T hi s di s pos i t i on i s notappr opr i a t e f orpubl i c a t i on a nd i s notpr e c e de nt * e xc e pta s pr ovi de d by 9th C i r . R . 36- 3. NOT F OR P UB L I CAT I ON UN I TE D STATE S C OU RT OF APPE ALS FOR T HE NI NTH CI RC UI T SO V EREI G N G EN ERA L I N SU RA N CE S E R V I C E S , I N C ., P la in tif

f - A p p e lla n t, a nd M A R T IN F . S U L L IV A N , S r. ; G L O R IA S UL L I VA N, C o u n t er-cl ai m an t s, v. SCO TTSD A LE I N SU RA N CE COM PANY ; NA TI ON AL CASUALTY COM PANY ; SC OTTS DA LE I N D EM N I TY CO M PA N Y ; W ESTERN HE R I T AG E I NS UR AN C E C OMP AN Y; R . MAX WI L L I AMS ON ; J OS E P H A . LU G H ES, D efen d an t s - A p p el l ees. N o. 08- 17422 D. C . No . 2 : 0 5 - c v - 0 0 3 1 2 - MC E - DA D ME MOR AN DU M *

SO V EREI G N G EN ERA L I N SU RA N CE S E R V I C E S , I N C ., P l ai nt i ff

, a nd N o. 08- 17424 D. C . No . 2 : 0 5 - c v - 0 0 3 1 2 - MC E - DA D



# FI LED APR08 2 010 M OLLY C. DW Y ER, CLERK U . S. C O U R T OF APPE ALS2

M A R T IN F . S U L L IV A N , S r. ; G L O R IA S UL L I VA N, C o u n t er-cl ai m an t s - A p p el l an t s, v. SCO TTSD A LE I N SU RA N CE COM PANY ; NA TI ON AL CASUALTY COM PANY ; SC OTTS DA LE I N D EM N I TY CO M PA N Y ; W ESTERN HE R I T AG E I NS UR AN C E C OMP AN Y; R . MAX WI L L I AMS ON ; J OS E P H A . LU G H ES, D efen d an t s - A p p el l ees. W ESTERN H ERI TA G E I N SU RA N CE C O M P A N Y , an A r i z onac orpor a t i on, P la in tif

f - A p p e lla n t, v. SO V EREI G N G EN ERA L I N SU RA N CE S E R V I C E S , I N C ., aC a lif o rn ia c o rp o r a t i o n ; MAR T I N F . S UL L I VA N, S r . ; G L O R I A S U L L I V A N hus ba nd a nd w i fe, g u aran t o rs, D e f

e n d a n ts - A p p e lle e s . N o. 09- 15246 D. C . No s . 2 : 0 5 - c v - 0 0 3 1 2 - MC E - DA D 2 : 0 5 - c v - 0 1 3 8 9 - MC E - DA D

A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt f o rth e E a s te rn D is tr ic t o f C a lif o rn ia M orr i s on C . E ngl a nd, D i s tr i c tJ udge , P r e s i di ng3 A r gue d a nd S ubm i tt e d J a nua ry14, 2010 S a n F r a n c is c o , C a lif

o rn ia B efo re: K O Z IN S K I, C h i ef Ju d g e, W A L L A C E an d C L IF T O N , C i rcu i tJu d g es. S ove r e i gn G e ne r a l I ns ur a nc e S e rvi c e s , I nc . ( S ove r e i gn) appe a l s f r om the di s tr i c tc ourt ’ s s um m a ry j udgm e ntf orW e s t e rn H e r i t a ge I ns ur a nc e C om pa ny ( W e s t e rn) on S ove r e i gn’ s c l a i m s a ga i ns tW e s t e rn. W e s t e rn c r os s - appe a l s f r om the di stri ctcourt ’ s deni al of pre- j ud gm enti nt er es ton the dam ages aw ar ded t o W es t ern by the j ury on W es t ern’ s c l ai m s a gai nstS ov er ei gn . T he di stri ctcourthad j u ri sd i ct i o n p u rsu an tt o 2 8 U . S . C . § 1 3 3 2 d u e t o co m p l et e d i v ersi ty o f th e p art i es, a nd w e ha ve j ur i s di c t i on ove rthe f i na l j udgm e ntof

the di s tr i c tc ourtunde r28 U .S .C . § 1 2 9 1 . W e r e v ie w th e d is tr ic t c o u rt’s s u m m a ryju d g m e n t d e n o v o . U ni v e rs al H e al th Se rvs . , I

nc . v . T hom ps on , 3 6 3 F .3 d 1 0 1 3 , 1 0 1 9 ( 9 th C ir . 2 0 0 4 ) . W e r e vi e w the di s tr i c tc ourt ’ s de ni a l of pr e - j udgm e nti nt e r e s tunde rs t a t e l a w f or ab u s e o f d is c r e tio n . Cha m

pi on P rodu ce, Inc. v. R ub y R ob i nson C o. , Inc. , 342 F . 3d 1 0 1 6 , 1 0 2 0 (9 th C i r. 2 0 0 3 ). W e affi rm su m m ary j u d g m en to n S o v erei g n ’ s cl ai m s, a nd r e ve r s e the di s tr i c tc ourt ’ s de ni a l of pr e - j udgm e nti nt e r e s tc l a i m e d byW e s t e rn. I. S o v e r e ig n ap p e a ls f

r o m th e d is tr ic t c o u rt’s s u m m a ryju d g m e n t o n its contra ctual cl ai m s f

or po st -t erm i nat i on cont i ng entcom m i ss i on s. H ow ever ,4

S o v e r e ig n d o e s n o t d is p u te th a t, u n d e rth e te rm s o f th e A g e n c yA g r e e m e n t, W e s te rn d id n o t o w e S o v e r e ig n a n yp o s t- te rm in a tio n c o n tin g e n t c o m m is s io n s u n til a ll c la im s a n d lo s s e s u n d e rth e p o lic ie s in e f f e c t a t te rm in a tio n w e r e r e s o lv e d . I t is a ls o u n d is p u te d th a t a ll s u c h c la im s a n d lo s s e s h a d n o t b e e n r e s o lv e d a s o f th e d a te of the sum m ary j ud gm ent . T he di stri ctcourtthere fore prop er l y det erm i ned that b e c au s e o u ts ta n d in g liab ilitie s u n d e rth o s e p o lic ie s h a d n o t b e e n r e s o lv e d , n o p o s tte rm in a tio n c o n tin g e n t c o m m is s io n s w e r e y e t d u e . S ov er ei gn ar gu es thatthe di stri ctcourt ’ s s um m ary j ud gm entprec l ud es So v e r e i g n f

r o m ev err e c ove r i ng the pos t - t e rm i na t i on c ont i nge ntc om m i s s i ons . B ut S ove r e i gn s i m pl y ha s no vi abl e c l a i m f orbr e a c h of

c ontr a c tunt i l the c om m i s s i ons becom e due, and thatw i l l no thapp en un t i l al l of the op en cl ai m s and other l i abi l i t i es on tho se po l i ci es ar e r es ol ved. N othi ng i n the di stri ctcourt ’ s s um m ary ju d g m e n t f

o rW e s te rn w o u ld h a v e ap r e c lu s iv e e f f e c t o n S o v e r e ig n ’s ab ilityto re cover com m i ss i on s i f, atsom e f uture t i m e, i f they bec om e due and W es t ern r e f u s e s to p a y th e m . S ove r e i gn a r gue s tha tthe r e w a s ac ont i nge ntc om m i s s i on a l r e a dydue a nd ow i ng t o S ove r e i gn pr i ort o the A ge nc yA gr e e m e nt ’ s t e rm i na t i on, a nd tha ta m ount s h o u ld h a v e b e e n ap p lie d to o f f s e t th e a m o u n ts th e ju rya w a r d e d to W e s te rn . A gai n, ho w ever , no pre- t erm i nat i on cont i ng entcom m i ss i on s w er e y etdu e und er5

the t e rm s of

the c ontr a c t . T he di s tr i c tc ourtc orr e c t l yi nt e rpr e t e d the pr ovi s i ons of th e A g e n c y A g r e e m e n t to m e a n th a t S o v e r e ig n “c a n n o t c la im e n title m e n t to in te r im c o m m is s io n p a y m e n ts if it o w e d f

u n d s , in c lu d in g p r e m iu m p a y m e n ts , to W es t ern H er i t age. ” T he di stri ctcourtthen h el d that , because i tw as un di sput ed tha ta s of J une 30, 2004 S ove r e i gn ha d not p a id W e s te rn a ll o f

th e p r e m iu m s it ow e d, W e s t e rn di d notbr e a c h the c ontr a c tbynotpa y i ng the c om m i s s i on. S ov er ei gn ar gu es thatthere w as a di sput e a s t o the am ou ntof prem i um du e, and thatdi sput e s ho ul d n othave been deal tw i th o n sum m ary j ud gm ent . H ow ever , the di s tr i c tc ourtdi d notde t e rm i ne the e xa c ta m ount s of pr e m i um ow e d or c ont i nge ntc om m i s s i on due . R a the r , i tc onc l ude d tha t , vi e w i ng the e vi de nc e i n the l i gh tm ostfa vo rabl e t o S ov er ei gn , the m o st tha tW e s t e rn ow e d S ove r e i gn on J une 30, 2004 i n pr e - t e rm i na t i on c ont i nge ntc om m i s s i ons w a s $62, 262, a nd the mi n i mu m th a t S o v e r e ig n o w e d W e s te rn in u n p a id p r e m iu m s w a s $ 1 8 0 ,0 0 0 . S ove r e i gn a r gue s tha tthe a m ountof c om m i s s i on due w a s m or e tha n $62, 262 b ecau se th e p art i es h ad al l eg ed l y m o d i fi ed th e fo rm u l a fo r cal cu l at i n g th o se co m m i ssi o n s, b u tS o v erei g n h as w ai v ed th i s arg u m en to n ap p eal b y fai l i n g t o rai se it in its o p e n in g b r ie f

. I nde p. T ow e rs of W as h. v . W as hi ngton , 350 F . 3d 925, 929 (9th C i r. 20 03 ). T he di stri ctcourtdi d n oterr i n con cl ud i ng thatthe un di sput ed fa ct s s ho w ed thatS ov er ei gn ow ed m ore t o W es t ern i n u np ai d p re m i um s than6

W e s t e rn w oul d ha ve ow e d t o S ove r e i gn i n c om m i s s i ons , a nd thus , W e s t e rn di d not br e a c h the c ontr a c tby f a i l i ng t o pa yS ove r e i gn a nypr e - t e rm i na t i on c ont i nge nt co m m i ssi o n s. A s w i th the po st -t erm i nat i on cont i ng entcom m i ss i on s, S ov er ei gn ar gu es that th e d is tr ic t c o u rt’s o r d e rh a s th e e f f e c t o f c au s in g S o v e r e ig n to “f o r f e it” its r ig h t to r e c e i ve c ont i nge ntc om m i s s i ons i ta l l e ge dl ye arne d pr i ort o t e rm i na t i on of the A gency A gree m ent . B utthe i ss ue on sum m ary j ud gm entw as no tw hether S ov er ei gn m i gh tsom edayhave a ri gh tt o tho se com m i ss i on s. R ather, the di stri ct co u rtad j u d i cat ed w h eth er, o n th e fact s b efo re i t , W est ern ’ s fai l u re t o p ay th o se am ou nt s c on st i tut ed a brea ch of contra ct . T he di stri ctcourtprop er l y hel d that W es t ern d i d n otow e any paym entt o S ov er ei gn as of June 30 , 20 04 , and thu s there h a d b e e n n o b r e a c h . T h is h o ld in g d o e s n o t in v o lv e as itu a tio n th a t m ig h t o c c u ra t a future t i m e. S o v e r e ig n a ls o a r g u e s it h a s c la im s a g a in s t W e s te rn f o rin te r f e r e n c e w ith pr os pe c t i ve e c onom i c a dvant a ge , a c c ount i ng, a nd f r aud. T hos e c l a i m s a r e not spec i fi ca l l y di sc usse d i n S ov er ei gn ’ s openi ng bri ef , and w e there fore deem them aba ndone d on appe a l . S i m i l a r l y , S ove r e i gn’ s ope ni ng br i e f doe s notm a ke a ny a r gum e nttha tW e s t e rn’ s t e rm i na t i on of the A ge nc yA gr e e m e ntw a s , i n a nd of i t se l f, w rong ful , and thu s any such ar gu m enti s w ai ved o n app ea l . S ov er ei gn has7

also w aiv ed it s ap p ea l as to claim s r eg ar d in g “ren ew al rig h ts.” S o v er eig n ’s ope ni ng br i e f

m e nt i ons r e ne w a l r i ght s onl yi n pa s s i ng, w i thoutc i t i ng f a c t s i n the re cord and w i tho utprov i di ng any s peci fi c l egal ar gu m entre gardi ng the contra ctual te rm s r e la te d to r e n e w a l r ig h ts o rth e p r o v is io n s o f th e C a lif

o rn ias ta tu te to w h ic h it al l u d es. II. W e ne xtturn t o the c r os s - appe a l ba s e d on the di s tr i c tc ourt ’ s de ni a l of pr e j udgm e nti nt e r e s tf

orW e s t e rn. U nde rA r i z onal a w , “ pr e j udgm e nti nt e r e s ton a l i qu i dat ed cl ai m i s am att erof ri gh t . . . . [and ] a c l ai m i s l i qu i dat ed i f the pl ai nt i ff s p r o v id e ab a s is f

o rp r e c is e lyc a lc u la tin g th e a m o u n ts c la im e d .” G em star L td. v. E rns t & Y oung , 91 7 P . 2d 22 2, 23 7 (A ri z. 19 96 ). A cl ai m i s notun l i qu i dat ed “m e r e lyb e c au s e th e ju ry m u s t f in d c e rta in f

a c ts in f a v o ro f th e p la in tif

f in o r d e rto d et erm i n e th e am o u n to f d am ag es. A l l th ati s n ecessary is th atth e ev i d en ce fu rn i sh d a taw h ic h , i

f bel i ev ed , m akes i tpo ss i bl e t o com pu t e the am ou ntw i th exactness . ” T r u s J o is t C o r p . v . Sa f e c o I n s . C o . o f A m. , 735 P . 2d 125, 139 ( A r i z . C t . A pp. 1986) . A n unl i qui da t e d c l a i m i s one w he r e a n e xa c ta m ount c a nnotbe de f

i ni t e l y f i xe d f r om the f a c t s pr ove d, di s put e d or undi s put e d, butm us ti n the l a s ta na l y s i s de pe nd upon the opi ni on or di sc re t i on of the j ud ge or j ury a s t o w hether al ar ger or asm al l er a m ounts houl d be a l l ow e d. . . . [ T ] he e xe r c i s e of “ opi ni on or8

d is c r e tio n ” th a t r e n d e r s ac la im u n liq u id a te d r e f e r s to th e m a n n e rin w hi c h da m a ge s ar e c a l c ul a t e d. J o h n C . L in c o ln H

o s p . & H e a lth C o r p . v . M a r ic o p a C o u n ty , 96 P . 3d 530, 542 ( A r iz . C t. A p p . 2 0 0 4 ) . H er e, the dam ages w er e c al cul at ed w i tho utre sortt o “ op i ni on or di sc re t i on ”; they w er e bas ed on prec i se ac coun t i ng re cords of premi um s S ov er ei gn ow ed W es t ern and w hen each of tho se prem i um s s ho ul d h ave been pai d. T he j ury aw ar d i s properl y vi ew ed as the t ot al of a s er i es of l i ne i t em s, w here ea ch i nd i vi du al un pai d p re m i um w as a def i ni t e a m ou ntow ed on a def i ni t e dat e. S ov er ei gn ar gu es that , un der A ri zona l aw , dam ages ar e notl i qu i dat ed i f they c an on l y be det erm i ned vi ae xpe rtopi ni on. H ow e ve r , W e s t e rn’ s e xpe rtdi d notde t e rm i ne the a m ountof dam ages ; he on l y ver i fi ed the accuracy o f c alcu lati o n s p er fo rm ed b y W es tern ’s a c c ount i ng s t a f

f a nd s y s t e m s . M or e ove r , the m e r e f a c ttha tthe a m ount s ow e d by S ov er ei gn fl uctuat ed du ri ng the pend encyof the l i t i gat i on do es no tre nd er S o v e r e ig n ’s d e b ts u n liq u id a te d . See H om e s & Son C ons tr . C o. v . B olo C or p. , 526 P .2 d 1 2 5 8 , 1 2 6 2 ( A r iz . C t. A p p . 1 9 7 4 ) . T h e d is tr ic t c o u rt ab u s e d its d is c r e tio n in d e n y in g W e s te rn p r e -

ju d g m e n t in te r e s t.9

W e th erefo re A F F IR M su m m ary j u d g m en tas t o al l o f S o v erei g n ’ s cl ai m s, a n d R E V E R S E a n d R E M A N D th e d e n ia l o f p r e - ju d g m e n t in te r e s t f

o rW e s te rn . S o v e r e ig n is to b e a rW e s te rn ’s c o s ts o n ap p e a l.