Order that it had previously approved in the case.  Karrani v. JetBlue Airways Corp., No. C18-1510 RSM, 2019 WL 2724046, at *3 (W.D. Wash. June 28, 2019)

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COMMENTS ON OVERDRAFT RULE ARE DUE BY JULY 1.

I left the following Comments on the overdraft rule earlier today.  Comments are due by July 1.  The overdraft rule is being examined by the Consumer Financial Protection Bureau because the CFPB is required to review the rule by the Regulatory Flexibility Act.  Reviews and revisions of rules by the CFPB since 2017 have not been favorable to consumer financial protection.  If you want to leave Comments on the overdraft rule that advance consumer financial protection, your time grows short.  Go to www.regulations.gov, input “overdraft rule,” and click on “Comment Now!”  Comments do not have to be as long or as complicated as books or articles.  They can be short and to the point, which if I had it to do over again, I would make my own Comments even shorter and even more to the point.

Here are the Comments I left on the overdraft rule earlier today:

I would like to leave these comments on improving and strengthening the overdraft rule.

First, as I understand the present situation, banks may charge fees without getting a customer's prior approval whenever the customer overspends her or his account by using a paper check.  As it is currently written, the overdraft rule applies to most electronic transactions.  Paper checks may not be as prevalent as they once were, but prevalence of electronic transactions is no excuse for this inequity.  (This would be true in any case, but today it is especially true because electronic transactions are required by the very banks who benefit from the rule's failure to regulate transactions involving paper checks.)  This is unfair and unequal.  The overdraft rule should now be updated and strengthened by extending its application to the customer's use of a paper check.

Further, I understand that some banks still reorder debit transactions so that one tiny shortage in the customer's account becomes an automatic trigger of overdrafts and fees charged by the banks.  The banks that indulge themselves in this practice and that continue to inflict it upon their customers apparently rely on disclosure to their customers of what they do, usually in small inconspicuous type in a disclosure document.  Disclosure is no excuse for predatory practices.  Customers often have little or no choice of banking options in their communities.  This practice of reordering debit transactions, usually by processing them from the highest amount to the lowest amount, must be barred completely.  The overdraft rule should be updated and strengthened accordingly, with a complete prohibition on any practice of reordering debit transactions that has the result of charging the customer with overdraft and any other associated charges.

Thank you for your consideration.

Dennis Wall

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Download CI and IBF 06.27.19.

A POX ON BOTH YOUR BAD FAITH HOUSES: EXPERT TESTIMONY UNHELPFUL.

In Hansen Constr. Inc. v. Everest Nat’l Ins. Co., No. 16-cv-02902-CMA-GPG, 2019 WL 2602510 (D. Colo. June 25, 2019), a Federal Judge granted the plaintiff’s and the defendant insurance company’s motion to exclude expert witness testimony in a bad faith case.

The reason that both sides filed their motions to exclude their respective experts’ testimony was the same.  Both sides argued that testimony from  experts on the issue of insurance industry standards of good faith and bad faith would be of no help to the jury in deciding the bad faith issues in that case:

    Both parties intend to call expert witnesses at trial to offer opinions regarding insurance industry standards of care and whether Defendant’s conduct in handling Plaintiffs’ claim was reasonable. Defendants object to Plaintiffs’ proffered experts, J. Kent Miller and Garth H. Allen, on the basis that their opinions are improper and inadmissible under Fed. R. Evid. 702. (Doc. # 102.) Plaintiffs object to Defendant’s proffered expert, Jon F. Sands, on similar grounds. (Doc. # 101.)

Hansen Constr. Inc. v. Everest Nat’l Ins. Co., No. 16-cv-02902-CMA-GPG, 2019 WL 2602510, at *1 (D. Colo. June 25, 2019).

The Federal Judge agreed in this case and granted both motions to exclude the expert testimony on bad faith vs. good faith industry standards applicable to this case:

    Neither party raises arguments related to the qualifications of the experts at issue. Rather, both parties assert that the expert opinions should be limited or excluded because the opinions are not helpful due to the fact that they relate to subject matter committed exclusively to the jury or to the Court. The Court agrees.

Hansen Constr. Inc. v. Everest Nat’l Ins. Co., No. 16-cv-02902-CMA-GPG, 2019 WL 2602510, at *3 (D. Colo. June 25, 2019).

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FILED RATE DOCTRINE IS NOT A BAR TO JURISDICTION. IT IS A DEFENSE ...

even if a "filed insurance rate doctrine" were to be recognized.

Aetna started it. Aetna sued Insys. Aetna alleged that Insys defrauded Aetna into reimbursing Insys and its officers for off-label prescriptions of a certain drug.

MSI tried to join the party. Specifically, MSI tried to intervene in Aetna's lawsuit against Insys. Its motion for leave to intervene was ultimately denied, but the Court's treatment of the filed rate doctrine raised by Aetna is worth noting.

MSI alleged that it is Aetna's insured, and that it, MSI, purchased healthcare coverage for its employees from Aetna. MSI alleged against Insys that Insys's alleged misconduct caused MSI to pay increased premiums, higher deductibles, and pay greater co-pays charged by Aetna than otherwise would have been the case without Insys's alleged misconduct.

Aetna did not want MSI at Aetna's party. Aetna opposed MSI's intervention in part by raising the filed rate doctrine. Aetna contended that its rates "are filed with and approved by the Pennsylvania Insurance Department," so that the Court did not have jurisdiction to adjudicate MSI's claims which challenged Aetna's filed insurance rates, Aetna contended.

This Court would have none of that. The Federal Judge ruled that "this doctrine is a defense to claims rather than a jurisdictional bar." Aetna Inc. v. Insys Therapeutics, Inc., 330 F.R.D. 427 (E.D. Pa. 2019) (pinpoint page numbers not available from Westlaw at the time of publication).

Simple as that. No ruling whether Pennsylvania would recognize a filed insurance rate doctrine or not, and no need to rule on that question. Instead, the filed rate doctrine as the Court recognized in this case is a defense on the merits, not a defense to jurisdiction.

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"BAD FAITH BREACH OF INSURANCE CONTRACT": $1 MILLION PUNITIVE DAMAGES ...

... IN CALIFORNIA, NOT IN FLORIDA.

"As reduced by the trial court, the $ 1 million in punitive damages (approximately three times the amount of compensatory damages) is within the constitutionally permitted range in view of the degree of reprehensibility of GEICO’s conduct."  This holding is published in the Court's opinion immediately before the Court began to discuss the Background of the case.  Mazik v. GEICO General Ins. Co., 35 Cal. App. 5th 455, (Cal. 2d DCA, Division 2, 2019) (page numbers not available from Westlaw at the time of this writing).  When Mazik first appeared in publication unofficially in Westlaw, it was the subject of an earlier article here on May 21, 2019.

A jury originally assessed punitive damages on GEICO in the amount of $4 Million, but the trial judge reduced the punitive damages assessment to the amount of $1 Million affirmed by the appellate court.

In many ways, this case mirrors the Manor House decision of Florida's Fifth DCA that was profiled here in an earlier article on Tuesday of this week.  Both Mazik and Manor House were decided in May, but Mazik involved a cause of action for "bad faith breach of insurance contract" of an underinsured motorist policy, presumably meaning a breach of the implied covenant of good faith in California, while Manor House involved a cause of action for breach of a property insurance contract in Florida.

The differences can be determinative of the outcomes.  While punitive damages does not seem to have been an issue in Manor House unlike Mazik, it is unlikely that Florida courts would countenance an award of $1 Million in punitive damages for a breach of contract without a showing of bad faith which, it will be recalled, could not be made even if the plaintiffs in Manor House had attempted to allege a cause of action beyond breach of contract because Citizens Property Insurance, the defendant in Manor House, is statutorily immune from "bad faith" lawsuits in Florida.

There was clearly no such immunity against a cause of action for breach of the implied covenant of good faith in the Mazik case in California.

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Download IBF 06.20.19.

BREACHING CONTRACT BY IMPROPERLY DELAYING LOSS ADJUSTMENT: FLORIDA CONSEQUENTIAL DAMAGES.

In a case that “involves the snail-paced resolution of insurance claims for property damage caused by a hurricane in 2004,” a Florida appellate panel unanimously held that the policyholder could sue Citizens Property Insurance Corporation for consequential damages but not for bad faith. Manor House, LLC v. Citizens Prop. Ins. Corp., No. 5D17-2841, 2019 WL 2306107, at *1 (Fla. 5th DCA May 31, 2019) (Edwards, J., for a unanimous Court; opinion stated not final until released for publication in the permanent law reports).

In reaching this decision, the Florida appellate court acted with significance beyond its borders and even beyond Florida itself. Citizens is immune from “bad faith” in Florida. However, Citizens is not immune, this Court held, from consequential damages for breach of contract that require neither allegations nor proof of bad faith.

The policyholder owned apartment buildings that were damaged during Hurricane Frances in 2004. Citizens allegedly improperly adjusted the claim including unnecessary delay in processing it. The policyholder alleged that as a consequence of the property insurance carrier’s delay (i.e., by Citizens), the policyholder lost rental income that it would have received had its property insurance claim been adjusted properly and without unnecessary delays.

The trial judge held that Citizens is not liable for such consequential damages and entered partial summary judgment in favor of Citizens on that claim.

On appeal, the Fifth District panel reversed this holding. The appellate panel established the law of Florida beyond bad faith extracontractual damages. The panel unanimously held that when an insurance carrier breaches the insurance contract it must face exposure to extracontractual damages in this sense: The contract breach allegedly caused the consequential damages. No inquiry into bad faith or good faith is necessary in such a case.

As the appellate panel held in a well-reasoned opinion by Judge Edwards in this case:

    In granting summary judgment, the trial court denied Manor House the opportunity to prove whether the parties contemplated that Manor House, an apartment complex, would suffer consequential damages in the form of lost rental income if Citizens breached its contractual duties to timely adjust and pay covered damages, which in this case allegedly resulted in a significant delay in completing repairs so that units could once again be rented. We hold that the trial court erred in so ruling, and we reverse that partial summary judgment so that the parties may litigate all issues related to Manor House's claim of lost rent. It is undisputed that Citizens, a creature of statute, is immune from bad faith claims. See § 627.351(6)(s) 1, Fla. Stat. (2017). However, the consequential damages Manor House seeks are based squarely on breach of contract claims requiring no allegation or proof that Citizens acted in bad faith.

Manor House, LLC v. Citizens Prop. Ins. Corp., No. 5D17-2841, 2019 WL 2306107, at *2 (Fla. 5th DCA May 31, 2019).

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Download IBF 06.18.19.

SPEAK, MR. BARR, SPEAK.

A guest article by John K. DiMugno, Esquire, a California attorney, legal educator, and the author or coauthor of multiple legal treatises and legal periodicals published by Thomson Reuters.

William P. Barr, Attorney General of the United States, recently spoke at the American Law Institute’s Annual Meeting in Washington, D.C. The ALI likely extended the invitation shortly after Mr. Barr’s confirmation when there was hope that he would play a role similar to that of the departed General Mattis and General McMaster and place guardrails on the President’s more authoritarian instincts. By the time of the Annual Meeting, those hopes had evaporated. Mr. Barr’s dissembling about the contents of the Mueller Report raised serious concerns about the Attorney General’s complicity in administration efforts to undermine the rule of law.

This Blog highlighted the incongruity between Mr. Barr’s conduct in office and the core mission of the ALI. Notably, Mr. Wall’s post made no attempt to silence Mr. Barr, a solution that would have satisfied the wishes of many in the ALI who were rightfully appalled by Mr. Barr’s transparent attempt to mislead the American public. But barring Mr. Barr from speaking would have entangled the ALI in partisan politics, something the organization scrupulously avoids for good reason. Staying above the political fray insulates the ALI’s Restatements of the Law against charges of political bias and broadens their influence on courts and legislatures around the country.

Mr. Wall’s proposed solution—letting Mr. Barr speak while contributing the ALI’s earnings from the speech to legal aid societies around the country—perfectly balanced those competing concerns. It had the salutary effect of simultaneously benefitting public interest groups that desperately need the money while drawing attention to questions about Mr. Barr’s integrity.

Mr. Barr’s penchant for making transparently misleading and often contradictory statements has left some wondering what he hopes to achieve other than aggrandize power and influence in the Trump administration. Sharon LaFraniere, Charlie Savage and Katie Benner, People Are Trying to Figure Out William Barr. He’s Busy Stockpiling Power, New York Times on line, June 9, 2019. 

He misled the American public about the contents of the Mueller Report knowing full well that when the report was released several weeks later his lies would be evident to everyone.

When Mr. Barr sought confirmation as Attorney General, he told the U.S. Senate that he had known Robert Mueller for years and did not believe that Mr. Mueller would engage in a “witch hunt.”  Yet, shortly before his confirmation hearings, he sent a memo to the Justice Department characterizing the obstruction of justice charges against the President as “asinine” and sent an e-mail stating he saw far less reason to scrutinize the Trump campaign’s ties to Russia than to investigate whether donations to Hillary Clinton’s family foundation had influenced her actions as secretary of state. Once he was confirmed, he enabled the President’s attempts to distract from the contents of the Mueller Report by opening an investigation of those who investigated him.

When Mr. Barr was seeking confirmation, he told the U.S. Senate Judiciary Committee that he was willing to reconsider the Justice Department’s decision not to defend the Affordable Care Act (ACA).  But, when he became Attorney General, he put the resources of the Justice Department behind litigation in Texas federal district court seeking to invalidate the entire Affordable Care Act.

As the song goes, “There’s something happening here. What it is ain’t exactly clear.” Buffalo Springfield, For What It’s Worth.  I say let Mr. Barr speak. Listen closely to what he says and watch what he does. Only then will whatever is happening start to become clear.

Download John DiMugno 06 13 19 Blog Article for IBF (2)

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UBER RUN OVER BY ITS OWN STIPULATED PROTECTIVE ORDER.

The City Attorney of San Francisco started an investigation which concerned Uber.  The City Attorney issued administrative subpoenas as the City Attorney was authorized by California law to do.

The administrative subpoenas required Uber to provide reports and data that Uber had previously submitted to the California Public Utility Commission.

Uber's response to the subpoenas was less than "substantial compliance," which triggered a lawsuit by the City Attorney.  The City Attorney requested a court to enforce the administrative subpoenas.

Early in the lawsuit, Uber and the City Attorney entered into a Stipulated Protective Order.  In it, Uber stipulated that its confidentiality interests were fully protected by the Order.

Nonetheless they resisted.

The appellate court affirmed.  "It is Uber's burden to demonstrate that the protective order is inadequate to protect its privacy interests, a burden that Uber fails to meet."  City and County of San Francisco v. Uber Technologies, Inc., No. A153205, 2019 WL 2436750, *10 (Cal. 1st DCA May 17, 2019).

They were for it until they were against it.  The Stipulated Protective Order was great until it wasn't.  That doesn't work in court very often.  It did not work here, that's certain.

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PARTIES STIPULATE "ATTORNEYS' EYES ONLY," MAGISTRATE JUDGE FINALLY SAYS "NO."

In Hyundai Mtr. Am., Inc. v. Midwest Indus. Supply Co., No. 2:17-cv-03010-JCM-GWF, 2019 WL 2411420 (D. Nev. June 6, 2019) (Foley , USMJ), both the defendants and the plaintiffs filed motions to seal testimony and evidence.

Both sides said that they had stipulated to this secrecy.  Both sides said that they had "good cause" to seal this evidence.

In their requests to seal testimony and other evidence, the defendants said:

Defendants represent that such filings contain confidential and proprietary information designated as confidential or for “attorney's eyes only” pursuant to the parties' stipulated protective order. Further, Defendants represent that [one of the witnesses' testimony] contains confidential settlement discussions.

Hyundai Motor America, 2019 WL 2411420 at *1.

Likewise, along with their own requests to seal testimony and other evidence, the plaintiffs said:

Plaintiffs represent that the above documents contain confidential, sensitive and non-public information and is designated as confidential under the parties' stipulated protective order.

Hyundai Motor America, 2019 WL 2411420 at *1.

The Magistrate Judge ruled that the parties had shown good cause to seal neither the testimony nor the documentary evidence that they wanted to keep from public view.  The testimony and the documents had been filed in support of dispositive motions, motions more than "tangentially related" to the issues in the case.  The presumption of public access to court files trumped the parties' stipulation in this case.

So far.  The Magistrate Judge gave the parties in this case until Monday, June 17 to file more motions to seal.

Stay tuned.  Until then, the presumption of public access to evidence that judges rely on in their rulings -- at the request of the same parties that want to keep the evidence secret even though they ask the judge to rule on it -- is prevailing.

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WILL THE SECRECY EVER STOP? WILL PUBLIC ACCESS COURT FILES?

This article continues from the end of the article published here on Wednesday, June 5, 2019.

 

2. Under Secrecy agreements and Secrecy orders like the ones in the People of California v. Wells Fargo case, what was marked "confidential" purportedly stays "confidential" even if it is put in front of the judge.  California Rules of Court 2.550 and 2.551 were written to cover the case of what evidence can be sealed and how someone can go about asking a judge to seal that evidence.  However, neither of these Rules applies to the evidence exchanged between the parties as a lawsuit goes forward, which again is called discovery.

Under the Rules of discovery that are meant to apply to all cases, everybody drops the argument that they have a "right" to conceal evidence once they argue that previously concealed evidence is a part of their case.  This includes when they give the judge the evidence they previously marked "confidential" in an effort to get a favorable ruling from the judge on one of their motions. 

Secrecy agreements and their secrecy orders like the ones in the People of California v. Wells Fargo case make the exchange of evidence during litigation more of a joint exercise in concealment than a concerted effort at discovering the truth, or at least discovering evidence.   Using these agreements and orders, people can show concealed evidence to a judge, but not to the public, just by putting  the evidence into an envelope marked "CONFIDENTIAL--FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER AND WITHOUT ANY FURTHER SEALING ORDER REQUIRED."^[1]  This simply could not be done without the secrecy agreements and their orders rewriting the Rules.

3. Keeping control over the evidence marked "confidential." The secrecy stipulations in this case, and the January 2016 agreement in particular, were also written to keep control of the "confidential" evidence after the case was over.  The January stipulation provides that it shall always be "binding" unless the party that designated the evidence as confidential, or a judge, says otherwise.^[2]

It apparently was not enough to make the January stipulation in this case endless, however, even after it became a judge's order in February 2016.  The agreement and its order also add a provision typically found in secrecy stipulations-turned-into-secrecy-orders in many other cases, to the effect that once the case ends, "confidential" evidence must either be returned to the party that designated it "confidential," or it must be destroyed.^[3]  In short, the people that possess the evidence marked confidential are required to give it up at the end of that case.  They cannot make the evidence public.  The evidence can only be used for that one case.  When that one case ends, then the way that the thinking goes behind the secrecy here, there is no longer any reason to hold onto the evidence.  The public has no interest in it, according to the lawyers who write these agreements, it seems, and the public seemingly has no dog in this fight either, according to the judges who enable this behavior by validating these secrecy agreements.

This is the end of a three-part series of articles on representative secrecy stipulations that the parties agreed to in one case, the case of People of California v. Wells Fargo.  This is not the end of secrecy stipulations, of course.

Not by a long shot.

Not yet.

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[1] Id., ¶ 18, at p. 8.

 

[2] Id., ¶ 21, at p. 8.

 

[3] Id., ¶ 22, at p. 9.

 

MORE SECRECY, MORE THROWING SHADE ON YOUR FINANCES?

This article continues from the end of the article published here on Tuesday, June 4, 2019.

The stipulation adopted by a judge's order in February 2016 in People v. Wells Fargo lines up behind many other secrecy stipulations and orders used in many other jurisdictions.  It restricts the use of any evidence marked "confidential," to the lawsuit in which the stipulation is filed.  It provides that such evidence may not be used for any other purpose "whatsoever."^[1]   This was pretty obviously intended to be taken literally.  It would mean that the only people who can use evidence marked "confidential" in the People of California v. Wells Fargo case in California are the people involved in that case.  No-one else can ever use it, or even see it. Even the people involved in the case named People of California v. Wells Fargo cannot use such "confidential" evidence anywhere else.

So, perhaps it would be wrong to assume without evidence that the L.A. City Attorney's Office shared Wells Fargo's forbidden special interrogatory answers with the federal agencies that subsequently filed actions over the same charges against Wells Fargo.  There is absolutely no evidence for that matter that the Los Angeles City Attorney's Office ever shared any information with anyone else that was stipulated to secrecy in that case.  This is a much more certain way of keeping a secret than asking a judge to apply the law.

The City Attorney's Office and Wells Fargo also agreed and the judge ordered in that case that if a party considered "competitively sensitive" information to require a "confidential" marking did not mean that anyone else agreed that it was competitively sensitive just because it was marked confidential.^[2]   In other words, the parties agreed in that case that "competitively sensitive" information could be withheld from public view.

The only party that could possibly care if something was "competitively sensitive" is of course a business which faces competition.  In this case, the only party fitting that description is the bank which was accused of abuses in "cross-selling" financial products to the bank's existing customers.  By grafting the concept of keeping any "competitively sensitive" secret to the overall idea of court protection, the parties rewrote the Rules to benefit themselves.

Perhaps more accurately, one of them did and the other agreed to it.  The Rules say nothing about keeping evidence from the public because the evidence might be "competitively sensitive," of course.  The rewritten rule of secrecy agreements like the January 2016 Stipulation would make it possible for a bank, for example, to withhold evidence that might tend to support charges that it is opening accounts in customers' names without the customers' permission or even knowledge.  If that kind of evidence got out into the public, it could be misconstrued.  Whether misconstrued or true, such evidence would understandably be "competitively sensitive." 

What evidence Wells Fargo may have had in the People of California v. Wells Fargo lawsuit is something we may never know.  Wells was granted the "right" in this case by this stipulated secrecy order to conceal whatever it knew.

When the judge signed this stipulation into an order, Wells Fargo's "right" became a ruling and not just an agreement.

To be continued ....  Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

 

[1] Id., ¶ 9, at p. 6.

 

[2] Id., ¶ 11.a, at p. 6.

 

SECRECY STIPULATIONS CLOSED ACCESS FOR CLAIMS OF CROSS-SELLING PRACTICES.

Proposed secrecy orders in 2015-2016 California lawsuit filed by the L.A. City Attorney. Many of the changes made by the secrecy agreements in this California lawsuit were made earlier in previous lawsuits, as noted.  Other Rules changes in the agreements signed in this case have not often appeared in other cases, however.

There are three main ways in which their January 2016 secrecy agreement validated by the judge in February in this case changes the Rules that were written to apply to all cases. 

1. The secrecy agreements and proposed orders defined "confidential" to mean what the lawyers say it means.  One of the familiar features of secrecy agreements in private litigation is that the definition of exactly what is "confidential" is always what the lawyers say it is.  Like the stipulated agreements in most cases, the agreements in the case of People of California v. Wells Fargo do not give much of a definition.

What guidance the agreements do give on what is going to be "confidential" in the present case is certainly not based on judges' decisions in past cases.  The agreements and proposed orders generally say that "confidential" means simply whatever the lawyers choose to mark with the word, "confidential."  This includes documents and testimony in all such cases.

In the case of People of California v. Wells Fargo, a judge signed a proposed order which made this proposed agreement into the judge's ruling.  The February 2016 order validating the January secrecy agreement in this case was likely written by the bank.  The judge did not rewrite it.  To the contrary, she took the proposed order, crossed out the word, "proposed," and signed it.  At that point, the stipulation that lawyers wrote became the judge's ruling. 

 The February 2016 order continues down the foggy road of secrecy by adding that "confidential" means any documents or testimony that a party (including its lawyers) "believes in good faith ... is entitled to confidential treatment under applicable law."^[1] 

This includes giving the bank and the L.A. City Attorney in that case "the right to designate as 'Confidential'" any "non-public information," including documents and testimony.^[2]

There is no such thing in the Rules as "non-public information."  The Rules do not even use that term.  Making "non-public information" mean the same thing as protected "confidential" evidence makes it clear that the parties in this case were rewriting the Rules for their own use and, intentionally or not, preventing the public from seeing the evidence if they could.

The people writing the secrecy stipulations in these cases removed any requirement that concealment depends on "good cause shown."  Participants in civil lawsuits in most courts in the United States, including in California, ^[3] can ask a judge to protect them from such things as annoyance, embarrassment, oppression, or undue burden or expense.  However, they cannot ask a judge to protect them under any of the Rules from "non-public information" that may find its way into documents and testimony just because the "information" is "not public," as the participants in the People v. Wells Fargo lawsuit wrote here.

Rather, as we have already seen, the Rules generally governing civil litigation require a party withholding documents during discovery to show "good cause" not to disclose them.  Judges ordinarily rule that the party withholding evidence during litigation has to show that the evidence is privileged or protected from disclosure in some legally recognized way.  Trade secrets "or other confidential research, development, or commercial information"^[4] are examples.  "Non-public information" is not.

Under a Secrecy Stipulation like the one in this case, a person withholding evidence can apparently succeed just by showing that its "designations" were done in the right way in the first place.  If it made the designation the right way, then according to the February 2016 order, the designating person gets to continue to conceal the designated "confidential" evidence.  The only burden is "to uphold any or all designations on Documents, Testimony, or Information."^[5]  People can conceal evidence using a secrecy order like this one by writing the word, "confidential," on anything so long as they say that they "believe[] in good faith that such information is entitled to confidential treatment under applicable law."^[6]

It is certainly easier to prove that a piece of evidence was marked "confidential" in good faith than to prove a privilege against disclosure of that evidence as the Rules require.

It is also a lot easier to prove a good faith belief when you are the only party that possesses evidence of that "good faith belief."

To be continued .....  Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

 

[1] Stipulation and Protective Order ¶ 1.c., at page 1, entered and filed on February 2, 2016 in People v. Wells Fargo & Co., Case No. BC 580778 (Los Angeles County Superior Court).

 

[2] Stipulation and Protective Order ¶ 2, at page 2, entered and filed on February 2, 2016 in People v. Wells Fargo & Co., Case No. BC 580778 (Los Angeles County Superior Court).

 

[3] The California Code of Civil Procedure regulates civil litigation in California courts.  California Code of Civil Procedure § 2031.060(b) provides as follows in this regard:

(b) The court, for good cause shown, may make any order that justice requires to protect any party or other person from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense.

[Boldface added.]

 

 

[4] Federal Rule of Civil Procedure 26(c)(1)(G). 

 

[5] January 2016 Secrecy Stipulation, ¶ 6, at p. 4. 

 

[6] Id., ¶ 1.c, at p. 1.

 

 

NO BAD FAITH DAMAGES FOR INADEQUATE DEFENSE CLAIM.

That is because Count III failed to state a claim for inadequate defense upon which relief could be granted.  It does not mean that the substantive law of the forum State does not award damages for an inadequate defense; it does.

However, in the federal case of Mosley ex rel. Cellini v. Progressive Am. Ins. Co., No. 14-cv-62850-BB, 2018 WL 4208201 (S.D. Ill. April 8, 2018), U.S. District Judge Beth Bloom granted the liability carrier's motion to dismiss the inadequate defense claim which was alleged in Count III of Plaintiff's Amended Complaint against the carrier.  Count III failed to state a claim of inadequate defense for two reasons.  The Court's reasons for dismissing the inadequate defense claim in that case are instructive.

First, the claim contained a failure to settle allegation so that a claim for contract breach because of an inadequate defense, could not be determined objectively from the contract itself.  It would require a determination of "bad faith" or "good faith," which is a fact determination reserved exclusively to failure-to-settle claims.  The question of good or bad faith, in the eyes of the Court, has nothing to do with a claim of an inadequate defense.  Mosley, 2018 WL at *3.

Second, the Plaintiff did not present any "evidence" that defense counsel was "not competent or qualified[.]"  Mosley, 2018 WL at *4.  In the absence of such allegations, and since liability carriers are not vicariously liable for provided counsel's negligence in the forum State, there could be no claim for inadequate defense in this case as a matter of law.  (The Court must have meant that the Plaintiff did not present any allegations, since the Court was ruling on a motion to dismiss for which evidence should not be an issue.)

Allegations of inadequate defense are clearly almost inextricable from allegations of a failure to settle.  The rulings in this case make that all the more clear.

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CREATIVE USES OF A STIPULATED PROTECTIVE ORDER (SPO).

The parties to a patent infringement case found a creative use for SPO's.  First, they settled the case.  Next they agreed to a protective order that restrained them from talking about the settlement other than what the SPO provided they could talk about.

Well, as sometimes will happen, at least one defendant issued press releases after the settlement and after the trial judge, from the Northern District of California, entered the stipulated protective order which did not allow for the press releases, in basic and simple terms.

So, the trial judge found the defendant in contempt of the SPO which the judge had signed, making it his own.  He awarded the plaintiff's counsel "'the full amount of [the plaintiff's] reasonable attorneys' fees and costs incurred in connection with those contempt proceedings and with their efforts to secure defendants' compliance with the [stipulated protective order]'[.]"  Codexis, Inc. v. Enzymeworks, Inc., No. 2018-1655, 2019 WL 495165, at *2 (Fed. Cir. Feb. 8, 2019).   He also ordered that defendant to retract the press releases and to issue a new statement which he, the trial judge, wrote for them.

The Federal Circuit Court of Appeals affirmed the rulings of the California District Judge in this case.

The moral of the story:  Well there are two morals to this story, really.  First, be creative when thinking about stipulated secrecy.  Second, settle then get a stipulated secrecy order prohibiting anyone from saying anything about the settlement other than what the SPO allows them to say if anything.

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