Court Opinion

ID: 8910859
Source: CourtListenerOpinion
Date Created: 2022-11-27 02:57:19.397028+00
Date Added: 2024-06-11T17:08:31.041186
License: Public Domain

ORDER AND OPINION ON PETITIONS FOR REHEARING
On petitions for rehearing by the reinsurers, Allstate Insurance Co., American Motorists Insurance Co., American Mutual Insurance Co. of Boston, Employers Mutual Liability Insurance Co. of Wisconsin, Guaranty Reinsurance Co., Urbaine Fire Insurance Co., Grange League Insurance Co., National Casualty Co., Hardware Mutual Casualty Co., and Arkwright-Boston Manufacturers Mutual Insurance Co. The petitions for rehearing by the reinsurers, in addition to making the same argument made in their main briefs, argue that not to dismiss the case would have “serious consequences for the entire insurance industry” (Petition for Guaranty Reinsurance Co. at 5); “Now, re-insurers will be held directly liable as principals of the reinsured to third parties” (Petition for American Mutual Insurance Co. of Boston at 4); and that “the decisions of the New York Courts have uniformly followed a rule of strict privity to even the extent that insureds of the direct insurer do not generally have an action against reinsurers” (Petition for other reinsurers at 3—4).
Our decision, however, in no way seeks to, or operates to, impinge upon the doctrine of privity usually prevalent in reinsurance matters. We have held only on the particular facts involved in this case and on the record we had before us that there was sufficient' evidence to take the case to the jury on the question whether, in negotiating the settlement with the Slotkins, Ratner was acting as agent for the reinsurers and whether his comments misrepresenting the scope of the insurance coverage in the course of those negotiations were within the scope of his agency. At 317.1
If plaintiffs exercise their option under our opinion to “retry the case ab initio against all appellees except George Berkowitz on both liability and damages,” at 318, an option which they may not elect to take, and plaintiffs on a retrial meet their burden of proof to take the issue of agency to the jury, it will of course be open to the reinsurers to adduce contrary proof on the existence of the agency relationship or whether Ratner’s misrepresentations as to excess coverage were within the scope of his agency for them. Similarly the factual issue whether Ratner contacted the reinsurers to obtain their consent to the $185,000 settlement,2 to the extent it has a bearing on those issues and the case, will be subject to proof ab initio.
Under the foregoing circumstances OAKES and GURFEIN Circuit Judges adhere to their previous opinion, and VAN *324GRAAFEILAND, Circuit Judge adheres to his dissent.
ORDER ON PETITIONS FOR REHEARING OF PETITIONERS CHRISTOPHER McGRATH, JR., AND JOHN McGRATH
Petitioners Christopher McGrath, Jr., and John McGrath move separately for rehearing and rehearing en banc of this court’s August 29, 1979, decision. Christopher McGrath, Jr., claims that the court distorted New York law, and John McGrath that the verdict below was misinterpreted with respect to him and that he should not have been held liable on a partnership theory.
PETITION OF CHRISTOPHER McGRATH, JR.
Petitioner Christopher McGrath, Jr., claims that the opinion both misconstrues the facts of his involvement and applies the wrong law. The first argument remains unconvincing. The second is inaccurate. It is petitioner who misstates the scienter requirements of New York law — under Burgundy Basin Inn v. Watkins Glen Grand Prix, cited at 314, petitioner acted with intent.
Petitioner’s best argument is that the judicially approved New York state settlement had the force of a judgment, barring plaintiff from instituting and appealing his federal case. He places primary reliance on Holm v. Shilensky, 388 F.2d 54 (2d Cir. 1968), in which this court, also applying New York law in diversity jurisdiction, declined to review an earlier Nevada decree allegedly obtained via fraud. But the ratio decidendi of Holm is solely that New York courts must give full faith and credit to the decree of the rendering state, and since the decree would not have been reviewable in Nevada, a New York court could not review it. Holm supports petitioner only if New York forbids the sort of challenge to an earlier decree here permitted. In support of that position, petitioner adduces Grossman v. Kass, 124 N.Y.S.2d 416 (Sup.Ct. 1953). Grossman is, however, effectively supplanted by Byrnes v. National Union Insurance Co., cited at 312, quoted approvingly in National American Corp. v. Federal Republic of Nigeria, 597 F.2d 314, 323 (2d Cir. 1979). Byrnes holds that when plaintiffs do not ask for rescission of a release (which, as in the instant case, was judicially approved) but rather affirm it and sue for damages for fraud in its procurement, the new trial is legitimate. 310 N.Y.S.2d at 782. It is not barred by res judicata because it is for a different, albeit related, cause of action. See Inman v. Merchants Mutual Casualty Co., cited at 312, 83 N.Y.S.2d at 803.
PETITION OF JOHN McGRATH
The opinion reinstates the first general verdict against all defendants. Petitioner John McGrath’s new, separate counsel makes the new arguments that that verdict was vague, tentative, uncertain, and possibly not unanimous, see at 310-311 n. 13, and that the judge sent the jury back for further deliberation before petitioner had an opportunity to poll them, as was his right under Humphries v. District of Columbia, 174 U.S. 190, 194, 19 S.Ct. 637, 43 L.Ed. 944 (1899). Accordingly, the argument runs, it is unfair to hold petitioner liable under the first verdict — the jury may or may not have intended to find against him.
Even accepting this as true the second verdict rather than the first would have to be reinstated. The jury therein found petitioner liable but assessed no monetary damages against him. While in state courts there is some disagreement as to whether a verdict against defendant for $0.00 amounts to judgment for plaintiff or defendant, see Annotations, 116 A.L.R. at 834; 49 A.L.R.2d at 1331, 1334, most federal cases interpret the verdict as a finding of defendant’s liability to a given extent, viz., $0, e. g., Joseph v. Rowlen, 425 F.2d 1010, 1013 (7th Cir. 1970) (“We believe any distinction between an award of 6± and ‘0’ damages is more of form than substance”); Wingerter v. Maryland Casualty Co., 313 F.2d 754, 756 (5th Cir. 1963) (verdict neither invalid nor ambiguous, no retrial needed); but see Association of Western Railways v. Riss & Co., *325112 U.S.App.D.C. 49, 51, 299 F.2d 133, 135 (D.C.Cir.), cert. denied, 370 U.S. 916, 82 S.Ct. 1555, 8 L.Ed.2d 498 (1962) (remanding for entry of judgment for defendant since finding of no damage meant plaintiff had not proven claim).
Under this interpretation, the jury by its second verdict found petitioner a joint tortfeasor. Acting under erroneous apportionment instructions, however, it allocated none of the damages to him. This allocation, however, must be set aside under New York law which holds tortfeasors jointly and severally liable.
Therefore, even if petitioner should be judged by the second rather than the first verdict, his liability remains the same.
We are persuaded, however, that the alternative holding finding John McGrath liable as a matter of law for his partner’s torts, at 316, is erroneous and should be eliminated. The case was not tried on this theory; were it, John McGrath could have taken steps, now foreclosed, to decrease his liability. He could have joined as a defendant both his partnership, see N.Y.C.P.L.R. § 1025, and his other partner, see N.Y.Partnership Law § 24. He may not be able hereafter to sue them for contribution. Because of the prejudice to petitioner of affirming on the basis of a theory not advanced below, the alternative holding should be and it hereby is stricken from the opinion.
The petitions for rehearing are otherwise each denied.
VAN GRAAFEILAND, Circuit Judge, adheres to his dissent.

. Our opinion said, at 316:
The reinsurers were closely involved in all the transactions leading up to the settlement. They had written notice of the state court trial, and they had an absolute right to all information concerning any matter affecting their coverage. Moreover, their consent was needed for any settlement within the reinsured range, i.e., over $50,000. There was abundant evidence, including Ratner’s own testimony, that throughout the trial Ratner communicated with each of them either directly or through his subordinate. Ratner told Toberoff that he had to telephone the reinsurers as soon as the settlement talk crossed the $50,000 line. Indeed, Toberoff provided Ratner with a copy of the National Institutes of Health study better to enable Ratner to persuade the reinsurers to settle. Ratner testified that he contacted each of the reinsurers to obtain their final consent to the $185,000 settlement. And according to Toberoff s testimony in the court below, Berkowitz told him at the time of the settlement negotiations that Ratner was talking to the reinsurers; Christopher McGrath confirmed that Ratner told him that he, Ratner, had obtained the reinsurers’ consent to the settlement.

. While Ratner’s criticál testimony on deposition was most equivocal, he did testify [348A] that “[t]here might have been one conversation where I obtained [the reinsurers’] consent to settle the case for $185,000,” by which he said he meant, “I called each one individually but it concerned this one matter.”