Bingham v. Supervalu, Inc.
Filing
OPINION issued by Sandra L. Lynch, Appellate Judge; Norman H. Stahl, Appellate Judge and William J. Kayatta , Jr., Appellate Judge. Published. [15-1437]
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Date Filed: 11/13/2015
Entry ID: 5953547
United States Court of Appeals
For the First Circuit
No. 15-1437
WARREN BINGHAM, as Executor of the Estate of Marion Bingham,
Plaintiff, Appellant,
v.
SUPERVALU, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Indira Talwani, U.S. District Judge]
Before
Lynch, Stahl, and Kayatta,
Circuit Judges.
Joshua N. Garick, with whom Law Offices of Joshua N. Garick,
P.C., was on brief, for appellant.
Wesley S. Chused, with whom Preti Flaherty Beliveau & Pachios
LLP, was on brief, for appellee.
November 13, 2015
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STAHL, Circuit Judge.
Date Filed: 11/13/2015
Entry ID: 5953547
Massachusetts law prohibits those
"in the business of insurance" from employing "unfair methods of
competition and unfair or deceptive acts or practices," which
include
"[f]ailing
to
effectuate
prompt,
fair
and
equitable
settlements of claims in which liability has become reasonably
clear."
Mass. Gen. Laws ch. 176D, § 3(9)(f) ("Chapter 176D").
This appeal requires us to consider what it means to be "in the
business of insurance."
The
Appellant,
Warren
Bingham,
proceeding
in
his
capacity as the executor of the estate of Marion Bingham (the
"Estate"), brought suit alleging that the Appellee, Supervalu,
Inc., acted as an insurer of one of its subsidiaries, and violated
Chapter
176D
effectuate
by
the
failing
to
settlement
promptly,
of
prior
fairly,
litigation
and
equitably
between
the
subsidiary and the Estate. The district court found that Supervalu
was not in the business of insurance and, on this basis, entered
summary
judgment
in
Supervalu's
favor.
The
Estate
appeals.
Finding no error, we AFFIRM.
I. Facts and Background
A.
The Prior Litigation
In January 2006, Marion Bingham was shopping at a Shaw's
Supermarket in East Boston, Massachusetts when she was struck by
a motorized cart.
Ms. Bingham suffered a laceration to her right
heel in the area of her Achilles' tendon.
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At the time, Ms. Bingham
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was
in
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her
early-eighties,
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and
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the
incident
precipitated a rapid decline in her health.
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seems
to
have
Ms. Bingham passed
away approximately eight months later in September 2006.
Before she died, Ms. Bingham brought a negligence action
against Shaw's in Massachusetts state court.
Later, after her
death, Ms. Bingham's nephew, Warren Bingham, was appointed as the
executor of the Estate, and was substituted as the plaintiff in
the suit against Shaw's.
At the time of the January 2006 incident, Shaw's was a
subsidiary
of
Albertson's,
Inc.
On
Albertson's was acquired by Supervalu.
June
2,
2006,
however,
Thus, when Ms. Bingham
filed her lawsuit against Shaw's at the end of June 2006, Shaw's
was a subsidiary of Supervalu and, pursuant to the manner in which
Supervalu structured its relationship with its direct and indirect
corporate subsidiaries, Supervalu had the authority to negotiate
and settle claims on behalf of Shaw's.
Including Shaw's, Supervalu owned some 228 distinct
subsidiaries.
Supervalu maintained a centralized risk management
system whereby it negotiated and resolved claims made against its
subsidiaries
that
were
not
otherwise
1
covered
by
insurance.1
At all relevant times, Shaw's was covered by general
liability insurance policies taken out by Albertson's (and
transferred to Supervalu in the acquisition), but the policies
were subject to a self-insured retention of $2,000,000. This meant
that Shaw's was effectively self-insured for all claims below
$2,000,000.
See Self-Insured Retention, Black's Law Dictionary
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Supervalu employed claims adjusters to perform these functions,
and once a self-insured claim was settled, Supervalu would issue
payment from a central account on behalf of the subsidiary against
which the claim was made.
Supervalu did not issue insurance
policies to its subsidiaries.
However, in order to minimize its
total costs and exposure, Supervalu opted to centralize the selfinsured claims administration process.
In July 2008, in the liability action, a judge of the
Massachusetts
Superior
Court
entered
judgment
against
Shaw's
pursuant to Massachusetts Rule of Civil Procedure 33(a), which
permits the entry of judgment against a party failing to timely
respond
to
interrogatories.
See
Mass.
R.
Civ.
P.
33(a).
Approximately a year later, in June 2009, the Superior Court
awarded damages to the Estate in the amount of $300,000, plus postjudgment interest.
Rather than pay the judgment, Supervalu filed an appeal
to the Appeals Court of Massachusetts, which summarily affirmed
the
Superior
Supermarkets,
(unpublished).
Court's
Inc.,
damages
936
Then,
award.
N.E.2d
Supervalu
452
See
Bingham
(Mass.
threatened
App.
to
v.
Shaw's
Ct.
2010)
seek
further
appellate review in the Massachusetts Supreme Judicial Court (the
(10th ed. 2014) (defining a self-insured retention as "[t]he amount
of an otherwise-covered loss that is not covered by an insurance
policy and that usu[ally] must be paid before the insurer will pay
benefits").
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"SJC").
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Rather than risk prolonging the litigation, the Estate
accepted a $475,000 settlement offer, which represented a figure
slightly below the sum of the original award, plus the postjudgment interest that had accrued to that date.
The Estate contends that Supervalu's decisions to appeal
to the Appeals Court of Massachusetts, and then to threaten a
further appeal to the SJC, were undertaken contrary to the advice
of counsel that, in each instance, an appeal was unlikely to
succeed.
The Estate argues that Supervalu's sole motive was to
protract the litigation in the hopes of achieving a reduced
settlement.
Ultimately, Supervalu made payment to the Estate on
December 8, 2010.
B.
The Proceedings Below
All was quiet until April 2013, when the attorney who
had
represented
the
Estate
in
the
underlying
state
court
proceedings sent a demand letter to Shaw's and Supervalu asserting
that Supervalu had acted as Shaw's insurer and had violated Chapter
176D and Mass. Gen. Laws ch. 93A ("Chapter 93A") by failing to
promptly and fairly resolve the Estate's claim against Shaw's.2
The letter demanded payment of just over $1,000,000.
Supervalu
declined to pay.
2
Chapter 93A provides an express cause of action for persons
aggrieved by a violation of Chapter 176D. See Mass. Gen. Laws ch.
93A, § 9(1).
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The
Estate
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brought
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suit
against
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Supervalu
in
Massachusetts Superior Court, asserting claims for violation of
Chapter 176D and Chapter 93A based on Supervalu's "willful" and
"frivolous" delay in resolving the underlying litigation between
Shaw's and the Estate.
Supervalu removed the action to federal
court and moved for summary judgment, arguing solely that it was
not in the business of insurance, and therefore was not subject to
regulation under Chapter 176D.
Pursuant to a report and recommendation issued by a
magistrate judge, the district court concluded that Supervalu was
not in the business of insurance.
Relying heavily on the SJC's
holding in Morrison v. Toys "R" Us, Inc., Mass., 806 N.E.2d 388
(Mass. 2004), the district court reasoned that Supervalu did not
act as an insurer because it did not sell insurance policies for
profit and was not contractually obligated to settle claims made
against Shaw's or its other subsidiaries.
Rather, the district
court found that Supervalu operated a centralized risk management
system to negotiate and settle claims made against any of its
subsidiaries that were below the limits of its applicable insurance
coverage.
Thus, for these claims, as a "self-insurer," Supervalu
was not "in the business of insurance" as that term is contemplated
in Chapter 176D and in Morrison.
On this rationale, the district
court entered summary judgment in Supervalu's favor, prompting the
instant appeal.
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II. Standard of Review
We review orders for summary judgment de novo, assessing
the record in the light most favorable to the nonmovant and
resolving all reasonable inferences in that party's favor. Packgen
v. BP Expl. & Prod., Inc., 754 F.3d 61, 66 (1st Cir. 2014).
The
entry of summary judgment is appropriate when "there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law."
Id. (quoting Fed. R. Civ. P. 56(a)).
III. Discussion
Although a litigant is typically free to mount a vigorous
defense, and is under no obligation to make a settlement offer or
to otherwise promptly resolve a dispute, see Mass. Const. art. XV,
Chapter 176D imposes a statutory obligation on those "in the
business of insurance" to "prompt[ly], fair[ly] and equitabl[y]"
settle claims in which liability has become reasonably clear.
Mass. Gen. Laws ch. 176D, § 3(9)(f).
Chapter 176D was "enacted to
encourage settlement of insurance claims . . . and [to] discourage
insurers from forcing claimants into unnecessary litigation to
obtain relief."
Hopkins v. Liberty Mut. Ins. Co., 750 N.E.2d 943,
952 (Mass. 2001) (quoting Clegg v. Butler, 676 N.E.2d 1134, 1139
(Mass. 1997)).
"One obvious legislative concern was that entities
that profit from selling insurance policies not abuse exclusive
rights and duties to control litigation vested through those same
policies."
Morrison, 806 N.E.2d at 390.
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The sole issue we must consider is whether Supervalu was
in the business of insurance.
The Estate proffers a series of
arguments suggesting that it was.3
First, the Estate contends that
the district court erred in concluding, pursuant to the SJC's
decision in Morrison, that Supervalu was a "self-insurer" exempt
from regulation under Chapter 176D.
Second, the Estate argues
that Supervalu functions in a manner similar to both a "captive
insurer" and a "third-party administrator," and thus should be
deemed to be in the business of insurance.
Third and finally, the
Estate suggests that because one of Supervalu's many subsidiaries,
Risk Planners, Inc. ("Risk Planners"), was an insurance agency,
that Supervalu, as its parent company, was by definition engaged
in the business of insurance.
We consider each of these arguments
in turn.
A.
The Morrison Exemption for Self-Insureds
In Morrison, the SJC considered the contours of Chapter
93A and Chapter 176D in the context of a suit brought by a Toys
"R" Us ("Toys") patron who was injured while shopping at a Toys
store.
806 N.E.2d at 388-89.
After the Superior Court entered
3
In her report and recommendation, the magistrate judge
concluded that the Estate bore the burden of proof under Chapter
176D to demonstrate that Supervalu was engaged in the business of
insurance. See Bingham v. Supervalu Inc., No. 13-11690-IT, 2015
U.S. Dist. LEXIS 42925, at *14 (D. Mass. Feb. 20, 2015). Because
the Estate appears to concede the point, we assume -- without
deciding -- that the magistrate judge's conclusion was correct.
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summary judgment for Toys on grounds that it was not in the
business
reversed.
of
insurance,
the
Appeals
Court
of
Massachusetts
See Morrison v. Toys "R" Us, Inc., Mass., 797 N.E.2d
405 (Mass. App. Ct. 2003).
On further appellate review, the SJC
reinstated the judgment of the Superior Court, finding that Toys
was indeed not in the business of insurance.
Morrison, 806 N.E.2d
at 388.
We rehearse the factual background as described by the
SJC, augmenting where necessary with the Appeals Court's somewhat
more robust account.4
After she had been injured by a falling sign
at a Toys location in Massachusetts, the plaintiff brought suit
against
Toys
"R"
Us,
Inc.,
Massachusetts,
subsidiary of Toys, seeking damages of $250,000.
N.E.2d at 406-07.
a
wholly-owned
Morrison I, 797
Toys had a policy whereby it handled claims of
less than $1,000,000 made against itself or its subsidiaries
through a central risk management department. Morrison, 806 N.E.2d
at 389.
Toys, through the risk management department, made the
plaintiff a series of exceedingly low offers, all of which she
rejected.
Id.
At trial, the jury returned a $1,200,000 verdict
for the plaintiff based on her "significant" injuries.5
Morrison
I, 797 N.E.2d at 406-07.
4
We cite to the Appeals Court's decision as "Morrison I."
5
This figure was later reduced by remittitur.
797 N.E.2d at 407.
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Morrison I,
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The plaintiff then brought a separate suit alleging that
Toys had violated Section 176D by failing to promptly, fairly, and
equitably resolve her claim against the Toys subsidiary. Morrison,
806 N.E.2d at 389.
In affirming the Superior Court's entry of
summary judgment for Toys on grounds that it was not in the
business of insurance, the SJC found that Toys was "self-insured,"
meaning that it "assum[ed] [its] own risk, instead of transferring
it to a third-party insurer by means of purchasing insurance
coverage."
Id. at 390 n.1.
Focusing on the fact that Toys
administered, negotiated, and settled claims made only against
itself, "or one of its subsidiaries," the SJC reasoned that Chapter
176D "cannot legitimately be extended to a self-insurer . . . which
had no contractual obligation to settle the plaintiff's claim and
is not otherwise regulated by the Commonwealth for insurance
activities."
Id. at 389, 391.
We find the Estate's attempts to distinguish Morrison
unpersuasive because these attempts overlook critical factual
parallels between the two cases.
In Morrison, as here, the
plaintiff brought suit against a subsidiary retailer responsible
for injuries occurring on the retailer's premises.
In both cases,
the subsidiary's parent company undertook to resolve the claim
directly with the claimant, rather than rely on insurance provided
by a third party.
Toys, as a matter of practice, attempted to
negotiate and resolve claims for less than $1,000,000 made against
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itself and its subsidiaries.
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Supervalu had a similar practice
whereby it negotiated and resolved uninsured claims made against
its subsidiaries through a centralized risk management system.
Then, in both cases, the plaintiff brought a subsequent suit
alleging that the parent company was in the business of insurance.
The SJC has recognized that the hallmarks of companies
engaged in the business of insurance include making "profit driven
business
decisions
about
premiums,
commissions,
marketing,
reserves and settlement policies and practices," assuming the risk
of losses suffered by third parties, Poznik v. Mass. Med. Prof'l
Ins. Ass'n, 628 N.E.2d 1, 3 (Mass. 1994), and settling claims
pursuant to a contractual obligation to do so, Morrison, 806 N.E.2d
at 391.
As in Morrison, none of those factors are present here.
Supervalu did not sell insurance policies to its subsidiaries; it
handled claims only for itself and its subsidiaries and therefore
did not assume risk on behalf of unaffiliated third parties; and,
Supervalu was not under a contractual obligation to settle claims
with the Estate or with any other claimant.
True, as the Estate notes, Supervalu spread risk among
its subsidiaries and paid claims out of a central account, much
like a typical insurer.
Supervalu
qualifies
But this merely underscores the fact that
as
self-insured
because,
like
the
parent
company in Morrison, Supervalu opted to bear the full risk of loss
stemming
from
uninsured
claims
made
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against
itself
and
its
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subsidiaries.
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See id. at 390 n.1 ("The term 'self-insured' is a
manner of referring to a decision not to be insured by a third
party when one has the financial means . . . to satisfy claims or
judgments imposing liability for wrongful conduct.").
For all of
these reasons, we concur with the district court that Morrison is
controlling and that Supervalu is properly characterized as a selfinsurer exempt from regulation under Chapter 176D.
B.
Captive Insurers and Third-Party Administrators
The Estate next contends that Supervalu should fall
within Chapter 176D's purview by virtue of functioning in a manner
similar to a captive insurer and a third-party administrator.
We
conclude that neither shoe fits.
Captive
insurers
are
"insurance
companies
owned
by
another organization whose exclusive purpose is to insure risks of
the parent organization and affiliated companies[.]"
Lemos v.
Electrolux N. Am., Inc., 937 N.E.2d 984, 989 (Mass. App. Ct. 2010)
(quoting Mass. Gen. Laws ch. 175, § 174G). The Estate's suggestion
that Supervalu is properly viewed as a captive insurer cannot
survive a basic reading of this statutorily-prescribed definition.
As
an
initial
matter,
Supervalu
was
not
owned
by
another
organization; it was the parent company to Shaw's and its other
subsidiaries, and there is no record support for the conclusion
that Supervalu's purpose (let alone its exclusive purpose) was to
insure its affiliates. Furthermore, for reasons we have described,
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Supervalu did not operate as an insurance company in that it did
not issue insurance policies for profit and was not contractually
obligated to settle claims.
Cf. Lemos, 937 N.E.2d at 987-90
(finding that a captive insurer could not "evade its statutory
duties imposed by [Chapter 176D]" where the captive insurer had,
inter alia, issued insurance policies to its parent company in
exchange for a premium and had the exclusive right to resolve
claims on the parent company's behalf).
Simply put, no reasonable
reading of Lemos or Mass. Gen. Laws ch. 175 would support the
conclusion that Supervalu should be regulated as a captive insurer.
The Estate next contends that Supervalu is in the
business of insurance by virtue of functioning like a third-party
administrator by resolving claims on behalf of its subsidiaries.
In advancing this argument, Supervalu principally relies on Miller
v. Risk Mgmt. Found. of Harvard Med. Insts., Inc., 632 N.E.2d 841
(Mass. App. Ct. 1994).
There, the plaintiff brought a medical
malpractice claim against a Harvard-affiliated hospital.
842-43.
Id. at
The hospital was insured by a Harvard-owned insurance
company, and malpractice claims against the hospital were assessed
and negotiated through a separate Harvard-owned risk management
provider.
93A
and
Id. at 844.
Chapter
management
In a separate suit brought under Chapter
176D,
provider
had
the
plaintiff
unlawfully
settlement, despite obvious liability.
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alleged
stymied
Id.
that
his
the
attempts
risk
at
In concluding that
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the risk management provider was liable under Chapter 93A, the
Appeals Court of Massachusetts found that, "as claims negotiator
and potential settler, [the risk management provider] has been
interposed between the insurer [] and the claimant, and nothing
seems more appropriate than to apply to it the standards of fair
dealing expressed in [Chapter 176D]."
The
scrutiny.
Estate's
reliance
on
Id. at 846.
Miller
cannot
withstand
For one thing, in the underlying litigation, Supervalu
was not interposed between an insurer and the Estate; indeed, as
we have said, Supervalu was self-insured for the first $2,000,000
of potential liability facing any one of its subsidiaries.
See
Morrison, 806 N.E.2d at 391 ("The significance of the holding of
the Appeals Court in the Miller case is that an insurance company
cannot evade its statutory duties imposed by [Chapter 176D] by
delegating its work.").
What is more, unlike the risk management provider at
issue in Miller, Supervalu did not purport to act on behalf of an
insurer that had a contractual obligation to pay claims.
Rather,
Supervalu was under no duty to settle claims made against Shaw's
or its other subsidiaries.6
See id. ("The Miller decision simply
6
The Estate points to record evidence which it suggests
establishes that Supervalu may have acted as a claims administrator
for one or more subsidiaries that it did not wholly own. We do
not view this evidence as establishing a dispute of material fact
regarding whether Supervalu was in the business of insurance
because there is no evidence that Supervalu bore the risk of loss
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cannot be read to impose an affirmative claim settlement duty on
the risk management department of Toys, when none could be imposed
on Toys itself.").
In sum, we share the view of the district court
that Supervalu did not function as a captive insurer, nor did it
function as a third-party administrator, and thus it should not be
regulated as such.
C.
Supervalu's Ownership of Risk Planners
Finally, the Estate contends that Supervalu was in the
business of insurance by virtue of owning Risk Planners, an
insurance agency.
court
During the pendency of the underlying state
litigation,
Risk
Planners
was
one
of
Supervalu's
subsidiaries.
It
is
undisputed
that
Risk
Planners
was
uninvolved in the litigation between the Estate and Shaw's.
wholly
Risk
Planners did not insure either Shaw's or Supervalu, and it had no
role in adjusting, negotiating, or litigating the Estate's claim.
Nevertheless, the Estate's argument is not entirely without merit.
Take, for example, a hypothetical parent company that has a number
of subsidiaries in different sectors, including one that operates
an airline. By virtue of owning a subsidiary airline, no one could
reasonably dispute that the parent company is, by some measure,
for these entities, that it adjusted claims on their behalf
pursuant to a policy of insurance, or that it was obligated to
settle claims made against these entities.
See Morrison, 806
N.E.2d at 391; Poznik, 628 N.E.2d at 3.
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"in the airline business."
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So too, one might fairly conclude that
Supervalu was "in the business of insurance" by virtue of owning
an insurance agency.
It is an entirely different proposition, however, to
suggest that a parent company is independently subject to all of
the
laws
and
regulations
individual subsidiaries.
that
govern
the
operation
of
its
For example, it would defy logic to
suggest that our hypothetical parent company is itself subject to
aviation regulations, even though those regulations would plainly
apply to its subsidiary airline.
What is more, the Estate's suggestion that Supervalu was
in the business of insurance by virtue of owning an insurance
agency that had nothing to do with the subject litigation contorts
Chapter 176D's well-established policy underpinnings.
As we have
said, Chapter 176D was enacted to curb abuses that might result
from an insurer's exclusive right to control litigation stemming
from policies that the insurer has sold for profit.
N.E.2d at 390.
Morrison, 806
Here, there is no such concern because Risk
Planners neither sold relevant coverage, nor had any control over
the litigation between Shaw's and the Estate.
Thus, Supervalu's
ownership of Risk Planners does not support the conclusion that it
was in the business of insurance for purposes of Chapter 176D.
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IV. Conclusion
We concur with the district court that Supervalu was not
in the business of insurance, and thus we AFFIRM the entry of
summary judgment in Supervalu's favor.7
7
Prior to oral argument, the Estate filed a motion asking
that we certify a series of questions to the SJC bearing on the
scope of Chapter 176D. That motion was denied without prejudice
by order dated August 21, 2015.
Because the motion was not
renewed, we need not consider it. And, in any event, we would
decline to certify these issues to the SJC given the law's existing
clarity. See Tarr v. Manchester Ins. Corp., 544 F.2d 14, 15 (1st
Cir. 1976) (per curiam) ("The purpose of certification is to
ascertain what the state law is, not, when the state court has
already said what it is, to afford a party an opportunity to
persuade the court to say something else.").
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