A ft erexami ni ng t he br i efs and appe l l at e r ecor d, t hi s panel has det erm i ned * unani m ous l yt hator al ar gum entw oul d notm at er i al l yas s i s tt he det erm i nat i on of th is a p p e a l. See F e d . R . A p p . P . 3 4 (a )(2 ); 1 0 th C ir. R . 3 4 .1 (G ). T h e c a se is th e re fo re o rd e re d su b m itt e d w ith o u t o ra l ar g u m e n t. T h is o rd e r a n d ju d g m e n t is notbi ndi ng pr ece dent , exce ptundert he doctr i nes of l aw of the ca s e, r es j udi cat a, and col l at er al es t oppel . I tm aybe ci t ed, how ever , fori t s per s uas i ve val ue cons i s t entw i t h Fed. R . A pp. P. 32. 1 and 10th C i r . R . 32. 1. T he H on orabl e W esl eyE . B row n, S eniorD i stri ctJudg e, D i stri ctof K ansas, ** s i t t i ng bydes i gnat i on. 

## F I LED United States C ourt of Appeals Tenth Circuit 

### D ecember 1,200 6 Elisab eth A. Shumaker C l erk of C ourt UNI TED S TATES CO URT O F AP PEALS F O R T H E T E N T H C IR C U IT
N O T W E N C O R P O R A T IO N , a De l a wa r e c o rp o r a t i o n ; WCN/ GAN PA R T N E R S, L T D . , a C ol or ado l i m i t ed p a r t n e r s h i p ; WI L L I AM C. NE WTON ,

P l ai nti ffs-A pp el l ants , v. A ME R I C A N E C O N O MY I NS UR ANC E CO M P ANY,

D efe ndant - A ppel l ee. N o. 06- 8016 (D . C . N o. 05 -C V -104-A B J)

(D . W y o .)

ORDE R AND J UDGM EN T * B efor e O’ BR I EN and BROR BY , C i r cui tJ udges , and B R O W N , D i s tr i ctJ udge. **W i l l i am N ew t on expl ai ned thathe cr eat ed W C N / G A N Par tner s and N ot w en 1 C o rp o ra tio n to h a n d le, re sp e c tiv e ly(w ith so m e o v e rla p ), h is in v e stm e n ts a n d h is fa m ily a ffa ir s g e n e ra lly. A p lt. A p p . a t 2 7 4 . -2- P l a i n t i ffs No t we n Co rp o r a t i o n , W CN/ GAN P a r tn e r s Lt d . , a n d W i l l i a m C. N ew t on ( col l ect i vel y , “N ot w en pl ai nt i ffs ” or j us t “pl ai nt i ffs , ”) w er e i ns ur ed 1 undera bus i nes s ow ner s l i abi l i t ypol i cyi s s ued i n W y om i ng bydefe ndant A m er i can Econom yI ns ur ance C om pany( A E I C ) . T he pol i cycover ed, among ot hert hi ngs , uni nt ended a nd unexpec t ed pr opertydamage caus ed bypl ai nt i ffs t hroug h accidental occu rr ences. P l ai nti ffs broug ht this diver si tyact i on against A E I C w hen i tr efus ed t o defe nd them agai ns tan O r egon l aw s ui tt hatt heyi ns i s t ed fel l w i t hi n t he s cope of t he pol i cy . O n cr os s m ot i ons fors um m aryj udgm ent , t he di s t r i ctcour tfol l ow ed the magi s tr at e j udge’ s r ecomm endat i on t o hol d thatt he O r egon l aw s ui t , al l egi ng pl ai nt i ffs had mi s appr opr i at ed tr ade s ecr et s and other pr oper t y , ar os e outof i nt ent i onal m i s conduct , notacc i dent al occurr ence s and, hence , t hatA E I C had no dutyt o defe nd. Pl ai nt i ffs appea l ed. W e r evi ew t he d i s t r i c tc o u r t ’ s d e t e r mi n a t i o n , i n c l u d i n g i t s a s s e s s me n to f c o n tr o l l i n g s t a t e l a w, u n d e r a d e n o v o s ta n d a rd . See Fre ightquot e. com , Inc. v. Har t f or d C as . Ins . C o. , 397 F. 3d 888, 892 ( 10t h C i r . 2005) . W e agr ee w i th the di s tr i ctcourt ’ s anal y s i s of th e o p e ra tiv e c o n tr a c t la n g u a g e a n d a p p lic a b le la w a n d , a c c o rd in g ly, affir m . “The i nt erpr et at i on of an i ns ur ance contr acti s governed bys t at e l aw and, s i t t i ng i n di ver s i t y , w e l ook t o t he l aw of the forum s t at e. ” Hous t on G en. Ins . C o.-3-

v. A m . Fence C o. , 1 1 5 F . 3 d 8 0 5 , 8 0 6 (10 th C ir . 1 9 9 7 ). T h u s, as th e d istri ct co u rt r ecogni zed a nd t he part i es agr ee, w e l ook t o W y om i ng l aw t o det erm i ne the s cope o f A E IC ’s d u ty to d e fe n d u n d e r t h e p o lic yin q u e s tio n . See Mar athon A s hl and P i pe Li ne LLCv. Mar

yland C as . C o. , 2 4 3 F .3 d 1 2 3 2 , 1 2 3 6 , 1 2 4 3 (1 0 th C ir . 2 0 0 1 ). U nderW y om i ng l aw , t he i ns ur er ’ s dut yt o defe nd turns on w hether“‘ the al l eged cl ai m [aga i ns tt he i ns ur ed] r at i onal l yfal l s w i thi n the pol i cycover age. ’ ” Id. at 1244 ( quot i ng Shos hone Fi rs tB ank v. P ac. E mpl oyers Ins . C o. , 2 P. 3d 510, 513 ( W y o. 2000) ) . T o r es ol ve a duty - t o- defe nd cl ai m , the courtexami nes the pol i cy to d e ter m in e its sc o p e a n d th e n re v iew s th e c o m p lain t in th e u n d e rly in g law su it t o det erm i ne w hethert he cl ai m s al l eged ther ei n coul d r at i onal l yfal l w i thi n that s c o p e . Law r ence v. Stat e Farm F i r e & C as . C o. , 1 3 3 P . 3 d 9 7 6 , 9 8 0 (W y o . 2 0 0 6 ); R eis ig v. Uni on Ins . C o. , 8 7 0 P .2 d 1 0 6 6 , 1 0 6 8 (W y o . 1 9 9 4 ). T h a t is p re c ise ly w h a t th e d is tr ic t c o u rt d id h e re . T he pol i cypr ovi ded thatA E I C w oul d undert ake pl ai nt i ffs ’ defe ns e i f a la w s u it s o u g h t d a m a g e s o th e rw is e c o v e re d b yth e p o lic y . See A pl t . A pp. at252 ( s ect i on A . 1. a) . Pr opert ydamage w as cover ed i f “c aus ed byan ‘ occurr ence , ’ ” i d. ( s ect i on A . 1. b. ( 1) ( a) ) , defi ned i n turn as “an a cci dent , ” i d. at 26 3 (sec ti o n F . 1 2 . ). R ei nfor ci ng t he l i m i t ed natur e of thi s cover age, the pol i cys peci fi cal l yexcl uded pr oper t ydamage “expe ct ed ori nt ended f r om the s t andpoi ntof the i ns ur ed. ” Id. at 25 4 (sect i on B . 1. a. ). W y om i ng cou rt s have fou nd such langu age u nam biguou s,T he pl eadi ngs i n t he O r egon s ui tw er e amended numer ous t i m es . T he 2 N o tw e n p lain tiffs d id n o t ev e n a p p e a r u n til th e T h ird A m e n d e d C o m p lain t. P lain tiffs a ss e rt th a t to th e e x ten t su b se q u e n t am e n d m e n ts, w h ich w e re lar g e ly or gani zat i onal , added a nyal l egat i ons r el evantt o ouri nqui ryher e, t heypr ovi ded (c o n tin u e d ...) -4- a ttr ib u tin g to th e te rm “ a c c id e n t” its c o m m o n s e n s e m e a n in g . Mat lack v . Mountai n W. Far m B ur eau Mut . Ins . C o. , 44 P. 3d 73, 77 ( W y o. 2002) . A pol i cy o f th is sort do es n o t create a d u tyto d efen d the in su red ag ains t i n tention al t o rt cl ai m s, such as co nv ers i on or tres pass, or cl ai m s that, tho ug h n ot i ntent i on al t ort s, i nvol ve a mat er i al el ementof del i ber at e conduc t , s uch as m i s r epr es ent at i on ( w hi ch, even i f onl ynegl i gent , r equi r es an i nt entt o i nduce r el i ance ) and br eac h of c o n tr a c t. See, e. g. , i d. a t 8 0 ; R e isig , 8 7 0 P .2 d a t 1 0 6 9 -7 1 ; F i rs tW yo. B ank v. C ont ’ lIns . C o. , 8 6 0 P .2 d 1 0 9 4 , 1 0 9 9 -1 1 0 1 (W y o . 1 9 9 3 ). T he O r egon l aw s ui tw as br oughtbythe pur chas erof as s et s bel ongi ng t o a c e llu lar -p h o n e tec h n o lo g yfirm in b a n k ru p tcy pr o c e e d in g s. T h e p u rc h a se r’s b a sic compl ai ntw as t hatt r ade s ecr et s and otheras s et s of the fi r m thats houl d have be en t r ans ferr ed t o t he bankrupt cyt rus t ee a nd thence t o hi m had bee n m i s appr opr i at ed bysom e of it s di rect ors and o t hers w ho used them t o p ursue a com peti ng bu si ness t hates s ent i al l ycont i nued the bankruptfi r m . T he pl eadi ngs as s er t ed s ever al br oad claim s, three o f w h ich h ad su b sidiaryaidin g -an d -ab ett ing an d ac ti n g -i n -co n ce rt “count s ” i m pl i cat i ng t he N ot w en pl ai nt i ffs forthei ral l eged faci l i t at i on of the w rongf ul schem e. T he thr ee cl ai m s w ere for m i sapprop ri at i on of tr ade secret s,

2( . . . cont i nued) 2 ad d it ion al su p p o rtfo r plainti ffs’ po sit ion . A p lt . O p en ing B r. at 9. W e the refo re fo c u s o n th e la s t p le a d in g , th e F if th A m e n d e d C o m p la in t. -5- in ten tio n a l in ter fe re n c e w ith c o n tra c t, an d in ten tio n a l in ter fe re n c e w ith e c o n o m ic r el at i ons . I n t he ac t i ng- i n- conce r tcount s forthes e cl ai m s , the N otw en pl ai nt i ffs w er e al l eged t o have “ agr eed . . . t o become par tof the gr oup pur s ui ng t hi s pl an and i t s as s oci at ed ac t i vi t i es , ” A pl t . A pp. at215, 222, 225. I n the ai di ng and abett i ng count s , t heyw er e al l eged t o have pr ovi ded fundi ng, “moni t or ed, r evi ew ed, and pr ovi ded i nfl uent i al bus i nes s advi ce, ” “appr oved and di r ect ed the cont i nui ng m i s appr opr i at i on and conc eal m entof [the bankruptfi r m ’ s ] tr ade s ecr et s and otheras s et s fr om t he trus t ee i n bankrupt cy , ” s ol i ci t ed i nves t m entfor t he s cheme, and funde d l i t i gat i on “i n or dert o hi nder , det er , del ayand pr event[the p u rc h a se r] f

ro m a c q u irin g th e [ b a n k ru p t firm ’s a ss e ts] to w h ich h e is rig h tf u lly ent i t l ed. ” Id. at218- 220 , 223, 226. M or e gene r al l y , the compl ai ntal l eged that t he N ot w en pl ai nt i ffs “atal l m at er i al t i m es had know l edge of the w r ongful nes s of t he [s cheme det ai l ed i n t he compl ai nt ] . ” Id. a t 2 1 8 . C om par i ng s uch i nt ent - dr i ven cl ai m s t o the ac ci dent al - occurr ence condi t i on in p lain tiffs’ lia b ili typ o licy , the d istric t co u rt c o n c lu d e d th a t th e O re g o n law su it di d nott r i ggera dutyt o defe nd. W e ful l yagr ee, and none of the poi nt s r ai s ed by p la in tiffs p e rs u a d e u s o th e rw is e .-6-

Pl ai nt i ffs ar gue thatunderO r egon l aw a cl ai m form i s appr opr i at i on of tr ade s e c r e t s c a n b e b a s e d o n t h e u s e o f s e c r e t s b y s o m e o n e w h o k n o w s o ro n l y has r eas on t o know of thei rw r ongful der i vat i on and, thus , s uch a c l ai m need not al w ay s cons t i tut e a s t r i ct l yi nt ent i onal t or t . B ut“[i ] n det erm i ni ng t he ques t i on of w hethert he i nt ent i onal t or t [s ] of [mi s appr opr i at i on and i nt ent i onal i nt er fer ence ] can be cons i der ed an ‘ acc i dent , ’ w e l ook onl y to the al l egat i ons of the C ompl ai nt fil e d[in th e u n d e rly in gla w su it] ,” R e isig , 870 P. 2d at1069 ( emphasi s added) , and t hi s i nqui r yfocus es on “the fa c ts i n the compl ai nt , ” Mat lack , 44 P. 3d at80 ( emphasi s added) . A s s etoutabove, the fa ct s al l eged r egar di ng the s cheme i n t he O r egon s ui t , and pl ai nt i ffs ’ par t i ci pat i on i n par t i cul ar , cl ear l yr efl ectknow i ng m i s conduct . W hi l e the W y om i ng Supr eme C ourthas i ndi cat ed ther e maybe ci r cumst ance s i n w hi ch an i nt ent i onal actbas ed on a mi s t ake c oul d s t i l l qual i fyas an ac ci dent al occurr ence if th e m ista k e h a d “ so m e b a sis in fa c t” a n d w a s “ h e ld in good fai t h, ” i d. a t 7 8 , the fa c tu a l alle g a tio n s a g a in st p lain tiffs in th e O re g o n su it c le a rl yp ro v id e n o o c c a s io n fo r a p p lic a tio n o f th is lim ite d e x c e p tio n . Pl ai nt i ffs al s o s eek t o br i ng themsel ves w i thi n the pr i nci pl e, acc ept ed by s om e court s , t hata bus i nes s l i abi l i typol i cym ayent i t l e an e m pl oy ert o i ns i s ton t he i ns ur er ’ s defe ns e aga i ns tvi car i ous l i abi l i ty/r es pondeat - s uper i orcl ai m s bas ed o n o th e rw ise e x c lu d e d in ten tio n a l to rts o f e m p lo y e e s. T h e yin sis t th is p rin c ip le is i m pl i cat ed her e bec aus e the O r egon ca s e i ncl uded al l egat i ons of w r ongdoi ng on-7-

t he partof Li s a deCost a, N ot w en C orpor at i on’ s di r ect orof i nves t m ent s . B utno vi car i ous l i abi l i t ycl ai m w as as s ert ed i n the O r egon ca s e. I ndeed, the pl eadi ngs al l eged t hat al l of the N otw en p l ai nti ffs had kn ow l edg e of the w rongf ul ent erpr i se t hatM s . deC os t a hel ped fa ci l i t at e forthem and t hats he ac t ed w i th the appr oval of defe ndantN ew t on hi m s el f. A pl t . A pp. at218. I n act i ng as the age ntforthe N ot w en pl ai nt i ffs s he w as al l eged, i n s hor t , t o have be en i ns trum ent al t o the e ffe c tu a tio n o f

th e iro w n w ro n g f

u l d e s ig n s . I n a l as teffor tt o for es t al l the r es ul tdi ct at ed byappl i cat i on of the contr ol l i ng l aw t o t he al l egat i ons i n the O r egon pl eadi ngs , pl ai nt i ffs ar gue thatt he di s t r i ctcour ts houl d have c ons i der ed a s t at ementt aken f r om pl ai nt i ff W i l l i am N ew t on i n w hi ch he de ni ed know l edge of the w r ongdoi ng al l eged i n thatcas e. Pl ai nt i ffs i ns i s tt hi s s t at ementcr eat es a fa ctual di s put e as t o the i nt ent i onal i tyof N e w to n ’s c o n d u c t a n d , c o n s e q u e n tly, a s to c o v e ra g e u n d e r t h e A E IC p o lic y . T her e ar e atl eas tt w o bas i c pr obl ems w i th thi s ar gum ent . Fi r s t , i truns afoul of t he rul e, r epea t ed w i t houtqual i fi cat i on i n the W y om i ng cas es w e have di s cus s ed, th a t d u ty -to -d e fe n d c laim s m u st tu rn o n th e a lleg a tio n s in th e u n d e rly in g law su it. Second, t he ar gum enti s pat ent l yci r cul ar , r ender i ng the exc l us i on of i nt ent i onal t or t s fr om t he l i abi l i t ypol i cym eani ngl es s , atl eas tunderthe ci r cumst ance s p rese n ted h ere : i t asserts, in effe ct, that a d u tyto d efen d ag ains t i n tention al-t o rt cl ai m s excl uded undert he pol i cyi s neverthel es s tr i gger ed w heneve rthe i ns ur ed-8-

deni es he comm i t t ed the al l eged i nt ent i onal t or t s , i . e. , w heneve rthe i ns ur ed s eeks to d efen d it self (w ith the in su rer’s assist an ce ) i n a law su itall eg ing inten ti o n al-t o rt cl ai m s . W e do nott hi nk W y om i ng l aw r ender s the pl ai n and expl i ci texcl us i on of in te n tio n a l- to rt c la im s f ro m a lia b ility p o lic ys o in s u b s ta n tia l. T he di s t r i ctcour tcorr ect l yhel d thatthe bus i nes s ow ner s l i abi l i typol i cyat i s s u e h e r e d i d n o ti mp o s e o n AEI C a d u tyt o d e fe n d p l a i n t i ffs o n th e c l a i ms as s er t ed aga i ns tt hem i n t he O r egon l aw s ui t . A ccor di ngl y , s um m aryj udgm ent w as pr oper l yent er ed forA E I C on pl ai nt i ffs ’ cl ai m s forbr eac h of contr act , bad fa ith , s ta tu to ry in te re s t a n d a tto rn e yfe e s . T h e ju d g m e n t o f

th e d istric t co u rt is A F F IR M E D . A p p e llan ts’ m o tio n to p re s e n t o ra l a rg u m e n t is D E N IE D . E n tered fo r th e C o u rt We s l e yE . Br o wn D i s tr i ctJ udge