tremendous admiration and respect for him but in this particular case what he did was something that on a daily basis as lawyers and judges we as jurors not to do which is don't make up your mind until you've heard all of the facts based on the issues that are fully exploited explored and each party has had an opportunity to present its evidence to you and only then should you make a decision here but judge lovell did was to render three sanctions orders without disclosing that he was going to use evidence that was not in the record before him that was based on conduct that was pre litigation conduct and that was based on a disciplinary matter that he didn't say he was going to address as a result of that approach together with using the wrong standard not clear and convincing evidence  we contend that those sanction orders or in error and should be reversed and the the factual basis on which the reversal should be made would be shown had my clients had an opportunity to present that at the hearing for example one of the grounds that judge level relied on imposing the most severe sanction using both one hundred twenty seven and inherent power authority was based on suppose a conflict that he perceived on the part of my client had there been a hearing at which my client had noticed that that was one of the judge's concerns we would have been able to present evidence that first of all there was no conflict certainly not in two thousand and eleven because what is the point of this lawsuit of a claim against the insurance company they paid out the entire covers a month right they policy unfair settlement practices used yes they had an obligation in two thousand and eleven when billy reading was the only claimant to investigate the claim to settle it if they could reasonably and promptly and to explain why they weren't going to pay if they weren't and they didn't do those things until two thousand and twelve so the basis of the lawsuit was the activity of them went and got some other e client suffer from it would have been the difference of whatever she was able to prove or her damages in the bad faith suit vs what she actually collected in two thousand and twelve so where's the bad faith that faith is in failing to comply with the requirements of the practices act in two thousand and eleven there were four different elements for the bad faith claim one was the failure to investigate when was the failure to respond to an offer in a timely manner and the third was to not explain the basis for refusing to pay in two thousand and eleven it was only this excuse me i don't know well and i think i think i'm helping to proceed with the questions my understanding of judge district judge's order is that he sanctioning for only for a continuation of litigation after it was apparent that the bad faith lawsuit was going to fail that it is correct your honor so how clear was it the lawsuit was going to fail at the time from which the judge begins to run the sang sanctions well the judge made his decision based on the claim of one witness that said i wouldn't have settled in february of two thousand and fourteen and the fact is that under the act the insureds willingness to settle or consent or not is here are immaterial to the insurers and good faith obligation to investigate promptly pay or at least promptly explain why they weren't going to honor the claim and and here in new york marine didn't do that so when was the four million dollars payment made in july of two thousand and twelve and when was the first claim made against the insurance company in two thousand and ten and when were the subsequent claims made let's say there was a for those firstly it was a claim by the one person that's correct ms reading right writing claim and then there was the claims by i think five more people and one with those claims made they were filed it various times in two thousand and twelve some were actual lawsuits others were simply claims you know i see a lot of insurance coming cases i see a lot more tardy payments on the claims well that assumes that the client didn't agree your honor and the proof would have been the client's did agree and it wasn't ms dollar who decided how to allocate these funds unilaterally now i started  continue to be litigated and it's only in the continuation that he says i'm not going to sanctions that part is true but he based it on a statement that someone would have given consent and consent isn't a defense to the insurers obligation to investigate and settle which should have been done in two thousand and eleven that was the basis of the lawsuit and it was a was always a viable basis undermined tell a lot what why can't geisha conduct be used as part of the judge's order and sanction what is what is the reason it cannot be used to pre litigation conduct related to the underlying litigation  in under one nine hundred twenty seven it's only conduct during the course of the litigation and doesn't even apply to the initial filing initial pleading so it's limited to bad faith in this particular that occasion and whether it ultimately turned out to be a case that somebody thought had great merit or or little merit it wasn't done maliciously it wasn't done in bad faith and it was done under a fervent belief that this insurance company had not done what they were required to do legally in two thousand and eleven  so he used an absolute under the paris we save go case and which says that consent is immaterial to the insurers duty he relied on that theory to impose a sanction from that day forward and he did it as if it was a statement by a gentleman named gary carlson he did it as if that statement was uncontested it was hotly disputed there was evidence in the form of letters from the insurance companies hired lawyers for the district judge believe them i'm sorry why is that why does it have to be uncontested why isn't it them off the streets believe them well if we would've known that was going to be the basis for the judge's ruling again we would have and had it the opportunity to be heard on it we could have brought in some of the evidence but he if he simply says i believe one person statement that cannot comply with the current convincing evidence standard so this is like treason well if you're going to deal with a subjective test which is the the test here i think you have to have witnesses you have to be able to at least ask the the lawyer what's in her mind or his mind when they were doing this in that never occurred he also he also impose these sanctions in large part because he said he focused on what he perceived to be an ethical violation by distributing these trust fund moneys when if there was a hearing that would we would have been able to show that wasn't the case at all but more importantly we had no idea that that was going to be the focus of his sanctions ruling because in his first order what he said is at the end i may refer this to disciplinary authorities we had no idea that he was not only going to do that but that it was actually going to base his decision on dismiss perception of what happened in relation to the distribution of those funds and he did refer them to it the to snare authorities in fact my client self reported before that ever happened and i'm not sure it's relevant to them to be in front of us what happened with respect to the disciplinary has i've sorry it does have to do solely with conflict of interest if you get the short answer is those are on result though those are on resolved i can state that there's been a complaint and an answer from her clients or from other witnesses that the insurance company wanted to pay full policy limits in march of or february of two thousand and eleven what i think that gets down to is the distinction between  wanted to pay for policy limits or within policy limits but that is not reckless it might be a misstatement but it's not done recklessly which again is a standard you know as i wanted to allow mr davis to have five minutes of my time and i'd like to save what is now about two and a half minutes for rebuttal if i mean thank you thank you and i as as the file reflects i represent richard mike lane who was misty old as co counsel in the federal court case and also initiated the original case on behalf of miss reading against anderson ruling i want to pick up though on first of all note that the sanctions as entered against my client rest on judge lovell asking a number of questions  that he never answers rhetorical questions in his in the five hundred fifteen thousand dollars sanction order and given the requirement i think that we agree on that there needs to be a finding of subject of bad faith asking a bunch of rhetorical questions that you don't buy that the court doesn't bother to answer strikes me as an insufficient basis to impose sanctions on my client beyond that i endorse everything that mr taleb has said on behalf of mis rhetorical questions in that order which he does not answer but i heard what you said but i did i disagree that that if we're talking about sanctioning and a lawyer for five hundred thousand dollars i disagree that the idea that in that requires a some kind of whether it's clear gambling can convincing or simply a burden of proof that they're subject of bad faith the behalf of my client i think it requires something more than asking the questions rhetorical and not answering them so i do disagree with you sir that that's sufficient under the standards under either nine hundred twenty seven or the court's inhere if he did and explained it and gave an opportunity also when we've got something else we addressed was an opportunity be heard on these matters and they weren't really given an opportunity to be heard and explain those matters but i want to go back in my limited time to york marine reformulated the issues and the issue became would they have ever paid two million dollars to settle miss redding's claim but that wasn't the legal standard the legal standard as mr telep said was that they had to liabilities become reasonably clear in february of two thousand and eleven mr lane made a two million dollar policy when it's demand that's undisputed there was a mediation new york marine came with seven hundred fifty thousand dollars of authority offered two hundred fifty yet the question became should they have paid two million many cases you've seen lots of insurance cases  acetyl sometimes in between and so the question becomes was it so clear that in offering two hundred fifty thousand dollars in march of two thousand and eleven new york marine satisfied its legal  montana law not whether they should have paid two million dollars in hindsight but whether doing that in and of itself satisfied those obligations and if you say if if when i think the correct analysis is kno that that's reasonable minds could differ is it a million dollar case i don't know what i have brought the case as mr tells us i probably would have brought the case but can you say categorically that that case the but i'm not aware of one judge but but the issue whether the issue is the converse of that or the reverse that it can you not be held in bad faith for not attempting to settle when you recognize i the question is mrs reading arguably could have received seven hundred fifty thousand in total in two thousand and eleven rather than the six hundred some thousand she received in two hundred two thousand and twelve is that a great case no is a one the totally lacks merit no and if if there's any modicum of merit to that case there's no reason to have sanctioned mr jealous client or my client in two thousand and fifteen thank judge think i still have one more minute of morning so good morning your honor mark good men for prostate specialty management company prostate specialty insurance company and new york marine and general insurance company i'm here with my local case is not for your honour's of course because the district court found that there was no bad faith as a matter of law and that matter is not on appeal that appeal was filed  the lack of merit in that case to me as a lawyer for the client was apparent from the get go which is why we brought a motion to dismiss on the pleadings of the twelve motion which the judge judge lovell was inclined to grant at the hearing we had extensive oral argument on that motion and the judge found ultimately decided not to grant the motion because in this deal of represented to him that she had she didn't believe she had evidence that the insured consented or requested my client to pay policy limits to settle his readings claim alone so all of this discussion that we just heard about the failure to settle ms writings claim that key here was that the policy issue the insurance contract issue require consent of the insured which is reading it was suing at the time as deal as client was suing the insured insured never consented to paying seven hundred fifty thousand or two million dollars or anything else in that settlement no specific figure and we made that argument in the dismissal motion and the court and the court in reliance on ms deal with statement to the court that she had evidence to the contrary is what caused the case to continue evidence to the contrary specifically being what that's a good you got me here i think what she was relying on was a letter from defense counsel for the insurer which said that gave an analysis of the case and gave a statement in there that they believe the case should settle for with in policy limits and i think that's what she was relying on but there's no statement in that letter or from the insured itself as opposed to defense counsel saying please pay policy limits to settle to ms reading alone to settle these cases this is this these cases are rows of the d b s i scheme you know you might be familiar your honour's might be familiar with that there are a lot of cases arising out of this so the are insured their innocence remulla knew that this was not going to be a one off there were going to be multiple claims against it it was never going to agree to pay all of its available insurance to one party news can be sued by the parties and sure enough it was right it got sued by other parties of represented an almost all of those parties and it's untrue and you can see from the record she's the one who allocated all of the payment that was ultimately made to settle all of those cases so here you have an insured with four million dollars of total possible policy limits and really there was a very good argument that we had that there was two million dollars available because there was a relation back  provision in our policies so that we paid the maximum amount to settle the maximum number of claims all of them and that's what judge lovell was faced with here's my problem with this case as soon as i read judge levels order is very long it's quite articulate it's even impassioned and he's really unhappy with what he perceives to be unethical conduct of ms deal that does not strike in in an allocate in the funds not in litigating the bad faith case so i just i read his order and i say you're mad at her for something that you see that she's done and well you're correct or not and that i'm not going to get into for the moment but i don't see what that has to do with a bad faith lawsuit that's that's something that happened before and it seems to me off to one side and i'm not saying you cannot as a categorical matter you can never consider litigation conduct but i don't see what this conduct has to do with a bad face for which were looking up to have a million dollars worth of sanctions i don't think it does and i don't think i think he said he references it in the order your honor yes but not a reference that he's going to a long time talking about he does right and i think but i think it is gives contacts i don't there's there's no indication or that he sanctioned conduct before the them according to conclusion she's a bad person now i don't think so your honor i don't think that's what the order is meant to do it i think that's what it does i think as you know the law here says that you can sanction an attorney for either doing something for an improper purpose or unreasonably multiplying the proceedings in there in improper purpose i think what that does is it gives context to the improper purpose because the fact that ms dillard did these things and allocated and didn't give her client enough money shows why she sued my client to try to get more money to cover up what she did to her client but the the that sanctioned five hundred thousand dollars for not allocating properly the money term client where he says is it became clear in this case the bad faith case during discovery after the insured i think really got him because that's what ms eula said she could show during the twelve b motion so once that happened there was no basis i said at the beginning of my argument this morning and i said it four years ago or five years ago that there was no she didn't have any evidence will certainly after anderson's or newlyn testified that there was no evidence that was the end of the case and that's what judge level really focused on that's the conduct that he focused on  and after that that's the point in time after which he found that that's one thing that's the but for your honor exactly if that if they had said and there must be accountability that's why we have these rules that's why we have one nine hundred twenty seven and rule eleven and the court inherent authority to sanction lawyers who have to be responsible to the court and to their opposing parties to bring meritorious claims claims that have a basis and i think judge lovell could have gone much further back in time for sanctions but he picked the latest point in time when it was absolutely clear you have the thing that misdeal a said she was existed and you have that from the horse's mouth it didn't exist that should have been the end of the honor there is no indication that the witness lied there's no impetus for this witness to lie it was a corporate designee who testified the lawyer who wrote the letter that ms reference also said he never received any instruction from his client to settle for policy limits or any specific amount and he never said intended for his letter to say that he said that if he wanted to say that to pay a specific amount he would have said that and he didn't so it's not just one isolated incident of someone witness saying something that puts a dent in their case it was the nail in the coffin literally there was a there was no evidence to begin with and all of the discovery confirmed what we had said from the beginning so not only was there no evidence supporting what ms eula said to the court the evidence was directly to the contrary and that's what i think judge level focus is really focuses on and that's what he's saying otherwise he would have pushed the sanctions way back to the to the getting the case for pre k so somehow that's not what happened of course what he's focusing on in the order and i agree with your honor there is a lot of focus on the pretty good comic began i think that has to be because it wasn't what he sank in them for he sanction them for you brought a claim without any evidence and then you found out that there was it was confirmed and you kept going and it was the keeping going that he really sanction them for not as far as again as far as i'm concerned what could have been pushed back in view on that is that's a shame because there i think there needs to be a lot more accountability you represent well not always your honor and and i've pursued and when i do represent defendants i also bring cross plains and i have of defenses and i understand my responsibility in pursuing those cross claims and asserting those affirming defenses that if i don't have the evidence to support them i have to get rid of them i have to drop them and that's something that i think is really important  have to be accountable as warriors to the system otherwise it's all of this it's not an it's not a victimless crime this trickles down to all of us as consumers of products when when the ideas well we'll just sue companies and well if that will just walk away at the end of the day if we lose we lose but you know so they had to spend millions of dollars to defend themselves against their frivolous claims you have to be held responsible i  that you believe that the district court summary judgment order was sufficient to put the other side on notice of the grounds on which sanctions could be levied that and other things rather yes and just tell me why why do you think it that told the court that she was going to be able to show that the insured consented to a settlement of two million dollars and there was undisputed evidence that that wasn't the case that the insured did not consent to such a payment and there was also the order is long and carefully it's one of the longest wars i've seen in my twenty six years of practicing where he sets out the whole history of the case but there's also in your honor knows in this record other than one hundred four page order there was the begin the motions to dismiss that we brought those letters that we wrote to counsel saying you don't have any evidence tell us what evidence are relying on and we did that after the the lawyers were deposed and they said they hadn't been given instructions by their client to pay any amount of money and settlement and we wrote two separate letters saying you're going to tell us what the evidence because you don't have any and if you don't if you continue this we're going to seek sanctions against you and we have multiple conversations at hearings where i said you know my client is not an a t m machine it's not an endless supply of funds where we can just keep this case going mis has to come up with a basis for her claims and the judge says i'm very cognizant of that and then we brought a motion this was not a she was spontaneous motion for sanctions we brought that rule fifty four motion for fees and costs and laid out all of the grounds in there they opposed that motion they asked for additional time they got it they never asked for an oral argument every time they asked for a long argument this case they got it did not ask for an argument on the sanctions motion so the idea that their arguments were not heard first arguments were heard they had four briefing and multiple affidavits are saying that they would call witnesses what witnesses they had affidavits that they gave to the court the court consider everything that they said in their opposition to our motion is what they're saying in their papers here and that's what they just told your honour's today so there's nothing that they've identified as far as a specific fact that they would have been able to put forward discovery was completed a summary judgment motion had been granted there there was nothing left in this case so there was no further evidence that they could have brought forward yet they still brought forward affidavits and made arguments and none of their a by several filings with this court and in twenty minutes or almost twenty minutes of argument how they identified any fact that would have given that they were not able to present so i think there was a question as to  they were put on notice of that they presented there's no indication that they did not put forth any such evidence they did they had affidavits it was like three hundred pages of material that the submitted to judge level that he considered on the honor that it's the subject of bad faith or a frivolous religion frivolous arguments that multiply the proceedings that i think is that's another thing the judge level focused on with respect to this point in time after which it was not possible for them to to in good faith continue to litigate this case again while i think it could have gone before the inner sins or mulan thirty six deposition testimony on valentine's day in two thousand and fourteen where they said that we know we never agreed or consented to a settlement think there was plenty of evidence before that and judge level didn't go there he said this is the point in time when it was absolutely one hundred percent clear that your claims were no good and you didn't say ok that we're walking away we don't have the evidence that i thought we sanctionable but at the point in time where they didn't do that and they had the letters and they had the motions and they had the evidence and they had all these things then they had the evidence is there your honor and they they made the points that they wanted to make and they were given the opportunity to do that and they did it they didn't say hey give us a hearing because there's no indication the judge level would have given them a hearing if they had said that there's in their don't know but the but this is not a judge who just you know came in on the bench he's a senior judge he's seen a lot of litigation he found that the rates and the amounts that were charged were them from the point forward were reasonable we obviously asked for a lot more when we asked for the sanctions he granted only a fraction of what we asked for so i hate putting on the record that abuse i think the fact that this was an expensive case they made us do a lot of work rate to this client is x is heavily discounted from my standard rate so it's a matter by national and international law firms so the amount that was awarded i think there is no evidence that it was somehow excessive even though by itself five hundred thousand dollars of record he doesn't i don't think he uses the phrase clear and convincing but i think i don't think a lot of judges on the in the district court have used that phrase as far as i find based on clear and convincing i think it was clear from the evidence that he looked at the record and finds that he made that it was based on clear and convincing do you think he was required to find make the finding by clear and convincing evidence or is that not the standard that he had to use well i think with respect to the bad  faith finding it had to be honest and clear and convincing i don't think he had to utter the words and making this finding on clear and convincing evidence but i think the evidence had to be clear and convincing and i think again the if you look at what he based the sanctions on which is the circumstances of the case the fact you have an insurance company that paid out its full policy limits that was not sued by its insured for anything that this is a lawsuit brought by a third party and there was a statement being that here's what i'm relying on by the plaintiff and that statement was proven to be false or at least entirely accurate  that's pretty clear and convincing i think that meets the standard whether the court actually used that phrase in its order or not it meets the standard there is not and you know when you're looking at it obviously you're looking at it for a br discretion in clear air i think it would be clear error if there was a finding by you that there was certainly not clear and convincing evidence but i don't think you can make that finding based on the record in front of you thank you thank you very much thank you with regard to the motion for judgment on the pleadings the record will show that what was alleged in the complaint was that the insurance company didn't respond to the demand letter and that it was the recommendation of the accountants lawyers to settle the case so we're nothing in jettisons with the consent of the shore the consent of the insured again under our statute and case law is immaterial to the insurers obligation to investigate and respond and explain and that was the crux of the case the as mr davis said trying to lay this on whether the insured consent i'm sorry to interrupt you i'm not conceding that i'm saying the insured can't unreasonably withhold consent and if they tried to there's a hammer clause in the insurance policy that said new york marine could pay the policy limits would not no longer have an obligation or duty to defend or pay out any more money but the what does a hammock law say it says if you if we want to settle and you refuse you withhold consent unreasonably we ha to have other people of what's with that situation didn't exist in march in february of two thousand and eleven when the demand came in there weren't any other claimants but they knew there were some coming because they ok but and if that was the case then they could have filed a deck action they could have entered pleas into pleaded the funds and said we don't know how this should be divvied up but instead they only had one claimant who made a claim and they didn't base their failure to respond to billy reading on the fact that there might be other claimants they said two things in the only response it gave which was there might be a statute of limitations defense and there might be a defense based on the fact that some of these tendencies in common involve non recourse debt so it might have affected the damages that reading had but they never explored either of those grounds and never pursued them never made a motion on those grounds but my i'm sorry but my point regarding the motion for judgment on the pleadings is that at that time ms deal had filed with the court letters and other documents that she believed and i think can be reasonably interpreted to support the statement that she made but it at worst it's a misstatement but it's it's also evidence that the judge had at the time and his ruling on the that motion didn't depend at all on what she said at that