Utica Mutual Insurance Company v. Century Indemnity Company
Filing
661
ORDER that Century's 652 Motion to Amend or Correct the judgment is DENIED; Century's renewed Motions for Judgment as a Matter of Law are DENIED; Century's motion for a new trial is DENIED; and Century's motion for post-trial discovery is DENIED. Signed by Judge David N. Hurd on 12/3/2019. (see)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
-------------------------------UTICA MUTUAL INSURANCE
COMPANY,
Plaintiff,
-v-
6:13-CV-995
CENTURY INDEMNITY COMPANY,
as Successor to CCI Insurance Company,
as Successor to Insurance Company of
North America,
Defendant.
-------------------------------APPEARANCES:
OF COUNSEL:
HUNTON ANDREWS KURTH LLP
Attorneys for Plaintiff
2200 Pennsylvania Avenue, NW
Washington, DC 20037
SYED S. AHMAD, ESQ.
LATOSHA M. ELLIS, ESQ.
PATRICK M. MCDERMOTT, ESQ.
WALTER J. ANDREWS, ESQ.
O'MELVENY, MYERS LAW FIRM
Attorneys for Defendant
7 Times Square
Times Square Tower
New York, NY 10036
BRAD M. ELIAS, ESQ.
NATHANAEL T. EVERHART, ESQ.
TANCRED V. SCHIAVONI, ESQ.
VINCENT S. WEISBAND, ESQ.
REDWAN SALEH, ESQ.
E. STEWART JONES HACKER MURPHY, LLP
Attorneys for Defendant
28 Second Street
Troy, NY 12180
JAMES E. HACKER, ESQ.
DAVID N. HURD
United States District Judge
MEMORANDUM–DECISION and ORDER
I. INTRODUCTION
This is the epilogue to a hard-fought contract dispute between plaintiff Utica Mutual
Insurance Company ("Utica"), a primary insurer, and defendant Century Indemnity Company
("Century"), a reinsurer, over Century's alleged breach of two indemnity agreements
purchased by Utica in the 1970s.
On September 30, 2019, after hearing two full weeks of evidence, a jury returned an
across-the-board verdict for Utica on both of its claims, rejecting in the process a bad-faith
counterclaim brought by Century. Dkt. No. 628. Because the parties had stipulated to the
unpaid principal on the two reinsurance agreements, the Court accounted for pre-judgment
interest at the applicable statutory rate and entered a $6,257,889.02 judgment in Utica's
favor. Dkt. No. 630.
On October 18, 2019, Century moved under Federal Rule of Civil Procedure ("Rule")
60(a) and Rule 59(e) 1 to correct an alleged error in the interest calculation reflected in
the $6 million money judgment. Dkt. No. 652. Century also renewed its Rule 50(b) motions
for judgment as a matter of law and, in the alternative, moved for a new trial under Rule
59(a)(1). Dkt. No. 653; see also Dkt. Nos. 624-26.
The motions have been fully briefed. Century requested oral argument on its motion
to correct the judgment, Dkt. No. 659, but upon review of the filings the Court has concluded
that the issue should be resolved on the parties' briefs alone. Accordingly, both motions will
be decided on the basis of the submissions without oral argument.
1
Century noticed this branch of its motion under section (a) of Rule 59, but as Utica points out, the
relief sought by Century would come from section (e). Pl.'s Opp'n, Dkt. No. 656 at 9 n.2.
-2-
II. DISCUSSION
For brevity's sake, the trial transcript and other relevant materials will be referenced
only as necessary to resolve the final round of motion practice. However, an ambitious
reader seeking a blow-by-blow account of this dispute should consult the final pre-trial
Memorandum–Decision & Order for a thorough recitation of the procedural history, Utica Mut.
Ins. Co. v. Century Indemnity Co., 2018 WL 4625404 (N.D.N.Y. Sept. 26, 2018),
reconsideration denied, 2018 WL 6258560 (N.D.N.Y. Nov. 30, 2018), and the ten-volume
transcript of the trial proceedings for answers to any substantive questions about how the
claims and defenses fit into the parties' competing narratives, Dkt. Nos. 633-49.
A. Pre-Judgment Interest
In its first motion, Century contends the Court awarded Utica too much pre-judgment
interest. According to Century, the judgment must be reduced by roughly $280,000 to
prevent Utica from enjoying an improper windfall at Century's expense. Def.'s Mem., Dkt.
No. 652-1 at 5-7. 2
To understand Century's problem with the interest component of the award, it helps to
start with an understanding that the $6,257,889.02 money judgment is actually the sum of
two different principal amounts added to two separate awards of pre-judgment interest
calculated from two distinct dates. Dkt. No. 630.
First, for Utica's successful claim under the 1973 agreement, there is a sum of
$4,354,004.92, which includes principal of $2,760,533.96 plus interest of $1,593,470.96
running from May 3, 2013. Dkt. No. 630. Second, for Utica's successful claim under the
2
Pagination corresponds to CM/ECF.
-3-
1975 agreement, there is a sum of $1,903,884.10, which includes principal of $1,103,271.62
plus interest of $800,612.48 running from September 9, 2011. Id.
Century acknowledges the dates used in calculating these interest awards—May 3,
2013 and September 9, 2011—were selected by the jury in response to a pair of
interrogatories posed on the verdict form. Def.'s Mem. at 3; see also Court's Ex. 4, Dkt. No.
628 at 2-3.
Even so, Century complains it is improper to use these dates to calculate interest on
the entire principal amount of each agreement. Def.'s Mem. at 3. As Century explains, these
two dates coincide with the dates of Utica's initial billings under each agreement, not the
dates of any final or complete billings under either contract. Id. Because "the amounts of the
initial billings were only a fraction of the total amounts that Utica ultimately billed," Century's
argument goes, setting interest to run from the dates of the initial bills gives Utica an
improper windfall recovery. Id.
Century contends the better course of action would be to engage in a more detailed
accounting of pre-judgment interest. See Def.'s Mem. at 3, 5-7. Rather than running from a
single date for each agreement, Century argues interest should be re-calculated to run on a
series of smaller principal amounts measured from a series of different dates; i.e., each date
on which Utica sent out a specific bill to Century. Id. According to Century, the Court can
accomplish this task without further aid from the jury because "the dates and amounts of
Utica's bills are in the record and undisputed." Id. at 6. In fact, Century has provided a
spreadsheet that allegedly accounts for pre-judgment interest using this more detailed
approach. Id. at 4-5.
-4-
Century maintains that this is the kind of simple math error that can be corrected
under Rule 60, which provides in relevant part that "[t]he court may correct a clerical mistake
or a mistake arising from oversight or omission whenever one is found in a judgment, order,
or other part of the record." FED. R. CIV. P. 60(a); see also L.I. Head Start Child Dev. Servs.,
Inc. v. Econ. Opportunity Comm'n of Nassau Cty., Inc., 956 F. Supp. 2d 402, 408-09
(E.D.N.Y. 2013) ("The general purpose of Rule 60(a) is to afford courts a means of modifying
their judgments in order to ensure that the record reflects the actual intentions of the court.").
Alternatively, Century asks the Court to amend the money judgment under Rule 59(e),
which empowers a district court "to rectify its own mistakes in the period immediately
following the entry of judgment." Greene v. Town of Blooming Grove, 935 F.2d 507, 512 (2d
Cir. 1991) (citation omitted); see also Munafo v. Metro. Transp. Auth., 381 F.3d 99, 105 (2d
Cir. 2004) ("[D]istrict courts may alter or amend judgment 'to correct a clear error of law or
prevent manifest injustice.'" (citation omitted)).
In opposition, Utica argues that the Court got all these numbers right the first
time. Pl.'s Mem., Dkt. No. 656 at 4. Utica points to a companion case tried to a jury before
this Court last year, where it won another money judgment against another reinsurer that
refused to honor indemnity agreements similar to the two at issue here. Utica Mut. Ins. Co.
v. Fireman's Fund Ins. Co., 287 F. Supp. 3d 163 (N.D.N.Y. 2018), appeal filed, 18-828 (2d
Cir. Mar. 27, 2018).3
In that case, the Court also calculated an award of pre-judgment interest to run from a
single date chosen by the jury in response to a specific interrogatory posed on the
3
A panel of the U.S. Court of Appeals for the Second Circuit heard argument on August 29, 2019,
but the matter remains pending.
-5-
verdict form. Fireman's Fund Ins. Co., 287 F. Supp. 3d at 174. And there, as here, the
defendant–reinsurer moved under Rule 60(a) to correct the judgment based on the notion
that the date selected by the jury, which also coincided with the date of Utica's first billing
under the contract, amounted to an improper windfall. Id.
Fireman's Fund rejected the defendant–reinsurer's Rule 60(a) motion as procedurally
improper, concluding "such a revision would be substantive rather than clerical." Fireman's
Fund Ins. Co., 287 F. Supp. 3d at 174. In reaching that conclusion, Fireman's Fund noted
that the kind of revision sought by the defendant–reinsurer "would require a finding of fact
regarding the (additional) dates from which the interest would run." Id. However, that kind of
post hoc, substantive revision to the judgment would be improper now because "[t]hose facts
[were] properly ones for a jury to decide." Id.
Utica argues the same result is appropriate in this case, at least as to Century's Rule
60(a) motion, because Century is seeking the kind of revision to the judgment that this Court
has already expressly concluded is substantive rather than clerical. Pl.'s Mem. at 4-6. As
Utica correctly notes, Century's opening brief does not distinguish the holding or rationale of
Fireman's Fund or explain why the Court should reach a different result this time. Id.
Utica goes on to claim that Century is wrong on the merits, anyway. According to
Utica, New York law permits pre-judgment interest on multiple bills to run from a single date
where, as here, the counter-party has fully repudiated its obligation to pay on the future
billings. Pl.'s Mem. at 7-9. Even assuming otherwise, though, Utica insists a substantive
revision would still be improper because Century failed to raise the issue before the entry of
judgment. Id. at 9.
-6-
In reply, Century contends that Fireman's Fund does not control the outcome here
because unlike the defendant–reinsurer in that case, Century has also sought relief under
Rule 59(e), which permits amendments that go beyond mere clerical errors or
oversights. Def.'s Reply, Dkt. No. 658 at 7.
In Century's view, a substantive amendment under Rule 59 is appropriate "where, as
here, the calculation of prejudgment interest is inconsistent with the undisputed trial
evidence." Def.'s Reply at 5. According to Century, the re-calculated interest award tallied
up in the chart from its opening brief is drawn directly from undisputed documentary
submissions that Utica itself moved into evidence at trial. Id. at 7, 13.
Century further contends that Utica's assertion about New York law permitting interest
to run from the date of an initial billing in cases where the counter-party repudiates its future
obligations is wrong on the law. Def.'s Reply at 8-12. Century argues that, even under those
circumstances, the applicable provisions of New York's Civil Practice Law and Rules
("CPLR") makes clear that an award of pre-judgment interest on multiple billings must still run
from a "reasonable intermediate date," not the date of the first billing. Id.
Under New York law, pre-judgment interest is a mandatory component of the
damages awarded on a breach of contract claim. N.Y.C.P.L.R. § 5001(a); J. D'Addario &
Co., Inc. v. Embassy Indus., Inc., 957 N.Y.S.2d 275, 277 (N.Y. 2012) (reiterating mandatory
nature of interest award in breach of contract action). And it accrues at a statutory rate,
which is fixed at nine percent per annum. N.Y.C.P.L.R. § 5004.
The rationale for awarding this type of interest "is founded on the theory that there has
been a deprivation of the use of money or its equivalent, and that an award of interest will
make the aggrieved party whole." Spodek v. Park Prop. Dev. Assoc., 719 N.Y.S.2d 109, 110
-7-
(N.Y. App. Div. 2d Dep't 2001) (citations omitted); see also Woodling v. Garrett Corp., 813
F.2d 543, 561 (2d Cir. 1987) ("The purpose of a prejudgment interest award is to remedy the
delay in compensating a plaintiff for a loss.").
As a necessary corollary to this reasoning, the CPLR instructs that pre-judgment
interest should be computed "from the earliest ascertainable date the cause of action
existed." N.Y.C.P.L.R. § 5001(b). Where, as here, the cause of action is for breach of
contract, the claim "accrues at the time of the breach." Ely–Cruikshank Co., Inc. v. Bank of
Montreal, 599 N.Y.S.2d 501, 502 (N.Y. 1993) (citations omitted).
Notably, though, CPLR § 5001(b) provides a further wrinkle if some portion of a
prevailing party's damages were incurred after the cause of action initially accrued. Under
those circumstances, the CPLR "provides two methods for avoiding overcompensating the
plaintiff when prejudgment losses have occurred over a period of time: interest may be
computed from the various dates on which the losses occurred, or it may be computed on all
prejudgment losses 'from a single reasonable intermediate date.'" Woodling, 813 F.2d at
561 (applying CPLR § 5001(b) to prevailing party's monetary recovery on a tort claim).
Finally, "[n]otwithstanding the mandatory language of the statute, some New York
courts appear to have forged an exception to mandatory prejudgment interest to prevent
windfalls in favor of plaintiffs." E.J. Brooks Co. v. Cambridge Sec. Seals, 858 F.3d 744, 751
(2d Cir. 2017); see also GE Funding Capital Mkt. Servs., Inc. v. Nebraska Inv. Fin. Auth. , 767
F. App'x 110, 115 (2d Cir. 2019) (summary order) (observing that "New York courts
accordingly have looked to the economic realities of a given case to avoid conferring
windfalls in the form of prejudgment interest").
-8-
But what about a situation like this one, where the jury selected the specific dates from
which interest should run? After all, New York law expressly contemplates sending this issue
to a finder of fact. See N.Y.C.P.L.R. § 5001(c) ("If a jury is discharged without specifying the
date, the court upon motion shall fix the date, except that where the date is certain and not in
dispute, the date may be fixed by the clerk of the court upon affidavit.").
Courts in this Circuit have recognized it as an option, too. See, e.g., CSX Transp.,
Inc. v. Niagara Lubricant Co., Inc., 143 F. Supp. 3d 73, 75 (W .D.N.Y. 2015) ("The parties are
entitled to have the jury determine the date from which prejudgment interest should
run . . . . "); Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co. Am., 727 F. Supp. 2d 256,
295 (S.D.N.Y. 2010) (fixing date from which interest would run because jury was not asked to
select one under CPLR § 5001(c)); see also Conway v. Icahn & Co., Inc., 16 F.3d 504, 512
(2d Cir. 1994) (concluding trial court acted reasonably in fixing the date where "[t]he jury was
not asked to specify the date when the damages were incurred").
Not a single one of the cases cited by Century in support of its motion to amend the
judgment under Rule 59(e) appear to match this fact pattern; i.e., none discard a jury's
factual determination about the correct date in favor of a different one selected by the court.
For instance, in Esquire Radio & Elecs., Inc. v. Montgomery Ward & Co., Inc., 804
F.2d 787 (2d Cir. 1986), a jury found for the plaintiff after concluding the defendant breached
certain agreements by unilaterally terminating the parties' ongoing business
relationship. Because the court below had awarded interest as of the date on which the
defendant had first announced the termination of the business relationship, the panel
remanded the matter to the trial court to re-calculate interest from an intermediate date
during the period in which the payment obligations would have otherwise been
-9-
due. Esquire Radio & Elecs., Inc., 804 F.2d at 796. Missing from the discussion in Esquire
Radio, however, is an indication that the jury itself had first been asked to select the date or
dates from which interest should run. Id.
The same is true of Israel v. Benefit Concepts N.Y., Inc., 9 F. App'x 43 (2d Cir. 2001)
(summary order). Following a bench trial, the lower court awarded pre-judgment interest
running from the breaching party's "first refusal" to make transfers of certain valuable stock,
even though the transfers at issue should have occurred in "separate payments over several
years." Id. at 45. As in Esquire Radio, the panel remanded the matter to the trial court to
re-calculate the interest award. Id. But Israel was a bench trial, with the trial court wearing a
second hat as finder of fact. See id.
Century's other cited cases appear to suffer from the same shortcoming. In Nat'l
Utility Serv., Inc. v. Blue Circle, Inc., 793 F. Supp. 52 (N.D.N.Y. 1992), the trial court awarded
interest to the prevailing plaintiff in a breach of contract claim by determining the "median
date between the accrual of the cause of action and the final month . . . for which an invoice
was submitted." But that, too, was a bench trial. Id.
In Washington v. Kellwood Co., 2016 WL 845280 (S.D.N.Y. Mar. 4, 2016), the trial
court explained it would calculate interest on a portion of the prevailing plaintiff's damages
from a "reasonable intermediate date" because that component of the jury's verdict relied on
a "lost stream of profits" that would have accrued over time. Id. at *4. Again, though, there is
no indication the jury was tasked with selecting the date or dates in the first instance. Id.
And in Baer v. Anesthesia Assocs. of Mt. Kisco, LLP, 870 N.Y.S.2d 92 (N.Y. App. Div.
2d Dep't 2008), the appellate division reduced the interest component of a damages award in
a breach of contract action where the plaintiff's claim "was based on a buyout schedule
- 10 -
payable in installments" over a roughly two-and-a-half year period. Id. at 94. But again,
there is no discussion of whether or not the jury took a crack at fixing an appropriate date
first. Id.
To be clear, Century received plenty of notice that the Court planned to resolve this
issue by asking the jury to decide it. Under the "damages" section of the final charge, the
Court instructed the jury that if it found for Utica "on one or both of its breach of contract
claims, [it] must then determine the date as of which Utica Mutual demanded that Century
pay on that claim. Court's Ex. 3, Dkt. No. 629-1 at 30 (emphasis in original). This date
mattered, the Court explained, "because interest runs from that date." Id. (emphasis
added). In turn, the final verdict form asked the jury to decide "the date" on which Utica
"provided sufficient proof of loss" under each of the two certificates. Court's Ex. 4 at 2-3.
The proposed version of the final instructions provided to the parties in advance of the
charge conference included this cited language. See FED. R. CIV. P. 51(b). The same is true
of the proposed version of the final verdict form. Id. In formulating these two documents, the
Court considered the various proposals made by the parties in their pre-trial briefing as well
as the various requests and objections both parties entered on the record. T rial Tr. Vol. IX,
Dkt. No. 648 at 1496, 1498-1507.
Missing from all of this is any indication that Century lodged an objection to the Court's
proposed method of resolving the issue of pre-judgment interest; i.e., by asking the jury to
make a finding about the date from which it should run under each agreement in the event
Utica prevailed. See Trial Tr. Vol. IX at 1498-1507; see also ING Global v. United Parcel
Serv. Oasis Supply Corp., 757 F.3d 92, 97 (2d Cir. 2014) (explaining that Rule 51 of the
Federal Rules of Civil Procedure generally "requires parties to articulate and lodge their
- 11 -
objections to jury charges before they are delivered" so the trial court has an opportunity to
cure any alleged defects).
For example, Century could have argued that the selection of multiple dates by the
jury would be more appropriate (as to the multiple billings), or perhaps claimed that the jury
should be instructed to select a "reasonable intermediate date" from among the multiple
billings presented by Utica. Century did not take that approach. Trial Tr. Vol. IX at
1498-1507.
Alternatively, Century could have asserted that posing any questions to the jury about
the selection of dates would be improper or superfluous in light of the record evidence of
Utica's unpaid billings it points to now. Century did not take that approach, either. Trial Tr.
Vol IX at 1498-1507.
Nor did Century raise these issues in its trial brief, Dkt. No. 565, in its own proposed
instructions, Dkt. No. 563, in its own proposed verdict form, Dkt. No. 562, or in an amended
proposed verdict form it submitted during the course of the trial, Dkt. No. 623-1. In fact,
Century's proposed verdict form asks precisely the same questions the Court later adopted in
the final verdict form. Compare Dkt. No. 562, with Court's Ex. 4.4
Century also could have (but did not) argued to the jury in summation that the
appropriate date to fill in on the blank provided by the final verdict form was a "reasonable,
intermediate one" based on the billings in the record. Utica, for its part, was savvy enough to
take an approach favorable to itself during the closings. Trial Tr. Vol. X, Dkt. No. 649 at 1600
4
Century's amended proposed verdict form takes an entirely different approach to some of the
issues at play, Dkt. No. 623-1, without offering any briefing on the date-of-loss question, Dkt. No. 623.
- 12 -
(advocating to jury that date entered on verdict form under 1973 certificate "should be the
date of the first bill); id. at 1601 (advocating same as to 1975 certificate).
In essence, Century is asking the Court to throw out a pair of specific factual findings
made by the jury because it thinks the results unpleasant. Or maybe Century is seeking to
avoid the jury's fact-finding because the Court did not use certain magic words on the final
verdict form. Compare Court's Ex. 3 (instructing jury it must select "the date" on which Utica
demanded payment under each agreement "because interest runs from that date"), with
Court's Ex. 4 (verdict form asking jury to select date of "sufficient proof of loss").
Of course, "verdict questions must be read in conjunction with the judge's charge to
the jury." Vichare v. AMBAC Inc., 106 F.3d 457 (2d Cir. 1996). And Century has offered little
in the way of a post hoc rationalization for why it wanted these questions posed to the jury at
all. See Def.'s Reply at 13-14. Perhaps it was an attempt by Century to knock out some or
all of Utica's invoices—for instance, if the jury had found in Utica's favor on one or both
agreements but not picked the date of the first billing(s), then Century would probably still be
here, in a post-trial motion, arguing that amounts billed by Utica prior to the date(s) selected
by the jury should be carved out from any money judgment entered by the Court.
But even that explanation would have problems now. If, as Century says, the dates
and amounts of each and every billing (including the first ones sent out under each
agreement) that Utica issued are sitting undisputed in the trial record, then all the jury would
- 13 -
have needed to do under those circumstances is decide whether Utica had proven one or
both of its breach of contract claims.5
After that, the question of the principal amounts to be awarded, as well as the date or
dates from which pre-judgment interest should run, could have been handled directly by the
Court. Cf. Aristocrat Leisure Ltd., 727 F. Supp. 2d at 295 (finding it appropriate for the court
to fix the date from which interest should run where jury was not asked to do so).
In sum, the Court recognizes the time and expense associated with taking an
appeal. See Def.'s Letter Motion at Dkt. No. 659 (suggesting that granting Century's request
to reduce the interest award would avoid an "unnecessary appeal"). But the Court is
extremely reluctant, under the circumstances presented here, to set aside the jury's
fact-finding on this matter. In the event the Second Circuit winds up agreeing with Century
on this point for one undoubtedly good reason or another, the Court stands ready, willing,
and able to follow the appellate court's guidance in re-calculating the pre-judgment interest
component of Utica's recovery. For now, though, Century's request will be denied.
B. Judgment as a Matter of Law
Century has renewed its three motions for judgment as a matter of law. Def.'s Mem.,
Dkt. No. 653-1 at 3-14 (renewing filings at Dkt. Nos. 624-26). In the first two, Century
advances several reasons why it should still win judgment on one or both of Utica's breach of
contract claims. Def.'s Mem. at 4-11. In its third motion, Century contends it is entitled to
judgment on each and every one of Utica's various affirmative defenses. Id. at 12-14.
5
Notably, Century correctly argued elsewhere that any recovery on its bad-faith counterclaim, being
equitable in character, would be an issue for the Court to decide. Dkt. No. 623.
- 14 -
"Federal Rule of Civil Procedure 50 sets forth the procedural requirements for
challenging the sufficiency of the evidence in a civil jury trial and establishes two stages for
such challenges—prior to submission of the case to the jury, and after the verdict and entry
of judgment." Unitherm Food Sys., Inc. v. Swift–Eckrich, Inc., 546 U.S. 394, 399 (2006).
At the first stage, a defendant may seek judgment as a matter of law if, after a party
has been fully heard on an issue during trial, the Court finds that "a reasonable jury would not
have a legally sufficient evidentiary basis to find for the party on that issue." FED. R. CIV. P.
50(a). "If the court does not grant a motion for judgment as a matter of law made under Rule
50(a), the court is considered to have submitted the action to the jury subject to the court's
later deciding the legal questions raised by the motion." FED. R. CIV. P. 50(b). Thus, at this
second stage, a defendant "may filed a renewed motion for judgment as a matter of law." Id.
"The same standard that applies to a pre-trial motion for summary judgment pursuant
to FED. R. CIV. P. 56 also applies to motions for judgment as a matter of law made during or
after trial pursuant to Rule 50." Welch v. United Parcel Serv., Inc., 871 F. Supp. 2d 164, 173
(E.D.N.Y. 2012) (quoting Piesco v. Koch, 12 F.3d 332, 341 (2d Cir. 1993)). In other words,
"the movant must show that the evidence, when viewed most favorable to the non-movant,
was insufficient to permit a reasonable juror to have found in the non-movant's favor." Conte
v. Emmons, 895 F.3d 168, 171 (2d Cir. 2018).
Accordingly, a Rule 50(b) motion "'may only be granted if there exists such a complete
absence of evidence supporting the verdict that the jury's finding could only have been the
result of sheer surmise and conjecture, or the evidence in favor of the movant is so
overwhelming that reasonable and fair minded [persons] could not arrive at a verdict
- 15 -
against [it].'" Wiercinski v. Mangia 57, Inc., 787 F.3d 106, 112 (2d Cir. 2015) (quoting Brady
v. Wal–Mart Stores, Inc., 531 F.3d 127, 133 (2d Cir. 2008)).
1. Utica's Allocation
According to Century, the Court should throw out Utica's claims under both
reinsurance agreements because the "uncontroverted" evidence shows Utica billed Century
inconsistently with the terms of the 2007 Utica–Goulds settlement. Def.'s Mem. at 4-11.
Utica responds that Century's complaints about the settlement and the resulting reinsurance
allocation are meritless, were properly rejected by the jury, and should also be rejected
now. Pl.'s Opp'n, Dkt. No. 657 at 9-15. In Utica's view, Century's arguments misstate the
governing legal principles and ignore contrary evidence the jury could have credited in finding
for Utica on its breach of contract claims. Id. Century replies that Utica's allocation of the
settlement was inconsistent and therefore unreasonable as a matter of law. Def.'s Reply,
Dkt. No. 660 at 5-7.
This argument fails to measure up to Rule 50(b)'s demanding standard. In short,
Century has rehashed an assertion it made at summary judgment: that Utica's
post-settlement allocation is categorically or objectively unreasonable. To support its
renewed claim that Utica's conduct was "per se unreasonable and in bad faith," Century cites
to Allstate Ins. Co. v. Am. Home Assurance Co., 43 A.D.3d 113 (N.Y. App. Div. 2d Dep't
2007), and U.S. Fid. & Guar. Co. v. Am. Re-Insurance Co., 20 N.Y.3d 407 (N.Y. 2013) ("U.S.
F&G"). According to Century, these two cases confirm that an insurer cannot bill claims
differently "with its reinsurer than with its policyholder." Def.'s Mem. at 4.
But this argument begs the question: it begins from the premise that Utica's allocation
was definitively inconsistent, which is one of the issues that the parties have been sparring
- 16 -
over this whole time. So whether or not these two cases establish some kind of categorical
limitation, that rule would only necessitate Rule 50(b) relief in favor of Century if the
undisputed evidence adduced at trial conclusively established that things unfolded that way.
That is not what happened. At the close of discovery, Century's accusation that Utica
used "two sets of books" when tracking the asbestos settlements, combined with the force of
other related evidence marshaled by Century, was compelling enough to deny cross-motions
for summary judgment on the issue. Utica Mut. Ins. Co., 2018 WL 4625404, at *8 ("[N]either
party has established, as a matter of law, the propriety (or impropriety) of the allocation
decisions at issue here.").
At trial, the jury heard testimony elicited by Century about how Utica seemed to
mistreat Century before, during, and after the 2007 Goulds settlement. And while the "two
sets of books" language might have been an evocative way to phrase the assertion that Utica
acted in bad faith in making the post-settlement allocation, the Court permitted Century to
argue along those lines at trial. Dkt. No. 621 (ruling, inter alia, that Century could use
contested phrase at trial); see, e.g., Trial Tr. Vol. X at 1511, 1531 (arguing to jury in closing).
On the other hand, though, there is plenty of trial testimony from Utica witnesses
establishing that Utica's conduct remained reasonably consistent, if not exactly perfect,
before, during, and after its settlement with Goulds. See, e.g., Pl.'s Opp'n at 9-13. And Utica
offered the jury a plausible contrary explanation for the separate spreadsheet its employees
used to track the settlement. Id. at 11. The jury evidently credited some or all of this
evidence in siding with Utica. Accordingly, granting Rule 50(b) relief on this issue would be
improper.
- 17 -
Besides, Century overstates the impact of Allstate and U.S. F&G on this jury
trial. Both cases involve the "follow-the-fortunes" or the "follow-the-settlements" doctrines,
which as a general matter "bind[ ] a reinsurer to accept the cedent's good faith decisions on
all things concerning the underlying insurance terms and claims against the underlying
insured: coverage, tactics, lawsuits, compromise, resistance, or capitulation." N. River Ins.
Co. v. Ace Am. Reinsurance Co., 361 F.3d 134, 139-40 (2d Cir. 2004) (quoting British Int'l
Ins. Co. v. Seguros La Republica, S.A., 342 F.3d 78, 85 (2d Cir. 2003)). The doctrine
"applies to all outcomes, including settlements and judgments." Id. at 140. And although the
correct usage is context-dependent, courts often use the two terms interchangeably. See,
e.g., U.S. F&G, 20 N.Y. 3d at 418.
In Allstate, the plaintiff–reinsurer sought a declaratory judgment against its cedent,
arguing it was not bound to "follow" the defendant–insurer's allocation of loss to certain
reinsurance certificates the defendant purchased in the 1970s. Allstate Ins. Co., 43 A.D.3d
at 114-15, 120. According to the Allstate plaintiff, the cedent's allocation was unreasonable
as a matter of law because its position had changed dramatically following the settlement of
a separate coverage dispute with its underlying insured. Id. at 120.
The defendant in Allstate, a primary insurer, had been sued by its own insured in a
separate federal court action. Allstate Ins. Co., 43 A.D.3d 115-16. There, the parties fought
over certain primary insurance policies the Allstate defendant had issued to cover
commercial property damage at the insured's industrial sites. Id. Among other things, the
parties disagreed about how many "occurrences," i.e., losses, had happened at each
industrial site. Id. at 116.
- 18 -
This issue of "occurrences" was a huge sticking point for both the primary insurer and
its insured, since "[t]he number of occurrences dictated the number of [per-occurrence]
deductibles that would be applied." Allstate Ins. Co., 43 A.D.3d at 116. And of course,
"[m]ore deductibles meant less covered loss under the policies." Id.
Because the coverage litigation involved significant, possibly wide-ranging
environmental pollution at a large number of the insured's industrial properties, the federal
court held a bellwether trial to determine the issues of loss or damage at Windsor Locks, the
name of just one of the insured's sites. Allstate Ins. Co., 43 A.D.3d at 116.
After the jury returned a verdict finding that the insured had shown qualifying loss or
damage "at seven different areas" of the Windsor Locks site, the parties sought summary
judgment from the federal court "on the number of occurrences involved so they could
determine the number of $200,000 deductibles to be applied." Allstate Ins Co., 43 A.D.3d at
116.
In the primary insurer's view, eighteen or more individual deductibles should be
applied to the seven areas of loss found at this single industrial site; in the insured's view,
seven was a more appropriate number of deductibles. Allstate Ins. Co., 43 A.D.3d at
116. The federal court sided with the insured, concluding that only seven "occurrences" had
taken place at the Windsor Locks site. Id. Because fewer per-occurrence deductibles
applied, the insured stood to receive more insurance money as a result of this holding. Id.
Dissatisfied with the jury's verdict and the federal court's ruling on the "occurrence"
issue, the defendant–insurer moved for a new trial and petitioned for an interlocutory
appeal. Allstate Ins. Co., 43 A.D.3d at 116. Although the federal court denied permission to
seek interlocutory review of the legal question, the parties managed to settle their dispute
- 19 -
over coverage at this particular site (i.e., Windsor Locks) before the federal court decided the
motion for a new trial. Id. In settling, neither party budged from its position "as to the number
of occurrences" at the Windsor Locks site. Id.
The federal court coverage litigation continued over the remaining industrial
sites. Allstate Ins. Co., 43 A.D.3d at 116. In the run up to a second t rial that would involve
issues at several more of these sites, the parties persisted in their competing views of how
many "occurrences" had taken place at each location. Id. at 116-17.
Importantly, both the insured and the primary insurer believed that multiple
occurrences had taken place at each industrial site. Allstate Ins. Co., 43 A.D.3d at 116-17.
In other words, the coverage dispute was over just how many occurrences should be tallied
for each site, not whether there was more than one. Id.
However, as the second trial neared, the primary insurer and its insured engaged in
extensive settlement discussions on this and myriad other issues. Allstate Ins. Co., 43
A.D.3d at 117. Eventually, the parties entered a $112 million lump sum global settlement
that resolved the coverage dispute for all of the industrial sites at issue in the litigation. Id.
Shortly thereafter, the primary insurer's lead counsel cooked up an "analysis for
allocating the settlement to the [insured's primary] policies and to defendant's reinsurers"
that, almost inexplicably, "treated each site as one occurrence." Allstate Ins. Co., 43 A.D.3d
at 117. The defendant–insurer in Allstate then used this new analysis to trigger its
reinsurance coverage, billing its various reinsurers, including the plaintiff–reinsurer in Allstate,
"on a one-occurrence-per-site-per-year basis." Id. at 118.
When the Allstate plaintiff's claims analyst noticed the dramatic inconsistency between
the way its cedent had evaluated the "occurrence" issue for years before the final settlement
- 20 -
with the insured, the plaintiff–reinsurer realized that the allocation methodology used by the
federal court in the first trial (over the Windsor Locks site) would not have triggered
reinsurance obligations under certain policy years. Allstate Ins. Co., 43 A.D.3d at 119. In
other words, the Allstate plaintiff determined that the defendant–insurer had tried to unfairly
inflate its reinsurance recovery. See id.
Armed with this information, the plaintiff–reinsurer refused to cough up payment and
filed suit against the cedent instead. Allstate Ins. Co., 43 A.D.3d at 119. On cross-motions
for summary judgment, the trial court found in favor of the cedent, concluding that the
follow-the-fortunes doctrine insulated its decision-making "regardless of any inconsistency
between the reinsured's presettlement and postsettlement allocation positions." Id. at 120.
This made sense, the trial court reasoned, because otherwise the court would be forced into
an "intrusive factual inquiry" about the defendant–insurer's settlement process. Id.
The Appellate Division reversed, rejecting the trial court's conclusion that the
follow-the-fortunes doctrine applied to the particularly outrageous set of facts presented in
the record below. Allstate Ins. Co., 43 A.D.3d at 120-21. The court emphasized that the
post-settlement allocation at issue:
reflects, on this record, nothing more than [the defendant–insurer's
lead counsel's] subjective judgment, and in effect lends the court's
imprimatur to defendant's playing by two sets of rules: one, applied
at the insured's claim level where the occurrence deductible is used
as often as possible to minimize the amount of the insurer's
exposure and loss, and later, in the same loss setting, another,
where the occurrence deductible is used as sparingly as possible to
maximize the reinsured's recovery against the reinsurer.
Allstate Ins. Co., 43 A.D.3d at 120.
- 21 -
In the Appellate Division's view, the defendant–insurer's post-settlement,
one-occurrence-per-site allocation was totally unreasonable. Allstate Ins. Co., 43 A.D.3d at
122. This was so, the court held, because it "directly contradict[ed]" the federal court's ruling
about the number of occurrences chargeable to at least the first site (Windsor Locks) over
which the parties litigated, and "completely contradict[ed]" the multiple-occurrence position
that both cedent and its insured took during the litigation and in settlement talks. Id.
Indeed, the Allstate court concluded that the set of facts presented in this case were
"unlike any other reported case involving the follow-the-fortunes doctrine." Allstate Ins. Co.,
43 A.D.3d at 122. Accordingly, it directed the entry of judgment in the plaintiff–reinsurer's
favor without the need for any further factual development. Id. at 124.
However, nowhere in Allstate's discussion is any per se or categorical rule holding that
a cedent that changes its allocation pre- and post-settlement has acted unreasonably as a
matter of law. Rather, Allstate stands for the proposition that courts are still expected to
police the outer limits of the reinsurance relationship, and should not perm it a cedent to
railroad its reinsurer by forcing it to defer to outrageous, bad-faith conduct that runs afoul of a
contrary federal court ruling. Allstate Ins. Co., 43 A.D.3d at 123-24.
There is no per se or categorical rule lurking in U.S. F&G, either. In fact, the New
York Court of Appeals explicitly rejected an argument running in the other direction; i.e., that
evidence of an allocation's pre- and post-settlement consistency is itself sufficient to
demonstrate reasonableness as a matter of law.
In U.S. F&G, the parties litigated the question of whether the follow-the-settlements
doctrine obligated a group of defendant–reinsurers to accept the cedent's allocation of a
- 22 -
settlement it had entered into with its underlying insured to resolve a decade-long,
multi-million dollar coverage dispute over asbestos claims. U.S. F&G, 20 N.Y.3d at 415-17.
In the defendant–reinsurers' view, the cedent's allocation for reinsurance purposes
improperly "minimize[d] the burden on itself and maximize[d] the cost" on them. U.S., F&G,
20 N.Y.3d at 415-17. After the trial court rejected this argument and granted summary
judgment to the plaintiff–insurer, the Appellate Division affirmed over a dissenting justice's
insistence that a triable issue of fact remained about the reasonableness of some of the
more questionable decisions the cedent made during the settlement. Id. at 417.
The Court of Appeals reversed in part, modifying the Appellate Division's order to deny
summary judgment to the plaintiff–insurer on two particular issues. U.S. F&G, 20 N.Y.3d at
417. In so modifying the lower court's order, the U.S. F&G court began by adopting the
widely held view that a cedent's allocation decisions, like virtually all other decisions it makes,
are entitled to a measure of deference. U.S. F&G, 20 N.Y.3d at 419.
This rule made prudential sense, the high court reasoned, because "[d]eference to a
cedent's decisions makes for a more orderly and predictable resolution of claims." U.S.
F&G, 20 N.Y.3d at 419. To hold otherwise "would invite long litigation over complex issues
that courts may not be well equipped to resolve, creating cost and uncertainty and making
the reinsurance market less efficient." Id.
At the same time, however, the U.S. F&G court emphasized that this general principle
can only take you so far—the deference owed to a cedent's decision-making does not
completely immunize it from judicial scrutiny. U.S. F&G, 20 N.Y.3d at 420. Instead, the court
held that "a cedent's allocation of a settlement for reinsurance purposes will be binding on a
- 23 -
reinsurer if, but only if, it is a reasonable allocation, and consistency with the allocation used
in settling the underlying claim does not by itself establish reasonableness." Id. at 421-22.
What is reasonableness in this context? For starters, the U.S. F&G court observed
that reasonableness does not require a cedent to disregard its own interests, or to put the
interests of its reinsurer ahead of its own. 20 N.Y.3d at 420. And where several different
reasonable allocations might be possible, the court took the view that it was "unrealistic to
expect that the cedent will not be guided by its own interests in making the choice" between
them. U.S. F&G, 20 N.Y.3d at 421.
In giving more specific guidance, the U.S. F&G court opined that a reinsured's
allocation of a settlement would satisfy this test if it was "one that the parties to the
settlement of the underlying insurance claims might reasonably have arrived at in arm's
length negotiations if the reinsurance did not exist." 20 N.Y.3d at 420.
On this point, the U.S. F&G court cited approvingly to Travelers Cas. & Sur. Co. v. Ins.
Co. of N. Am., 609 F.3d 143 (3d Cir. 2010), which explained that a cedent cannot make
allocation decisions "primarily for the purpose of increasing its reinsurance recovery." Id. at
158. However, unlike the more freewheeling inquiry into the cedent's subjective motivations
contemplated by the Third Circuit in Travelers, the Court of Appeals in U.S. F&G cautioned
that, at least in the mine-run of reinsurance disputes, the cedent's subjective motivation for its
decision-making should generally be unimportant. U.S. F&G, 20 N.Y.3d at 421; but see
Travelers Cas. & Sur. Co., 609 F.3d at 158-59.
Applying these principles to the facts presented, the U.S. F&G court rejected the
notion that the plaintiff–insurer's allocation was reasonable as a matter of law simply because
the allocation the cedent "used in billing the reinsurers was one that it discussed and agreed
- 24 -
on in negotiations" with its insured. U.S. F&G, 20 N.Y.3d at 421. Instead, the court
remanded the case for trial on the reasonableness of certain decisions made by the cedent
in connection with the settlement and subsequent reinsurance allocation. Id. at 425-26, 429.
In sum, nowhere in Allstate or U.S. F&G is any categorical rule that "inconsistent
allocations are always unreasonable as a matter of law." Rather, Allstate signals that
dramatically inconsistent pre- and post-settlement allocations, or perhaps ones in direct
contravention of federal court rulings, can be unreasonable as a matter of law.
And U.S. F&G signals that it is sometimes appropriate to take allocation cases to trial
to determine whether the cedent acted reasonably when settling with its insured; i.e., whether
"parties bargaining at arm's length, in a situation where reinsurance was absent, could
reasonably" have reached the result being challenged by the reinsurer.
Thus, U.S. F&G recognizes that the follow-the-settlements doctrine sweeps broadly
enough to permit the resolution of most reinsurance disputes at summary judgment while
acknowledging that some edge cases will still require a trial. Indeed, U.S. F&G's guidance
on this issue found its way into the Court's jury instructions in this case:
What is objective reasonableness? Consistency with the allocation
used in settling the underlying claim does not by itself establish
reasonableness. If there is more than one reasonable allocation,
the cedent may choose the one that is more favorable to itself. The
standard of reasonableness does not require the ceding company
to disregard its own interests. Rather, the standard means that the
ceding company's allocation of the settlement must be one that the
parties to the settlement might reasonably have arrived at in arm's
length negotiations if the reinsurance did not exist.
Court's Ex. 3 at 25.
Century is therefore wrong to insist that "the issue should never have been presented
to the jury." Def.'s Mem. at 6. Reasonableness as a matter of law could not be decided at
- 25 -
summary judgment because of the unique circumstances of this particular edge case, so the
Court let the fact-bound question go to a jury. The jury sided against Century, and there was
sufficient evidence from which it could properly do so in light of the governing principles set
out by the New York Court of Appeals in U.S. F&G. See, e.g., Pl.'s Opp'n at 11-15
(recounting trial evidence). Accordingly, this argument will be rejected.
2. The Mid-Term Endorsement
Alternatively, Century insists the Court should at least throw out Utica's claim under
the 1973 agreement, since Utica never established that Century consented to the mid-term
modification on which Utica relied to bill defense costs in addition to limits. Def.'s Mem. at
4-11. Utica responds that the appropriate question is whether Utica acted reasonably in
billing under the endorsement based on what it knew at the time. Pl.'s Opp'n at 15-17.
Framed that way, Utica points to evidence that supports the jury's implicit conclusions about
the endorsement. Id. In reply, Century reiterates that the law governing endorsements to a
contract requires evidence of the counter-party's consent. Def.'s Reply at 7-10. According to
Century, Utica failed to introduce any at trial. Id.
This Rule 50(b) motion fares no better than the first one. In Century's view, any
change to the terms of the parties' agreement needed to accord with traditional contract
principles surrounding the modification of a contract. Def.'s Mem. at 7-11; see, e.g., Kaplan
v. Old Mutual PLC, 526 F. App'x 70, 72 (2d Cir. 2013) (summary order) (setting forth New
York law on contract modification).
Again, Century's contention fails to grapple with how the parties actually litigated this
issue. At the close of discovery, the Court denied Century's motion for partial summary
- 26 -
judgment on its assertion that the mid-term endorsement identified did not apply to the 1973
certificate because:
A review of the parties' submissions reveal genuine disputes of
material fact that preclude summary resolution of this issue. Among
other things, Utica has submitted evidence to substantiate its
position that the mid-term endorsement did not actually "modify" the
agreement in the manner claimed by Century. Instead, Utica argues
that the 1973 Certificate permitted Utica, as cedent, to issue
endorsements, like the mid-term endorsement at issue here, without
receiving consent from the reinsurer. According to Utica, standard
underwriting practices would have required it to inform Century of
any endorsements anyway—and that there is evidence to
substantiate Utica's assertion that it acted in conformity with those
practices when transmitting endorsements to Century.
Utica Mut. Ins. Co., 2018 WL 4625404, at *14.
Conversely, in the run up to trial, the Court rejected an attem pt by Utica to preclude
Century from arguing this consent/modification theory to the jury. Dkt. No. 621 (ruling, inter
alia, that Century could introduce evidence tending to show that "Utica needed to obtain
consent to the defense endorsement"). In other words, the Court declined to sanction either
party's theory of how the mid-term endorsement might fit into the peculiar facts of this case.
The Court took this approach because the docum entary evidence, viewed alone,
seemed inconclusive. Utica "discovered" the endorsement when an employee ran across a
written copy, which is unsigned, several months after executing the 2007 settlement
agreement with Goulds. In Utica's view, the lack of a signature did not answer the question
of whether the endorsement had actually been issued to Century. According to Utica, the
copy it discovered is an underwriting copy, which were often unsigned in 1970s. Thus, Utica
focused on other indicia, such as typed information identifying the policy number and the
effective date, to argue the endorsement was actually issued to Century.
- 27 -
Century, of course, took issue with this assertion. In its view, this kind of endorsement
would certainly have been signed if it had actually been issued. Century seized on the notion
that the version "discovered" by Utica could have been nothing more than an internal draft
document. According to Century, there was no evidence that Utica ever sent the
endorsement out to Century or that Century, as counter-party to the modification, ever
formally approved it.
Utica argued that it didn't matter whether Century had a record reflecting its formal
approval of the change in coverage. According to Utica, the endorsement just required the
cedent to provide the reinsurer with notice, which Utica planned to establish, at least in part,
through custom and practice evidence.
As for Century's eminently reasonable suggestion that it would have required Utica to
shell out some more premium payment in consideration for the increased risk it would be
taking on through the endorsement, Utica claimed that, as strange as it may seem to us now
in 2019, in the 1970s this kind of mid-term change to a reinsurance agreement was not
unusual because long-tail risks like asbestos were not on the underwriters' minds.
Aside from rejecting Century's assertion that a "clear and convincing" standard of
evidence should apply to Utica's attempt to prove up the missing information, the Court
permitted the parties to introduce evidence at trial that roughly tracked these two competing
views of the endorsement's applicability. Pl.'s Opp'n at 15-18 (discussing Utica's evidence at
trial).
As Utica points out, at least one of its witnesses testified that the reinsurance
certificate in question did not require the reinsurer's explicit approval for endorsements. Trial
Tr. Vol. V, Dkt. No. 641 at 788:8-15. As Utica also points out, testim ony of its other
- 28 -
witnesses tended to show that certain reinsurance principles applicable to the underlying
umbrella policy, including the follow-the-fortunes provision, made formal modification
unnecessary under these circumstances. In sum, then, Century has failed to demonstrate a
complete absence of evidence supporting the verdict. Accordingly, this Rule 50(b) motion
will also be denied.
3. Utica's Affirmative Defenses
In its third motion, Century contends that it is entitled to judgment as a matter of law
on Utica's seven affirmative defenses. Def.'s Mem. at 12-14. Utica responds that these
issues are mooted by the jury's verdict. Pl.'s Opp'n at 18-20. Century replies that these
defenses would be back in play if the Court ordered a new trial on one or both
agreements. Def.'s Reply at 10.
Upon review, the Court agrees that Century's third request for Rule 50(b) relief is
mooted by the jury's verdict. This is especially so since, as discussed infra, Century's motion
for a new trial will be denied in all respects. However, the Court also finds persuasive Utica's
arguments in opposition on these points, Pl.'s Opp'n at 18-20, and adopts them to the extent
a live dispute remains. Accordingly, this motion for Rule 50(b) relief will also be denied.
C. Century's Request for a New Trial
Next, Century argues the case should be tried again, either because the jury's verdict
is against the weight of the evidence or because a juror failed to disclose a relationship with
one of Utica's witnesses. Def.'s Mem. at 14-24.
Under Rule 59, a court "may, on motion, grant a new trial on all or some of the
issues—and to any party— . . . after a jury trial, for any reason for which a new trial has
heretofore been granted in an action at law in federal court." FED. R. CIV. P. 59(a)(1)(A).
- 29 -
"The general grounds for a new trial are that (1) the verdict is against the clear weight
of the evidence; (2) the trial court was not fair; (3) substantial errors occurred in the
admission or rejection of evidence of the giving or refusal of instructions to the jury; or
(4) damages are excessive." Welch, 871 F. Supp. 2d at 174 (citation omitted).
"The standards governing a district court's consideration of a Rule 59 motion for a new
trial on the grounds that the verdict was against the weight of the evidence differs in two
significant ways from the standards governing a Rule 50 motion for judgment as a matter of
law." DLC Mgmt. Corp. v. Town of Hyde Park, 163 F.3d 124, 133-34 (2d Cir. 1998).
First, "a new trial may be granted even if there is substantial evidence supporting the
jury's verdict." DLC Mgmt. Corp., 163 F.3d at 134; see also Fireman's Fund Ins. Co., 287 F.
Supp. 3d at 168. Second, "a trial judge is free to weigh the evidence himself, and need not
view it in the light most favorable to the verdict winner." DLC Mgmt. Corp., 163 F.3d at
134 (citation omitted).
However, "the granting of a new trial is an extraordinarily relief, and one that is
properly granted only upon a showing of exceptional circumstances." Welch, 871 F. Supp.
2d at 174 (citation and internal quotation marks omitted). Accordingly, "[i]t is well-established
that a district court may grant a new trial under Rule 59 only if it concludes that the jury
reached a 'seriously erroneous result' or that the 'verdict is a miscarriage of justice.'" In re
Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d 512, 573 (S.D.N.Y. 2011) (quoting
Manley v. AmBase Corp., 337 F.3d 237, 245 (2d Cir. 2003)).
1. Weight of the Evidence
As to the weight of the evidence, Century offers four reasons to conclude the jury's
verdict runs counter to the facts established at trial. First, Century reiterates its claim that it
- 30 -
was never on board with any mid-term endorsement to the 1973 agreement. Def.'s Mem. at
15-17. Second, Century returns to its assertion that Utica's post-settlement allocation of
defense costs to Century was objectively unreasonable. Id. at 17-18. Third, Century
resurrects its contention that it cannot be liable under the 1975 ag reement because it is not
the successor-in-interest to the company that issued the certificate. Id. at 19-20. Fourth,
Century insists the jury erred in rejecting its bad-faith counterclaim. Id. at 20-21.
Utica responds to Century's desire for a new trial on the breached agreements by
carefully cataloguing the extensive evidence supporting the jury's pro-Utica verdict. Pl.'s
Opp'n at 20-25. As Utica points out, Century's arguments focus on its own witnesses'
favorable testimony without doing much to explain why the Court should totally discount
Utica's contrary evidentiary showing, which the jury appears to have reasonably relied on in
finding for Utica. Id.
Century's reply memorandum borrows from its prior exposition of how the legal issues
in this case should shake out. Def.'s Reply at 10-14. In Century's telling, a new trial is
warranted because Utica failed to establish that Century ever consented to the mid-term
endorsement. Id. at 10-11. Century also maintains that Utica has failed to rebut its showing
that the allocation following the settlement with Goulds was objectively unreasonable. Id. at
11-12. Century then returns to its claim that it cannot be liable under the 1975 agreement
because some other entity is the appropriate successor-in-interest to INA's reinsurance
business. Id. at 12-13. Beyond that, Century emphasizes that the jury's rejection of its
bad-faith counterclaim runs against the weight of the evidence, which includes repeated
instances of Utica's witnesses failing to disclose material information to Century. Id. at
13-14.
- 31 -
Measured against the appropriate standard, though, Century's various weight-of-theevidence arguments come up short. The jury heard live or pre-recorded testimony from
twenty witnesses, some of whom helped to introduce a mountain of bankers' boxes stuffed
with the documentary evidence relevant to this dispute. Others assisted the jury with the
process of reconstructing certain pieces of this decades-old paper puzzle or offered evidence
about Utica's settlement with Goulds, including testimony from Utica officers and employees
who handled that task. Still others described how Utica's reinsurance relationships were
impacted by the settlement and the allocation. After independently weighing all of this
evidence, the Court is far from convinced that the jury reached a seriously erroneous result
or that the verdict is a miscarriage of justice. Accordingly, this branch of Century's Rule 59
motion for a new trial will be denied.
2. Fairness of the Trial
Finally, Century declares the trial might well have been tainted by a juror's undisclosed
relationship with Bernard Turi, one of Utica's star witnesses. Def.'s Mem. at 22-24. Century,
relying on the Supreme Court's decision in McDonough Power Equip. Inc. v. Greenwood,
464 U.S. 548, 556 (1984), insists it "should be granted an opportunity to take discovery on
that relationship and, if appropriate, renew this motion [for a new trial] after discovery is
complete." Def.'s Mem. at 22. Utica responds that Century's theory of juror misconduct is
totally baseless and therefore the Court should reject it out of hand. Pl.'s Opp'n at
25-30. Century replies that Utica's protests about this claim are exaggerated, since it is only
seeking discovery into the possibility of improper juror behavior. Def.'s Reply at 14.
In McDonough, the Supreme Court considered the circumstances under which a
juror's non-disclosure of information warranted a new trial. The underlying action involved a
- 32 -
state law diversity claim brought in federal court against a lawn mower manufacturer by the
parents of a child who suffered injuries from the mower's blades. McDonough Power Equip.,
Inc., 464 U.S. at 549.
During voir dire, the plaintiffs' attorney asked prospective jurors whether they, or
anyone in their immediate family, had sustained injuries from an accident "that resulted in
any disability or prolonged pain or suffering." McDonough Power Equip., Inc., 464 U.S. at
549-50. This question, which was posed to the whole jury panel rather than any specific
prospective juror, did not elicit a response from Ronald Payton, who was later seated as a
juror. Id. at 550.
After a three-week trial, the jury returned a verdict that did not include an
apportionment of fault to the defendant–manufacturer. McDonough Power Equip., Inc., 464
U.S. at 550. Instead, through a quirk of Kansas products liability law, the jury apportioned
fault for the accident among three non-defendants: the child's mother, the child's father, and
the next-door neighbor operating the mower at the time of the injury. Id.
In post-trial proceedings, the losing plaintiffs sought permission to approach the
members of the jury and in particular to question Mr. Payton, whom they alleged had failed to
disclose during voir dire that his son had once been seriously injured by the explosion of a
truck tire. McDonough Power Equip., Inc., 464 U.S. at 551.
Following that inquiry, the plaintiffs learned that the juror's son had in fact suffered a
broken leg from an exploding tire at some point in the past. McDonough Power Equip., Inc.,
464 U.S. at 555. According to the juror, he had not disclosed his son's injury during the voir
dire examination because he did not consider it "severe" within the meaning of the question
posed by the plaintiffs' attorney. Id. at 551 n.3. Based on that information, the plaintiffs
- 33 -
sought and were denied a new trial on, inter alia, their contention that the juror's failure to
respond affirmatively to the personal-injury question on voir dire had prejudiced the
proceedings. Id. at 551.
On appeal, a panel of the Court of Appeals for the Tenth Circuit granted the plaintiffs a
new trial, reasoning that the undisclosed information "indicated probable bias." McDonough
Power Equip., Inc., 464 U.S. at 552. In the Tenth Circuit's view, the apparently good-faith
nature of the juror's mistake was irrelevant. Id. What mattered, the court said, was whether
"an average prospective juror would have disclosed the information" revealing the probable
bias claimed by the plaintiffs below. Id.
The Supreme Court granted certiorari and reversed. McDonough Power Equip., Inc.,
464 U.S. at 552. In doing so, the Court acknowledged that a fair trial requires an impartial
trier of fact; i.e., "a jury capable and willing to decide the case solely on the evidence before
it." 464 U.S. at 554 (quoting Smith v. Phillips, 455 U.S. 209, 217 (1982)). And it was true,
too, the Court agreed, that voir dire protects this fair trial right by
exposing possible biases, both known and unknown, on the part of
potential jurors. Demonstrated bias in the responses to questions
on voir dire may result in a juror being excused for cause; hints of
bias not sufficient to warrant challenge for cause may assist parties
in exercising their peremptory challenges. The necessity of truthful
answers by prospective jurors if this process is to service its purpose
is obvious.
McDonough Power Equip., Inc., 464 U.S. at 554.
Even so, then-Associate Justice Rehnquist's majority opinion for the Court forcefully
rejected the idea that perfection was somehow the ultimate goal of voir dire
examination. McDonough Power Equip., Inc., 464 U.S. at 553; id. at 555 ("To invalidate the
result of a three-week trial because of a juror's mistaken, though honest response to a
- 34 -
question, is to insist on something closer to perfection that our judicial system can be
expected to give.").
The Court reasoned that prospective jurors, "[c]alled as they are from all walks of
life, . . . may be uncertain as to the meaning of terms which are relatively easily understood
by lawyers and judges." McDonough Power Equip., Inc., 464 U.S. at 555. Thus, the Court
concluded the Tenth Circuit's "average juror" standard would be too difficult to apply to these
kinds of disputes. Id.
Instead, the Court in McDonough fashioned a more demanding standard: "to obtain a
new trial in such a situation, a party must first demonstrate that a juror failed to answer
honestly a material question on voir dire, and then further show that a correct response
would have provided a valid basis for a challenge for cause." McDonough Power Equip.,
Inc., 464 U.S. at 556.
The Second Circuit has adopted McDonough's holding as a two-part test, applying it in
both civil and criminal cases. See, e.g., United States v. Nix, 275 F. Supp. 3d 420, 437
(W.D.N.Y. 2017) (collecting cases applying McDonough); accord Tinsley v. Borg, 895 F.2d
520, 524 (9th Cir. 1990) ("Th[e] [McDonough] standard applies in civil and criminal cases.").
First, a party must demonstrate the juror "deliberately lied or consciously deceived the
Court, as opposed to providing inaccurate responses as a result of a mistake,
misunderstanding or embarrassment." Nix, 275 F. Supp. 3d at 437. Second, " the Court
must determine if it would have granted a hypothetical cause challenge if [the challenged
juror] had responded accurately to the Court's questions." Id. at 438. "Challenges for cause
- 35 -
are generally based on actual bias, implied bias, or inferable bias." United States v. Greer,
285 F.3d 158, 171 (2d Cir. 2002). 6
Century argues limited post-trial discovery is warranted because Juror No. 3 may have
run afoul of the rule set out in McDonough. In Century's view, it "is likely entitled to a new
trial because it appears that Utica failed to disclose a professional relationship between
[Juror No. 3] and Utica's General Counsel Bernard Turi." Def.'s Mem. at 22. As Century
explains it, Juror No. 3 "works, either directly or indirectly, for Bernard Turi's current or former
wife, Carol Turi, at Upstate Cerebral Palsy, Inc." Id. at 22-23.
Century's submissions establish that Carol Turi is First Vice President of the Board of
Directors at Upstate Cerebral Palsy, Inc. ("UCP"), a Utica-area non-profit organization that
provides programs and services to children and families with developmental disabilities. Ex.
B to Weisband Decl., Dkt. No. 653-4; see also http://www.upstatecp.org/about/board-ofdirectors/ (last visited Nov. 25, 2019).
Century substantiates its claim of a possible "relationship" to Juror No. 3 by submitting
UCP's Internal Revenue Service Form 990 from the 2017 tax year, which shows that Ms. Turi
averages about an hour per week in her role on UCP's board. Ex. A to Weisband Decl., Dkt.
No. 653-3 at 17. Juror No. 3, on the other hand, is a UCP em ployee who "oversee[s]
residences where kids with disabilities live." Trial Tr. of Jury Selection, Dkt. No. 651 at
49:16-25.
6
"Actual bias is bias in fact." Greer, 285 F.3d at 171 (citing United States v. Torres, 138 F.3d 38, 43
(2d Cir. 1997), cert. denied, 523 U.S. 1065 (1998)). "Implied bias, by contrast, is bias presumed as a matter
of law." Id. (citation omitted). "Finally, inferred bias is available when actual or implied bias does not
apply." Id. "Bias may be inferred when a juror disclosed a fact that bespeaks a risk of partiality sufficiently
significant to warrant granting the trial judge discretion to excuse the juror for cause, but not so great as to
make mandatory a presumption of bias." Id.
- 36 -
Upon review, Century's request for discovery based on this theory of possible juror
misconduct will be denied. As Utica points out, Century cites McDonough but does not even
attempt to apply its teachings. At step one of McDonough, the only question Century
suggests Juror No. 3 might have failed to answer honestly is buried in a footnote—Century
suggests Juror No. 3 should have been more forthright in response to the Court's general
query to the panel about "any connections" they might have to Utica. Def.'s Mem. at 22
n.41.
But this theory of juror misconduct is awfully similar to the one rejected by the
Supreme Court in McDonough, which warned the lower courts not to impose a
hyper-technical or sweeping disclosure requirements to every honest-but-arguably-mistaken
answer given by a prospective juror during voir dire.
As the Form 990 relied on by Century also shows, UCP employed 2,390 workers and
301 volunteers in 2017. Ex. A to Weisband Decl. at 2. Beyond that, the Court takes judicial
notice of the fact that UCP has nearly thirty different locations across Central New
York. See https://www.upstatecp.org/locations/ (last visited Nov. 26, 2019). While Juror
No. 3 presumably works at one of these locations, Ms. Turi, a board member, spends about
an hour a week at one of them, probably the organization's administrative office.
To even warrant discovery into this theory of possible juror misconduct, Century needs
to make some kind of basic, threshold showing of impropriety beyond mere generalized
speculation. Cf. United States v. Sattar, 395 F. Supp. 2d 66, 72-73 (S.D.N.Y. 2005)
(requiring strong indication that a specific impropriety has occurred to warrant further
proceedings on a McDonough-based jury misconduct claim).
- 37 -
And the problem with Century's theory is that it rides the wrong side of that
line: Century has not even established a non-speculative connection, professional or
otherwise, between Juror No. 3 and Ms. Turi, let alone one between Juror No. 3 and Mr.
Turi.7
Where, as here, an out-of-towner winds up going to trial against a large employer that
calls the judicial district its home, a not-insubstantial portion of the jury pool is going to have
some kind of tenuous "connection" to the entity if you look hard enough.
But the voir dire process is not concerned with connections that might be established
at several degrees of separation; it exists to help safeguard the litigants' right to a fair trial by
ferreting out actual, implied, or inferable bias. Because there is not a whiff of any such bias
here, Century's request for discovery on this issue will be denied.
V. CONCLUSION
The parties have spent years litigating thorny issues raised in the wake of Utica's 2007
settlement with Goulds. Those issues were complicated, in no small part, by both parties'
short-sighted document retention policies. The Court gave both sides a full and fair
opportunity to air their grievances to a jury, which eventually sided with Utica. Because
Century has failed to establish any grounds for post-trial relief, its motions must be denied.
Therefore, it is
ORDERED that
1. Century's motion to amend or correct the judgment is DENIED;
2. Century's renewed motions for judgment as a matter of law are DENIED;
7
In opposition, Utica submitted an affidavit from Mr. Turi, who explains that Carol Turi is his former
spouse. Turi Aff., Dkt. No. 657-1. The pair legally separated in 2012, id. ¶ 5, and divorced in 2015, id.
- 38 -
3. Century's motion for a new trial is DENIED; and
4. Century's motion for post-trial discovery is DENIED.
IT IS SO ORDERED.
Dated: December 3, 2019
Utica, New York.
- 39 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?