Court Opinion

ID: 6221037
Source: CourtListenerOpinion
Date Created: 2022-02-11 17:02:18.805045+00
Date Added: 2024-06-11T08:57:20.167177
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CONDUENT STATE HEALTHCARE, LLC, )
f/k/a XEROX STATE HEALTHCARE, LLC, )
f/k/a ACS STATE HEALTHCARE, LLC,   )
                                   )
            Plaintiff,             )
                                   )
       v.                          )           C.A. 2022-0020 MMJ
                                   )
ACE AMERICAN INSURANCE COMPANY, )
                                   )
            Defendant.             )
                                   )
CONDUENT STATE HEALTHCARE, LLC, )
f/k/a XEROX STATE HEALTHCARE, LLC, )
f/k/a ACS STATE HEALTHCARE, LLC,   )
                                   )
            Plaintiff,             )
                                   )
       v.                          )           C.A. No. N18C-12-074 MMJ CCLD
                                   )
AIG SPECIALTY INSURANCE COMPANY )
f/k/a CHARTIS SPECIALTY INSURANCE )
COMPANY, et al.,                        )
                                        )
          Defendants.                   )
                                        )

                        Submitted: January 27, 2022
                        Decided: February 10, 2022

                     ON PLAINTIFF’S MOTION FOR AN
                   ANTI-SUIT PRELIMINARY INJUNCTION

                               GRANTED
Adam S. Ziffer, Esq., (Argued), Robin L. Cohen, Esq., Keith McKenna, Esq., Cohen Ziffer
Frenchman & McKenna LLP, New York, New York; Jennifer C. Wasson, Esq., David A.
Seal, Esq., Carla M. Jones, Esq., Potter Anderson & Corroon LLP, Wilmington, Delaware,
Attorneys for Plaintiff

Neal Glazer, Esq., (Argued), London Fischer LLP, New York, New York; Robert J.
Katzenstein, Esq., Julie M. O’Dell, Esq., Smith Katzenstein & Jenkins LLP, Wilmington,
Delaware, Attorneys for Defendants

JOHNSTON, J.1

                        PROCEDURAL AND FACTUAL CONTEXT

         Plaintiff Conduent State Healthcare, LLC (“Conduent”) seeks to enjoin

Defendant ACE American Insurance Company (“ACE”) from continuing to litigate

ACE’s lawsuit filed in the New York Supreme Court. 2 Conduent asserts that the

New York Action is duplicative, and addresses the same defenses to the same

insurance claim under the same insurance policy that the parties have been litigating

in the Delaware Superior Court for more than three years. The Superior Court case

is set for trial, beginning February 14, 2022. Jury selection begins today, February

10, 2022.

1
  Sitting as a Vice Chancellor on the Court of Chancery by special designation, pursuant to Del. Const. Art. IV,
§13(2).
2
  ACE American Insurance Co. v. Conduent State Healthcare, LLC, No. 657120/2021 (N.Y. Sup. Ct.).
           ACE argues that the New York Action is a unique, unprecedented dispute,

which never has been at issue in the Superior Court. Additionally, the declaratory

judgment claim underlying the New York Action did not ripen until mid-December

2021.

           The Superior Court case, filed on December 10, 2018, is a dispute about

insurance coverage for Conduent’s settlement of Medicaid-related claims brought

against it by the State of Texas. ACE is a first layer excess insurance carrier and has

denied coverage.            ACE’s defenses include the affirmative defense that ACE was

not required to pay until the underlying primary policies are exhausted, and

exhaustion has not yet occurred.

           The Superior Court issued a summary judgment opinion in June 2021. 3 That

decision held that the defendant insurers had a duty to defend Conduent against the

Medicaid-related             claims.       However,        factual      issues      prevented   resolving

indemnification obligations prior to trial. Following the June 2021 decision, the

primary insurance carrier, AIG Specialty Insurance Company (“AIG”), agreed to

entry of an order requiring AIG to pay its full $10 million primary policy limit

toward Conduent’s defense costs. AIG’s payment was subject to reservation of its

3
    Conduent State Healthcare, LLC v. AIG Specialty Ins. Co., 2021 WL 2660679 (Del. Super.).
right to appeal the Superior Court’s defense rulings. AIG made payment in mid-

December 2021.

      Conduent requested that ACE pay approximately $2.1 million in excess

defense costs. ACE has refused. ACE served Conduent in the declaratory judgment

action in New York on December 27, 2021. The New York Action seeks a

declaratory judgment that ACE has no present obligation to pay Conduent’s defense

costs. Although AIG paid its full policy limits, AIG reserved the right to

appeal. Thus, ACE asserts that AIG’s policy limits cannot be deemed “exhausted”

until AIG pays without reservation.

      Conduent filed this Chancery Court action on January 6, 2022. Following

designation by Chief Justice Collins J. Seitz, Jr., with the consent of Chancellor

Kathaleen St. J. McCormick, to sit as a Vice Chancellor in this case, Superior

Court Judge Mary M. Johnston heard oral argument on the anti-suit preliminary

judgment motion on January 27, 2022.

                    ANTI-SUIT INJUNCTION STANDARD

      In order to obtain a preliminary injunction, the plaintiff must demonstrate: (1)

a reasonable probability of success on the merits; (2) that irreparable harm will occur
absent the injunction; and (3) that the balance of the equities favors granting the

injunction.1

       The purpose of an anti-suit injunction is: (1) to address a threat to the court’s

jurisdiction; (2) prevent evasion of an important public policy; (3) prevent a

multiplicity of suits; or (4) protect a party from vexatious or harassing litigation. 2

Anti-suit injunctions should be entered sparingly. Such relief is appropriate only

where there is clear evidence of threatened irreparable harm, equity supports the

injunction, the relief will be effective, and comity has been fully exercised. 3 The

Court’s power to enjoin the prosecution of a proceeding in another jurisdiction is

discretionary, and must be exercised cautiously. 4 Nevertheless, as a general matter,

all claims arising from a single chain of events should, where practicable, be

adjudicated in a single action in a forum having jurisdiction over all parties and

capable of doing prompt and complete justice. 5

                                        ANALYSIS

       The parties in the New York Action have been in litigation in the Superior

Court since 2018. The crux of the Delaware case is interpretation of the primary and

excess insurance policies, and whether they provide coverage for defense costs and

1
  Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 179 (Del. 1986).
2
  In re: TransPerfect Global, Inc, 2019 WL 5260362, at *14 (Del. Ch.).
3
  North River Ins. Co. v. Mine Safety Appliances Co., 2013 WL 6713229, at *1 (Del. Ch.).
4
  Ivanhoe Partners v. Newmont Mining Corp., 1988 WL 34526, at *3-4 (Del. Ch.).
5
  Household Intern., Inc. v. Eljer Industries, Inc., 1995 WL 405741, at *1 (Del. Ch.).
the ultimate settlement reached between Conduent and Texas. The Superior Court

already has found that the insurers are obligated to pay defense costs. The narrow

issue in the New York Action is whether payment, subject to a reservation of right

to appeal at the conclusion of the case, is or is not exhaustion of primary policy

limits, which would trigger the payment obligations for the excess carriers. All

parties agree that this precise issue is one of first impression under New York Law.

      ACE argues that New York is the proper venue to address the exhaustion

issue. Additionally, the New York Action is not duplicative because the conditional

payment issue has never been raised in the Delaware case and will not be resolved

as part of the upcoming trial.

      In the Delaware case, ACE’s Third Affirmative Defense states: "[Conduent’s]

claims against ACE are barred to the extent [Conduent] has not properly and fully

exhausted all applicable retentions, other insurance, and the limits of liability of the

underlying AIG Primary Policy.” ACE argues that the focus of the Third

Affirmative Defense is “solely on the conditions of AIG’s payment, which have been

approved by the Court, and therefore are not, and never have been, at issue in [the

Superior Court case]. As a result, the New York Action and the triggering of ACE’s

potential liability by AIG’s conditional payment, is not and cannot be duplicative of

the forgoing affirmative defense.” ACE contends that the “Conditional Payment”

issue did not exist until AIG made payment on December 10, 2021. ACE concludes
that the “Conditional Payment” issue “is not just a ‘horse of a different color;’ it is

an entirely different species.”

      The Court finds that Conduent has demonstrated a reasonable probability of

success on the merits. Delaware has jurisdiction to consider the issue now pending

in New York. ACE attempts to minimize the similarity of the Superior Court case

and New York Action by describing the exhaustion issue as unique and

separate. However, during argument on the instant motion, counsel for ACE

conceded that there was no practical or legal impediment to the Superior Court

deciding this legal issue.

      Throughout the pending litigation, the parties in the Superior Court case have

brought countless policy interpretation issues before the Court at all stages of the

proceedings. The Superior Court has issued numerous decisions, and interpreted the

relevant policies pursuant to New York law. The exhaustion/reservation of right to

appeal/conditional payment issue is one which can and should be decided by the

same court that has decided all other policy interpretation issues.

      Viewing the facts in the light most favorable to ACE, the Court further finds

that the Third Affirmative Defense is at least closely related (and more likely

identical) to the issue raised in the New York Action. The New York Action
involves merely the timing of payment that already has been determined to be

required by the policy terms.

      The Court also finds that irreparable harm will occur absent the

injunction. The parties are just a few days away from a lengthy and complex jury

trial. Their attorneys undoubtedly are presently wholly consumed in trial

preparation. The issues raised in New York should not simply be passed off to

attorneys who are not intimately familiar with the Delaware litigation—no matter

the extent of the resources of the New York litigants’ law firms. In any event, an

anti-suit injunction should not be granted or denied on the basis of the size of the

parties’ counsels’ resources.

      The balance of equities favors injunctive relief. The New York Action has

barely begun. No issues of comity require that the Superior Court step aside at this

stage of the proceedings. The issue of exhaustion clearly can be resolved by

interpretation of the insurance policies—something the Superior Court has been

dealing with in excruciating detail for over three years. ACE has failed to

demonstrate that it will be prejudiced in any way by imposition of an anti-suit

preliminary injunction.
                                            CONCLUSION

          The Court finds that an anti-suit injunction is necessary to protect Conduent

from “vexatious or harassing litigation.”12 Conduent has established a reasonable

likelihood of success on the merits. There is no reason why the issue presented in

the New York Action cannot be brought in the pending Superior Court

case. Imminent, irreparable harm will result if the injunction is not granted and

Conduent is required to participate in virtually duplicative litigation on the eve of,

and during, trial in Delaware. The balance of equities favors injunctive relief.

          THEREFORE, Conduent’s Motion for an Anti-Suit Preliminary Injunction is

hereby GRANTED.

          IT IS SO ORDERED.

12
     See In re: TransPerfect Global, Inc, 2019 WL 5260362, at *14 (Del. Ch.).