1 0 8
- 5 5 0 4
- cv I n re: Laf

arge N. Am

. , I

nc. 1 UNITED S TATES C OU RT OF APPE ALS 2 FOR TH E SECO ND C IRCUIT 3 A ugus t T erm

2009 4 D o c k e t N o s. 0 8
- 5 5 0 4
- c v ( L) ; 0 9
- 1 1 0 4
- c v ( CO N ) ; 0 9
- 1 1 3 9
- c v ( CO N ) ; 5 09-1149- cv (CON); 09-1153- cv

(CON) 6 A

rgued: No v em

b er 16, 2009 Dec i ded: M arch 15, 2010 7

_____________________________________________________________________________ 8 NEW

YOR K M ARINE A

ND GENE RALINS UR

A NC E CO M PA

NY, 9 P laintif f -Counter -Def endant-A ppellee-Cr

oss -A ppellant , 1 0 - v .- 1 1 L AF AR G E N O R TH AM ERIC A , IN C ., 12 Def endant-Counter

-Plaintif f -A ppellant- Cr

oss -A ppellee
. 13

_____________________________________________________________________________ 1 4 AM ERIC A

N STEA M SH IP O W

N ER S MU TU ALPR O TEC TIO N A N D IN D EM

N ITY 1 5 A SS O C IATIO N , IN C ., 16 P laintif f -Counter -Def endant-A ppellee , 1 7 - v .- 1 8 L AF AR G E N O R TH AM ERIC A , IN C ., 19 Def endant-Counter

-Plaintif f -A ppellant
. 20

_____________________________________________________________________________ 21 T HE NORT HE RN A S S URA NCE COMPA

NY O F AME RI CA

an d AME RI CA

N HO ME 2 2 A SS U R

A N C E C O M PA

N Y , 23 P laintif f s -Counter

-Def endants -A ppellants-Cr

oss -A ppellees , 24 NEW

YOR K M ARINE A

ND GENE RALINS UR

A NC E CO M PA

NY, 25 Int er venor P laintif f -Counter -Def endant-A ppellee-Cr

oss -A ppellant , 2 6 - v .- 2 7 L AF AR G E N O R TH AM ERIC A , IN C ., 28 Def endant-Counter

-Plaintif f -A ppellant- Cr

oss -A ppellee —Th e C l e rk o f t h e C o urt i s d i

re c t e d t o ame n d t h e o f f i c i a l c a p t i o n i n t h i s c a s e t o c o n f

o rm * t o t h e l i s t i n g o f t h e p art i e s a

b o v e . B e c a u s e t h e H o n o r a

b le J o s é A
. C a

b r an e s r e c u s e d

h ims e lf p r io rt o o r a l ar g ume n t , t h is ** a p p e a l is b e ing d e c id e d

b y t h e r e ma ining t w o me mb e r s o f t h e p an e l p ur s u an t t o S e c o n d

C ir c u it In t e rn a l O p e rat i n g Pr o c e d

ure E(b ). 2 1 A ppellee-Cr

oss -A ppellant , 2 AM ERIC A

N STEA M SH IP O W

N ER S MU TU ALPR O TEC TIO N A N D IN D EM

N ITY 3 A SS O C IATIO N , IN C ., 4 Def endant-A ppellee
.

* 5

_____________________________________________________________________________ 6 Bef

o r e: MI NE R an d S T RA

UB, Ci r cuit Judg es. ** 7 I ns ur e d

- and i ns ur e r s - a p p e l l ant s a

p p e a l f r o m an o r d e re nt e r e d

o n J anu ary

2 9 , 2 0 0 7 , and 8 s um

mary j udgmen t s en t ered o n Oct o b er 27, 2008, an d F eb ruary 19, 2009, i

n t h e Uni t ed St at es 9 Di s t ri ct Co urt f

o r t h e So ut h ern

Di s t ri ct o f

New Y o rk ( Haigh

t , J
. ), t h e co urt h av i

n g, i n t er ali a, ( 1) 1 0 d i s m

i s s e d a l l c a u s e s o f a c t i o n b roug h t a g a i n s t i n s ure r-a p p e l l e e , a f

t e r c o n c l u d i n g t h at t h e i

n s ure r11 appell ee w as n o t respo n s i b l e un der a li ab i li

t y po li cy f o r damages all egedl

y caus ed b y

a b reakawa

y 12 b arge t h at was mo o red t o t h e i n s ured’ s f acili t y duri n g Hurr i can e Kat ri

n a; (2) gran

t ed t h e i n s ured 1 3 t h e f

e e s an d e x p e n s e s o f t w o o f t h e t h re e l awf i rm s i t re t a i n e d , b a s e d

o n a f i n d i n g t h at t h e i

n s ure r1 4 a p p e l l an t ’ s p o l i c y p e rm i t t e d i n s ure d t o t ak e re a s o n a

b l e p rot e c t i

v e me a s ure s t o m

i n i m iz e e x p o s ure 1 5 to li a

b i l i ty ar i s i n g f r om th e b r e ak aw ay

b ar g e ; an d

( 3 ) d e n i e d

i n s ur e d ’ s motion

to t r an s f e ran d i ts 1 6 a p p l i c at i o n f o r at t o rn e y s ’ f

e e s i n c urre d i n c o n n e c t i o n w i t h mo t i o n s b e f

o re t h e d i s t ri c t c o urt
. 1 7 A f

f i rme d i n p art , v a c at e d

i n p art , an d re man d e d
. 18 A NT H ONY J. P R U ZIN SKY , J o h n J
. Sul li v an , Ro b ert G. 19 Cl y n e, Hi l l Ri v ki n s &Hay den L L P, New Y o rk, New 2 0 Y o rk , f o r L a f arg e N o rt h

A me ri c a , In c o rp o rat e d
. 21 22 J OH N A
. V. N IC O LE TTI , No o shi n Namazi , Kev i

n J. B. 23 O’ M all ey , Ni co l et t i Ho rn i g &Sween ey , New Y o rk, 2 4 N e wY o rk , f o rT he N o rt he rn As s ur anc e C o m p any 25 o f A meri ca a n d A meri can Ho me A s s uran ce 2 6 C o mp an y. 27 D AVI D H. F R O MM an d M i ch ael P. Naugh t o n , Bro wn 2 8 G av a l a s &F r om m L L P , N e wY ork , N e wY ork , f or 2 9 N e wY o rk M ar in e an d

G e n e r a l I n s ur an c e C o mp an y. 30 J OH N M. W OODS an d J o h n R. St ev en s o n , Cl

y de & 31 Co
. US L L P, New Y o rk, New Y o rk, f o r Ameri can 3 2 S te am s h i p O w n e r s M utu a l

P r ote c ti on

an d I n d e m n i ty 3 3 A s s o c i at i o n , In c o rp o ra t e d
. 34 35 M INE R, Ci

rcui t J udge:3 1 In s ured def en dan t -co un t er- pl ai n t i f f -appell an t -cr o s s -appell ee L af

arge No rt h

A meri ca, I n c. 2 ( “La f

ar g e ” ) , i nt e rve no rand

p r i mary- i ns ur e rp l a i

nt i f f

- c o unt e r - d e f

e nd ant - a p p e l l e e - c r o s s - a

p p e l l ant 3 N e wY o rk

M ar i ne and G e ne r a l I ns ur anc e C o m

p any ( “N Y M AG I C ” o rt he “p r i mary i ns ur e r ” ) , and 4 ex ces s -i

n s urer s pl ai

n t i f f s -co un t er- def en dan t s -appell an

t s -cr o s s -appell ees No rt h ern A s s uran ce 5 C o m

p an y o f A me ri c a (“ N A C A ” ) an d

A me ri c an H o me A s s uran c e C o m

p an y (“AH A C ” o r, 6 co l l ect i

v el y wi t h NYMA GI C, i

n i t s addit i o n al

capac i t y as ex cess i

n sur er , an d NA CA , t h e “ ex cess 7 i n s ur e r s ” ) , a

p p e a l f r om an or d e re n te r e d on J an u ary 2 9 , 2 0 0 7 , an d

s um mary j u d g me n ts e n te r e d on 8 O c t o b e r 2 7 , 2 0 0 8 , an d F e b ru ary 1 9 , 2 0 0 9 , i

n t h e U n i t e d State s D i s t ri c t C o urt f

o r t h e South e rn 9 D i s tr i c t of

N e wY ork

( H a i g h t, J
. )
. T h e D i s tr i c t C ourt, i n te ra li a , ( 1 ) d i s m

i s s e d a l l c a u s e s of a c ti on 10 b ro ugh

t agai n s t i n s urerpl ai

n t i f f -co un t er- def en dan t -appell ee A

meri can St eams hi p Own ers Mut ual 11 Pr o t ect i o n

an d In dem

n i t y A s s o ci at i o n , In c. ( t h e “A meri can Cl ub ” o r t h e “ Cl

ub ”); (2) gran

t ed 1 2 L a f

ar g e th e f e e s an d e x p e n s e s of tw o of th e th r e e l awf i rm s i t r e ta i n e d w i th out th e kn ow l e d g e or 1 3 c o n s e n

t o f t h e p r ima

ry ins ur e r ; ( 3 ) d e n ie d

L a far g e ’ s mo t io n

fo rat t o rn e ys ’ fe e s in c urr e d in 1 4 d e f

e n d i n g a g a i n s t th e i n s ur e r s ’ moti on s f

ors um mary j u d g me n t; an d ( 4 ) d e n i e d

L a f ar g e ’ s moti on 1 5 to tr an s f

e rth e A me r i c an C l u b a c ti on to th e U n i

te d S tate s D i s tr i c t C ourt f

orth e E a s te rn

D i s tr i c t of 1 6 Lo u i si ana. Fo rt h e r ea so n s t h at f o l l o w, we af

f i rm i n p ar t and vaca t e i

n p ar t t h e D i st r i ct Co urt ’s 1 7 j u d g me n

t s . 18 I . B ACK GROUND 19 A
. Ba rge I NG 4727 2 0 O n Au g u s t 2 9 , 2 0 0 5 , H urr i c ane Kat r i na ma d e l and f

a l l i n N e wO r l e ans , L o u i s i ana . T he 2 1 l e ve e p r o t e c t i

ng t he L o w e rN i

nt h War d o f N e wO r l e ans f

a i l e d d ur i ng t he hurr i c ane , c a

u s i ng t he 2 2 M i s s i s s i

p p i R i v e rto f l ood th e ar e a . W i d e s p r e a d

d e v a s tati on

an d d e ath e n s u e d
. I n

th e c our s e of 23 t h e di s as t er, Ba

rge I NG 4727, wh i ch

was o n e o f

h un dreds o f

b arges an d v es s el s t o b reak awa y 2 4 f rom t h e i r m o o ri n g s d uri n g t h e s t o rm , c ame t o re s t a g a i n s t a h o u s e o n t h e l an d s i d e o f t h e l e v e e . 2 5 O n

S e p t e mb e r9 , 2 0 0 5 , t h e W a ll S t r e e t J o urn a l p u b lis h e d an art ic le e n t it le d “ S t ill 26 Un

kn o wn : Di d a B arge Brea ch t h e L ev ee? ” In

t h at art i cl e, t h e A

rm y Co rps o f E n gi n eers was4 1 quo t ed as s t at i

n g “ t h at o n e po s s i

b l e ca us e o f t h i s b reach

i s t h at [Barge ING 4727] s mas h ed 2 t h ro ugh [t h e l ev ee]. ” Th e art i cl e i den t i f i ed In gram

Ba rge Co m pan y (“ In gram”) as Ba

rge I NG 3 4727’ s o wn er, an d L af arge as t h e o perat o r r es po n s i b l e f o r t h e t erm

i n al t o wh i ch Ba rge I NG 4727 4 was mo o red wh en t h e h urr i can e s t ruck. In gram

was quo t ed as s t at i

n g t h at “ i t wo ul d h av e b een 5 t h e t erm

i n al ’ s respo n s i

b i l i t y t o s ecure [Ba

rge I NG 4727] i

n adv an ce o f

t h e s t o rm . ” L af

arge, 6 wh i ch

was co n t act ed t h e day

b ef o re b y t h e repo rt er pr epari

n g t h e art i cl e, st at ed o n l

y t h at i t was 7 “n ot ye t a

b l e to p r ov i d e a d d i

ti on a l i n f ormati on r e g ar d i n g th e te rm

i n a l ori ts r e l ate d tr an s p ortati on 8 o perat i o n s . ” It t h

us was b ro ugh

t t o pub li c at t en

t i o n t h at Ba rge I NG 4727 m

ay n o t h av e b een 9 merel

y a ca s ual t y o f Hurr i can e Kat ri

n a but i n f act may h av e ca us ed t h e f l o o di n g o f t h e L o wer 10 Ni

n t h W ard. F urt h er, t h e art i cl e i m pl i ed t h at L af

arge may h av e f ail ed t o pro perl

y mo o r Barge 1 1 I N G 4 7 2 7 d

ur i ng t he s t o rm

and t hat L a f ar g e w a s t he r e f

o r e r e s p o ns i

bl e f o rt he d e va s t at i o n t o t he 1 2 L o w e r N i

n t h W ard
. 1 3 L a f

ar g e , o ne o f

t he l ar g e s t s u

p p li e r s o f c o ns t ru c t i o n mat e r i a l s i

n t he U ni t e d S t at e s and 14 Ca

n ada, was well

awa re t h at t h e ex

po s ure t o po t en

t i al li ab i li t y creat ed b y

Ba rge I NG 4727 1 5 t h

r e at e n e d t h e e x is t e n c e o f t h e c o mp an y. T h u s , u p o n r e c e iv ing t h e init ia l inqu iry fr o m t h e W a ll 16 St reet J o urn al

repo rt er o n

Sept em b er 8, 2005, an d t h ereb y

f i rst b eco m i n g awa re o f a po t en t i al 1 7 c a

u s a l c o n n e c t io n b e t w e e n B ar g e I N G 4 7 2 7 an d

t h e b r e a c h e d

le v e e , L a far g e r e t a in e d

G o o dw in 18 Pr o ct er LL P ( “ Go o dwi n Pr o ct er”), wh i ch

L af arge des cri

b ed as “ a t o p l aw f

i rm wi t h a n at i o n al 1 9 r e p utati on

[ th at] h a d

r e p r e s e n te d [ L a f ar g e ] i n c l a s s a c ti on

/ma s s tor t an d

oth e rc om

p l e x li ti g ati on 2 0 [ i n th e p a s t]
. ” L a f

ar g e a l s o r e ta i

n e d H oll an d &K n i g h t L L P ( “ H & K” ) , w h i c h , a c c or d i n g to 2 1 L a f

ar g e , h a d a “p r om i n e n t mar i ti me i n v e s ti g ati on

an d li ti g ati on p r a c ti c e . ” T h e n e xt d ay , on 2 2 S e p t e mb e r9 , 2 0 0 5 , a ft e rb e ing a dv is e d b y G o o dw in

P r o c t e ra b o ut t h e n e e d

fo rlo c a l c o un s e l, 23 L af

arge ret ai n ed t h e Ne w Orl ean s l aw f i rm Ch af f e M cC all L L P ( “ Ch af

f e”), wh i ch

al s o h ad a 24 s izab l e m

ari t i me pract i ce. T h e l aw f

i rm s i m medi at el y b egan t h ei r wo rk: “ Go o dwi

n [P ro ct er] h ad 25 primary

respo n s i b i l i t y f o r o v ersigh

t , co m m un i cat i o n , an d all

l egal i s s ues deali

n g wi t h po t en t i al 26 mas s t o rt l i ab i l i

t y ; H& K h ad t h e l ead o n

mari t i me i s s ues an d i

n v es t i gat i o n [; ] an d Ch af

f e pro v i dedT h e co m m un i cat i o n was made b et wee n

L af arge’ s i n s uran ce b ro ker, W i l li s o f New Y o rk, 1 I n c . , an d N Y M A G I C ’ s man a g e r s in t h e M ut u a l M ar in e O ffic e , I n c . F o re a s e o f r e fe r e n c e , t h is o p i n i o n w i l l re f e r t o t h e s e an d

s i m i l ar c o m m un i c at i o n s a s b e t w e e n

L a f arg e an d N Y M A G IC
. 5 1 n e c e s s ary

l oc a l s u p p ort.” A l

th ou g h G oodw i n P r oc te ran d

C h a f f e w ou l d c on ti n u e to r e ma i

n on 2 t h e ca s e, H& K

was di s ch arged i

n earl y 2006 af t er t h e f i rm co m pl et ed i t s repo rt s o n

t h e i n i t i al 3 i nve s t i g at i o n “i

nt o t he c i r c um s t anc e s o f

t he br e ak aw ay

[ B ] ar g e I N G 4 7 2 7 and

t he f a i l ur e o f t he 4
. . . l ev ee s t ruct ures.” 5 Mean

wh i l e, o n S ept em b er9, 20 05 , Laf

ar ge h ad n o t i f

i ed it s pr i mary i n sur er , NYMA GI C, 6 ab o ut Ba

rge I NG 4727 and t h e po s s i b i li t y o f cl ai m s agai n s t L af arge. A t t h at t i me, La f arge 1 7 adv i s ed NYM A GIC o n l y t h at i t h ad ret ai n ed H& K
. In

a f acs i m i l e t ran s m i s s i o n dat ed Sept em

b er 8 1 3 , 2 0 0 5 , N Y M A G I C r e s p on d e d th at i t h a d “ s e t up a f i l e an d [ w ou l d ] aw a i

t f urth e rd e ta i l s or 9 o t h e rd e v e lo p me n

t s . ” N Y M A G I C a ls o n o t e d in t h e t r an s mis s io n

t h at “w e h av e g o o d

c o un s e l in 1 0 N e wO r l e ans , M e s s r s . S ut t e r f i e l d and We bb [ ( “S ut t e r f

i e l d ” ) ] , w ho w e w o u l d

li k e t o i nvo l ve 11 s h o ul d t h ere b e an y s i gn i f i can t cl ai m agai n s t [Laf arge] i n t h i s mat t er. ” It was n o t un t i l Sept em b er 1 2 2 0 , 2 0 0 5 , t h at L a far g e n o t ifie d N Y M A G I C t h at it h a d

r e t a in e d G o o dw in P r o c t e ran d

C h a ffe , in 1 3 a d d i

t i o n t o H &K. L a f

ar g e ne ve ro bt a i

ne d N Y M AG I C ’s p r i o rc o ns e nt t o t he a p p o i nt me nt o f any 1 4 o f

t h e s e l awf

i rm s . In a res po n s e dat ed Sept em b er 22, 2005, NYM A GIC advi s ed L af arge t h at 15 “we c an

n o t co m m i t t o pay i n g f o r pub l i c rel at i o n s o r l o b b y i n g ef f o rt s ” and t h at “ [f

]o r def en s e, we 16 wi s h

t o as s i gn o n e o f t h e L o ui s i an a f

i rm s o n o ur ‘Pan el

Co un s el ’ li s t
. ” T he r e s p o ns e i nc l u d e d t he 1 7 n ame s o f

s i x N e wO rl e an s l awf

i rm s , i n c l u d i n g Sut t e rf

i e l d , s p e c i a liz i

n g i n mari t i me li t i g at i o n . 1 8 L a far g e , h o w e v e r , d id n o t r e s p o n d

t o N Y M A G I C ’ s o ffe r e d

lis t o f c o un s e l, an d

it b e c ame 1 9 c l e ar t h at L a f

arg e “w o u l d

n o t c o n s e n

t t o an y o f t h e s i x l awf i rm s p ropos e d

b y N Y M A G IC an d

. . . 20 t h at t h ey

i n t en ded t o co n

t i n ue t o em pl o y Go o dwi n Pr o ct [e] r, Ch af

f e . . . an d [H& K]. ” In

ane2 1 ma i l

d ate d S e p te m b e r2 8 , 2 0 0 5 , N Y M A G I C a dv i s e d L a f ar g e th at “ [ w e ] c an

a g r e e to th e c os ts of 22 t h e ex

pert s an d s urv ey

o rs b ut [we] can

n o t agree t o pay

f o r t h e t h ree s et s o f

at t o rn eys o n

t h e ca s e, 23 n o n e appro v ed b y us . ” In a s eparat e e-mail

dat ed t h e s am

e day , NYM A GIC al s o i

n f o rmed 24 L af

arge t h at “ [w] e h av e dec i ded t o appo i n t Sut t erf i el d &W ebb as def

en s e co un s el

i n L o ui s i an a.”6 1 L a f

ar g e t he n i

ns t ru c t e d G o o dw i n P r o c t e rt o “c o o p e r at e w i t h S ut t e r f i e l d and t o br i ng D an We bb, 2 o f t h at f i rm , up t o s peed.” 3 On

No v em b er 3, 2005, t h e f

i rst act i o n agai n s t L af arge was f

i l ed i n t h e Uni t ed St at es 4 D is t r ic t C o urt fo rt h e E a s t e rn D is t r ic t o f L o u is ian a . S e e I n r e Kat r in a

C an a l B r e a c h e s C o n s o l. 5 L it ig
. , N o . 0 5
- 4 1 8 2 , 2 0 0 8 WL4 4 0 1 9 7 0 , at * 8 ( E
. D
. L a . 2 0 0 8 )
. T h e a c t io n t h e n w a s p r e d ic t a

b ly 6 e n l arge d a

n d ra pi dl y m ut at e d i n t o l i t i gat i o n o f s ub s t an t i a l ma gni t ud e an d c o m

pl e x i t y : 7 No f

ewert h an f o ursepar at e cl ass act i o n

co m pl ai n t s h av e b een

f i l ed ag ai n st 8 L af

arge, s o me wi

t h put at i v e clas s es as l arge as 40, 000 mem b ers, se eki

n g dam ages 9 a s hi g h a s $ 1 0 0 bi l l i o n. N o f e w e rt han 9 0 0 d o c k e t e nt r i e s w e r e ma d e i n t he 1 0 Kat r i

na B ar g e L i t i g at i o n w he n i

t w a s p e nd i

ng be f o r e C hi e f J u d g e B e rr i g an, and

no 1 1 f

e w e rt han 1 6 , 0 0 0 d o c k e t e nt r i e s have be e n ma d e i n t he c o ns o li d at e d

Kat r i na 1 2 L i

t i g at i o n p e nd i

ng be f o r e J u d g e D uva l
. At l e a s t 2 8 o t he rp art i e s , i nc l u d i ng 1 3 in s ur e r s a s d ir e c t a c t io n d e fe n d an t s , ar e o rh av e b e e n

c o - d e fe n d an

t s o f L a far g e in 1 4 t h e Kat ri

n a B arg e L i t i g at i o n . 15 16 N.Y. M ari

n e and Gen
. In s . Co
. v . L af arge N. Am . , In c., 598 F
. Supp. 2d 473, 495 (S
. D.N. Y. 1 7 2 0 0 9 ) ( i

n te rn a l qu ota ti on mark s an d

a l te r ati on om i tte d )
. A l th ou g h th e me r i ts of L a f ar g e ’ s li a b i l i ty 1 8 (t h e “b arg e l i

t i g at i o n ” ) w i l l

b e a d j u d i c at e d i n t h e L o u i s i an a

D i s t ri c t C o urt , L a f

arg e ’ s i n s ure rs 1 9 c om

m e n c e d th r e e s e p ar ate a c ti on s g i

v i n g r i s e to th i s a

p p e a l i n th e U n i te d S tate s D i s tr i c t C ourt f

or 2 0 t he S o ut he rn D i s t r i c t o f N e wY o rk
. I d
. at 4 7 6

– 7 8
. I n t ho s e a c t i o ns , t he i ns ur e r s s o u g ht 2 1 d e c l arat o ry

j u d g me n t s w i t h re s p e c t t o i s s u e s o f

c o v e ra g e un d e r t h e p ri

mary an d e x c e s s p o li c i e s . 2 2 Id
. 2 3 B
. L a f arg e ’ s In s ure rs 2 4 P ur s u ant t o N Y M AG I C ’s p r i mary p o li c y , N Y M AG I C p a i d

“t he a p p r o ve d l e g a l f e e s and 25 ex

pen s es o f Sut t erf i el d & W ebb an d L af

arge’ s ex pert f ees an d co s t s . ” Th es e ex

pen s es ex h aus t ed 26 t h e pr i

mary po l i cy ’s li

m i t o f $5 m i l l i o n . Un dert h e ex cess po li cy i ssued b y t h e t h r ee ex cess 2 7 i ns ur e r s —

N Y M AG I C , AH AC , and N AC A —

N Y M AG I C p a i d

and c o nt i nu e s t o p ay

4 0 % o f t he 2 8 le g a l fe e s an d

e x p e n s e s b ill e d

b y S ut t e r fie ld

an d t h e e x p e n s e s b ill e d

b y L a far g e ’ s e x

p e rt s in 2 9 c o nne c t i o n w i

t h t he bar g e l i

t i g at i o n. T he r e ma i

ni ng 6 0 % o f

t he f e e s and e xp e ns e s ar e s a i d

t o be 30 co v ered un der t h e ex ces s po l i cy b y AHA C a n d NA CA , b ut t h es e t wo i n s urer s h av e ref

us ed t o pay 3 1 s o f

ar. Id . at 4 9 0 & n .1 2 . Th e e x c e s s p o li c y i s s u e d j o i n t l y b y t h e t h re e e x c e s s i

n s ure rs c o v e rs7 1 L a f

arg e f o r li a b i l i t y an d e x p e n s e s u p t o $ 4 5 m

i l li o n an d un d e r c e rt a i

n c i rc um s t an c e s , $ 5 0 m

i l l i o n . 2 Nei

t h er NYM A GIC, A HA C, n o r NA CA h as appro v ed o r pai d an

y o f t h e l egal f ees an d ex

pen s es 3 o f G o o dw in

P r o c t e r , H & K , an d

C h a ffe
. T h e t o t a l le g a l fe e s an d e x p e n s e s o f t h e s e t h

r e e firms 4 am

o un t t o o v e r $ 1 0 m

i l l i o n a s o f N o v e m b e r 1 1 , 2 0 0 8 . Id . at 4 9 0
. 5 In

addi t i o n t o b ei n g i n s ured un der NYM A GIC’ s primary po li cy an d t h e ex ces s po li cy 6 is s u e d

b y t h e t h r e e e x c e s s in s ur e r s , L a far g e a ls o is a me mb e ro f t h e A

me r ic an C lu b , a n o n - p r o fit 7 m ut ual i n s uran ce a s s o ci at i o n , wh i ch pro v i des a “

pro t ect i o n

an d i n dem n i t y ” po li cy (t h e “A meri can 8 C l u b Pol i c y ” ) f o r i t s me m b e rs . Th e A

me ri c an C l u b Pol i c y “ c o v e r[s ] s h i

p o w n e rs an d

c h art e re rs 9 a g a in s t t h ir d

- p art y li a b ili t ie s ar is ing fr o m t h e o w n e r s h ip o ro p e r at io n o f in s ur e d

v e s s e ls
. ” T h

u s , in 1 0 a c c o r d anc e w i

t h t hi s g e ne r a l

p ur p o s e , a li s t o f s p e c i f i c ve s s e l s t o be i

ns ur e d i s i d e nt i f i e d by 1 1 L a far g e an d

in c o r p o r at e d in t o it s C e rt ific at e o f E n

t ry, a d o c ume n t p r o v ing L a far g e ’ s me mb e r s h ip 1 2 w i

t h t h e A me ri c an C l u b
. 13 A l

t h o ugh In gram o wn ed B arge ING 4727 — an d t h eref o re t h e b arge was n o t li s t ed as an 14 i n s ured v es s el

un der La f

arge’ s Ce rt i f

i cat e o f E n t ry — L af arge’ s mem

b ershi p i n t h e A meri can Cl ub 1 5 in c lu d e d

t h e fo llo w ing s p e c ia l t e rm an d c o n d it io n : “ I f L a far g e . . . a c qu ir e s an in s ur a b le in t e r e s t in 1 6 an

y v e s s e l .
. . t h

r o u g h p ur c h a s e , c h art e r , le a s e o ro t h e rw is e , [ t h e A me r ic an C lu b P o lic y w ill ] 17 aut o mat i call

y co v er suc h

. . . v es s el

ef f ect i v e f ro m t h e dat e and t i

me [La f arge] acqui

res a n 1 8 i ns ur a bl e i nt e r e s t i n s u c h .
. . ve s s e l
. ” ( e m

p ha s i s a d d e d )
. As e xp l a i

ne d i n mo r e d e t a i l

be l o w , o ne 19 o f

t h e pri n ci pal i s s ues at co n

t en t i o n i n t h i s appea l

i s wh et h er t h e t erm

“ o t h erwi s e” i

n t h e A meri can 2 0 C l

u b P ol i c y i n c l u d e s B ar g e I N G 4 7 2 7 , w h i c h L a f ar g e a c qu i

r e d s ome i n te r e s t i n p ur s u an t to a 2 1 Tran s p o rt at i o n

A g re e me n

t b e t w e e n L a f arg e an d t h e b arg e ’ s o w n e r, Ing ram . 2 2 Th e t h

re e s e p arat e a c t i o n s f

i l e d i n t h e U n i t e d State s D i s t ri c t C o urt f

o r t h e South e rn 23 Di s t ri ct o f

New Y o rk were as f

o l l o ws : F i rst , NYM A GIC s o ugh

t j udgmen t s agai n s t L af arge 2 4 d ec l ar i

n g t h at ( 1 ) NY MA GI C’s p r i mar y p o li cy d i d n o t co v ert h e l eg al

f ee s earn edb y

Laf ar g e’s 25 co un s el , i
. e., Go o dwi n Pr o ct er, H& K , an d Ch af f e, wh i ch f i rm s were ret ai

n ed wi t h o ut 2 6 N Y M AG I C ’s kno w l e d g e and c o ns e nt ; ( 2 ) N Y M AG I C — w hi c h a s s e rt s t hat i

t r e t a i ne d t he r i g htIn t h e al t ern at i v e, A HA C a

n d NA CA

s o ugh t a dec l arat i o n

t h at t h ey were n o t o b li gat ed 2 t o p ay unt i l N Y M AG I C ’s p r i

mary p o l i c y w a s e xha u s t e d and L a f ar g e , a s a s e l f

- i ns ur e r , p a i d

t he f u l l am o un t o f w h at s h o u l d

h av e b e e n

p a i d un d e r t h e A

me ri c an C l u b Pol i c y . 8 1 un d e ri

ts p r i mary p oli c y to d i r e c t th e d e f

e n s e of an y a c ti on a g a i n s t L a f ar g e — h a d f u l f i l l e d i ts 2 o bl i g at i o ns und e r

t he p o l i c y ; and

( 3 ) N Y M AG I C i s o bl i g at e d t o p ay o nl y r e a s o na bl e f e e s and 3 ex pen s es rel at i

n g di rect l y t o t h e def

en s e o f t h e clai m s agai n s t L af arge. Seco n d, t h e A

meri can 4 Cl ub s o ugh t a j udgmen

t agai n s t L af arge dec l ari

n g t h at t h e A

meri can Cl ub Po li cy di d n o t co v er 5 B ar g e I N G 4 7 2 7 an d th at, th e r e f

or e , th e A me r i c an C l u b w a s n ot ob li g ate d

to c ov e ran

y of 6 Laf

ar ge’s ex pen ses o rl i ab i l i

t i es ar i si n g f r o m t h e b ar ge l i

t i gat i o n . A

n d t h i r d, AHA C an d NA CA 7 s o ugh

t j udgmen t s agai n s t L af arge an d t h e A

meri can Cl ub declari n g t h at (1) t h e A

meri can Cl ub 8 P oli c y

c ov e r e d B ar g e I N G 4 7 2 7 ; ( 2 ) AH A C an d N A C A , a s e x c e s s i

n s ur e r s , w e r e n ot o b li g ate d to 9 p ay

unt i l N Y M AG I C ’s p r i

mary p o l i c y and t he Ame r i c an C l

u b P o li c y w e r e f i r s t e xha u s t e d ; and

2 1 0 ( 3 ) b e c a

u s e N Y M A G I C ’ s p r ima

ry p o lic y d id

n o t c o v e rL a far g e ’ s le g a l fe e s e arn e d b y G o o dw in 1 1 P r oc te r , H & K , an d C h a f f e , AH A C an d

N A C A a l s o w e r e n ot l i a

b l e to r e i m b ur s e L a f ar g e f or 1 2 p ay

me n t s t o t h o s e l awf

i rm s . Id . at 4 7 6

– 7 7
. 1 3 L a f

ar g e mov e d

to t r an s f e rth e A me r i c an C l u b a c ti on to t h e L ou i s i an a

D i s tr i c t C ourt; 1 4 h ow e v e r , th at m

oti on w a s d e n i e d

on J an u ary 2 9 , 2 0 0 7
. S e e A

m . S te am s h i

p O w n e r s M ut. P r ot. 1 5 an d

In d e m . A s s ’ n , In c . v . L a f arg e N . A m ., In c ., 4 7 4 F . Su

p p . 2 d 4 7 4 , 4 8 2

– 9 1 (S .D .N .Y . 2 0 0 7 ). 16 S ub sequent l

y , NYMA GI C, i

n i t s capacit y

as an ex cess i n sur er , was gr an

t ed l eav e t o i

n t erv en e as a 1 7 p arty

p l a i n ti f f s o th at i t c ou l d a s s e rt c l a i

m s m i rr or i n g th os e i n AH A C an d

N A C A ’ s a c ti on

f or 18 declarat o ry

j udgmen t agai n s t t h e A meri can Cl ub an d L af

arge. A s t h e Di s t ri ct Co urt o b s erv ed, 1 9 “[ t hi s ] i s no t s ur

p r i s i ng , s i nc e a l l t hr e e i ns ur e r s , havi

ng s u bs c r i be d t o t he E xc e s s P o li c y , ar e i n t he 20 s am

e b o at an d i

n t en t upo n b ai l i n g i t o ut
. ” L af

arge N. Am . , In c., 598 F
. Supp. 2d at 478. E ach 2 1 p arty

th e n f i l e d moti on s an d

c r os s - moti on s f

ors um mary j u d g me n t an d , a l te rn ati v e l y , i n th e c a s e of 2 2 t h e A

me ri c an C l u b , a mo t i o n t o d i s m i s s a l l c l a i m s a s s e rt e d

a g a i n s t i t
. 2 3 C
. T h e D i s tr i c t C ourt’ s D e c i s i on s on S um mary J u d g me n t 2 4 O n

O c tob e r2 7 , 2 0 0 8 , th e D i s tr i c t C ourt g r an te d th e A me r i c an C l u b ’ s moti on

f or9 1 s um

mary j udgmen t agai n s t L af arge, declari

n g t h at t h e A

meri can Cl ub h as n o o b li gat i o n

t o pro v i de 2 c o v e ra g e f

o r t h e c l a i m s a s s e rt e d

a g a i n s t L a f arg e i n c o n n e c t i o n w i t h t h e b arg e li

t i g at i o n . 3 R e v i e w i

n g th e te rm s of

th e T r an s p ortati on

A g r e e me n

t, wh i c h e s ta b li s h e d th e c on d i ti on s of 4 Laf

ar g e’s u se o f

I n g r am ’s b ar g es, t h e D i st r i ct Co urt co n cl u d edt h at t h e Am

er i can Cl u b P o li cy ’s 5 p r o vi s i o n p r o vi d i

ng f o ra ut o mat i c c o ve r a g e o f

i ns ur a bl e i nt e r e s t s i n any ve s s e l a c qu i r e d by 6 L af

arge “ t h ro ugh purch as e, ch art er, l eas e o r o t h erwi s e” did n o t appl y t o In gram ’ s Ba

rge I NG 7 4 7 2 7 . Se e A

m . Stea m s h i p O w n e rs M ut . Pr o t . an d

In d e m . A s s ’ n , In c . v . L a f arg e N . A m ., In c ., 8 N o . 0 6 C i

v. 3 1 2 3 , 2 0 0 8 WL 4 4 4 9 3 5 3 , at * 8

– * 9 ( S
. D
. N
. Y
. S e p t
. 2 9 , 2 0 0 8 )
. Ac c o r d i ng t o t he 9 Di s t ri c t C o urt : 10 L af

arge t ell s In gram

i t n eeds a ce men

t cargo t o b e t ran s po rt ed f ro m J o ppa t o New 1 1 O rl e an s o n a p art i c u l ar d at e . Ing ram

s e l e c t s f rom i t s f l e e t o f b arg e s o n e t o p e rf

o rm 1 2 t h e w o rk : i t c o u l d b e t h e IN G 4 7 2 7 , o r 4 7 2 6 , o r 4 7 2 8 , o r an y o t h e r Ing ram

b arg e . 13 L af

arge n ei t h er kn o ws [n ]o r cares. A l l i t kn o ws i s t h at i f

all go es well , an

In gram 1 4 b ar g e w i l l arr i v e at L a f ar g e ’ s N e wO r l e an s f

a c i li ty to d i s c h ar g e a

c e me n t c ar g o. 1 5 I d
. at * 9
. T h e c ourt c on c l u d e d th at th i s arr an g e m

e n t b e tw e e n L a f ar g e an d I n g r am d i d n ot 16 co n s t i

t ut e an acqui s i t i o n b y L af arge — “ t h

ro ugh purch as e, ch art er, l eas e o r o t h erwi s e” — o f an 1 7 i n s ura b l e i n t e re s t i n B arg e IN G 4 7 2 7
. 1 8 O n

F e b ru ary 1 9 , 2 0 0 9 , th e D i s tr i c t C ourt ( 1 ) g r an te d th e A me r i c an C l u b ’ s moti on

f or 19 s um

mary j udgmen t an d di s m

i s s ed AHA C, NA CA , an d NYM A GIC’ s cl ai m s agai n s t t h e A meri can 20 Cl

ub , t h e co urt h av i

n g co n cl uded t h at t h e A

meri can Cl ub Po li cy , as ex

pl ai n ed i n i t s Oct o b er 27, 2 1 2 0 0 8 s um

mary j u d g me n t, d i d n ot c ov e rB ar g e I N G 4 7 2 7 ; ( 2 ) g r an te d L a f ar g e ’ s moti on

f or 22 s um

mary j udgmen t agai n s t t h e ex ces s i

n s urer s an d declared t h at t h ey were o b li gat ed t o co v er 23 Laf

ar ge, t h e co ur t h av i

n g co n cl ud ed t h at t h e ex cess i

n sur an ce po li cy

was t r i gg er ed b ecause 2 4 L a far g e p r o p e r ly ma int a ine d

t h e Ame r ic an

C lu b P o li c y an d b e c a u s e L a far g e w a s n o t a

s e lf

2 5 i n s ure r; an d

(3 ) g ran t e d , i n p art , L a f arg e ’ s mo t i o n

f o r s um mary j u d g me n t a g a i n s t b o t h t h e p ri mary 2 6 and

e xc e s s i ns ur e r s and

d e c l ar e d t hat t he y w e r e o bl ig at e d

t o c o ve rt he l e g a l

f e e s e arne d

by 27 Go o dwi

n Pr o ct er an d H& K

b ut n o t Ch af

f e. S ee ge n erall

y L af arge N. Am . , In c., 598 F
. Supp. 2d 2 8 at 4 8 1

– 9 7
. T he c o urt a l s o d e ni e d a l l c l a i m s f o rat t o rne ys ’ fe e s i

n c o nne c t i o n w i

t h t he mo t i o ns andL af arge al s o dem

an ded a j ury

t ri al i n t h e ac t i o n

b ro ugh t b y t h e A meri can Cl ub , b ut t h at 3 d e man d w a s s t r ic k e n

b y t h e c o urt in

a d e c is io n d at e d A u g u s t 1 , 2 0 0 8
. S e e A

m. S t e ams h ip O w ne r s M ut
. P r o t
. and

I nd e m . As s ’n, I nc . v. L a f ar g e N
. Am
. , I nc . , N o . 0 6 C i v. 3 1 2 3 , 2 0 0 8 WL 2 9 8 0 9 1 9 , at * 1

– * 2 ( S
. D
. N
. Y
. A u g . 1 , 2 0 0 8 ) ( c on c l

u d i n g th at L a f

ar g e d i d n ot h av e a

r i g h t to a j ury i n a c a s e br o u g ht p ur s u ant t o t he c o urt ’s a dm i r a l t y j ur i s d i c t i o n)
. B e c a

u s e w e a f f i rm t he Di s t ri ct Co urt ’ s det erm

i n at i o n t h at t h e A

meri can Cl ub Po li cy do es n o t co v er Barge ING 4727, we n e e d n o t d e c i d e w h e t h e r t h e D i s t ri c t C o urt e rre d i n s t ri k i n g L a f arg e ’ s j ury

d e man d
. 10 1 c r o s s - m

o t i o ns f o rs um mary j u d g me nt
. I d
. at 4 9 7
. T he c o urt d i r e c t e d e nt ry o f f i na l j u d g me nt 2 pursuan

t t o F ederal

Rul e o f Ci v i l Pr o cedure 54(b ), s ee id. at 497–98, an d t h i s t i mel y appea l 3 f o l l o w e d
. 4 D. A

rgumen t s o n A ppeal 5 On

appea l , L af

arge, NYM A GIC, A HA C, an d NA CA argue t h at t h e A

meri can Cl ub Po l i cy 6 c ov e r s B ar g e I N G 4 7 2 7
. L a f ar g e a l s o c h a l l e n g e s th e D i s tr i c t C ourt’ s d e n i a l of i ts motion to 7 t r ans f

e rve nu e ; t he c o urt ’s d e t e rm i nat i o n t hat t he p r i

mary and e xc e s s p o li c i e s d i d

no t c o ve rt he 8 l e g a l

f e e s e arne d

by C ha f f e ; and t he c o urt ’s r e f

u s a l t o aw ar d at t o rne y s ’ fe e s i

n c o nne c t i o n w i

t h t he 9 m o t i o n s an d cro s s -mo t i o n s f o r sum mary j udgmen t
. NYM A GIC, A HA C, an d NA CA f urt h er 3 1 0 c h a lle n g e t h e D is t r ic t C o urt ’ s d e c is io n s o n s umma ry ju d g me n

t , c o n t e n d ing t h at t h e c o urt e rr e d in 11 co n cl

udi n g t h at t h e ex ces s po l i cy

was t ri ggered and t h at b o t h t h e pri mary an d ex ces s po li ci es 1 2 c o v e re d

t h e l e g a l f e e s e arn e d

b y G o o dw i n Pr o c t e r an d

H & K
. 13 I I . DI SCU SSI ON 1 4 A
. M oti on to T r an s f e rto L ou i s i an a

D i s tr i c t C ourt 1 5 W e re v i e wa d i s t ri c t c o urt ’ s d e n i a l

o f a mo t i o n t o t ran s f e r v e n u e f o r a b u s e o f d i s c re t i o n . 16 D.H. Bl ai

r & Co
. , In c. v . Go t t di en er, 462 F
. 3d 95, 105 (2d Ci r. 2006). A

di s t ri ct co urt may 1 7 e xe r c i s e i

t s d i s c r e t i o n t o t r ans f

e rve nu e “f

o rt he c o nve ni e nc e o f

p art i e s and

w i t ne s s e s , i n t he 1 8 i nt e r e s t o f j u s t i c e . ” 2 8 U
. S
. C
. § 1 4 0 4 ( a )
. Am o ng t he f a c t o r s t o be c o ns i d e r e d

i n d e t e rm i ni ng 19 wh et h er t o gran

t a m o t i o n t o t ran s f er v en ue “ are, i n t er ali a: (1) t h e pl ai

n t i f f ’ s ch o i ce o f

f o rum , (2) 2 0 th e c on

v e n i e n c e of

w i tn e s s e s , ( 3 ) th e l oc ati on

of r e l e v an t d oc um e n ts an d r e l ati v e e a s e of a c c e s s to 2 1 s o ur c e s o f

p r o o f , ( 4 ) t he c o nve ni e nc e o f

p art i e s , ( 5 ) t he l o c u s o f

o p e r at i ve f a c t s , ( 6 ) t he 2 2 ava i l a

bi l i t y o f p r o c e s s t o c o m

p e l t he at t e nd anc e o f

unw i l li ng w i t ne s s e s , and

( 7 ) t he r e l at i

ve me ans11 1 o f t h e p art i e s .” G o t t d i e n e r, 4 6 2 F .3 d at 1 0 6

– 0 7 (i

n t e rn a l qu o t at i o n

mark s an d

a l t e rat i o n o m i t t e d ).

2 H e r e , L a f

ar g e d o e s no t c o nt e s t t hat t he a bo ve f a c t o r s e i t he rar e ne ut r a l

o rf avo rt he 3 A meri can Cl ub agai n s t t ran s f err i n g t h e ca s e t o t h e L o ui s i an a Di s t ri ct Co urt
. In s t ead, L af arge 4 ar g u e s t h at t h e s o - c a lle d fir s t - file d ru le “ o v e r s h a d o w s a ll o t h e rc o n s id e r at io n s . ” L a far g e R e p ly 5 B r . at 2 4
. R e l

y i n g m u c h on th e r ati on a l e of

av oi d i n g d u p li c ati v e li ti g ati on th at un d e r li e s th e f

i r s t6 f i l e d ru l e , L a f ar g e ar g u e s th at th e D i s tr i c t C ourt a b u s e d i ts d i s c r e ti on

b e c a u s e th e i s s u e of 7 c o ve r a g e w i l l

no t be bi nd i ng o n t he L o u i s i ana

D i s t r i c t C o urt and

w i l l ne e d t o be r e - li

t i g at e d i n t he 8 L o u i s i an a

D i s t ri c t C o urt , w h e re t h e b arg e li t i g at i o n i s c urre n t l y un d e rw ay . 9 T h e f

i rst -f i l ed rul e s t at es t h at , i

n det erm i n i n g t h e pro per v en

ue, “ [w] h ere t h ere are t wo 1 0 c o mp e t ing law s u it s , t h e fir s t s u it s h o u ld h av e p r io r it y. ” G o t t d ie n e r , 4 6 2 F
. 3 d at 1 0 6
. T h e ru le is 1 1 i n ap p l i cab l e w h en t h er e ar e “spe ci al ci r cu m st ances . ” E m

p l o yer s I n s. o f

W au sauv . Fo x

E n t m ’t 1 2 G r ou

p , I n c . , 5 2 2 F
. 3 d

2 7 1 , 2 7 6 ( 2 d

C i r . 2 0 0 8 )
. S p e c i a l

c i r c um s tan c e s i

n c l u d e man i p u l ati v e or 13 dece pt i

v e b eh av i o r o n

t h e part o f

t h e f i rst -f i li n g pl ai n t i f f
. Id. In addi t i o n t o “ s peci al 1 4 c i r c um s tan c e s , ” tr an s f

e rto th e f i r s t- f i l e d j ur i s d i c ti on

i s a l s o i n a p p r op r i ate w h e n

“ th e b a l an c e of 1 5 c o nve ni e nc e f

avo r s t he s e c o nd

- f

i l e d a c t i o n. ” I d
. at 2 7 5 ( i

nt e rna l qu o t at i o n mark s o m

i t t e d )
. T he 1 6 “b a l an c e of

c on v e n i e n c e ” i s d e te rm

i n e d b y c on s i d e r i n g th e s ame f

a c tor s “ c on s i d e r e d

i n c on n e c ti on 1 7 w i

t h mo t i o n s t o t ran s f

e r v e n u e .” Id
. 1 8 H e r e , t h e “ s p e c ia l c ir c ums t an c e s ” e x c e p t io n t o t h e fir s t - file d

ru le is in a

p p lic a b le
. T h e r e is 19 n o al l egat i o n

o f decep t i v e o rman i

pu l at i v e b eh av i o rb y

t h e f i r st - f i l ed p l ai n t i f f s i n Lo ui si an a. T h

us, 2 0 b e c a

u s e “ [ w ] h e r e s p e c ia l c ir c ums t an c e s ar e n o t p r e s e n t , a b a lan c ing o f t h e c o n

v e n ie n c e s is 21 n ece s s ary , ” i d. at 276, L af arge’ s cl ai

m t h at t h e f i rst -f i l ed rul e “ o v ersh ado ws all o t h er 2 2 c on s i d e r ati on s ” i n th i s c a s e i s i

n c orr e c t, s e e i d
. at 2 7 5 ( “ [ T ] h e f i r s t- f i l e d ru l e i s on l

y a p r e s um p ti on 23 t h at may

b e reb ut t ed b y

pro o f o f t h e des i rab i li t y o f pro cee di n g i n t h e f o rum o f t h e s eco n d-f

i l ed 2 4 a c t i o n .” (i

n t e rn a l qu o t at i o n

mark s o m

i t t e d )); s e e a l s o i d . (s t at i

n g t h at t h e c o n

v e n i e n c e f

a c t o rs 2 5 c o m

p o s e t h e “ c e n

t ra l i t y ” o f a d j u d i c at i n g t ran s f e r m o t i o n s ). F urt h e r, s o f

ar a s t h e D i s t ri c t C o urtW e a d d th at th e L ou i s i an a

D i s tr i c t C ourt h a s s u

b s e qu e n tl y s tate d th at i t i n te n d s to 4 f o l l o w t h e ruli

n gs o f t h i s C i rcu i t wi t h res pe c t t o i s s ue s i

n v o l v i n g c o v e rag e : [ I ] t is c le art h at t h is e n

t ir e c o v e r a g e mat t e rh a s b e e n an d w ill b e a d ju d ic at e d in N e wY ork

an d i n th e S e c on d

C i r c u i t C ourt of A p p e a l s i n a ti me l y f a s h i on . F or r e a s o ns o f

c o m i t y and j u d i c i a l e c o no m y , t hi s C o urt w i l l

no t und e rt ak e a

s e c o nd l o o k at t h e preci s e s am

e i s s ues . Such

a co urse o f

act i o n co ul d po t en

t i all y wreak h av oc an d

c r e ate un n e c e s s ary c on f li c ts
. [ T h e N e wY ork

D i s tr i c t C ourt] det erm i n ed t h at t h e f

i rst t o f i l e rul e wa s n o t appli cab l e t o t h es e di s put es an d as s u c h , t h e C o urt w ill

n o t t ak e an

y a c t io n t o c r e at e an

y p o t e n t ia l c o n flic t
. S imp ly pu t , t wo f eder al co ur t s sh o ul d n o t b e adj ud i cat i n g t h e same i ssues. In re Kat ri n a C an al Breac h es Co n s o l
. L i

t i g. , No
. 05-4182, Sect i o n K(2) , Order an d Re as o n s (E
. D. La. Oc t
. 9 , 2 0 0 8 ) ( r ep r i

n t edi n t h e App endix

t o t h e Am

er i can Cl u b A n sw er i n g Br
. )
. Laf

ar g e’s f e ar of d u p l i c at i v e l i t i g at i o n , t h e re f

o re , h a s l e s s f

o rc e n o wa s a

p ra c t i c a l mat t e r. 12 1 c on s i d e r e d

th e f i r s t- f i l e d ru l e an d b a l an c e d th e c on v e n i e n c e f

a c tor s , w e s e e n o a

b u s e of d i s c r e ti on 2 i n t h e D i s t ri c t C o urt ’ s an a l

y s i s . 3 A s t h e Di s t ri ct Co urt n o t ed, amo n g i t s o t h er o b s erv at i o n s , t h e A meri can Cl ub Po li cy was 4 n ego t i at ed and ex ecut ed i n New Y o rk, i s s ued b y

a Ne w Yo rk i

n s urer , s t i pul at ed t o appl

y New 5 Y o rk

l aw , an d a g re e d u p o n t o b e l i t i g at e d i n t h e Un i t e d State s D i s t ri c t C o urt f

o r t h e South e rn 6 D is t r ic t o f N e wY o rk in t h e e v e n t L a far g e b r o u g h

t a c la im a g a in s t t h e A

me r ic an C lu b
. S e e A m. 7 S. S. Own ers Mut
. Pr o t
. & In dem
. A s s ’ n , In c. v . L af arge N. Am . , In c., 474 F
. Supp. 2d 474, 8 482–90 (S
. D.N. Y. 2007)
. T h us , t h e l o cus o f

o perat i v e f act s as well

as t h e i n t eres t s o f ef f i ci en cy 9 and

f a i rne s s f avo ra N e wY o rk

f o rum . Wi

t h r e s p e c t t o L a f

ar g e ’s c l a i

m o f d u p li c at i ve li t i g at i o n, 1 0 t he D i s t r i c t C o urt r e a s o na bl y d e t e rm i ne d t hat t he li a

bi li t y and c o ve r a g e i s s u e s i

n t he L o u i s i ana

and 11 New Y o rk act i o n s , respe ct i v el y , are n o t co ex

t en s i v e b eca us e res o l ut i o n as t o t h e li ab i li

t y i s s ues 12 wo ul d n o t n ece s s ari l y reso l v e L af arge’ s cl ai

m s agai n s t t h e A meri can Cl ub f o r def en s e co s t s . Id. at 1 3 4 7 6

– 7 7 , 4 8 6
. M or e ov e r , th e D i s tr i c t C ourt r e a s on a b l y r e li e d on F i f th C i r c u i t p r e c e d e n

t to 1 4 c o nc l

u d e t hat i t w a s unl i k e l y t hat t w o i

nc o ns i s t e nt j u d g me nt s o n t he me r i t s w o u l d r e s u l t f r o m t he 15 co urt ’ s deni al

o f L af arge’ s t ran s f

er mo t i o n . See A co s t a v . M as t er Ma i n t
. &Co n s t r. In c., 452 4 1 6 F
. 3 d

3 7 3 , 3 7 7 n . 7 ( 5 th

C i r . 2 0 0 6 ) ( s tati

n g th at an ar b i tr ati on aw ar d may b e “p e r s u a s i

v e , i f n ot13 1 b i n d i n g , ” on d i r e c t- a c ti on

p l a i n ti f f s w h o a r e n ot p arti e s to t h e ar

b i tr ati on b e tw e e n d e f e n d ant2 i n s ur e d an d d e f e n d an t- i n s ur e r( e m

p h a s i s a d d e d ) )
. W e i g h i

n g L a f ar g e ’ s a s s e rte d

c l a i m s of 3 dupl i cat i

v e li t i gat i o n , t h e unl i

kel y ev en t o f i n co n s i s t en

t j udgmen t s , t h e v ari o us co n

v eni en ce 4 f a c tor s , an d

th e i n te r e s ts of j u s ti c e , th e D i s tr i c t C ourt r e a s on a b l y c on c l u d e d th at tr an s f

e rw a s n ot 5 w arra

n t e d i n l i g h t o f t h e t o t a l i t y o f t h e c i rc um s t an c e s . Id . at 4 9 0
. 6 L a f

ar g e a l s o a

r g u e s t hat t he D i s t r i c t C o urt a p p li e d t he w r o ng s t and ar d

i n e va l u at i ng t he 7 m o t i o n t o t ran s f er, n am el y , t h at t h e co urt err o n eo us l y appli ed t h e “ cl ear and co n v i n ci n g ev i den ce” 8 s t and ar d
. Al

t ho u g h w e have ne ve re xp li c i t l y a p p r o ve d a d i s t r i c t c o urt ’s u s e o f

t he “c l e arand 9 co n

v i n ci n g ev i den ce” s t andard i

n rul i n g o n a m o t i o n t o t ran s f er v en ue, t h e pro pri et y

o f t h at 10 s t an dard t o t ran s f er- mo t i o n s i s ev i den

t
. W e h av e s t at ed t h at t h e part y reques t i n g t ran s f er carr i es 1 1 t he “bur d e n o f

mak i ng o ut a s t r o ng c a s e f

o rt r ans f e r . ” Fi l m li ne ( C r o s s - C o unt ry

) P r o d s . , I nc . v. 1 2 U n it e d

A rt is t s C o r p . , 8 6 5 F
. 2 d

5 1 3 , 5 2 1 ( 2 d

C ir
. 1 9 8 9 ) ( in

t e rn a l q u o t at io n mark s o mit t e d )
. I t is 1 3 t he r e f

o r e a p p r o p r i at e t hat t he d i s t r i c t c o urt s i n o urC i r c u i t have c o ns i s t e nt l

y a p p li e d t he c l e arand 14 co n

v i n ci n g ev i den ce s t an dard i

n det erm i n i n g wh et h er t o ex erci s e di s cret i o n t o gran t a t ran s f er 15 m

o t i o n . See, e. g. , Hersh

man v . Un um Pr o v i den t Co rp. , 658 F
. Supp. 2d 598, 600 (S
. D.N. Y. 16 2009); M AK

M kt g. In c. v . Kal apo s , 620 F
. Supp. 2d 295, 298 (D. Co n n . 2009); W agn er v . N.Y. 17 M arr i o t t M arqui s , 502 F
. Supp. 2d 312, 315 (N. D.N. Y. 2007) ; Neil Bro s . L t d. v . W o rl d W i de 18 Li

n es, I n c. , 42 5 F. S up p. 2d32 5, 32 7 ( E
. D. N. Y. 20 06 ) ; T o m &S al l y ’s Han dmade Ch o co l at es, 1 9 In c . v . G a s w o rk s , In c ., 9 7 7 F . Su p p . 2 9 7 , 3 0 2 (D . V t . 1 9 9 7 ); U n i t e d State s v . G e n . M o t o rs 2 0 C o rp ., 1 8 3 F . Su p p . 8 5 8 , 8 6 1 (S .D .N .Y . 1 9 6 0 ); s e e a l s o C h ri s t i n a C an a d a , In c . v . W i o r C o rp ., 2 1 7 0 2 F. S u

p p . 4 6 1 , 4 6 3 ( S
. D
. N
. Y
. 1 9 8 8 ) ( “[ A] bs e nt a c l e arand c o nvi nc i ng s ho w i ng t hat t he 2 2 b a l an c e o f

c o n v e n i e n c e f

av o rs t h e u l

t i mat e f o rum , d i s c re t i o n ary

t ran s f e rs are n o t f

av o re d .” 23 (i n t ern al quo t at i o n

marks o m

i t t ed)) ; acc o rd Headri ck v
. A t chi s o n , T
. &S. F
. Ry
. Co
. , 182 F
. 2d 2 4 3 0 5 , 3 1 0 ( 1 0 th

C i r . 1 9 5 0 ) ( h ol d i

n g th at un d e r2 8 U
. S
. C
. § 1 4 0 4 ( a ) , “ th e p l a i n ti f f ’ s c h oi c e of 25 f o rum [sh o ul d n o t b e] di s t urb ed[] un l es s t h e b al an ce i n t h e def en dan t ’ s f av o r i s s h o wn

b y cl ear 2 6 an d

c o n v i n c i n g e v i d e n c e ” ); c f

. In re H o rs e s h o e En

t m ’ t , 3 3 7 F .3 d

4 2 9 , 4 3 4 (5 t h

C i r. 2 0 0 3 ).14 1 A c c or d i

n g l y , w e s e e n o e rr or

f r om w h i c h to c on c l u d e th at th e D i s tr i c t C ourt a b u s e d i ts 2 d i s c re t i o n

i n d e n y i n g L a f arg e ’ s mo t i o n

t o t ran s f e r t o t h e L o u i s i an a

D i s t ri c t C o urt
. 3 B. St an dard o f Re v i ew 4 “We r e vi e wa g r ant o f s um mary j u d g me nt d e no vo , c o ns t ru i ng t he e vi d e nc e i

n t he li g ht 5 m o s t f av o rab l e t o t h e n o n -mo v i

n g part y an d drawi

n g all reas o n ab l e i

n f eren ces i n i t s f av o r. ” 6 P a l

m i e r i v . A l l s tate I n s . C o. , 4 4 5 F
. 3 d 1 7 9 , 1 8 7 ( 2 d

C i r . 2 0 0 6 )
. S um

mary j u d g me n t i s a p p r op r i ate 7 “wh en

n o gen ui n e i ssue o f

mat er i al f act ex i st s an d t h e mo v i

n g p ar t y i s en t i t l ed t o j ud gmen

t as a 8 mat t e ro f

l aw . ” I d
. ; s e e a l s o Fe d
. R
. C i v. P
. 5 6 ( c )
. I n t he c o nt e xt o f an a c t i o n p r e d i c at e d

o n a 9 co n

t ract di s put e, sum

mary j udgmen t i s gen erall

y i n appro pri at e wh ere t h e co n t es t ed co n

t ract ual 10 l anguage i s am

b i guo us . Pal

m i eri , 445 F
. 3d at 187. T h e di s t ri ct co urt ’ s det erm i n at i o n o f wh et h er 11 a co n

t r act ual pr o v i si o n i s am b i gu o us i s a quest i o n

o f l aw t h at we r ev i ew d e n o v o . I d. ; see al so 12 Re l i aSt ar Li f

e In s . Co
. o f

N.Y. v . Ho me De po t U.S
. A
. , In c., 570 F
. 3d 513, 517 (2d Ci r. 2009) 1 3 ( p e rc ur i am

)
. S e e g e ne r a l l

y P a l m i e r i , 4 4 5 F. 3 d

at 1 8 7 ( “Am

bi g u i t y r e s i d e s i n a w r i t i ng w he n — 1 4 a f

t e ri t i s vi e w e d

o bj e c t i ve l y — mo r e t han o ne me ani

ng may r e a s o na bl y be a s c r i be d t o t he 1 5 l an g u a g e u s e d .” (q u o t i n g Th o m p s o n v . G j i v o j e , 8 9 6 F .2 d

7 1 6 , 7 2 1 (2 d

C i r. 1 9 9 0 )))
. 16 It i s un di s put ed t h at New Y o rk l aw a ppl i es i n o ur ex am

i n at i o n o f t h e v ari o us i

n s uran ce 1 7 p o l i c i e s at i s s u e i

n t hi s c a s e . And

“[ u ] nd e rN e wY o rk

l aw , t he qu e s t i o n o f

am bi g u i t y . . . m u s t be 1 8 d e t e rm

i ne d f r o m t he f a c e o f t he a g r e e me nt , w i

t ho ut r e f e r e nc e t o e xt r i

ns i c e vi d e nc e . ” C o l li

ns v. 19 Harri s o n -Bo de, 303 F
. 3d 429, 433 (2d Ci r. 2002) ( f

o o t n o t e o m

i t t ed). “ On ce a

co urt co n cl

udes 2 0 th at an

i n s ur an c e p r ov i s i on

i s am b i g u ou s , th e c ourt m

ay a c c e p t an

y av a i l a b l e e xtr i n s i c e v i d e n c e to 21 as cert ai

n t h e m eani n g i n t en ded b y t h e part i es duri

n g t h e f o rmat i o n o f t h e co n t ract
. ” Parks R eal 22 E s t at e Purch as i

n g Gro up v . St
. Paul

F i re & M ari n e In s . Co
. , 472 F
. 3d 33, 43 (2d Ci r. 2006) 2 3 (i n t e rn a l qu o t at i o n

mark s o m

i t t e d ). 2 4 A l

th ou g h a d e te rm i n ati on th at ac on

tr a c t i s am

b i g u ou s or d i

n ar i l y r e qu i r e s d e n i a l of 2 5 s umma

ry ju d g me n

t , t h e c o urt may n o n e t h e le s s g r an t s umma ry ju d g me n

t w h e r e t h e e xt r in s ic 2 6 e vi d e nc e i l l

um i nat i ng t he p art i e s ’ i

nt e nd e d me ani ng o f t he c o nt r a c t i s “so o ne - s i d e d t hat noNYM A GIC, A HA C, an d NA CA al s o t ake t h e po s i

t i o n t h at t h e A

meri can Cl ub Po li cy 5 c ov e r s B ar g e I N G 4 7 2 7
. A l th ou g h w e r e f e ron l y to L a f ar g e i n th e te xt of

th e op i n i on f ore a s e of r ef er en ce, i n do i n g so we ad dr ess all

ar gu men t s f o rco v er age made by

Laf ar ge, NYMA GI C, AH AC , and

N AC A. 15 1 r e a s on a

b l e p e r s on

c ou l d d e c i d e to th e c on

tr ary . ” C om

p a g n i e F i n an c i e r e D e C i c E t D e L ’ U n i on 2 E uro peen

n e v . M err i l l

L y n ch , Pi erce, F en

n er & Sm i t h , In c., 232 F
. 3d 153, 158 (2d Ci r. 2000) 3 (S o t o may

o r, J
. ) ( i n t ern al quo t at i o n

marks o m

i t t ed). Si m i l arl y , s um mary j udgmen t may b e gran t ed 4 d e s p i

te an y am b i g u i ti e s i n th e c on tr a c t “w h e r e th e r e i s n o e xtr i n s i c e v i d e n c e th at w ou l d

s u p p ort a 5 re s o l

ut i o n o f [t h e ] am b i g u i t i e s i n f av o r of t h e n o n mo v i n g p a rt y ’ s c a s e .” To p p s C o . v . C a d b ury 6 S t ani

S
. A. I
. C
. , 5 2 6 F. 3 d

6 3 , 6 8 ( 2 d

C i r . 2 0 0 8 )
. T he s e a

p p ar e nt e xc e p t i o ns me r e l

y r e i nf o r c e t he 7 pri n ci pl e t h at t h e l

y n ch pi n o f a s um mary j udgmen t det erm i n at i o n i s , i n mo s t cas es , t h e ex i s t en ce 8 ve l no n o f g e nu i ne i s s u e s o f

mat e r i a l f a c t s . S e e , e . g . , AD / S AT , D i v. o f S ky li g ht , I nc . v. 9 A s s o c i at e d

Pr e s s , 1 8 1 F .3 d

2 1 6 , 2 2 6 (2 d

C i r. 1 9 9 9 ). 10 C. T h e A meri can Cl ub Po li cy 11 Ba

rge I NG 4727 appe ars n o wh ere o n L af arge’ s li s t s et t i

n g f o rt h t h e v es s el s t o b e co v ered 1 2 b y t h e A

me r ic an C lu b P o lic y. N o n e t h e le s s , it is ar g u e d t h at B ar g e I N G 4 7 2 7 is a ut o mat ic a lly 13 co v ered pursuan

t t o t h e f o l l o wi n g pro v i s i o n

o f t h e A meri can Cl ub Po li cy (t h e “ Ch art ered Ba

rges 14 C l a

us e ” ): 1 5 I f L a far g e . . . a c qu ir e s an in s ur a b le in t e r e s t in an y v e s s e l in

a d d it io n t o o rin 1 6 s u

b s ti tu ti on f orth os e s e t f

orth h e r e i n , th r ou g h p ur c h a s e , c h arte r , l e a s e or 1 7 o t h e rw is e , s u c h in s ur an c e a s is a ffo r d e d

h e r e un d e rt o an

y s imilarv e s s e l s h a ll 1 8 a

ut o mat ic a lly

c o v e rs u c h

a d d it io n a l v e s s e l e ffe c t iv e fr o m t h e d at e an d t ime 1 9 [ L a f

ar g e ] a c qu i

r e s an i n s ur a b l e i n te r e s t i n s u c h a d d i ti on a l v e s s e l
. W i

th r e s p e c t to a 20 ch art ered, l eas ed o r si m i l arl y acqui red v es s el , t h e i

n s uran ce h ereun der 2 1 a

utomati c a l l

y i n c l u d e s th e ow n e ra s an

a d d i ti on a l A s s ur e d w i th w a i v e rof 22 s ub ro gat i o n agai n s t t h e o wn er, i f

requi red, ef f ect i v e f ro m t h e dat e and t i

me s uch 2 3 v e s s e l

i s i n s ure d h e re un d e r. (e m

p h a s i s a d d e d ). 24 L af

arge argues t h at i

t acqui red an i n s urab l e i n t eres t i n Ba rge I NG 4727 “t h

ro ugh 2 5 p ur c ha s e , c hart e r , l e a s e o ro t he rw i s e ” and , t he r e f o r e , t hat B ar g e I N G 4 7 2 7 i s c o ve r e d und e rt he 26 A

meri can Cl ub Po l i cy . Speci f

i call y , L af arge argues t h at i

t acqui red an i n s urab l e i n t eres t i n Ba rge 5 27 ING 4727 b y

mean s “ o t h erwi s e” vi a t h e Tr an s po rt at i o n A greemen

t wi t h In gram , wh i ch16 1 purpo rt edl

y co n f err ed upo n

L af arge t h e s t at us o f

b ail ee o f In gram ’ s Ba

rge I NG 4727. La f

arge 2 i n s i s t s t h at t h e t erm

“ o t h erwi s e” m

us t b e gi v en i t s di ct i o n ary

meani n g, i
. e., “ i n an y o t h er man

n er. ” 3 A cco rdi

n g t o L af arge, an y i n s urab l e i n t eres t i n a v es s el — b e i t acqui red b y L af arge t h ro ugh 4 purch as e, ch art er, l eas e, o r, i n t h e al t ern at i v e, “ regardl es s o f

h o w ac qui

red, ” L af arge Re pl y Br. at 5 4 (em

ph as i s added) — i s aut o mat i call y co v ered un der t h e pl ai

n t erm s o f t h e C h art ered Ba

rges 6 C l a

u s e . 7 A s L af

arge n o t es , we h av e i

n o t h er co n

t ex t s read “ o t h erwi s e” li

t erall y an d co n s t rued 8 p r o vi s i o ns c o nt a i

ni ng t hat t e rm

t o me an an a s s ur anc e o f

c o m p r e he ns i ve ne s s . S e e , e . g . , G r e e ne v. 9 U n i

te d S tate s , 7 9 F
. 3 d

1 3 4 8 , 1 3 5 5 ( 2 d

C i r . 1 9 9 6 ) ( “ W

h e n § 1 2 5 6 li s ts s e v e r a l

ty p e s of 10 t erm

i n at i o n s an d f

o l l o ws t h o s e wi

t h t h e wo rds ‘ o r o t h erwi s e,’ t h e s t at ut e n ece s s ari l y b ri n gs 1 1 t ran s f

e rs o f a l l k i n d s w i t h i n i t s c o m p a s s . Th e s t at ut e d o e s n o t s ay ‘ o r ot h e r s i

m i l ar t e rm i n at i o n s ,’ 1 2 n or

d oe s i t li m i t i n an y w ay th e w or d s ‘ or

oth e rw i s e . ’ ” ) ; D un

h am v . O mah a

&C oun c i l

B l u f f s S t. 1 3 R y . C o. , 1 0 6 F
. 2 d

1 , 3 ( 2 d C i r . 1 9 3 9 ) ( “ T h e w or d s ‘ oroth e rw i s e ’ f ol l ow i n g ‘ an y s u i t or 14 pro cee di

n gs i n equi t y ’ can o n l y enl arge t h e ref

eren ce t o t h e f

o rm o f act i o n t o i n cl ude an y o t h er 15 s ui

t o r pr o cee di

n gs . . . . ‘ Ot h erwi s e’ mean s , ‘ In a di f f eren t man n er; i n an o t h er way , o r i

n o t h er 16 ways . ’ ”). In

co n t rast t o Green

an d Dun h am , h o wev er, h ere, t h e s t ruct ure o f t h e C h art ered Ba

rges 17 Cl aus e and t h e pro v i s i o n s o f t h e A meri can Cl ub Po li cy co un s el agai n s t appl y i n g a li t eral 18 i n t erpr et at i o n

o f t h e t erm “ o t h erwi s e.” See JA

A pparel Co rp. v . A

b b o ud, 568 F
. 3d 390, 405 (2d 1 9 C i

r. 2 0 0 9 ) (s t at i

n g t h at i n e x am i n i n g a c o n t ra c t , t h e c o urt c o n s i d e rs “ t h e c o n t e xt o f t h e e n t i re 2 0 in

t e g r at e d a g r e e me n

t , ” a s w e ll a s “ t h e c u s t o ms , p r a c t ic e s , u s a g e s an d t e rmino lo g y a s g e n e r a lly 2 1 un d e rs t o o d

i n t h e p art i c u l ar t ra d e o r b u s i n e s s ” (i n t e rn a l qu o t at i o n

mark s o m

i t t e d )). 2 2 T h e A

me r i c an C l u b i s a “ S te am s h i

p O w n e r s M utu a l

P r ote c ti on

an d I n d e m n i ty 23 A s s o ci at i o n , ” and i n acc o rdan ce w i

t h t h at gen eral

purpo s e, t h e A

meri can Cl ub Po li cy requi res 2 4 me m

be r s t o p r o vi d e a

l i s t o f t he i rve s s e l s t o be e nt e r e d

w i t h t he C l u b. As a s p e c i a l c o nd i t i o n, t he 25 Ch art ered Ba

rges C l aus e perm

i t s aut o mat i c co v erage under t h e A meri can Cl ub Po li cy t o L af arge 2 6 i n th e e v e n t i t “ a c qu i r e s an i n s ur a b l e i n te r e s t i n an y v e s s e l i n a d d i ti on to ori n s u b s ti tu ti on f or17 1 t ho s e s e t f

o rt h he r e i n, t hr o u g h p ur c ha s e , c hart e r , l e a s e o ro t he rw i s e . ” I n c o ns i d e r i ng t he 2 C h art e r e d

B ar g e s C la

u s e , w e fin d

it s ig n ific an

t t h at it a ut o mat ic a lly

c o v e r s v e s s e ls t h at ar e “ in 3 addi

t i o n t o o r i n s ub s t i t ut i o n f o r t h o s e s et f

o rt h h erei n , ” i
. e., v es s el s o wn ed b y L af arge and t h at 4 ar e p art o f t h e “ L a far g e fle e t
. ” S e e L a far g e N
. A m. , I n c . , 2 0 0 8 WL4 4 4 9 3 5 3 , at * 2
. T h is 5 pro v i des t h e appro pri at e co n t ex t f o r i n t erpr et i n g t h e ph rase t h at i m medi at el y f o l l o ws , “ t h

ro ugh 6 purch as e, ch art er, l eas e o r o t h erwi s e,” wh i ch es s en t i all y des cri b es t h e wa

y i n wh i ch a s ub s t an t i al 7 i n t eres t aki n t o t h e i n t eres t i n t h e v es s el s “ s et f

o rt h h erei n ” m ay b e ac qui red. T h e ph

rase “ t h ro ugh 8 purch as e, ch art er, l eas e o r o t h erwi s e,” t h eref o re, reas o n ab l

y s i gn i f i es a li m i t i n g precept rat h er t h an 9 an a s s uran c e o f

c o m p re h e n s i v e n e s s . 1 0 I nd e e d , i

nt e r p r e t i ng “o t he rw i s e ” li

t e r a l l y w o u l d r e s u l t i n a s u bs t ant i a l mo d i f i c at i o n o f t he 11 Ch ar t er ed Bar ges Cl ause. I f “ o t h erwi se” wer e t o b e i

n t er pr et ed as l i

t er al l y as L af ar ge co n t en ds, 1 2 t he n t he C hart e r e d B ar g e s C l a

u s e ne e d no t have r e qu i

r e d t hat an i ns ur a bl e i nt e r e s t i n a ve s s e l be 13 acqui

red “ t h ro ugh ” an y part i cul ar t y

pe o f t ran s act i o n

i n t h e f i rst pl ace . In

f act , t h e C h art ered 1 4 B ar g e s C la

u s e n e e d n o t e v e n h av e r e fe rr e d

t o t h e a c qu is it io n

b e ing “ in a d d it io n t o o rin 15 sub st i

t ut i o n f o r ” t h e v essel s t h at make up t h e Laf ar ge f l eet
. Rat h er , t h e Ch art er ed Bar ges Cl ause 1 6 n e e d

o n ly ha v e s t at e d

t h at c o v e r a g e is w arr an

t e d fo ran y v e s s e l in

w h ic h L a far g e h a s an

in s ur a b le 1 7 i n t e re s t . Th

u s , b y l i t e ra ll y c o n s t ru i n g t h e t e rm

“ o t h e rw i s e ,” L a f

arg e e f f e c t i v e l y g ut s t w o e n

t i re 1 8 p h

ra s e s f rom t h e C h art e re d

B arg e s C l a

u s e . L a f arg e ’ s a p p roac h t o i n t e rp re t i n g t h e t e rm 19 “ o t h erwi se” t h er ef o r e v i o l at es t h e f

un damen t al rul e o f co n t r act i n t er pr et at i o n t h at “ a co ur t m

ust 20 st r i

v e t o gi v e mean i n g t o ev ery

sen t en ce, cl ause, an d wo r d. ” S ee Zur i ch A m . I n s. Co
. v . ABM 2 1 I nd

u s . , I nc . , 3 9 7 F. 3 d

1 5 8 , 1 6 5 ( 2 d

C i r . 2 0 0 5 ) ( i

nt e rna l qu o t at i o n mark s o m

i t t e d ) ( qu o t i

ng 22 T rav el ers C as . & Sur
. Co
. v . Ce rt ai n Un derwrit ers at L l o y

d’ s o f L o n do n , 96 N.Y. 2d 583, 594 2 3 (2 0 0 1 )). 2 4 L a f

ar g e r e f e r s to ad i f

f e r e n t s e n te n c e i n th e C h arte r e d

B ar g e s C l a

u s e p r ov i d i

n g f or 25 co v erage o f

t h i rd- part y o wn ers “ [w] i

t h respe ct t o a ch art ered, l eas ed o r si m i l arl y acqui red v es s el
. ” 2 6 L a f

ar g e c on te n d s th at th e C h arte r e d

B ar g e s C l a

u s e w ou l d

h av e u s e d

th e s ame l an g u a g e , i
. e . , “ or18 1 s imilar ly a c qu ir e d

v e s s e l, ” h a d

t h e p art ie s in

t e n d e d “ o t h e rw is e ” t o b e lim

it e d t o t r an s a c t io n s ak in 2 t o c hart e r s , l e a s e s , o rp ur c ha s e s . L a f ar g e a s s e rt s t hat “o t he rw i s e ” t he r e f o r e “sho u l d

be 3 i n t er pr et ed h er e t o b r o aden t h e sco pe o f co v er age avail ab l e un dert h e Ch art er ed Bar ges [ C] l ause 4 t o t h e s am

e ex t en t as t h o ugh

all po s s i b l e m et h o ds o f acqui ri n g an i n s urab l e i n t eres t i n a v es s el h ad 5 b e e n

i n c l u d e d b y n ame . ” AH A C & N A C A O p e n i n g B r . at 3 1
. T h i s l og i c , h ow e v e r , d oe s n ot 6 e xp l a i

n o ra d dr e s s t he mo d i f

i c at i o n o f t he C hart e r e d

B ar g e s C l a

u s e t hat w o u l d

r e s u l t f r o m t he 7 e l i m i n ati on of th e l i m i ti n g p h r a s e a l tog e th e r , w e r e w e to a d op t L a f ar g e ’ s li te r a l d e f i n i ti on of 8 “ o t h erwi s e.” See C en t
. Han o v er Ban

k & T rust Co
. v . Co m

m ’ r o f Int ern al Re v en ue, 159 F
. 2d 9 1 6 7 , 1 6 9 ( 2 d

C i r . 1 9 4 7 ) ( L e arne d

H and , J
. ) ( “T he r e i s no mo r e li k e l y w ay t o m i s a p p r e he nd t he 1 0 me ani

ng o f l ang u a g e —

be i t i n a c o ns t i t ut i o n, a s t at ut e , a w i l l o ra c o nt r a c t —

t han t o r e a d

t he 11 wo rds li

t eral l y , f o rget t i n g t h e o b j ect wh i ch

t h e do cum

en t as a wh o l e i s mean

t t o s ecure.”). See 12 gen eral l

y Ro b ert T
. L em

o n II , A l l o cat i o n

o f M ari n e Ri s ks : A

n Ov erv i ew o f

t h e M ari n e In s uran ce 1 3 P a c k a g e , 8 1 T u l. L
. R e v . 1 4 6 7 , 1 4 8 0

– 8 1 ( 2 0 0 7 ) ( “ T h e P & I [ P r o t e c t io n an d I n d e mnit y] p o lic y is 14 n o t a co m

preh en s i v e gen eral

l i ab i l i t y po li cy , f o r it do es n o t purpo rt t o co v er all t y pes o f an 1 5 i n s ure d ’ s l i a

b i l i t y . . . .” ). 16 L af

arge al s o ref

ers t o Rul e 2 o f

t h e A meri can Cl ub Po li cy , wh i ch

pro v i des t h at a m

em b er 17 o f

t h e A mer i can Cl ub “ sh al l b e i n dem n i f i ed i n co n n ect i o n wi t h each v essel
. . . agai n st an y l o ss, 1 8 d ama g e o re xp e ns e w hi c h t he M e m be rs ha l l be c o me li a

bl e t o p ay and s ha l l p ay by r e a s o n o f t he 19 f act t h at t h e M em

b er i s t h e o wn er ( o r o perat o r, man ager, ch art erer, mo rt gagee , t rust ee, r ece i v er 20 o r agen

t , as t h e ca s e m

ay b e) o f t h e i n s ured v es s el
. ” (em

ph as i s added). L af

arge co n t en ds t h at 21 “b eca

us e t h e C l ub ’ s Rul es i

n cl uded all s o rt s o f met h o ds f

o r acqui ri n g an i n s urab l e i n t eres t o t h er 2 2 t han —

and d i f f e r e nt f r o m — a p ur c ha s e , c hart e r , o rl e a s e , t he p hr a s e ‘o ro t he rw i s e ’ i n t he 23 Ce rt i f

i cat e o f E n t ry m us t l i kewi s e b e co n s t rued i

n t h at b ro ad m

an n er. ” L af arge Openi

n g Br. at 2 4 4 2
. B ut R

u l e 2 i s a f i ni t e l i s t o f r e l at i o ns hi

p s and d o e s no t s u

p p o rt L a f ar g e ’s c l a i

m t hat , und e rt he 2 5 C h art e re d

B arg e s C l a

u s e , an i n s ura b l e i n t e re s t i n a v e s s e l c a n b e a c qu i re d b y an y me an s . 26 F ur t h ermo r e, Laf ar ge ar gu es t h at t h e t erm

“ o t h erwi se” m

ust b e r ead l i

t er al l y t o en co m passM or e ov e r , w h i l e n ot a dv an c e d b y th e A me r i c a n C l u b , w e n ote th e p os s i

b i li ty th at a 6 v e s s e l may b e b e qu e ath e d

to L a f ar g e p ur s u an

t to aw i l l , d on ate d

to L a f ar g e p ur s u an

t to atru s t, or ado pt ed b y

Laf ar ge p ur suan

t t o an equ al mer gerwi

t h an o t h erco m

pan y . No n e o f

t h ese ci rcum s t an ces appea

r t o co n s t i

t ut e a “ purch as e, ch art er, [o r] l eas e,” b ut t h es e ex am pl es pro v i de me an i n g t o “ o t h e rw i s e ” t h at s urv i v e L a f arg e ’ s t e s t o f

s y n o n y m s . Because we af

f i rm t h e Di st r i ct Co ur t ’s deci si o n o n o t h ergr o un ds, we n eed no t addr ess 7 t h e pro pri et y

o f i t s us e o f ej us dem gen eri s t o make a

pl ai n meani n g det erm

i n at i o n o f t h e C h art ered B ar g e s C l a

u s e . B ut c f

. U n i te d S tate s v . T urk e tte , 4 5 2 U
. S
. 5 7 6 , 5 8 1 ( 1 9 8 1 ) ( “ T h e ru l e of e ju s d e m g e n e r is is n o mo r e t h an an a id t o c o n s t r u c t io n an d c o me s in t o p lay o n ly wh e n

t h e r e is s ome un c e rta i

n ty a s to th e me an i

n g of a p arti c u l arc l a

u s e i n a s tatu te
. ” )
. M or e ov e r , ru l e s of co n t ract i n t erpr et at i o n

n eed no t b e appli ed unl es s “ t h e ex t ri n s i c evi den ce do es n o t y

i el d a c o n c l u s i v e an s w e r a s t o t h e p art i e s ’ i n t e n t .” Pa rk s R e a l Es t at e Pu

rc h a s i n g G roup v . St. Pa

u l F i re 19 1 an y an d a l l t ran s a c t i o n s b e c a

u s e t h e re are “n o me an s o f a c qu i ri n g an i n t e re s t i n a v e s s e l t h at are 2 s i m i l ar t o a p urc h a s e , c h art e r, or l e a s e b ut n o t a l re a dy e n c o m p a s s e d w i t h i n t h e w o rd s ‘ p urc h a s e ,’ 3 ‘ c h arte r , ’ or‘ l e a s e . ’ ” L a f ar g e O p e n i

n g B r . at 4 5
. T o th e e xte n t av e s s e l may b e “h i r e d ” or 4 “ren

t ed,” L af arge argues t h at t h o s e t erm s are s y n o n y m s o f “ ch art er” and “ l eas e” a

n d t h at 5 i n t erpr et i n g “ o t h erwi s e” t o mean

all s y n o n y m s f o r “purch as e, ch art er, [o r] l eas e” w o ul d ren der 6 “ oth e rw i s e ” s u

p e r f l u ou s . A c c or d i

n g to L a f ar g e , th e r e f

or e , r e a d i n g “ oth e rw i s e ” a s ak i

n to 7 purch as e, ch art er, o r l eas e wo ul d read o ut “ o t h erwi s e” e n t i rel y . W h i l e L af arge do es make a 8 r e a s o na

bl e ar g ume nt i

n t hi s r e g ar d , w e no t e t hat t he a ut ho r i t i e s c i t e d by L a f ar g e t o s u p p o rt t he 9 pro po s i

t i o n t h at “ arguab l

y . . . s y n o n y m o us . . . t erm s s h o ul d b e t reat ed as m ut uall y ex cl us i v e, 10 rat h er t h an

as s y n o n y m s , ” s ee, e.g. , S. Ax el

ro d Co
. v . M el

Di x o n St udi o , In c., 471 N.Y. S. 2d 945, 1 1 9 5 1 ( C i

v. C t
. 1 9 8 3 ) , d o no t i

nvo l ve s i t u at i o ns w he r e a

r e a s o na bl y d i s c e rna bl e i nt e nt o f t he 1 2 c o n

t ra c t w o u l d

b e re n d e re d

a n u l l i t y i f w e w e re t o f

o l l o wt h e ru l e t o t h e l e t t e r. 6 1 3 We ar e t he r e f o r e unp e r s u a d e d

t hat “o t he rw i s e ” c anno t r e a s o na bl y be c o ns t ru e d

t o me an a 1 4 narr o wc at e g o ry

o f c o m me r c i a l c o nd u c t s ak i n t o a p ur c ha s e , c hart e r , o rl e a s e . N o ne t he l e s s , be 15 t h at as i

t may , we a

re un ab l e t o co n cl

us i v el y det erm i n e f ro m t h e f ace o f t h e A meri can Cl ub Po l i cy 1 6 a s i ng l e p l a i n me ani ng o f t he C hart e r e d

B ar g e s C l a

u s e . And i n t hi s r e g ar d , w e f

i nd e rr o ri n t he 17 Di st r i ct Co ur t ’s det erm i n at i o n t o t h e co n

t r ary . T h i s err o rwas i

n co n sequent i al , h o wev er , b ecause 1 8 t h e r e ar e n o g e n

u ine is s u e s o f m

at e r ia l f a c t s in t h is c a s e t h at w o u ld s u p p o rt t h e a

p p li c at io n o f a 1 9 l i t e ra l re a d i n g o f t h e t e rm “ o t h e rw i s e ” i

n t h e C h art e re d

B arg e s C l a

u s e . Se e g e n e ra l l

y In re 7& M ari

n e In s . C o ., 4 7 2 F .3 d

3 3 , 4 3 (2 d

C i r. 2 0 0 6 ) (i

n t e rn a l qu o t at i o n

mark s o m

i t t e d ). 20 1 M e t h

y l Te rt i ary B ut y l Et h e r P rods . L i a

b . L i t i g ., 4 8 8 F .3 d

1 1 2 , 1 3 4 (2 d

C i r. 2 0 0 7 ) (“ [A ]n 2 a p p e l l at e c o urt i s f

re e t o a f f i rm a d i s t ri c t c o urt d e c i s i o n

o n an y g roun d s f

o r wh i c h t h e re i s a re c o rd 3 s u f

f i c i e n t t o p e rm i t c o n c l u s i o n s o f l aw , e v e n

g roun d s n o t re li e d

u p o n b y t h e d i s t ri c t c o urt .” 4 (i n t e rn a l qu o t at i o n

mark s o m

i t t e d )). 5 A l

t h o u g h t h e re c o rd

d o e s n o t c l e arl

y i n f o rm u s o f t h e p re c i s e li

m i t s o f t h e t e rm 6 “o t he rw i s e , ” i

t i s a bs o l ut e l y c l e arw hat “o t he rw i s e ” i s no t : “o t he rw i s e ” d o e s no t i nc l u d e t he k i nd 7 o f r e lat io n s h ip a s s o c iat e d w it h a s h ip o w n e r ’ s b a ilm

e n t t o a t e rmin a l o p e r at o r—

t h e r e lat io n s h ip 8 I n gr am

h ad w i t h Laf ar ge f o rBar ge I NG 4 72 7. S ee general l y Do w Ch em . Co
. v . Bar ge U M-2 3B, 9 424 F
. 2d 307, 311 (5t h Ci r. 1970) ( A

t erm i n al o perat o r, o r “ wh arf

i n ger, ” i s a “

b ail ee f o r h i re [ t h at 10 i s ] r equi

red t o s ee t o i

t t h at t h e b arges were ade quat el y mo o red at all

t i mes . ”); A m . Ri v er T ran s p. 1 1 C o. v . P ar a g on

M ar i n e S e rv s . , I n c . , 2 1 3 F
. S u p p . 2 d 1 0 3 5 , 1 0 5 9 ( E
. D
. M o 2 0 0 2 ) ( “ T h e op e r ator 1 2 of

a f l e e ti n g f a c i li ty a s b a i l e e h a s th e r e s p on s i b i li ty of c ar i n g f or a b ar g e a f te ri t i s c om m i tte d to i ts 1 3 c u s t o dy .” ); a c c o rd B urn s B ros v . L o n g Is l an d R .R . C o ., 1 7 6 F .2 d

4 0 6 , 4 0 9 (2 d

C i r. 1 9 4 9 ). 14 L af

arge’ s i n s uran ce b ro ker, J o an

n e F edchi n , s t at ed at h er depo s i

t i o n t h at t h e C h art ered 15 Ba

rges C l aus e wa s n o t i

n t en ded “t o i

n s ure a t h i

rd- part y ’ s b arge t h at was s i m pl y deli v eri n g cargo 1 6 to a[ L a f

ar g e ] f a c i l i ty
. ” R ath e r , th e C h arte r e d B a r g e s C l a u s e w a s a d d e d

at th e i n s i s te n c e of 17 L af

arge “ f o r eas e o f b us i n es s ” b y perm i t t i n g aut o mat i c co v erage o f b arges t h at L af

arge was 1 8 c h art e r ing “ fo rv e ry s h o rt p e r io d s o f t ime an d
. . . o n a fa ir ly r e g u larb a s is
. ” I n d e e d , in a fa c s imile 19 t ran s m

i s s i o n dat ed A pri l 14, 1999, M s . F edchi

n wro t e t o t h e A

meri can Cl ub t h at L af

arge 20 “ ch art ers b arges i n f ro m t i me t o t i me — s o met i

mes f o r a 2 week pe ri o d, s o met i mes f o r a f ew 2 1 d ays ” ; c o n fi

rme d t h at t h e s e c h art e r s w e r e a ut o mat ic a lly c o v e r e d

un d e rt h e A

me r ic an C lub P o lic y; 22 an d en cl o s ed a pro po s ed claus e, wh i ch wo ul d ul t i mat el y b e i n co rpo rat ed i

n t o t h e A meri can Cl ub 2 3 Pol i c y

a s t h e C h art e re d

B arg e s C l a

u s e , c o n s i s t e n

t w i t h L a f arg e ’ s a i m s . M s . F edchi

n f urt h er 2 4 t e s t i f

i e d a s t o t he l o g i c be hi

nd he rund e r s t and i

ng o f t he C hart e r e d

B ar g e s C l a

u s e a s no t c o ve r i

ng 25 l i ab i l i

t i es i n curr ed b y

L af arge as a t erm

i n al o perat o r: “ T h ere i s a s eparat e po li cy t h at was pl ace dIn deed, i n an as s ert i o n b y t h e A meri can Cl ub t h at i s n o t ref

ut ed b y L af arge, L af arge 8 i n i t i all y at t em pt ed t o t en der t h e prem

i um f o r o n l y Ba rge I NG 4727 i

n t h e am o un t o f $852 af t er t h e co m men cem en t o f t h e b arge li

t i gat i o n . It was n o t un

t i l t wo years l at er t h at L af

arge at t em

pt ed to t e n d e rth e p r e m

i um s f or th e ov e r3 , 0 0 0 oth e rs i

m i l arb ar g e s to b r i

n g i ts c ond u c t i n li n e w i th i ts l e g a l c l a i m s . A me ri c an C l u b A n s w e ri n g B r. at 5 2

– 5 3
.

21 1 f o rL a [ f ] ar g e t o c o ve rt he i

rm i s c e l l ane o u s mar i

ne li a bi li t i e s , i nc l u d i ng t hi s e xp o s ur e w hi c h g o e s by 2 a v ari et y

o f n am es f o r t h e purpo s es h ere. I’ll j us t us e o n e. W

h arf i n gers li ab i li

t y . ” 3 In

acc o rd wit h

M s . F edchi

n ’ s t es t i mo n y i s L af arge’ s co n duct , wh i ch

ev i n ces an 4 und e r s t and i

ng t hat t hi

r d

- p art y bar g e s s u c h a s B ar g e I N G4 7 2 7 ar e no t c o ve r e d und e rt he 5 C hart e r e d

B ar g e s C l a

u s e . “C o nd

u c t o f t he p art i e s p r o vi d e s ano t he ri m p o rt ant s o ur c e f

o rd e r i vi ng 6 th e i

ri n te n t a s to t h e me an i

n g of th e i n s ur an c e c on

tr a c ts at i s s u e . . . . ‘ [ T ] h e r e i s n o s ur e rw ay to 7 fin d

o ut [ t h e in

t e n t o f t h e p art ie s t o a

c o n t r a c t ]
. . . t h an

t o s e e w h at t h e y h av e d o n e . ’ ” A m. H o me 8 P r o d s . C o r

p . v. L i be rt y M ut
. I ns . C o . , 5 6 5 F. S u p p . 1 4 8 5 , 1 5 0 3 ( S
. D
. N
. Y
. 1 9 8 3 ) ( qu o t i ng 9 B r oo k l

y n L i f e I n s . C o. v . D utc h e r , 9 5 U
. S
. 2 6 9 , 2 7 3 ( 1 8 7 7 ) ) ; s e e a l s o C i ty of N
. Y
. v . N
. Y
. C i

ty 10 Ry
. Co
. , 193 N.Y. 543, 548 (1908) (“ W h en t h e part i es t o a co n

t ract o f do ub t f ul meani n g, gui ded 1 1 b y

s e l f

- i n te r e s t, e n f or c e i t f or a l ong ti me b y a c on s i s te n t an d un i f orm c our s e of c ond u c t, s o a s to 1 2 g i

v e i t a p ra c t i c a l me an i ng , t h e c o urt s w i l l

t re at i t a s h av i n g t h at me an i

n g . . . .” ). 1 3 H e r e , p ur s u an t to th e C h arte r e d

B ar g e s C l a

u s e , an y d e c l ar ati on s an d

p r e m i um s f or 1 4 un lis t e d

v e s s e ls w o u ld

h av e b e e n

d u e an n u a lly
. L a far g e n e v e rd e c lar e d o rt e n d e r e d

an y p r e miums 15 f o r t h e o v er 3, 000 t h i

rd- part y o wn ed b arges t h at h ad pas s ed t h ro ugh i t s t erm i n al s f o r n earl y s ev en 1 6 ye ar s s i

nc e L a f ar g e ha d be c o me a

me m be ro f t he Ame r i c an C l

u b. N o ri s t he r e e vi d e nc e t hat t he 1 7 Ame r i c an C l

u b e ve rd e mand e d

p r e m i um s f o rt he s e t hi

r d

- p art y bar g e s . I t w a s o nl

y a f t e rt he 1 8 c o m

m e nc e me nt o f

t he bar g e l i

t i g at i o n t hat L a f

ar g e at t e m

p t e d t o s at i s f y at o nc e i t s d e c l ar at i o ns 19 an d p r em

i um s f o rt h e t h o usan ds o f

t h i r d- par t y b ar ges t h at passed t h

r o ug h i t s t erm i n al s f o rt h e past 2 0 s e v e n

ye ar s . L a f

ar g e ’ s i n a c ti on i s s tr ong e v i d e n c e th at thi r d

- p arty b ar g e s w e r e n e v e ri

n te n d e d to 2 1 b e c o v er edb y

t h e C h ar t er edBar g es C l au se, and t h at i n ac t i o n i s n o t amel i o r at edb y

Laf ar g e’s 2 2 s u

b s e qu e n t a s s e rt io n

o f c o v e r a g e t h at w a s , a s t h e D is t r ic t C o urt a p t ly o b s e rv e d , “ t r an s p ar e n t ly 2 3 t a c t i c a l .” L a f

arg e N . A m ., In c ., 2 0 0 8 WL4 4 4 9 3 5 3 , at * 1 0
. 8A l t h o ugh o n e o f L af arge’ s ri s k man agers t es t i f i ed at h i s depo s i

t i o n t h at t h e C h art ered 9 B ar g e s C la

u s e is r e a d

b r o a d ly t o c o v e rL a far g e ’ s a c qu is it io n o f an y ins ur a b le in t e r e s t in a v e s s e l, th e man a g e rte s ti f

i e d a s to h i s un d e r s tan d i

n g of th e te xt of

th e C h arte r e d

B ar g e s C l a

u s e an d n ot t h e i n t en t o f t h e C h art ered Ba

rges C l aus e. I n deed, i

t appea rs f ro m t h e reco rd t h at t h e m

an ager d i d no t r e c a l l t he C hart e r e d

B ar g e s C l a

u s e at a l l ; r at he r , at hi s d e p o s i t i o n, he i nt e r p r e t e d t he t e xt o f t h e claus e de no v o . Si

m i l arl y , acc o rdi n g t o t h e ci

t at i o n pro v i ded b y

L af arge, L af arge’ s o t h er r i sk man agermer el

y t est i f i ed t h at h e h ad d i

r ect ed h i s b r o ker s t o “ al

way s o b t ai

n t h e b r o adest co v erage po s s i

b l e” a n d di d n o t s t at e t h at t h e i

n t en t o f t h e C h art ered Ba

rges C l aus e wa s t o co v er an y an d al l i n sur ab l e i n t er est s acquir ed b y

Laf ar ge. T h ese t est i

mo n i es ar e i

n suf f i ci en t t o r ai se gen ui n e i s s ues o f

mat eri al f act
. See No ra Bev erages , In c. v . Perr i er Gro up o f A m . , In c., 269 F
. 3d 1 1 4 , 1 2 4 ( 2 d

C i r . 2 0 0 1 ) ( no t i

ng , i n t he c o nt e xt o f

an i nf r i ng e me nt a c t i o n, t hat s um

mary j u d g me nt w a s a p p ropri at e b e c a

u s e “ d e m i n i m i s e v i d e n c e [i s ] i

n s u f f i c i e n t t o ra i s e t ri a

b l e i s s u e s ” ). L a far g e ar g u e s t h at it s o v e r s ig h t is “n o t at a ll un c o mmo n ” b e c a u s e in s ur e d s o r d in ar ily 10 f o r g e t t o p ay

p r e m i um s unt i l l o s s e s ar e i

nc urr e d and be c a u s e i ns ur e r s s ho u l d

“be ha p p y t o have th e p r e m i um . ” E v e n

i f th at w e r e tru e , L a f

ar g e ’ s f a i l ur e to p ay

p r e m i um s f orth e th ou s an d s of t h i rd- part y b arges , wh i ch

h ad pas s ed t h

ro ugh i t s t erm i n al s f o r sev en years , dem

o n s t rat es t h at L af arge’ s f ai l ure t o pay

was n o t a s i

m pl e o v ersigh

t b ut , rat h er, s t ro n g ev i den ce t h at L af arge n ev er ex pect ed t h i rd- part y b arges t o b e co v ered un der t h e C h art ered Ba rges C l aus e. S ee s upra n o t e 8. 22 1 L a f

ar g e onl y c h a l l e n g e s th e c r e d i

b i li ty of M s . F e d c h i

n ’ s te s ti mon y an d d oe s n ot b r i

n g f orth 2 o t he re vi d e nc e t hat w o u l d g e nu i ne l y p l a c e i nt o qu e s t i o n he rund e r s t and i ng o f t he i nt e nt o f t he 3 Ch art ered Ba

rges C l aus e. No r do es L af arge o f f er an ex pl an at i o n , o t h er t h an

t h at i t was an 9 4 “ o v e r s ig h

t , ” fo rit s d e c is io n

n o t t o d e c lar e o rp ay a

n y p r e miums fo rt h ir d

- p art y v e s s e ls un t il i t 5 b eca

me t act i call

y des i rab l e t o do s o af

t er Hurr i can e Kat ri

n a. Cf
. T o pps Co
. , 526 F
. 3d at 68 10 6 ( S um

mary j u d g me n t i s a p p r op r i ate “w h e r e th e r e i s n o e xtr i n s i c e v i d e n c e th at w ou l d

s u p p ort a 7 reso l

ut i o n o f [t h e] am b i gui t i es i n f av o r o f t h e n o n mo v i n g part y ’ s cas e.”)
. In s t ead, L af arge argues 8 th at i

t w a s th e “ op e r ator ” of

B ar g e I N G 4 7 2 7 an d

n ot s i m p l y a w h ar f i n g e ra c ti n g a s th e b a i l e e of 9 t h e b arge. L af

arge co n t en ds t h at t h e s t ren gt h

o f t h e evi den ce s h o wi

n g t h at i t h ad o perat i o n al 1 0 c o n

t r o l o v e rB ar g e I N G 4 7 2 7 w arr an t s s umma ry ju d g me n

t in L a far g e ’ s fav o ro r , at a

minimum, 1 1 ra i s e s s u f

f i c i e n t i s s u e s o f f a c t s u c h t h at s um mary j u d g me n t i s i n a p p ropri at e . 1 2 A lt h o u g h t h e T r an s p o rt at io n

A g r e e me n

t b e t w e e n L a far g e an d

I n g r am c o n

t e mp lat e s s o me 1 3 c o n

t r o l b y L a far g e o v e rI n g r am’ s b ar g e s fo rp ur p o s e s o f un lo a d ing c ar g o o rs h ift ing b ar g e s w it h in 14 i t s t erm i n al , t h e agr eemen

t st at es t h at “ [ n ] o t h i

n g co n t ai n ed i n t hi s Co n t r act sh al l b e co n st ruedas a 1 5 c o n

t r a c t b y [ L a far g e ] fo rt h e c h art e r ing , h ir ing o rle a s ing o f an y b ar g e [ , an d ]
. . . [ L a far g e ] s h a ll 16 ex erci s e n o co n

t ro l o v er t h e o perat i o n

o f an y b arge. ” (em

ph as es added). T h i s l anguage23 1 art i c u l at e s t he o p p o s i t e c o nd i t i o n o f t he C hart e r e d

B ar g e s C l a

u s e , w hi c h r e qu i

r e s t hat a qu a li f y i ng 2 v e s s e l b e a c qu ir e d “ t h r o u g h p ur c h a s e , c h art e r , le a s e o ro t h e rw is e ” t o e s t a b lis h a ut o mat ic 3 c ov e r a g e . L a f

ar g e ’ s “ a c qu i s i

ti on ” of B ar g e I N G 4 7 2 7 , th e r e f

or e , f a l l s outs i d e th e p r ov i s i on s of 4 t h e C h art e re d

B arg e s C l a

u s e . 5 M o r e o ve r , i t i s und i s p ut e d

t hat L a f ar g e f i r s t c o nt a c t e d

I ng r am ’s s u

bc o nt r a c t o rt o mo ve 6 Ba rge I NG 4727; h av i

n g recei v ed n o repl

y , L af arge ca l l ed a t o wi

n g co m pan y t o mo v e B arge ING 7 4727 i

n preparat i o n

f o r t h e l an di

n g o f Hurr i can e Kat ri

n a. S ee In

re I n gram

Ba rge Co
. , No
. 05- 8 4419, 2008 WL906303, at *1–*2 (E
. D. La. Ma r. 31, 2008). W

h at ev er i n s urab l e i n t eres t L af arge 9 a c qu i

r e d i n B ar g e I N G 4 7 2 7 t hr o u g h i t s c o nt r o l o f t he ve s s e l

und e rt he s e e xt e nu at i

ng 10 ci rcum s t an ces , i

t was n o t — n o r was i

t aki n t o — an acqui s i t i o n o f t h e v es s el

t h ro ugh purch as e, 1 1 c h arte r , or

l e a s e . I t a l s o c an

n ot b e b r oa d l

y s a i d th at B ar g e I N G 4 7 2 7 w a s a c qu i r e d “ i n a d d i ti on to 1 2 o ri

n s u bs t i t ut i o n f o r ” a ve s s e l i n L a f ar g e ’s f l e e t
. As t he D i s t r i c t C o urt s um mar iz e d t he 1 3 r e l at i o ns hi

p be t w e e n L a f

ar g e and I ng r am : “La f

ar g e t e l l s I ng r am

i t ne e d s a c e me nt c ar g o t o be 1 4 t ran s p o rt e d [,] . . . . I n g ram s e l e c t s f rom i t s f l e e t o f b arg e s o n e t o p e rf

o rm t h e w o rk [, an d ] . . . . 15 L af

arge n ei t h er kn o ws [n ]o r cares [wh i ch o n e o f In gram ’ s b arges ] .
. . arr i v e at L af arge’ s New 16 Orl ean s f

acil i t y t o di s ch arge [t h e] cem

en t cargo . ” L af

arge N. Am . , In c., 2008 WL4449353, at 1 7 * 9
. T h e D i s tr i c t C ourt’ s ob s e rv ati on c on f i rm s th e r e l ati on s h i

p b e tw e e n

L a f ar g e an d I n g r am th at, 1 8 i n p r a c ti c e a s w e l l

a s i n a g r e e me n

t, B ar g e I N G 4 7 2 7 w a s n e v e ri ma g i n e d to b e “ i n a d d i ti on to or 19 i n s ub s t i t ut i o n f o r” a v es s el

i n L af arge’ s f l eet o r o t h erwi s e co n

t em pl at ed b y t h e C h art ered Ba

rges 2 0 C l a

u s e a s a c o v e re d v e s s e l
. 2 1 I n

v ie wo f t h e fo r e g o ing , a lt h o u g h t h e C h art e r e d

B ar g e s C la

u s e is amb ig u o u s , w e h o ld 2 2 t hat s um

mary j u d g me nt i

n f avo ro f t he Ame r i c an C l

u b i s w a rr ant e d g i ve n ( 1 ) t he s t r e ng t h o f

t he 2 3 e xtr i

n s i c e v i d e n c e th at th e C h arte r e d B ar g e s C l a

u s e w a s n e v e ri

n te n d e d to c ov e rth i

r d

- p arty 24 b arges s uch

as Ba rge I NG 4727; (2) t h e l ack o f an y ev i den ce a s t o a co n

t rary i n t en t t h at rai s es 2 5 g e nu i

ne i s s u e s o f

mat e r i a l f a c t ; and ( 3 ) t he T r ans p o rt at i o n Ag r e e me nt ’s e xp r e s s art i c u l at i o n o f t he 26 rel at i o n s h i

p b et wee n

In gram ’ s b arges an d L af

arge as o ut s i de t h e co n di

t i o n s o f t h e C h art ered24 1 B arg e s C l a

u s e . Se e M e rril l

L y n c h , Pi e rc e , F e n

n e r &Sm i t h , In c ., 2 3 2 F .3 d

at 1 5 8 ; To p p s C o ., 2 5 2 6 F .3 d

at 6 8
. 3 D
. L e g a l F e e s C o v e r e d b y t h e P r imary P o lic y 4 T h e res o l

ut i o n o f wh et h er NYM A GIC’ s primary po li cy co v ers t h e l egal

ex pen s es earn ed 5 b y G oodw i n P r oc te r , H & K , an d

C h a f f e — th e th r e e f i rm s r e ta i n e d b y L a f ar g e w i th out n oti c e to, 6 o rco n sen

t f r o m , NYMA GI C — l i es i n app l y i n g t wo pr o v i si o n s o f

t h e pr i mary po li cy . T h e f

i r st 7 p r o v is io n

s t at e s t h at N Y M A G I C h a s t h e o p t io n t o n ame mut u a lly

a c c e p t a b le at t o rn e ys w h o w ill 8 r e p r e s e nt L a f

ar g e i n any p o l i c y- r e l at e d

li t i g at i o n be t w e e n L a f

ar g e and t hi r d p art i e s ( t he “N am

i ng 9 C l a

us e ” ): 1 0 [ N Y M AG I C ] , i n c o ns i d e r at i o n, i

n c o ns u l t at i o n w i t h [ L a f ar g e ] , s ha l l

have t he 11 o pt i o n

o f n am i n g an y m ut uall y acc ept ab l e at t o rn eys wh o s h all repr es en t [Laf arge] 12 i

n t h e pro s ecut i o n

o r def en s e o f an y li t i gat i o n o r n ego t i at i o n s b et wee n

[Laf arge] 1 3 an d

th i r d p arti e s c on c e rn i

n g an y c l a i m b a s e d on a li a b i li ty or an a l l e g e d li a b i li ty 1 4 co v er edb y [ t h e p r i mar y] p o l i cy , and shal l

h ave t h e d i

r ec t i o n o f su ch li t i g at i o n ’s 1 5 [s i c ] or n e g o t i at i o n s . 1 6 T he s e c o nd

p r o vi s i o n s t at e s t hat L a f

ar g e i s o bl i g at e d

t o t ak e s t e p s t o p r o t e c t i

t s o w n and 1 7 N Y M AG I C ’s i

nt e r e s t s i n r e s p e c t t o any

o c c urr e nc e t hat i s li

k e l y t o g i ve r i s e t o a

c l a i m und e rt he 18 pri

mary po l i c y (t h e “ Pro t e c t i o n

C l a us e ” ): 1 9 [ I ] n

r e s p e c t o f an

y o c c urr e n c e lik e ly t o g iv e r is e t o a c la im un d e rt h is p o lic y, 2 0 [ L a f

ar g e ] i s ob l i g ate d

to an d s h a l l tak e s u c h s te p s to p r ote c t [ i

ts ] an d / or 2 1 [ N Y M A G I C ’ s ] i n te r e s ts a s w ou l d

r e a s on a b l y b e tak e n i n th e a b s e n c e of th i s or 2 2 s i

m i l ar i n s uran c e . 2 3 O n t he o ne hand , N Y M AG I C c o nt e nd s t hat , p ur s u ant t o t he N am i ng C l a u s e , i t ha s t he 2 4 r ig h

t t o n ame mut u a lly

a c c e p t a b le at t o rn e ys fo rL a far g e ’ s d e fe n s e in t h e b ar g e lit ig at io n ; t h at in 2 5 e x e r c is ing it s r ig h t t o s p e c ify c o un s e l, N Y M A G I C r e a s o n a b ly o ffe r e d

L a far g e t o c h o o s e fr o m a 2 6 p ane l

o f s i x qu a l i f i e d l awf i rm s ; t hat L a f

ar g e br e a c he d

i t s d ut y o f g o o d f a i t h by i g no r i ng 2 7 N Y M AG I C ’s o f

f e r e d l i s t o f c o uns e l ; t hat G o o dw i

n P r o c t e r , H &K, and

C ha f f e w e r e r e t a i

ne d by 2 8 L a f

ar g e w i th out N Y M A G I C ’ s kn ow l e d g e or c on s e n t; an d th at N Y M A G I C , w h i c h

h a s f u l f i l l e d i ts 2 9 ob l i g ati on

un d e rth e N am

i n g C l a u s e b y a p p oi n ti n g S utte r f

i e l d f orL a f ar g e ’ s d e f e n s e , i s n ot 3 0 o b l i g at e d

t o p ay f o r t h e l e g a l

f e e s e arn e d

b y t h e t h re e un a ut h o riz e d l awf i rm s .25 1 L a f

ar g e , on th e oth e rh an d , c on

te n d s th at i

t to ok r e a s on a b l e s te p s p ur s u an

t to i ts 2 o b l i gat i o n s un der t h e Pro t ect i o n Cl aus e. La f

arge as s ert s t h at i

t i m medi at el y ret ai n ed quali f i ed 3 c o un s e l

t o p re s e rv e e v i d e n c e , i

n v e s t i g at e t h e c a

u s e o f t h e b re a c h e d

l e v e e , an d

m i n i m iz e e x p o s ure 4 t o l i ab i l i

t y ; t h at t h e t h

r ee f i rm s wo rkedi

n di f f er en t capac i t i es an d d i d n o t dupl i cat e each o t h er s’ 5 w o rk ; and

t hat t he P r o t e c t i o n C l a

u s e , i n l i g ht o f t he e xc e p t i o na l

c i r c um s t anc e s o f

H urr i c ane 6 Kat r in a , t rump e d

t h e p r o v is io n s o f t h e N aming C la u s e . F urt h e rmo r e , L a far g e a s s e rt s t h at e v e n if 7 t h e Nam

i n g Cl aus e appli ed, NYMA GIC ac t ed i n b ad f ai t h b y f aili n g t o i n v es t i gat e t h e ca s e, 8 r e f u s i n g to e x p l a i n i ts r e j e c ti on of L a f ar g e ’ s c h oi c e of

c oun s e l , an d

of f e r i n g an i n a d e qu ate li s t of 9 firms t o r e p r e s e n

t L a far g e in

t h e b ar g e lit ig at io n . L a far g e a ls o a s s e rt s t h at N Y M A G I C is 1 0 p r e c l

u d e d f r om e x e r c i s i n g i ts r i g h ts un d e rth e N am

i n g C l a u s e b e c a u s e th e i n te r e s ts i n th e li ti g ati on 1 1 b e t w e e n

L a f arg e an d N Y M A G IC are i

n c o n f li c t
. 12 T h

us , acc o rdi

n g t o L af arge, t h e Di s t ri ct Co urt err ed b eca us e t h e pri

mary po li cy co v ered 13 n o t o n l

y Go o dwi n Pr o ct er an d H& K , b ut al s o Ch af f e, as t h e ret ai

n er o f all t h ree l aw f i rm s was 14 reas o n ab l e and requi red un der t h e Pro t ect i o n

Cl aus e. A cco rdi

n g t o NYM A GIC, t h e Di s t ri ct 1 5 C o urt e rr e d

b e c a u s e t h e p r ima

ry p o lic y c o v e r s n e it h e rG o o dw in P r o c t e r , H & K , n o rC h a ffe , a s a ll 1 6 t hr e e f

i rm s w e r e r e t a i

ne d w i t ho ut N Y M AG I C ’s kno w l e d g e o rc o ns e nt and i n vi o l at i o n o f

t he 1 7 N am

i n g C l a u s e . Ea c h

p art y e m p h a s iz e s o n e c l a

u s e an d m i n i m iz e s t h e i m p o rt an c e o f

t h e o t h e r. 1 8 We t hi

nk i t p l a i n t hat bo t h p r o vi s i o ns m

u s t be g i ve n f u l l e f f e c t
. S e e C ha

p man v. N
. Y
. S t at e D i

v. 1 9 fo rY o ut h , 5 4 6 F
. 3 d 2 3 0 , 2 3 6 ( 2 d

C ir
. 2 0 0 8 ) ( “ A

c o n t r a c t s h o u ld

b e c o n s t ru e d

s o a s t o g iv e fu ll 2 0 me an ing an d

e ffe c t t o a ll o f it s p r o v is io n s . ” ( in t e rn a l q u o t at io n mark s o mit t e d ) ( qu o t ing A m. 2 1 Ex

p re s s B an k L t d . v . U n i

roya l , In c ., 5 6 2 N .Y .S.2 d 6 1 3 , 6 1 4 (A

p p . D i v . 1 9 9 0 )))
. 2 2 L a far g e is c o rr e c t t h at in lig h t o f t h e e x c e p t io n a l c ir c ums t an c e s o f H urr ic an e Kat r in a , it 23 was reas o n ab l e t o act qui ckl y t o ret ai n Go o dwi n Pr o ct er, H& K , an d Ch af f e t o prese rv e evi den ce, 2 4 i nve s t i g at e t he c a

u s e o f t he br e a c he d

l e ve e , and

m i ni m iz e e xp o s ur e t o t he d ama g e s t hat w o u l d be 25 at st ake i

n t h e f o r eseeab l e an d i

n ev i t ab l e l awsuit s. Co n si der i

n g t h e l ev el

o f co m pl ex i t y o f t h e case 26 i n b o t h pro cedural

an d s ub s t an

t i v e res pect s , as well

as t h e po s s i

b i li t y o f b ei n g cas t i n dam ages t h at26 1 c o u ld

e x c e e d t h e v a lu e o f L a far g e s e v e r a l t ime s o v e r , w e a g r e e w it h t h e D is t r ic t C o urt t h at “ it 2 w a s r e a s o na

bl e f o rL a f ar g e t o r e t a i

n at o nc e a

l ar g e f i rm s u c h a s G o o dw i

n, w i t h c o m p l e x c a s e and 3 mas s t o rt ex

peri en ce, t o t ake i

m medi at e co n

t ro l o f L af arge’ s def en s e aga i n s t t h e an t i ci pat ed 4 l i t i gat i o n f l o o d (wh i ch

i n f act mat eri alized). It was al s o reas o n ab l e f o r Laf arge t o ret ai

n an 5 a dm

i r a l ty f i rm s u c h a s H & K , w i

th e x p e r i e n c e i n th e ‘ r a p i d r e s p on s e ’ i

n v e s ti g ati on

an d e v a l u ati on 6 o f ma j o r m ari n e c a s u a l t i e s .” L a f arg e N . A m ., In c ., 5 9 8 F . Su

p p . 2 d at 4 9 3
. 7 I n

p art ic u la r , w it h r e s p e c t t o H & K an d

G o o dw in P r o c t e r ’ s e ar ly e n g a g e me n

t o f a 8 reco gn ized m

ari t i me ex pert t o “ qui ckl

y as s em b l e[] a t eam

o f ex pert s i n di s ci pl i n es s uch as 9 h y dr ol og y an d s oil s c i e n c e , an d

tr av e l
. . . w i th h i s te am to N e wO r l e an s ” i

n or d e rto “ i

n v e s ti g ate 1 0 t h e b arg e b re ak aw ay an d t h e a l l e g at i o n s t h at t h e b arg e h a d c a u s e d t h e f a i l ure o f t h e . . . l e v e e ,” 1 1 id
. , t h e s e le c t io n

an d e n g a g e me n

t o f t h e e x

p e rt w a s a ls o r e a s o n a

b le
. “ [ T ] r ia l la

w ye r s an d

c la ims 1 2 a d

ju s t e r s kn o wt h at t h e p r o mp t id e n t ific at io n an d p r e s e rv at io n

o f e v id e n c e —

p h ys ic a l, 13 do cumen

t ary , an d t est amen

t ary — af t era maj o rcasual

t y i s v i t al
. . . . [ E ] v i den ce . . . co ul d b e l o st 1 4 or

c om p r om i s e d i f n ot g arn e r e d

qu i c k l y an d p r e s e rv e d

c ar e f u l l y . ” I d
. at 4 9 4
. W i

th r e s p e c t to 1 5 C h a ffe , “ [ t ] h e r e is n o d is p ut e t h at L a far g e r e qu ir e s lo c a l r e p r e s e n t at io n b y a L o u is ian a

firm w e ll 1 6 v e r s e d

i n a dm i r a l ty l aw , ” an d

th u s , i t w a s r e a s on a

b l e to r e ta i

n l oc a l c oun s e l , C h a f

f e , i n a d d i ti on to 1 7 G o o dw i

n Pr o c t e r an d

H & K . Id . at 4 9 5
. 1 8 T h e p r i

mary p oli c y ’ s p r ov i s i on

r e qu i r i n g N Y M A G I C to p ay

e x p e n s e s r e l ate d

to 1 9 “d e f

e nd i ng and / o ri nve s t i g at i ng ” i n c o nne c t i o n w i

t h c l a i m s ar i s i ng und e rt he p r i

mary p o li c y ( t he 2 0 “ E x

p e n s e C la u s e ” ) a ls o in fo rms t h e p o lic y’ s c o v e r a g e o f G o o dw in P r o c t e r , C h a ffe , an d , in 21 par t i cul ar , H& K ’s i n v est i gat i v e serv i ces. T h e E x

pen se Cl ause r equ i

r es 22 [NYMA GIC] t o pay s urv ey an d rel at ed ex

pen s es reas o n ab l

y i n curr ed b y

[Laf arge] 2 3 and

t he l e g a l c o s t and e xp e ns e o f

d e f e nd i ng and / o ri nve s t i g at i ng and / o rc o nd u c t i ng 2 4 p r o c e e d i

ng s t o l i m i t l i a bi l i t y o n any s u i t o rc l a i m a g a i ns t [ L a f ar g e ] ba s e d

o n a 2 5 l i a

b i l i t y o r an a l l e g e d l i a b i l i t y c o m i n g w i t h i n t h e s c o p e o f

[t h e p ri mary p o li c y] . . . 2 6 b ut [ N Y M A G I C ] s h a ll n o t b e lia b le fo rt h e c o s t o re x

p e n s e o f d e fe n d ing an

y s u it 27 o r cl ai

m un l es s s ai d co s t o r ex

pen s e s h all

h av e b een

i n curr ed wi

t h t h e wri t t en 28 co n s en

t o f [NYMA GIC]. [NYMA GIC], h o wev er, rese rv es t h e ri gh t t o co n duct 2 9 t h e d e f

e n s e o f an y a c t i o n s o r s u i

t s at i t s o w n e x p e n s e . 30 ( em

ph asi s added )
. Her e, H& K was r et ai n ed f o ri n v est i gat i v e pu r po ses — an d n o t as def

en se27 1 c o uns e l

— and w a s d i s c har g e d

f o l l o w i ng t he c o nc l

u s i o n o f i t s i nve s t i g at i o n o n t he c a

u s e o f t he 2 b reach ed l ev ee. A n d al t h o ugh t h e Ex pen s e C l aus e co n di

t i o n s pay men t o n NYM A GIC’ s writ t en 3 c on s e n

t, L a f ar g e h a d a p p r i s e d N Y M A G I C of

i ts r e te n ti on of H & K i n L a f ar g e ’ s f i r s t n oti f i c ati on 4 t o N Y M A G I C a

b o ut t h e p o s s ib ili

t y o f c la ims ar is ing fr o m B ar g e I N G 4 7 2 7 , an d N Y M A G I C d id 5 n ot ob

j e c t to H & K ’ s r e te n

ti on . M or e ov e r , N Y M A G I C n e v e ri n i ti ate d i ts ow n i n v e s ti g ati on

of 6 B ar g e I N G 4 7 2 7 , ye t c le ar ly dr aw s mu c h

b e n e fi t fr o m H & K’ s e ar li e rinv e s t ig at io n s . C f. 7 T ran s care N.Y. , In c. v . F i n kel s t ei n , L ev i n e &Gi t t l es o h n &Part n ers, 804 N. Y.S
. 2d 63, 64 (A pp. 8 D i v. 2 0 0 5 ) ( no t i

ng t he f a i l ur e o f t he i ns ur e rt o “i

nve s t i g at e t he me r i

t s o f t he und e r l

y i ng c l a i m ” and 9 s t at i

ng t hat “t he i

ns ur e rd o e s no t s at i s f

y i t s d ut y t o d e f e nd me r e l y by d e s i g nat i ng i nd e p e nd e nt 10 co un sel

t o def en d t h e l i t i gat i o n ” ( i

n t ern al qu o t at i o n

m arks o m i t t ed) )
. I n f act , t h e r emai

n i n g ex cess 1 1 i n s ure rs i m p l i c i t l y a c kn o w l e d g e t h at H & K ’ s i n v e s t i g at i v e s e rv i c e s w e re c o v e re d

b y t h e p ri mary 1 2 p o l i c y . S e e AH AC & N AC A R e p l y B r . at 1 6 ( s t at i

ng t hat “[ L a f

ar g e ] vi o l at e d

[ t he N am

i ng 13 Cl aus e] b y

un i l at eral l

y ret ai n i n g Go o dwi

n , ” wi t h o ut men

t i o n i n g H& K , wh i ch

t h ey des cri b ed as 1 4 “i nve s t i g at i ve c o uns e l ” )
. We t he r e f

o r e c o nc l u d e t hat t he f

e e s e arne d

by G o o dw i n P r o c t e r , H &K, 1 5 an d

C h a f f e , w h i c h f e e s w e re o f

t h e t y p e s p e c i f i c a l l y c o n t e m p l at e d un d e r t h e Ex

p e n s e C l a u s e , are 1 6 c o v e re d

un d e r t h e Pr o t e c t i o n

C l a u s e i n li g h t o f t h e c i rc um s t an c e s i

n t h i s c a s e . 1 7 T h at s a id , t h e N aming C la u s e w o u ld

b e r e n d e r e d

a n u lli t y b y t h e P r o t e c t io n

C la u s e if 18 Laf

ar ge’s dut y

t o m i n i m ize l i ab i l i t y per m i t t ed it t o h i

r e ex pen si v e at t o rn ey s an d est ab li sh 1 9 N Y M A G I C ’ s o b lig at io n t o p ay fo rt h o s e at t o rn e ys un t il t h e e n d o f lit ig at io n . W

h ile G o o dw in 2 0 P r o c t e r , H &K, and C ha f f e w e r e r e a s o na

bl y r e t a i ne d t o m i ni m iz e p o t e nt i a l

li a bi li t y ar i s i ng f r o m t he 2 1 e xtr a or d i

n ary c i r c um s tan c e s h e r e , th e P r ote c ti on C l a u s e d oe s n ot q

u a li f y N Y M A G I C ’ s op ti on

to 2 2 n ame m

utu a l l y a c c e p ta b l e c oun s e l

p ur s u an t to th e N am

i n g C l a u s e . T h e p r i

mary p oli c y d oe s n ot 2 3 hi

nt o f any c i r c um s t anc e s w he r e t he P r o t e c t i o n C l a u s e w o u l d

t rum p t he N am

i ng C l a u s e , and 2 4 L a far g e d o e s n o t p o in t t o an y la n g u a g e t o b r ing t h e t w o p r o v is io n s in t o d o u b t a s t o t h e ir

p la in 2 5 me an i

n g i n th i s r e g ar d
. T h

u s , on c e N Y M A G I C c l e ar l y e x p r e s s e d i ts i n te n ti on to f u l f i l l i ts 26 o b l i gat i o n s an d o f f ered L af arge a c h o i ce o f

s i x quali f i ed l aw f i rm s , i t was i n cum b en t upo n L af arge28 1 t o a c t i

n g o o d f a i t h t o c o n s i d e r a g re e i

n g t o re t a i

n a f i rm f rom N Y M A G IC ’ s li s t
. 2 Laf

ar ge n o w assert s v ar i o us r easo n s f o rr ej ect i n g NY MA GI C’ s o f

f er ed l i st o f

f i rm s; 3 h o w e v e r, n o n e o f

t h e s e arg ume n

t s h a s me ri

t . L a f arg e c l a i m s t h at t h e f

i rm s o f f e re d b y N Y M A G IC 4 were un quali f

i ed t o def en d i t s i n t eres t s i n t h e b arge li

t i gat i o n b eca us e Sut t erf

i el d i s “ o n l

y a f i v e5 p e r s o n

firm. ” B ut N Y M A G I C n o t o n ly o ffe r e d S ut t e r fie ld , b ut a ls o a

lis t o f s e v e r a l la

wfirms 6 co m

po sed o f b et ween 40 an d 1 60 at t o rn ey s speci al izi n g i n mar i t i me l aw an d ex

per i en ced i

n cl ass 7 a c t i o n s . It w a s o n l y a f t e r L a f arg e re f u s e d t o c o n s i d e r an

y o f t h e s e l arg e r f

i rm s t h at N Y M A G IC 8 ret ai

n ed Sut t erf

i el d t o def

en d L af arge, wh i ch

was t h en al ready b ei n g repr es en

t ed b y t h ree l arge 9 l awf

i rm s . M or e ov e r , L a f

ar g e ’ s ar g ume n

t i s p r e d i c ate d

on th e un w arr an te d a s s um p ti on th at a 1 0 “ fiv e - p e r s o n

firm” is le s s c o mp e t e n

t t h an a lar g e rfirm o rt h at t h e “ fiv e - p e r s o n firm” w o u ld 1 1 kn ow i

n g l y f a i l i n i ts d uti e s to a d e qu ate l

y p r e p ar e f orL a f ar g e ’ s d e f e n s e . S e e L a . R

u l e s of 1 2 Pr o f

e s s i o n a l C o n d u c t R . 1 .1 (a ) (“A

l aw ye r s h a l l

p rov i d e c o m

p e t e n t re p re s e n t at i o n t o a c li e n t .” ). 1 3 T h e r e is n o t h ing t o s u g g e s t t h at S ut t e r fie ld la c k s e x p e rt is e in c o mp le x mar it ime d e fe n s e o rt h at it 1 4 w o u ld

n o t a s s o c iat e it s e lf

w it h an o t h e rfi

rm i n t h e a b s e n c e o f G o o dw in P r o c t e ran d C h a ffe
. C f. 1 5 N
. Y
. R

u l e s o f P r o f e s s i o na l C o nd u c t R
. 1
. 1 ( b) ( “A l aw ye rs ha l l no t hand l e a

l e g a l mat t e rt hat t he 1 6 l aw ye rkno w s o rs ho u l d kno wt hat t he l aw ye ri s no t c o m p e t e nt t o hand l e , w i

t ho ut a s s o c i at i

ng 1 7 w i

t h a l aw ye r wh o i s c o m

p e t e n t t o h an d l e i

t .” ). 1 8 L a f

ar g e a l s o a

r g u e s t hat N Y M AG I C f

a i l e d t o p r o vi d e an e xp l anat i o n f o rr e j e c t i ng 1 9 L a f

ar g e ’ s th r e e un a uth or iz e d l awf i rm s , w h os e r e p l a c e me n

t s e v e r a l w e e k s a f te rth e i rr e te n ti on 2 0 w o u l d

be “no ns e ns i c a l ” and

“unr e a s o na

bl e . ” B ut t hi s ar g ume nt i s ba c kw ar d s . Af t e rbe i ng 21 i n f o rmed o f Laf ar ge’s un aut h o r ized r et en t i o n o f t h r ee l aw f i rm s, NYMA GI C o f

f er ed it s o wn

l i st 2 2 o f

f i rm s . L a f arg e ma d e n o re s p o n s e t o t h e o f f e r an d s u b m i t t e d n o re a s o n s f

o r re j e c t i n g i t
. 2 3 N Y M A G I C a c te d c on s i s te n tl y w i th th e N am i n g C l a u s e , w h i l e L a f

ar g e b r e a c h e d

i ts d uty to 2 4 c o ns i d e rN Y M AG I C ’s o f f e r e d l i s t o f l awf i rm s i n g o o d f a i t h. S e e N uve s t , S
. A. v. G u l f & W. 25 I n du s. , I n c. , 64 9 F. 2d94 3, 94 7 ( 2dCi r . 19 81 ) ( “Un derb o t h

co n t r act l aw an d ag en cy

pr i n ci pl es, 26 t h e par t i es o we each o t h era du t y o f go o d f ai t h
. ”)
. I n deed , b ecause Laf ar ge l o dg ed n o r espo n se29 1 t o NYM A GIC’ s o f f ered li s t o f

l aw f i rm s , i t s eems i n appro pri at e f

o r Laf arge t o n o w co m

pl ai n t h at 2 N Y M AG I C f

a i l e d t o c o ns i d e rt he hi g h c o s t o f r e p l a c i ng l awf i rm s t hat ha d

a l r e a dy be g un w o rk i

ng 3 on L a f ar g e ’ s d e f e n s e — an ar g ume n t th at c ou l d

h av e b e e n

ma d e h a d

L a f ar g e “ c on s u l

t[ e d ] ” w i th 4 N Y M A G IC re g ard i n g “ m ut u a l l y a c c e p t a b l e at t o rn e y s ” p urs u an

t t o t h e N am

i n g C l a u s e . 5 M o reo v er, Go o dwi n Pr o ct er an d Ch af

f e wo ul d n o t h av e b een

as en t ren ch ed and co s t l

y t o repl ace 6 h a d

L a f arg e i n f o rme d N Y M A G IC o f

t h e i r re t e n t i o n at an e arli e r t i me . 7 Fi

na l l y , L a f ar g e ar g u e s t hat N Y M AG I C i s p r e c l u d e d f r o m e xe r c i s i ng i t s r i g ht s und e rt he 8 N am

i n g C l a u s e b e c a u s e a c on f l i c t of i n te r e s t i s i n h e r e n t i n L a f ar g e ’ s r e l ati on s h i

p w i th 9 N Y M A G I C
. L a f

ar g e a s s e rts th at b e c a

u s e th e p ote n

ti a l li a b i li ty at s tak e i n th e b ar g e li

ti g ati on 1 0 (b i l l i o n s o f

d o l l ars ) i s s u

b s t an t i a l l y g re at e r t h an

t h e amo un

t c o v e re d b y N Y M A G IC 11 ( app r o x i

mat el y $3 0 mi l l i o n , wh i ch

i n cl ud es o b li gat i o n s un derb o t h t h e pr i mary an d ex cess 1 2 p o lic ie s ) , L a far g e w a s p e rmit t e d un d e rN e wY o rk

lawt o r e t a in

it s o w n c o un s e l an d

b ill 1 3 N Y M AG I C f

o rt hat e xp e ns e und e rt he p r i mary p o li c y . T hi s ar g ume nt , ho w e ve r , m u s t be 14 rej ect ed, as L af

arge’ s all eged “ co n f

l i ct ” wi t h NYM A GIC i s n o t o f

t h e t y pe reco gn ized t o co n f

er 1 5 an

i n d e p e n d e n

t ri g h t o n t h e i n s ure d t o re t a i n c o un s e l at t h e i n s ure r’ s e x

p e n s e . 1 6 T h e N e wY o rk C o urt o f A

p p e a ls h a s h e ld

t h at “ [ i] n d e p e n d e n

t c o un s e l is o n ly ne c e s s ary in 1 7 c a s e s w he r e t he d e f e ns e at t o rne y ’s d

ut y t o t he i ns ur e d w o u l d r e qu i r e t hat he d e f

e at li a bi li t y o n any 18 gro un d an d h i s dut y t o t h e i n s urerwo ul d requi

re t h at h e def

eat li ab i li t y o n l y upo n gro un ds wh i ch 1 9 w o u l d

re n d e r t h e i

n s ure r li a b l e .” Pu b . Se rv . M ut . In s . C o . v . G o l d f arb , 5 3 N .Y .2 d

3 9 2 , 4 0 1 n .* 2 0 (1 9 8 1 ); s e e a l s o C un n i f f v . W e s t f i e l d , In c ., 8 2 9 F . Su

p p . 5 5 , 5 7 (E.D .N .Y . 1 9 9 3 ); Em o n s In d u s ., 2 1 In c . v . L i

b e rt y M ut . In s . C o ., 7 4 9 F . Su p p . 1 2 8 9 , 1 2 9 7 (S .D .N .Y . 1 9 9 0 ). H e re , b o t h N Y M A G IC 22 an d L af

arge s h are a c o m

mo n i n t eres t i n def eat i n g L af arge’ s li ab i li

t y i n t h e b arge li

t i gat i o n . Rat h er 2 3 th an

a l l e g e a c on f l i c t of i n te r e s t b a s e d

on d i f f e r e n t th e or i e s of

d e f e n s e a f f e c ti n g th e d i s tr i

b uti on of 24 l i ab i l i

t y b et wee n L af arge an d NYM A GIC, Laf arge as s ert s i

t s purpo rt ed co n f

li ct o n t h e s ub s t an

t i al 25 di f

f eren ce i n t h e am o un t s at s t ake i

n t h e b arge li

t i gat i o n an d t h e am

o un t s t h at are co v ered un der 26 t h e pri

mary po l i cy . L af

arge’ s purpo rt ed co n f

li ct i s n o t a reco gn ized b as i s f o r per m i t t i n g L af argeT o t h e ex t en t NYM A GIC s ugges t ed t h at L af arge ret ai n addi t i o n al at t o rn eys (at 11 L a f ar g e ’s o w n e xp e ns e ) i

n l i g ht o f t he p o t e nt i a l

f o re xp o s ur e a

bo ve t he li

m i t s o f t he r e l e vant p oli c i e s , s u c h

a s u g g e s ti on

d oe s n ot n e c e s s ar i l

y me an N Y M A G I C h a s a

c on f li c t of i n te r e s t w i th L a f ar g e . I n d e e d , i

t i s e n c our a g e d

i n s i tu ati on s w h e r e th e p ote n

ti a l c l a i m s e x c e e d

th e p oli c y

li m i ts t o a dvi s e t he i

ns ur e d o f r e t a i ni ng s e p ar at e c o uns e l
. S e e N at ’l C o nf e r e nc e o f L aw ye r s and

L i a b. In s urer s , A

m . Ba r A s s ’ n , Gui di

n g Pr i n ci pl es II (r epri

n t ed i n Do ugl as R. Ri ch

mo n d, W al

ki n g a T ig h t r o p e : T h e T r ip art it e R e lat io n s h ip B e t w e e n I n s ur e r , I n s ur e d , an d

I n s ur an c e D e fe n s e C o un s e l, 7 3 N e b
. L
. R e v . 2 6 5 , 2 8 6

– 9 1 ( 1 9 9 4 ) ) ; i d
. at 2 8 7 ( “ [ T ] h e [ i n s ur e r ] r e ta i

n s th e e x c l

u s i v e r i g h t to c on tr ol an d c on d u c t th e d e f

e n s e of th e c a s e , i

n g ood f a i th , s u b j e c t to th e r i g h

t of th e i n s ur e d or s u c h a d d i t i o n a l at t o rn e y t o p art i c i p at e .” ). 30 1 t o re t a i

n i n d e p e n d e n

t c o un s e l at t h e e x p e n s e o f N Y M A G IC ’ s p ri

mary p o li c y . A s t h e N e wY o rk 2 C o urt o f

A pp e a l s o b s e rv e d: 3 [W ]h ere m ul t i pl e clai m s prese n t n o co n f li ct — f o r ex am pl e, wh ere t h e i

n s uran ce 4 co n

t r act pr o v i des l i ab i l i

t y co v er age o n l

y f o rper so n al

i n j ur i es an d t h e cl ai

m agai n st 5 t h e i

n sur ed seek s re co v ery

f o rpr o per t y

damage as wel l

as f o rper so n al

i n j ur i es — 6 n o th

r e at of d i v i d e d l oya l ty i s p r e s e n t an d th e r e i s n o n e e d

f orth e r e te n

ti on of 7 s eparat e co un s el
. T h i s i s s o b eca us e i n s uch a s i t uat i o n t h e ques t i o n

o f i n s uran ce 8 c o v e r a g e is n o t in t e rt w in e d w it h t h e qu e s t io n

o f t h e in s ur e d ’ s liab ilit y. 9 G o l d f

ar b, 5 3 N
. Y
. 2 d

at 4 0 1 n. * ( e m

p ha s i s a d d e d )
. O f

c o ur s e , w e o bs e rve t hat s e t t l e me nt 10 n ego t i at i o n s may rai s e a c o n f

l i ct o f i n t eres t ev en

b et wee n an i n s ured an d an

i n s urers h ari

n g a 1 1 c o m

m o n g o a l o f d e f e nd i ng a g a i ns t l i a bi li t y , but s u c h a

p o t e nt i a l o ra c t u a l c o nf li c t i s no t a

p p ar e nt 12 i n t h i s cas e. L af

arge t h eref

o re di d n o t h av e a ri gh

t t o pursue i

n dependen

t co un s el wh o s e l egal 11 1 3 f e e s w o u l d b e c o v e re d

b y t h e p ri mary p o li c y . 14 A cco rdi

n gl y , t o gi v e f ul l ef f ect t o t h e pro v i s i o n s i

n t h e pri mary po li cy , we h o l d t h at 1 5 G oo dw i

n P r oc te r ’ s an d

C h a f f e ’ s l e g a l f e e s ar e c ov e r e d

un d e rth e P r ote c ti on

C l a u s e f or amoun ts 16 i n curr ed b y

L af arge pri o r t o , b ut n o t i

n cl udi n g, Sept em

b er 28, 2005, wh en

i t b eca me cl ear t h at 1 7 L a f

ar g e w a s n ot a c ti

n g i n g ood f a i th i n c on s i d e r i n g th e li s t of

s i x qu a li f y i n g l awf i rm s p r op os e d

on 1 8 S e p te m

b e r2 2 b y N Y M A G I C , an d

w h e n N Y M A G I C a dv i s e d

L a f ar g e b y e - ma i l th at i t w ou l d n ot 1 9 “ a g r e e to p ay

f or th e th r e e s e ts of

atto rn e y s on

th e c a s e , n on e a

p p r ov e d b y [ N Y M A G I C ]
. ” W i

th 20 respe ct t o H& K , b eca us e i t was ret ai

n ed o n a t em po rary b as i s f o r an i n v es t i gat i v e m i s s i o n rat h er 2 1 th an

a s d e f e n s e c oun s e l , an d

b e c a u s e N Y M A G I C “ d i d

n ot c om m i s s i on an y i n v e s ti g ati on

of i ts 2 2 o w n

i n t o t h e i n c i d e n t an d re c e i v e d f u l l d i s c l o s ure o f

t h e f ru i t s o f L a f arg e ’ s ,” L a f

arg e N . A m ., In c ., 2 3 5 9 8 F . Su

p p . 2 d at 4 9 4 , t h e f

e e s e arn e d

b y H & K are c o v e re d

i n t o t o un d e r t h e Pr o t e c t i o n C l a u s e .31 1 E
. Co v erage Under t h e Ex ces s Po li cy 2 1
. C o v e r a g e G e n e r a lly 3 T h e ex ces s i n s urer s co n cede t h at a f

i n di n g o f “ s i m pl e n o n -co v erage” o f

Ba rge I NG 4727 4 un d e rth e A

me r i c an C l u b P oli c y n e g ate s an

y ar g ume n t th e y may h av e th at L a f

ar g e b r e a c h e d

i ts 5 o b l i g at i o n

un d e r t h e e x c e s s p o l i c y

t o ma i n t a i n an d k e e p i n f u l l e f f e c t t h e A me ri c an C l u b Pol i c y . 6 Be caus e we h o l d t o day t h at s um mary j udgmen t i n f av o r o f t h e A meri can Cl ub i s warran

t ed b as ed 7 o n t h e si m pl e n o n - co v er age o f

Bar ge I NG 4 72 7 un dert h e A mer i can Cl ub P o li cy , an d b ecause 8 th e r e i s n o d i s p ute th at N Y M A G I C ’ s p r i mary p oli c y h a s b e e n e x h a u s te d , th e e x c e s s p oli c y

n ow 9 a p p l i e s t o c o v e r e x

p e n s e s i n e x c e s s o f t h e p ri mary p o li c y ’ s li

m i t s . 10 2. Co v erage o f L af arge’ s Un aut h o ri zed L egal E x pen s es 1 1 T h e D is t r ic t C o urt d e t e rmin e d t h at t h e e x c e s s p o lic y h e r e is a “b umb e r s h o o t ” p o lic y, 12 wh i ch

i s a t y pe o f i n s uran ce “ i

n t en ded t o f

i l l an y co v erage ga

p wh i ch m i gh t o ccur wh en

an 13 as s ured’ s un derl

y i n g o r pr i mary i n s uran ce li

m i t s are ex cee ded, o r wh en

un derl y i n g i n s uran ce 14 co v eri

n g t h e ri s k i

n v o l v ed do es n o t ex i s t
. ” L af

arge N. Am . , In c., 598 F
. Supp. 2d at 486 (i n t ern al 1 5 qu o t at io n

mark s o mit t e d ; e mp h a s e s a d d e d )
. T h is d e t e rmin at io n is s u p p o rt e d b y t h e e x c e s s p o lic y, 16 wh i ch

s t at es t h at i

t co v ers “ [a] l l

Pr o t ect i o n

an d In dem

n i t y ri s ks o f wh at s o ev er n at ure i

n cl udi n g, 17 b ut n o t l i

m i t ed t o , t h o s e co v ered b y

t h e Underl

y i n g Pr o t ect i o n

an d In dem

n i t y i n s uran ces ”; 18 “ Gen eral

A v erage, Co l l i s i o n

L i ab i l i t i es , T o wer’ s L i ab i li

t i es , Sal v age, Sal v age C h arges , an d Sue 1 9 an d

L a b o rar is ing fr o m an

y c a u s e w h at s o e v e r ” ; an d

“ [ a ] ll o t h e rs ums w h ic h

[ L a far g e ] s h a ll 2 0 be c o me l e g a l l

y l i a bl e t o p ay . . . f o rd ama g e s o f

w hat s o e ve rnat ur e ” f

o r “[ p ] e r s o na l

i nj ur i e s ” and 21 “ [p] ro pert y

[d] am age.” See St
. Paul

F i re & M ari n e In s . Co
. v . Bd. o f

Co m m ’ rs o f Po rt o f New 2 2 O r l e ans , 6 4 6 F. S u p p . 2 d 8 1 3 , 8 1 8

– 1 9 ( E
. D
. L a . 2 0 0 9 ) ( d e s c r i bi ng t he f o r e g o i ng c o ve r a g e , i

n t he 23 ex act t erm s, as “ co n si der ed st an dar d i n mar i n e b um b er sh o o t po li ci es”)
. T h e ex cess po li cy al so 2 4 br o a d l

y c o ve r s “su c h e xp e ns e s a s ar e s e t o ut i n t he d e f i ni t i o n o f ‘U L T I M AT E N E T L O S S ’” ( t he 2 5 “ L o s s C l a

u s e ” ), wh i c h , i

n t urn , i n c l u d e s “ e x p e n s e s f o r d o c t o rs , l aw ye rs , n

urs e s an d i n v e s t i g at o rs 2 6 an d

oth e rp e r s on s , an d

f or l i ti g ati on , s e ttl e me n

t, a d j u s tme n t a n d i n v e s ti g ati on

of c l a i m s an d s u i tsT h e e x c e s s p oli c y p r ov i d e s , i

n p art, th at “ [ i ] f

oth e rv a li d

an d c oll e c ti b l e i n s ur an c e w i

th 12 any o t he rI ns ur e ri s ava i l a

bl e t o [ L a f

ar g e ] c o ve r i

ng a l o s s a l s o c o ve r e d

by t hi s P o li c y , . . . t he i n s uran ce a f

f o rded b y t h i s Po l i cy

s h all b e i n ex ces s o f an d s h all n o t co n t ri b ut e wi t h s uch o t h er i n s uran ce.” 32 1 wh i ch

ar e pai d as a co n sequence o f an y o ccur r en ce co v er ed h er eun der
. ” A n d al t h o ug h t h er e i s a 2 cl aus e t h at co n di

t i o n s t h e ex ces s po l i cy

o n t h e pro per mai

n t en an ce o f

s peci f i ed pri mary i n s uran ce 3 p o l i c i e s , t h at c l a

u s e d o e s n o t s p e ak

t o t h e c i rc um s t an c e w h e re t h e un d e rl y i n g p ri mary p o li c i e s are 4 p r op e r l

y ma i n ta i n e d but n on e th e l e s s d o n ot c ov e ran e x p e n s e th at i s oth e rw i s e c ov e r e d b y , f or 5 ex am

pl e, t h e L o s s Cl aus e. T h e ex ces s po li cy i s , t h eref o re, a “ b um b ersh o o t
. ” 6 Be cau se t h e p r i mar y p o l i cy co v er s a p o rt i o n

o f t h e l eg al f ee s earn edb y

Laf ar g e’s 7 un aut h o r ized l aw f i rm s, an y amo un t ex ceedin g t h e pr i

mary po li cy ’s li

m i t wi t h r espect t o t h o se 8 e x p e n s e s i s c ov e r e d

b y th e e x c e s s p ol i c y . B ut b e c a u s e th e e x c e s s p oli c y

i s a l s o a 12 9 “b um

b e rs h o o t ,” c o v e ra g e o f

t h e p o rt i o n s o f

t h e l e g a l e x p e n s e s n o t c o v e re d

un d e r t h e p ri

mary 1 0 p o l i c y

i s s t i l l p o s s i b l e . 1 1 A l

t h o u g h t h e e x c e s s p o l i c y

d o e s n o t i

n c l u d e a p rov i s i o n s i m i l ar t o t h at i

n t h e p ri mary 12 po l i cy

rese rv i n g t h e i n s urer s t h e ri gh

t t o n am e L af arge’ s def en s e co un s el , t h e ex ces s po li cy do es 1 3 g ran

t t h e i n s ure rs t h e ri g h

t t o a s s o c i at e w i

t h N Y M A G IC t o d e f

e n d L a f arg e i n t h e b arg e li

t i g at i o n . 14 Spe c i f

i c a l l y , t h e pro v i s i o n

(t h e “ A s s i s t an c e C l a

us e ” ) all o wi

n g f o r as s o c i at i o n

pro v i de s : 1 5 [ T h e e x c e s s i n s ur e r s ] s h a l l

h av e th e r i g h

t an d s h a l l b e g i v e n th e op p ortun i

ty to 16 asso ci at e wit h [ Laf ar ge] o r[ Laf

ar ge’s] U n der l

y i n g I n sur er s, o rb o t h , i

n t h e def en se 1 7 and

c o nt r o l o f any c l a i m , s u i t o rp r o c e e d i

ng r e l at i ve t o an o c c urr e nc e w he r e t he 18 cl ai

m o rsui t i n v o l v es o rapp ear s re aso n ab l

y li kel y t o i n v o l v e [ t h e ex cess i

n sur er s] 1 9 in

w h ic h e v e n t [ L a far g e ] , t h e U n d e r lyi

n g I n s ur e r s an d

[ t h e e x c e s s in s ur e r s ] s h a ll 2 0 c o o p e rat e i n a l l t h i n g s i n t h e d e f e n s e o f s u c h c l a i m , s u i t o r p roce e d i

n g . 2 1 R e l

y i n g u p on th i s p r ov i s i on , th e e x c e s s i n s ur e r s ar g u e th at th e e x c e s s p oli c y ’ s c ov e r a g e of 22 l egal

f ees i s li m i t ed t o t h o se co v er ed b y

t h e pr i mary po li cy . But we d o n o t see wh at t h e ex cess 2 3 i ns ur e r s i ma g i ne i s c o nt a i

ne d i n t he As s i s t anc e C l a

u s e t hat p l a i

nl y s u p p o rt s t he i

rar g ume nt
. T he 24 A s s i s t an ce C l aus e do es n o t i n co rpo rat e t h e pri

mary po li cy ’ s Nam

i n g Cl aus e. No r do es i

t ado pt 2 5 t he N am

i ng C l a u s e a s a l i m i t at i o n o n t he e xc e s s i

ns ur e r s ’ o bl i g at i o n t o p ay l e g a l f e e s . T he 2 6 A s s i s tan c e C l a

u s e s i m p l y a l l ow s f orth e e x c e s s i

n s ur e r s to a s s oc i ate w i

th e i th e rN Y M A G I C or33 1 L a f

ar g e , o rbo t h, i

n t he d e f e ns e o f qu a li f y i ng c l a i m s , and o t he rw i s e r e qu i

r e s c o o p e r at i o n amo ng 2 all part i es i n t h e co m mo n go al o f def en s e. I n deed, t h i s rese rv at i o n o f ri gh t s i s s t ro n g ev i den ce 3 th at c ov e r a g e f

orf e e s e arn e d

b y b oth c oun s e l , e i

th e ra s e x c e s s to N Y M A G I C ’ s p r i mary p oli c y or 4 a s init ia l c o v e r a g e fo rL a far g e ’ s in d e p e n d e n t c o un s e l, w a s in

t e n d e d p ur s u an t t o t h e umb r e lla 5 co v erage pro v i ded b y t h e ex ces s po l i cy . T h at t h e ex ces s i n s urer s may

as s o ci at e wi

t h o n e co un s el 6 d oe s n ot e n d

th e i rb r oa d ob l i g ati on

to i n d e m n i f y e x p e n s e s f oroth e rc oun s e l

w h o, at th e op ti on

of 7 t h e e x c e s s i

n s ure rs , w o u l d

h av e a l s o b e e n

a s s o c i at e d

w i t h t h e e x c e s s i

n s ure rs ’ c o un s e l
. 8 Be caus e we co n cl ude t h at t h e ex ces s po li cy i s a “ b um b ersh o o t ” and may

co v er l egal 9 expe n ses t h at ar e no t co v er edb y t h e p r i mar y p o li cy , t h e o n l

y li m i t at i o n t o t h e e x ce ss p o li cy ’s 10 co v erage o f

l egal ex pen s es i s t h e gen eral

rul e t h at co v erage b e f

o r r eas o n ab l e l egal

ex pen s es — a 1 1 p o in

t o f lawn o t in

d is p ut e b y t h e p art ie s . S e e L a far g e N
. A m. , I n c . , 5 9 8 F
. S u

p p . 2 d at 4 9 7 ( “A ll 1 2 p arti e s a g r e e th at th e I n s ur e r s ar e r e s p on s i b l e to p ay on l y th e ‘ r e a s on a

b l e ’ f e e s an d c os ts of 13 at t o rn eys . ”). In

t h i s regard, al

t h o ugh we rej ect t h e ex ces s i

n s urer ’ s co n s t ruct i o n

o f t h e A s s i s t an ce 1 4 C l a

u s e , w e a g r e e t hat L a f

ar g e ’s r e t e nt i o n o f

G o o dw i n P r o c t e rand

C ha f f e i n o p e n d e f

i anc e o f t he 15 pl ai

n t erm s o f t h e Nam i n g Cl aus e o f

t h e pri mary po li cy was un reas o n ab l e. T h e ex ces s po li cy 1 6 s p e c i f

i c a l l y re qu i re s t h e p ri mary p o l i c y t o b e ma i n t a i n e d i n f u l l e f f e c t ; t h e e x c e s s i

n s ure rs t h e re f

o re 1 7 r e a s o na

bl y e xp e c t e d L a f ar g e ’s d e f e ns e c o uns e l

t o be s e l e c t e d

p ur s u ant t o t he p l a i

n t e rm s o f

t he 18 primary

po l i cy . M o reo v er, wh i l e i t may h av e b een

reas o n ab l e f

o r Laf arge t o ret ai

n i t s o wn 1 9 at t o rne y s t o p r o t e c t a g a i ns t any r e mo t e p o t e nt i a l

c o nf li c t s o f i nt e r e s t be t w e e n t he i

ns ur e r s and 2 0 L a f

ar g e , th e c on

ti n u e d r e te n ti on of G oo dw i n P r oc te ran d

C h a f f e g oe s w e l l

b e y ond th e n e c e s s i

ty 2 1 o f

f i l l i ng t hat mo d e s t r o l e . Ac c o r d i ng l y , w e c o nc l

u d e t hat t he e xc e s s p o li c y d o e s no t c o ve rt he 2 2 f e e s an d e x p e n s e s c l a i

me d b y G o o dw i n Pr o c t e r an d

C h a f f e o n o r a f t e r S e p t e m

b e r 2 8 , 2 0 0 5
. 2 3 F
. L e g a l F e e s i n C o n n e c t i o n w i t h M o t i o n s B e f

o re t h e D i s t ri c t C o urt 2 4 At t o rne y s ’ fe e s aw ar d s i n a dm i r a l t y s u i t s ar e d i s c r e t i o nary

and o r d i nar il y r e qu i r e a f i nd i ng 2 5 o f

b a d f a i t h . Se e Ing e rs o l l

M i l l i n g M a c h . C o . v . M /VB o d e n a , 8 2 9 F .2 d 2 9 3 , 3 0 9 (2 d

C i r. 1 9 8 7 ). 2 6 I n d e ny

i ng a mo t i o n f o rat t o rne y s ’ fe e s , t he D i s t r i c t C o urt may a l s o c o ns i d e r , i

nt e ra li a , t he34 1 re l e v an

t s t at e ru l e , h e re , N e wY o rk , an d , a s w e l l , t h e s t at u s o f t h e p art y mo v i n g f o r f e e s , i .e ., 2 w h e t h e r t h e mo v an t i s a p re v a i l i n g p art y . Se e N .Y . M ari

n e &G e n . In s . C o . v . Tra d e li n e (L L C ), 3 2 6 6 F
. 3 d

1 1 2 , 1 3 0 ( 2 d

C i r . 2 0 0 1 )
. T h e D i s tr i c t C ourt i n th i s c a s e d e n i e d

L a f ar g e ’ s moti on

f or 4 at t o rn ey s’ f

ees b ecause: ( 1) un derNew Y o rk l aw, Laf ar ge w o ul d n o t b e en

t i t l ed t o at t o rn ey s’ 5 f e e s , and ( 2 ) L a f ar g e o nl y p art i a l l y p r e va i l e d i n d e f e nd i ng a g a i ns t t he i ns ur e r s ’ s um

mary j u d g me nt 6 m o t i o n s . In

l i gh t o f o ur h o l di n gs t o day , L af

arge ca n n o t cl ai m err o r wit h

respe ct t o t h e Di s t ri ct 7 C o urt ’ s l at t e r c o n c l u s i o n . 8 “Un der New Yo rk l aw, i t i s well s et t l ed t h at an

i n s ured can

n o t reco v er h i s l egal

ex pen s es 9 in a c o n t r o v e r s y w it h

a c arr ie ro v e rc o v e r a g e , e v e n t h o u g h t h e c arr ie rlo s e s t h e c o n

t r o v e r s y a n d is 10 h el d respo n s i

b l e f o r t h e ri s k. ” Em

pl o yers Mut
. Ca s . Co
. v . Key Ph arm s . , 75 F
. 3d 815, 824 (2d 1 1 C i

r . 1 9 9 6 ) ( i

n te rn a l qu ota ti on mark s om

i tte d )
. A “n arr owe x c e p ti on” to t h i s ru l e a p p li e s , L i b e rty 1 2 S ur

p l u s I n s . C or

p . v . S e g a l

C o. , 4 2 0 F
. 3 d

6 5 , 6 7 ( 2 d

C i r . 2 0 0 5 ) ( p e rc ur i am

) ( i n te rn a l qu otati on 13 marks o m

i t t ed), wh en

an i n s ured i s “ cas t i

n a def en s i v e po s t ure b y

t h e l egal s t eps an i n s urert akes 14 i n an e f f o rt t o f ree i t s e l f f ro m i t s po l i c y o b li gat i o n s , an d wh o pre v a i l s o n t h e me ri t s ,” U .S. 1 5 U n d e rw r i

te r s I n s . C o. v . C i

ty C l u b H ote l , L L C , 3 N
. Y
. 3 d

5 9 2 , 5 9 7 ( 2 0 0 4 ) ( i

n te rn a l qu otati on 1 6 mark s om

i tte d )
. A l th ou g h th e e x c e p ti on

a p p e ar s b r oa d l

y a p p li c a b l e to i n s ur e r s atte m

p ti n g to 1 7 e s c a

p e any p o l i c y o bl i g at i o n, w e have he l d

t hat t he i ns ur e d i s e nt i t l e d t o at t o rne y s ’ fe e s o nl

y i f t he 18 i n s ured pr ev ai l s i

n a di s put e o v er t h e i

n s urer ’ s at t em

pt “ t o f ree i t s el f ” f ro m i t s “ dut y t o def en d. ” 1 9 L i

b e rt y Surp l u s In s . C o rp ., 4 2 0 F .3 d

at 6 7

– 6 8
. 2 0 H e re , N Y M A G IC d o e s n o t c o n t e s t i t s d ut y t o d e f e n d L a f arg e i n t h e b arg e li

t i g at i o n . 2 1 I n d e e d , N Y M A G I C c on c e d e s th at i t h a s s u c h a d uty , an d h a s a c c or d i

n g l y of f e r e d a li s t of 22 at t o rn eys f

o r Laf arge’ s def en s e, ass i gn ed Sut t erf

i el d t o L af

arge’ s def en s e af t er La f arge 2 3 un

r e a s o n a b ly r e je c t e d N Y M A G I C ’ s o ffe r e d

lis t o f at t o rn e ys , an d

c o n t in u e s t o p ay fo rS ut t e r fie ld 2 4 an d

o t h e rr e lat e d

e x p e n s e s . S imilar ly, a lt h o u g h AH A C an d

N A C A qu ibb le w it h

t h e o r d e rin 2 5 w h i c h

th e y s h ou l d p ay f or L a f ar g e ’ s d e f e n s e , n e i th e ri n s ur e rd e n i e s th at i

t h a s a d uty to p ay f or 2 6 L a far g e ’ s le g a l e x p e n s e s in s o fara s t h o s e e x p e n s e s e x c e e d

t h e p r imary p o lic y. M o r e imp o rt an t ly,35 1 AH A C an d

N A C A a d o p t N Y M A G IC ’ s p o s i t i o n w i t h re s p e c t t o c o v e ra g e un d e r t h e p ri mary 2 po l i cy

an d do n o t co n

t es t NYM A GIC’ s dut y

t o def en d L af arge i n t h e b arge li

t i gat i o n . In

es s en ce, 3 t h e i

n s urer s h ere o n l

y ch all enge t h ei

r o b li gat i o n

t o pay f o r Laf arge’ s f i rm s , wh i ch

were ret ai

n ed 4 w i t ho ut N Y M AG I C ’s kno w l e d g e o rc o ns e nt and i n c o nt r ave nt i o n t o t he N am i ng C l a u s e o f t he 5 p ri mary p o l i c y . N Y M A G IC i s a s s e rt i n g i t s ri g h t un d e r t h e N am

i n g C l a u s e t o d e f e n d L a f arg e . 6 Ac c o r d i

ng l y , be c a u s e t he i ns ur e r s d o no t at t e m

p t t o avo i d

t he i rd ut y t o d e f e nd L a f ar g e , t he 7 D i s t ri c t C o urt ’ s c o n c l u s i o n s re g ard i

n g N e wY o rk

l aww e re n o t i

n e rror. 8 W e t h eref

o re co n cl ude t h at t h e Di s t ri ct Co urt di d n o t ab us e i t s di s cret i o n . T h e Di s t ri ct 9 C o urt ’s und e r l

y i ng r e a s o ns f

o rd e ny i ng L a f ar g e ’s mo t i o n f

o rat t o rne y s ’ fe e s w e r e s u f f i c i e nt and 1 0 w i

t h o ut e rror. 11 I I I . CO NC L USI ON 1 2 We have c o ns i d e r e d t he r e ma i ni ng ar g ume nt s ma d e by

t he p art i e s and

f i nd t he m t o be 1 3 e i t he rw i t ho ut me r i

t o runne c e s s ary

t o a d dr e s s i

n l i g ht o f o urho l d i ng s i n t hi s o p i ni o n. Fo rt he 1 4 f or e g oi n g r e a s on s , th e j u d g me n

t of th e D i s tr i c t C ourt i s AF F I RM E D i n p art, V A C A T E D i

n p art, 1 5 an d

REM A N D ED f o r f urt h e r p roce e d i

n g s n o t i n c o n s i s t e n

t w i t h t h i s o p i n i o n .