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. e du/thir dc ir c uit_1999/121Filed May 13, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 98-5168

ROBESON INDUSTRIES CORP., Appellant,

v.

HARTFORD ACCIDENT & INDEMNITY COMPANY; ZURICH INSURANCE COMPANY; CONTINENTAL

INSURANCE COMPANY

No. 98-5285

IN RE: ROBESON INDUSTRIES CORP., Debtor,

ROBESON INDUSTRIES CORP.

v.

HARTFORD ACCIDENT & INDEMNITY COMPANY; ZURICH INSURANCE COMPANY; CONTINENTAL

INSURANCE COMPANY

On Appeal from the United States District Court for the District of New Jersey District Judge: Honorable Garrett E. Brown (Civ. Nos. 97-5185, 98-1500)

Argued February 17, 1999

BEFORE: GREENBERG, ROTH, and LOURIE,* Circuit Judges

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*Honorable Alan D. Lourie, Circuit Judge of the Uni ted States Court of Appeals for the Federal Circuit, sitting by designa tion.(Filed: May 13, 1999)

Eugene R. Anderson (argued) Michael R. Magaril

Steven J. Pudell Anderson Kill & Olick, P.C. One Gateway Center, Suite 901 Newark, NJ 07102

Attorneys for Appellants

Lon A. Berk (argued)
Sandra Tvarian Wiley Rein & Fielding 1776 K Street, NW Washington, DC 20006

Gerald A. Hughes Hughes & Hendrix 850 Bear Tavern Road, Suite 304 West Trenton, NJ 08628

Attorneys for Appellee Zurich Insurance Company

James W. Greene (argued) Thompson, O'Donnell, Markham,

Norton & Hannon 805 15th Street, NW, Suite 705 Washington, DC 20005

Paul J. Russoniello Flaster, Greenberg, Wallenstein, Roderick, Spirgel, Zuckerman,
Skinner & Kirchner 1810 Chapel Avenue West
Third Floor Cherry Hill, NJ 08102

Attorneys for Appellees Continental Casualty Company and American Casualty Company of Reading

2OPINION OF THE COURT

LOURIE, Circuit Judge.

Robeson Industries Corp. appeals from the decision of
the United States District Court for the District o f New Jersey affirming the bankruptcy court's grant of su mmary judgment that Robeson was not entitled to coverage under its insurance policies and could not prevail in its tort claims against the insurers. Robeson also appeals f rom the decision of the district court denying jurisdiction to review the bankruptcy court's imposition of sanctions unde r Bankruptcy Rule 9011. See Robeson Indus. Corp. v. Z urich Ins. Co., Civ. No. 97-5158(GEB) (D.N.J. Feb. 20, 19 98) (summary judgment); (D.N.J. June 2, 1998) (sanction s). We
affirm.

BACKGROUND

This appeal arises out of an adversary proceeding commenced by debtor Robeson in the United States Bankruptcy Court for the District of New Jersey. In that proceeding, Robeson contended that Hartford Acciden t and Indemnity Co., Zurich Insurance Co., and Continenta l Insurance Co. (the "Insurers") had a duty to defend and indemnify it against claims arising from the discha rge of certain contaminants at its manufacturing facility in Castile, New York, including a claim brought by the New York State Department of Environmental Conservation in 1990.1 Robeson had purchased various commercial gen eral liability insurance policies from the Insurers that provided coverage from 1976 to 1983. The policies were negot iated in New York and were issued to Robeson at its headquar ters in Mineola, New York. Although the policies were apparently not identical as to the property covered , see Robeson Indus. Corp. v. Zurich Ins. Co., Bankr. No. 93-

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1. In addition, a private claim was later filed aft er the commencement of the bankruptcy proceeding by an adjacent landowner. See Robeson Indus. Corp. v. Zurich Ins. Co., Bankr. No. 93-3326 5(KCF), at 3 (Bankr. D.N.J. Jan. 24, 1997) (memorandum opinion).

333265(KCF), at 4 (Bankr. D.N.J. Jan. 24, 1997)

(memorandum opinion), they all pertained generally to Robeson's New York property, including the Castile facility. None of the policies contained a choice-of-law prov ision.

The policies contained two provisions relevant to t he present controversy. The first provision obligated Robeson to give prompt notice to the Insurers of any occurr ence or third-party claim covered by the policies (the "lat e notice" provision).2 The parties do not dispute that the st ates of New York and New Jersey differ in their interpretat ion of the "late notice" provision. Under New York law, an insured's breach of the timely notice provision rel ieves the insurer of its duty to defend or indemnify, even ab sent a showing of prejudice to the insured. See Unigard Se c. Ins. Co. v. North River Ins. Co., 594 N.E.2d 571, 573 (N .Y. 1992). In contrast, under New Jersey law, an insurer mustf irst establish prejudice before untimely notice relieves the insurer of its duties under the policy. See Cooper v. Government Employees Ins. Co., 237 A.2d 870, 874 (N .J. 1968).

The second policy provision generally excludes cove rage for environmental contamination, except for contami nation that was "sudden and accidental" (the "pollution ex clusion" exception). Although Robeson argued to the bankrupt cy court that no conflict of law existed between New Y ork and New Jersey on the interpretation of the "pollution exclusion" exception, the court disagreed, noting t hat New

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2. What we refer to as the "late notice" provision is actually two separate provisions in the policies that cover different cir cumstances, both of which were implicated in this case. The first provi sion states: "If a
claim is made or suit is brought against insured, the ins ured shall immediately forward to the company every demand, notice, summon s or other process received by him or his representative." See Robeson Indus. Corp. v. Zurich Ins. Co., Bankr. No. 93-33265(KCF), at 3 (Bankr. D.N.J. Aug. 27, 1997) (memorandum opinion) (emphasis added). Th e second provision states: "In the event of an occurrence, w ritten notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, pl ace and circumstances thereof, and the names and addresses of available w itnesses, shall be given by or for the insured to the company, or any of its authorized agents as soon as practicable." Id. (emphasis added ).

4Jersey interprets the "sudden and accidental" langu age to

cover gradual discharges, see Morton Int'l, Inc. v. General Accident Ins. Co., 629 A.2d 831, 870-75 (N.J. 1993)
, whereas New York interprets this language as coveri ng only abrupt discharges, see Powers Chemco, Inc. v. Feder al Ins. Co., 548 N.E.2d 1301, 1302 (N.Y. 1989). See also Pf izer, Inc. v. Employers Ins. of Wausau, 712 A.2d 634, 640 -41, 643-44 (N.J. 1998) (summarizing the differences bet ween New York's and New Jersey's interpretations of the" late notice" provision and the "pollution exclusion" exc eption).

The interpretations to be given to the "late notice " provision and the "pollution exclusion" exception a re outcome-determinative in this case. Robeson did not timely notify the Insurers of their potential liability un der the policies until December 1992, two-and-a-half years after the State of New York filed its claim against Robes on and several years after the contamination began. Moreov er, Robeson's contamination was gradual, ostensibly occ urring over several years. Robeson thus contended in the Bankruptcy court that New Jersey law applied to the interpretation of the policies. Robeson's main argu ment in support of its contention was that it had moved its headquarters to South Plainfield, New Jersey in Apr il 1991.3 Robeson further argued, in an attempt to show its c lose ties to New Jersey, that it had been using warehousing f acilities in New Jersey for approximately the last twenty yea rs, paid New Jersey taxes thereon, and had continually maint ained management personnel and sales representatives in N ew Jersey.

The bankruptcy court, applying New Jersey choice-of -law rules, found Robeson's argument in favor of the app lication of New Jersey law unpersuasive, and held on summary judgment that New York law applied to the interpret ation of the policy exclusions. See Robeson Indus. Corp. v. Zurich Ins. Co., Bankr. No. 93-33265(KCF), at 17 (Bankr. D .N.J. Jan. 24, 1997). The court later granted summary jud gment of non-coverage to the Insurers. See id. at 2-8 (Ba nkr.

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3. At some time prior to its filing of the instant suit, Robeson moved its headquarters again from New Jersey to California. S ee Robeson's Brief,
at 8 n.9.

5D.N.J. Aug. 27, 1997). The court also clarified tha t its

choice-of-law ruling also applied to Robeson's tort claims against the Insurers--claims stemming largely from the Insurers' alleged bad faith with respect to the den ial of coverage. Finding such claims to be unsustainable u nder New York law, the court granted summary judgment to the
Insurers on the tort claims as well. See id. at 8-1 2. The district court summarily affirmed the bankruptcy co urt's summary judgment rulings on appeal. See Robeson Ind us. Corp. v. Zurich Ins. Co., Civ. No. 97-5158(GEB) (D. N.J. Feb. 20, 1998).

In its summary judgment opinion, the bankruptcy cou rt
invited the Insurers to move for sanctions under Bankruptcy Rule 90114 because of Robeson's dogged insistence that New Jersey law or policy should app ly even
in the face of the court's earlier choice-of-law ru ling and New York law directly on point. The Insurers accept ed this invitation, and, not surprisingly, the bankruptcy c ourt granted the resulting motion,5 awarding the Insurer s their

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4. Bankruptcy Rule 9011 is similar to Rule 11 of th e Federal Rules of Civil Procedure. It states in relevant part:

(b) Representations to the court--By present ing to the court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to th e best of the person's knowledge, information, and belief, formed a fter an inquiry reasonable under the circumstances--(1) it i s not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in th e cost of litigation; (2) the claims, defenses, and other legal conten tions therein are warranted by existing law or by a nonfrivolo us argument for the extension, modification, or reversal of exis ting law or the establishment of new law[.]

Subsection (c) provides for the imposition of sanct ions for the breach of a party's Rule 9011 obligations. 5. The bankruptcy court stated: "This court determi ned on January 27, 1997 that under New Jersey choice of law rules . . . New York law applied. From January 27, 1997 to August 27, 1997, the plaintiff in an overly zealous manner created expense to the defend ants on related issues without presenting [a] consistent theory or a good faith argument for reversing existing [law]. [Robeson's] briefs we re duplicative, circulative, voluminous, self-righteous and full of [citations to] selfserving publication[s] which it authored." See Robe son Indus. Corp. v. Zurich Ins. Co., Bankr. No. 93-33256(KCF), at 2 (Ba nkr. D.N.J. Feb. 11, 1998) (memorandum opinion).6litigation expenses for the time period between the court's

choice-of-law ruling and its grant of summary judgm ent.

Robeson appealed the imposition of sanctions to the district court, but the court dismissed the appeal on the ground that it had not been filed within the ten-da y time limit prescribed by Bankruptcy Rule 8002(a). The di strict court noted that the bankruptcy court signed its sa nctions order on February 11, 1998, that the order was ente red on the clerk's docket on February 23, 1998, and that t he tenday period began to run on this latter date. Becaus e Robeson's notice of appeal was filed on March 6, th e district court continued, it was one day late and t herefore the court lacked jurisdiction. See Robeson Indus. C orp. v. Zurich Ins. Co., Civ. No. 97-5158(GEB) (D.N.J. Jun. 1, 1998) (hearing transcript). Ruling in the alternative, th e district court affirmed the decision of the bankruptcy court to impose sanctions on the merits. See id.

Robeson appealed the summary judgment rulings and the sanctions order to this court. We have jurisdic tion pursuant to 28 U.S.C. S 1291 (1994).

DISCUSSION

A. Standards of Review

Summary judgment is appropriate when there are no genuine issues of material fact and the moving part y is entitled to judgment as a matter of law. See Fed. R . Civ. P. 56(c). This court reviews a district court's grant of summary judgment de novo, reapplying the summary judgment standard. See General Ceramics, Inc. v. Firemen's F und Ins. Cos., 66 F.3d 647, 651 (3rd Cir. 1995). Choice-of-l aw is a question of law which this court reviews de novo . See id. Whether an appeal from the bankruptcy court to the district court is timely is also a question of law which this
court reviews de novo. See Shareholders v. Sound Ra dio, Inc., 109 F.3d 873, 879 (3rd. Cir. 1997). Because w e sit in diversity in the present case, we are bound to foll ow the substantive law of the forum, see Clark v. Modern G roup, Ltd., 9 F.3d 321, 326 (3rd Cir. 1994), including th e forum's choice-of-law rules, see Klaxon v. Stentor Elec. Mf g. Co., 313 U.S. 487, 496 (1941).

7B. Choice-of-Law

The Supreme Court of New Jersey has in several case s set forth New Jersey's choice-of-law rules for the interpretation of casualty insurance contracts. See , e.g., Pfizer, Inc. v. Employers Ins. of Wausau, 712 A.2d 634 (N.J. 1998); HM Holdings, Inc. v. Aetna Cas. & Sur. Co., 712 A.2d 645 (N.J. 1998) (decided concurrently with Pfizer); Unisys Corp. v. Insurance Co. of N. Am., 712 A.2d 649 (N.J . 1998) (decided concurrently with Pfizer); The Gilbert Spr uance Co. v. Pennsylvania Mfrs.' Ass'n Ins. Co., 629 A.2d 885 (N.J. 1993). See also General Ceramics, supra. These case s make clear that New Jersey follows S 193 of the Restatem ent (Second) of Conflict of Laws.6 Pfizer, "applying th e principles" laid down in the Court's earlier opinio n in Spruance, sets forth the operative portions of that provision:

Spruance set forth a specific choice-of-law framework for interpreting casualty-insurance contract s. Under this framework, a court looks first to Resta tement section 193, which provides that the place t hat"the parties understood . . . to be the principal location of the insured risk governs unless some other s tate has a more significant relationship under the prin ciples stated in S 6 to the transaction and the par ties."

Pfizer, 712 A.2d at 638 (citation deleted). Thus, u nder S 193 of the Restatement, New Jersey generally interprets casualty-insurance policies in accordance with the law of the state in which the insured risk is principally located, unless some other state has a more significant rela tionship to the transaction and the parties as illuminated b y the

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6. The validity of a contract of fire, surety or ca sualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the p olicy, unless with respect to the particular issue, some other state ha s a more significant relationship under the principles stated in S 6 to the transaction

and the parties, in which event the local law of the other state will

be applied.

Restatement (Second) of Conflicts of Law S 193 (196 9).

8consideration of factors listed in S 6.7 The Court has

referred to the approach under S 193 as "site-speci fic." See Pfizer, 712 A.2d at 637.

However, not every application of S 193 necessitate s review of the S 6 factors. Indeed, rote application of the S 6 factors would swallow the "site-specific" rule that S 193 prescribes. The Supreme Court of New Jersey has recognized as much:

When the policy covers risks located primari ly in a single state, the choice-of-law issue can be straightforward. For example, there is no ch oice-of-law issue where the policyholder is located in o ne state, the environmental liability arises out of the sa me state, and the policies are issued by a state-based insurer for that one site. An easy example is that of a [commercial general liability] policy covering a solid w aste treatment plant creating a risk in a single state. At the other end of the spectrum are cases where a single ins ured seeks coverage under [commercial general liability ] policies
for certain environmental and toxic tort lia bilities, including . . . [multiple] sites located in . . . different states. When such an insured operation or ac tivity is predictably multistate, the significance of the principal location of the insured risk diminishes; in such a case, section 193 directs that the governing law i s that of the

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7. [T]he factors relevant to the choice of the appl icable rule of law include (a) the needs of the interstate and international system, (b) the relevant policies of the forum, (c) the relevant policies of

other
affected states and the relevant interests o f those states in the determination of the particular issue, (d) t he protection of justified expectations, (e) the basic policies underly ing the particular
field of law, (f) certainty, predictability, and unif ormity of result, and (g) ease in the determination and application of the law to be applied.

Restatement (Second) of Conflict of Laws S 6 (1969)

.

The Supreme Court of New Jersey, following Ceramics , collapsed these factors into four "categories" for purposes of appl ication: (1) the competing interests of the relevant states, (2) the national interests of commerce among several states, (3) the interests of the parties in realizing justified expectations and achieving pred ictable results, and (4) the interests of judicial administration. See Pfize r, 712 A.2d at 639-40.9state with the dominant significant relation ship

according to the principles set forth in Res tatement section 6 as applied to the particular issue involved.

Pfizer, 712 A.2d at 638 (citations and quotations o mitted). Therefore, a court need only consider the applicati on of the S 6 factors when the "insured operation or activity is predictably multistate," that is, when the policy c overs sites in many states, or when the insured risk is transie nt. See id. at 639 (noting that the insured risk was"to som e degree transient," and therefore "to choose the applicable law that governs the disputed issues, Spruance requires that we turn to the S 6 analysis."). The comments to S 193 confirm this interpretation:

The location of the insured risk will be giv en greater weight than any other single contact in dete rmining the state of the applicable law provided that th e risk can be located, at least principally, in a single s tate. Situations where this cannot be done, and where the loc ation of the risk has less significance, include (1) where the insured object will be more or less constant ly on the move from state to state during the terms of the policy and (2) where the policy covers a group of r isks that are scattered throughout two or more states.

Restatement (Second) of Conflict of Laws S 193 cmt. b (1969).

Robeson's principal argument is that HM Holdings , a case decided concurrently with Pfizer, mandates that New Jersey law applies in this case, at least with respect to the interpretation of the "late notice" provision. Robe son asserts that that case is "remarkably similar" to the facts presented here. We disagree. Like Pfizer, Unisys, Spruance, a nd General Ceramics, HM Holdings involved a "predictab ly multistate" insured operation, which consequently necessitated a S 6 inquiry on its particular facts. Specifically, HM Holdings involved coverage under a commercial general liability policy of nine waste s ites
located within seven different states. See HM Holdi ngs, 712
A.2d at 211-12. The Court concluded under S 6 that the law of the waste sites would apply to the interpretatio n of the "pollution exclusion" exception, and that either th e law of

10New Jersey or the law of the waste sites applied to the "late

notice" provision, with New Jersey law taking prece dence if
the law of the waste sites was similar to New York' s, the state in which the parties were headquartered. See id. at
648-49.

In contrast, Robeson's insured activities were not "predictably multistate," and they thus fit within the general site-specific rule of S 193. The policies i nvolved covered only Robeson's New York property, and only New York was implicated by Robeson's contamination. Com pare Spruance, 629 A.2d at 885 (involving the hauling of waste from Pennsylvania to New Jersey). These facts alone are dispositive under S 193 because the parties at the time of contracting clearly understood New York (more speci fically, Robeson's plant in Castile) to be the principal loc ation of the insured risk. In fact, the facts of this case, viz., "a commercial general liability policy covering a . . . plant creating a risk in a single state," were described by the Supreme Court of New Jersey as an "easy example" th at presents "no choice-of-law issue" and no need for a complex balancing of factors under S 6. See Pfizer, 712 A.2 d at 638; cf. Spruance, 629 A.2d at 891 ("When the waste prod ucing facility and the waste site are located in the same state, their common location makes the application of sect ion 193 straightforward.").8

Robeson's argument concerning the movement of its headquarters to New Jersey does not alter the resul t to which S 193 directs us. First, the site-specific ru le prescribed by that section is unaffected by the loc ation of the contracting parties' headquarters; the focus is the

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8. The bankruptcy court was also aware that "[t]he instant case represents the hypothetical `straightforward' case suggested by the court in [Spruance] because the insured risk was not tran sient and was not scattered through several states." See Robeson Indu s. Corp. v. Zurich Ins. Co., Bankr. No. 93-33265(KCF), at 10 (Bankr. D.N.J. Jan. 24, 1997) (memorandum opinion). Despite the bankruptcy court' s recognition of this fact, and its proper conclusion based thereon that New York law should apply to the interpretation of the policies, the court went on to
balance the various states' interests under S 6. Wh ile we consider this extra step unnecessary under S 193, we believe that it helped to underscore the bankruptcy court's conclusion.

11parties' understanding of the location of the insur ed risk.9

Second, S 193 prescribes that it is the parties' understanding of the principal location of the insu red risk "during the term of the policy" that matters. Thus, the movement of Robeson's headquarters to New Jersey se ven years after the expiration of the last of the polic ies at issue cannot have affected the parties' understanding at the time of contracting that New York was the principal loca tion of
the insured risk. Robeson's other contacts with New Jersey likewise do not affect the analysis under S 193.

We conclude that the district court correctly affir med the bankruptcy court's application of New Jersey choice -of-law rules and correctly affirmed the application of New York law to the interpretation of the policies. Because Robe son does not dispute that it is not entitled to coverage und er the laws of New York, the district court's affirmance o f the bankruptcy court's grant of summary judgment to the
Insurers is also affirmed.

C. The Tort Claims

Robeson argues that the bankruptcy court improperly applied New York law to its tort claims. Robeson as serts that its tort claims are independent of its claim f or coverage under the policy, and that New Jersey choice-of-law rules mandate that New Jersey law should apply to those c laims. Robeson supports this assertion by noting that its various tort claims,10 which it summarizes generally as the

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9. We do not mean to suggest that the location of a party's headquarters is irrelevant in a "multistate activity" case--i.e. , when a weighing of

the S 6 factors is warranted under S 193, see, e.g., Pf izer, 712 A.2d at 641 (assessing the relevance of New York law in a multi state site case because New York was the principal place of busines s of the insured and was the location in which the contracts were negoti ated), but this is not

such a case.

10. The relevant tort claims are styled in Robeson' s complaint as "breach of covenant of good faith and fair dealing,""failur e to warn," and "breach of fiduciary duty." See Robeson's Complaint at 15, 17, 22. Review of these claims reveals, as Robeson admits, that the c laims are premised upon the Insurers' alleged bad faith in the handlin g of Robeson's claims. Thus, we will refer to Robeson's various tort claim s as a single claim for
bad faith.

12Insurers' "bad-faith claims handling and investigat ion of

Robeson's claims in connection with the Castile fac ility," Robeson's Opening Brief at 18, all took place after Robeson had moved its headquarters to New Jersey and theref ore that the state of New York has no relevant interest in the controversy. Robeson argues further that New Jersey law allows for the imposition of tort liability against an insurer
for bad faith even when the insured was not entitle d to coverage under the policy, and cites several cases from various state supreme courts in support of this con tention. The Insurers respond that the same state's law--New York's --should apply to both Robeson's coverage and bad f aith claims because the bad faith claims merely arise ou t of alleged unsatisfactory performance by the Insurers under the policy. Accordingly, the Insurers contend that New York law applies to the propriety of the bad faith claim s, and
that such claims are unsustainable thereunder.

We do not necessarily agree with the bankruptcy cou rt's conclusion that the same state's law necessarily ap plies to the coverage and bad faith claims. The appellate co urts of New Jersey have explained that

conflict of laws principles do not require t hat all legal issues presented by a single case be decided under the law of a single state. Instead the choice of law decisions can and should be made on an issue-by-issue basis, and thus the law of different states can app ly to
different issues in the same case.

O'Connor v. Busch Gardens, 605 A.2d 773, 774 (N.J. Super. Ct. App. Div. 1992) (citing Johnson Matthey, Inc. v

. Pennsylvania Mfrs.' Ass'n Ins. Co., 593 A.2d 367, 3 75 (N.J. Super. Ct. App. Div. 1991)). Therefore, a separate analysis to determine which state's law applies to Robeson's bad faith claim would normally be appropriate.

However, application of New Jersey's conflict-of-la w rules is unnecessary here because neither New Jersey nor New
York would sustain Robeson's tort claims. In New Yo rk University v. Continental Insurance Co., 662 N.E.2d 763 (N.Y. 1995), the Court of Appeals of New York dismi ssed a claim analogous to Robeson's, namely, that the insu rer had negligently and recklessly failed to adequately inv estigate

13the insured's claim and denied payment. See New Yor k

Univ., 662 N.E.2d at 769-70. The Court of Appeals b egan its analysis by noting that insurance policies, lik e other contracts, contain an implied duty of good faith an d fair dealing. See id. at 769. In order to sustain an act ion for tort liability against an insurer, as opposed to an acti on for breach of contract, the insured's complaint must as sert a basis for tort liability that goes beyond the breac h of the insurer's contractual duties. See id. at 770 (notin g that the insured's complaint must state a "tort independent of the contract"). The Court of Appeals concluded that

Plaintiff's claim amounts to nothing more th an a claim based on the alleged breach of the implied c ovenant of good faith and fair dealing, and the use of familiar tort language does not change the cause of action to a tort claim in the absence of an underlying tort d uty sufficient to support a claim for punitive d amages.

The cause of action is duplicative of the . . . cause of
action for breach of contract and should hav e been
dismissed.

Id. (citations omitted). Because Robeson's tort cla ims in essence allege no more than that the Insurers engag ed in bad faith in their performance of their duties unde r the policy, New York law mandates their dismissal.

Robeson's bad faith claim does not fare any better under New Jersey law. In Pickett v. Lloyd's, 621 A.2d 445 (N.J. 1993), the New Jersey Supreme Court concluded that
"there is a sufficient basis in law to find that an insurance company owes a duty of good faith to its insured in processing a first-party11 claim," a conclusion whi ch rested largely on the understanding that contracts general ly contain an implied duty of good faith and fair deal ing. See Pickett, 621 A.2d at 540. After extensive analysis of the authorities, the Court concluded that the cause of action
for bad faith is "best understood as one that sound s in

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11. Both New York University and Pickett involve fi rst-party claims. However, we see no reason why the rationales of the se cases should not likewise apply in the third-party context, i.e., wh en the policy covers damage to a third party's property.

14contract," id. at 452, and that contract damages we re the

appropriate remedy for breach, see id. at 454. The Court continued that whether bad faith exists depends on whether the insured's claim was "fairly debatable." Id. at 453. In other words, the insured must "show the abs ence of a reasonable basis for denying benefits of the p olicy and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim." Id. I n defining the scope of what claims are "fairly debatable," th e Court noted the following:

Perhaps the [fairly debatable] rule is easie st to
understand in the context of the denial of b enefits on the basis of non-coverage . . . . Under the "fairly debatable" standard, a claimant who could no t have established as a matter of law a right to su mmary judgment on the substantive claim would not be
entitled to assert a claim for an insurer's bad faith refusal to pay the claim.

Id. at 453-54 (citations omitted).

Here, Robeson did not establish a right to summary judgment that there was coverage. In fact, summary judgment was decided in favor of the Insurers , a r uling which we have affirmed as correct. Accordingly, the
Insurers did not act in "bad faith" as a matter of New Jersey law.

Because the application of the laws of New York or New Jersey to Robeson's tort claims would lead to the s ame conclusion--i.e., dismissal--there is no need for u s to embark upon a choice-of-law analysis with respect t hereto. Instead, we agree with the bankruptcy court and the
district court that these claims were not sustainab le in either jurisdiction, and we affirm the grant of sum mary judgment in favor of the Insurers.

D. Sanctions

Robeson's final argument is that its appeal of the bankruptcy court's sanctions order to the district court was not untimely under Bankruptcy Rule 8002(a). In supp ort of its argument, Robeson contends that the ten-day tim e period of Rule 8002(a) did not begin to run until t he district

15court had finally disposed of Robeson's earlier app eal on

the merits of coverage and tort liability on Februa ry 24, 1998.12 As Robeson's appeal of the sanctions order was filed on March 6, 1998, within 10 days of February 24th, Robeson contends that its appeal was timely filed.

We disagree. Rule 8002(a) states that "[t]he notice of appeal shall be filed with the clerk within 10 days of the date of the entry of the judgment, order, or decree appealed from." This court has noted that "[t]his deadline i s strictly construed. The failure to file a timely notice of a ppeal creates a jurisdictional defect barring appellate r eview." Shareholders v. Sound Radio, Inc., 109 F.3d 873, 87 9 (3rd Cir. 1997) (citations omitted). The rule clearly de fines the act that starts the running of the appeal period--v iz., entry of the order in the bankruptcy court. The rule make s no exception for the circumstance that a party has tak en an appeal to the district court on the merits of the c ase or on a separate issue presented in the same controversy. Furthermore, we perceive no reason that such an exc eption is warranted, and in any event it would not be cons istent with the "strict construction" that we are required to afford to the rule. Accordingly, we agree with the distric t court that Robeson's appeal of the sanctions order was no t timely and that the district court therefore lacked jurisd iction to review that order. Given our affirmance on jurisdic tional grounds, we express no opinion on the district cour t's
conclusion that the sanctions order was otherwise
affirmable on its merits.

___________________________________________________ ______________

12. Appellee Zurich appears to have misunderstood R obeson's argument,
for it discusses the relevance of the fact that the district court had stayed its sanctions order pending resolution of Ro beson's earlier appeal on the merits of coverage and tort liability. Howev er, Robeson clearly articulates its argument in its opening brief: "The relevant issue before this Court is whether an appeal of sanction may pro ceed in the absence of a final adjudication of an action, not whether a court's entry of a stay
of its own sanctions order tolls the time to file a notice of appeal from the Order." Robeson's Opening Brief, at 43 (emphasi s in original). Given the clarity of Robeson's argument, there is no reas on for us to consider the relevance of the district court's stay.

16CONCLUSION

The district court did not err in (1) affirming the bankruptcy court's conclusion that New York law app lied to the interpretation of the insurance policies at iss ue and that Robeson was not entitled to coverage thereunde r, (2) affirming the bankruptcy court's conclusion that Ro beson's tort claims were unsustainable, or (3) dismissing R obeson's appeal on the issue of sanctions for lack of jurisd iction. Accordingly, the judgment of the district court is

AFFIRMED.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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