Filed: Jun. 10, 2004
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 6-10-2004 IPSCO Steel v. Blaine Constr Corp Precedential or Non-Precedential: Precedential Docket No. 03-2929 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "IPSCO Steel v. Blaine Constr Corp" (2004). 2004 Decisions. Paper 559. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/559 This decision is brought to you for free and open access
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 6-10-2004 IPSCO Steel v. Blaine Constr Corp Precedential or Non-Precedential: Precedential Docket No. 03-2929 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "IPSCO Steel v. Blaine Constr Corp" (2004). 2004 Decisions. Paper 559. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/559 This decision is brought to you for free and open access b..
More
Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
6-10-2004
IPSCO Steel v. Blaine Constr Corp
Precedential or Non-Precedential: Precedential
Docket No. 03-2929
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
Recommended Citation
"IPSCO Steel v. Blaine Constr Corp" (2004). 2004 Decisions. Paper 559.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/559
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
PRECEDENTIAL COMPANY, a Massachusetts
Corporation; MARSH USA, INC., a
UNITED STATES COURT OF Delaware Corporation f/k/a J&H
APPEALS FOR THE THIRD CIRCUIT MARSH & MCLENNAN, INC.;
__________ LIBERTY INTERNATIONAL
CANADA, a division of LIBERTY
No. 03-2929 MUTUAL INSURANCE COMPANY, a
__________ Massachusetts Corporation.
IPSCO STEEL (ALABAMA), INC., an Kvaerner U.S. Inc., Appellant
Alabama Corporation; IPSCO
CONSTRUCTION, INC., an Alabama (D.C. Civil Action No. 01-cv-00440)
Corporation; KVAERNER U.S. INC., a
Delaware Corporation _________
v. On Appeal from the
United States District Court for the
BLAINE CONSTRUCTION Western District of Pennsylvania
CORPORATION, a Tennessee District Judge: Hon. Arthur J. Schwab
Corporation. __________
Kvaerner U.S. Inc., Appellant Argued on Tuesday, April 20, 2004
___________
(D.C. Civil Action No. 99-cv-02055)
__________ Before: SCIRICA, GARTH, and
BRIGHT,* Circuit Judges
No. 03-2966
__________
(Opinion Filed: June 10, 2004)
BLAINE CONSTRUCTION
CORPORATION, a Tennessee
Corporation
v.
IPSCO CONSTRUCTION, INC., an
Alabama Corporation; KVAERNER *
Honorable Myron H. Bright,
U.S. INC., a Delaware Corporation; United States Court of Appeals for the
LIBERTY MUTUAL INSURANCE Eighth Circuit, sitting by designation.
1
Doty, Robert W. Washington, DC 20005
Ejzak, Richard A. (argued)
Roman, Andrew M. Attorneys for Appellees IPSCO Steel
Cohen & Grigsby, P.C. (Alabama) Inc. and IPSCO Construction
11 Stanwix Street, 15th Floor Inc.
Pittsburgh, PA 15222
Medved, George M.
Rogers, E. Mabry Pepper Hamilton LLP
Bradley, Arant, Rose & White, LLP 500 Grant Street
1819 Fifth Avenue North 5000 One Mellon Bank Center
Birmingham, AL 35203 Pittsburgh, PA 15219
Attorneys for Appellant Kvaerner U.S. Little, J. Ford
Inc. Noell, Robert P.
Walton, Monty L.
Dingess, John R. Woolf, McClane, Bright, Allen &
Lund, Kenneth J. Carpenter, PLLC
Saulnier, Brian F. 900 South Gay Street
Kirkpatrick & Lockhart LLP Suite 900, Riverview Tower
535 Smithfield Street Knoxville, TN 37902
Henry W. Oliver Building
Pittsburgh, PA 15222 Attorneys for Appellee Blaine
Construction Corporation
Lucas, Kevin P.
Williams, Robert J. Long, Kevin M.
Manion, McDonough & Lucas P.C. Van Vugt, Eric J.
600 Grant Street Quarles & Brady LLP
Suite 1414 411 East Wisconsin Avenue, #2500
Pittsburgh, PA 15219 Milwaukee, WI 53202
Harper, Steven J. (argued) Attorney for Appellee Marsh USA, Inc.
Kirkland & Ellis LLP
200 East Randolph Drive Reed, Jonathan S.
Suite 6500 Smith, Sean K.
Chicago, IL 60601 Traub, Richard K.
Traub, Eglin, Lieberman & Straus
Landau, Christopher 100 Metroplex Drive
Kirkland & Ellis LLP Metroplex Corporate Center I, Suite 203
655 15th Street, N.W. Edison, NJ 08817
Suite 1200
2
Sherman, C. Leon suppliers. The PMA also specified that
C. Leon Sherman & Associates Kvaerner was “IPSCO’s agent for the
20 Stanwix Street purpose of administering Supplier
5th Floor Contracts and managing and
Pittsburgh, PA 15222 coordinating Suppliers’ Work” and that,
in connection with liens and disputes,
Attorneys for Appellee Liberty Mutual Kvaerner was “to protect IPSCO’s
Insurance Company interests at all times.”
__________ The PMA prescribed certain
penalties and incentives. Kvaerner
OPINION expressly warranted that the “Aggregate
__________ Cost” of the project would not exceed a
“Guaranteed Maximum Price” of $182
million and that it would reimburse
Garth, Circuit Judge: IPSCO for any costs in excess of $182
million. If, however, the Aggregate Cost
The question which we must came in below the Guaranteed Maximum
answer on this appeal is whether the Price, IPSCO promised to share 50% of
District Court properly approved two the savings with Kvaerner.
settlement agreements among the
litigants over the objection of one of the The PMA anticipated that certain
parties, Kvaerner U.S. Inc. (“Kvaerner”). disputes would arise with the suppliers
Because we hold that the District Court and it authorized Kvaerner to serve as
did not err, we affirm. IPSCO’s litigation manager. The
relevant provision, which is Section
I. 4.04(x) in the PMA, reads:
A. Kvaerner The Project Manager
[Kvaerner] shall be
This litigation arose from a $550 primarily responsible for
million project involving the the management and
construction of a steel plant in Alabama. resolution, either with its
The project owner, IPSCO Steel, Inc. own resources or through
(“IPSCO”) hired Kvaerner as its Project legal counsel or other
Manager. Under the Project consultants, of claims and
Management Agreement (“PMA”), disputes between Suppliers
Kvaerner was responsible for and with Suppliers within
recommending the contracts that IPSCO the Guaranteed Portion of
awarded to various subcontractors and the Project . . . provided
3
that [Kvaerner] shall Corporation (“Blaine”). Less than one
promptly inform and keep year into the project, Blaine discovered
IPSCO fully informed of design errors in its work and abandoned
such claims and disputes the project, which caused significant
and any negotiations or disruptions and delays.
legal proceedings with
such Suppliers . . . [and] In response to Blaine’s
that any final resolution or unexpected abandonment, IPSCO and
settlement of such dispute Kvaerner entered into a written
shall be subject to IPSCO’s agreement reinforcing their (IPSCO’s
approval . . . [and] and Kvaerner’s) agency relationship and
IPSCO’s interests are amending certain aspects of the PMA.
otherwise at all times The “Amending Agreement,” which
protected . . . . estimated the losses resulting from
Blaine’s abandonment to be in the range
(Appendix at 220.) of $14 million to $18 million, provided
that any proceeds ultimately recovered
The PMA also included an from Blaine or its insurers, if any, would
insurance component. Specifically, the be paid solely to IPSCO, but that such
PMA required IPSCO to procure at least recovered funds would be applied as a
$20 million of professional liability credit against the “Aggregate Cost”
insurance covering Kvaerner, the sub- under the PMA.
consultants, and the design
professionals. To satisfy this obligation, Under the terms of the Amending
IPSCO hired Marsh USA, Inc. Agreement, IPSCO and Kvaerner agreed
(“Marsh”), an insurance broker, who in Kvaerner would pursue recovery from
turn procured a $20 million policy from Blaine, Liberty Mutual and Marsh for
Liberty Mutual Insurance Company damages resulting from Blaine’s
(“Liberty Mutual”). The policy was a conduct. More important, IPSCO and
so-called “wasting policy,” whereby Kvaerner agreed their respective roles in
costs of defending legal actions would that dispute would be governed by
be deducted from the total amount of Section 4.04(x) of the PMA. See
available coverage. Amending Agreement ¶ 5.01 (“The
rights and responsibilities of [Kvaerner]
B. Blaine and IPSCO in respect of the Blaine
Action will be governed by section
On Kvaerner’s recommendation, 4.04(x) [of the PM A].”) (App. 278.).
IPSCO awarded the contract to complete
the design and construction of the C. Construction Action; Coverage
primary buildings to Blaine Construction Action
4
At about the same time, IPSCO stipulated judgment against Blaine in
and Kvaerner filed suit against Blaine in favor of IPSCO. Blaine, however, had
the District Court for the Western “empty pockets,” so IPSCO and
District of Pennsylvania, where Kvaerner further agreed that they would
Kvaerner has its principal place of satisfy the $26 million judgment, if any,
business. The complaint sought to by looking solely to Blaine’s insurers.
recover the damages caused by Blaine’s
abandonment and design errors. For To that end, the Construction
ease of reference, we will refer to this Action Settlement required Blaine to
lawsuit as the “Construction Action.” continue prosecuting the Coverage
Action against Liberty Mutual and
Blaine then turned to Liberty against Marsh. Blaine was prohibited
Mutual and demanded both defense and from settling any of its claims without
coverage under the $20 million wasting prior written approval from IPSCO and
policy that Liberty Mutual had issued. Kvaerner. Upon learning of the
When Liberty Mutual denied coverage Construction Action Settlement, the
on the ground that it had allegedly never District Court stayed both the
received proper notice that Blaine was an Construction Action and Coverage
insured under the policy, Blaine filed Action, presumably because a finding of
suit against Liberty Mutual in the “no liability” in the arbitration
Western District of Pennsylvania seeking proceeding would put an end to both
a declaration from the court that it was lawsuits.
covered under the policy. Blaine also
asserted claims against Marsh, the D. Alabama Action Against Kvaerner
insurance broker, because Marsh had
issued an “advice of insurance” three Meanwhile, IPSCO filed a lawsuit
years earlier assuring Blaine that it was against Kvaerner in federal court in
covered by the Liberty Mutual policy. Alabama seeking more than $60 million
We refer to this lawsuit as the “Coverage in various cost overruns on the project.
Action.” These cost overruns included damages
resulting from Blaine’s abandonment of
The following year, IPSCO and construction. Because Kvaerner is
Kvaerner entered into a confidential insured under the $20 million policy
settlement agreement with Blaine (the issued by Liberty Mutual, almost all of
“Construction Action Settlement”). the defense costs that it incurred in the
Under that agreement, the parties agreed Alabama lawsuit have been paid by
to submit the issue of Blaine’s liability to Liberty Mutual. Accordingly, each
an arbitration panel and, in the event the dollar spent on Kvaerner’s defense
arbitration panel found Blaine liable, the reduced Liberty Mutual’s coverage
parties agreed to enter a $26 million under its wasting policy. It was
5
estimated at oral argument that $5 litigation against Liberty
million had been expended to that time. and Marsh U.S.A., Inc.
(“Marsh”).
E. Liberty Mutual Settlement
Blaine, IPSCO, and
While the arbitration proceeding Liberty have now
was pending, IPSCO, Blaine, and concluded a settlement
Liberty Mutual commenced settlement agreement to resolve the
discussions. Apparently, Kvaerner was Pennsylvania proceedings
invited to participate in these as to all parties except
discussions, but declined to do so. In Marsh. A copy of the
May 2003, IPSCO, Blaine, and Liberty Settlement Agreement is
Mutual reached a settlement that enclosed.
resolved all of the outstanding claims in
the Construction and Coverage Actions Pursuant to the PMA,
except those claims involving Marsh (the IPSCO hereby directs
“Liberty Mutual Settlement”). Under the Kvaerner, as its agent, to
Liberty Mutual Settlement, (i) IPSCO confirm in the space
and Kvaerner agreed to release all claims provided below that
that they had asserted in the Construction Kvaerner consents to the
Action against Blaine, and (ii) Blaine enclosed Settlement
agreed to release all claims that it had Agreement insofar as any
asserted in the Coverage Action against such consent might be
Liberty, IPSCO and Kvaerner. In return, required from Kvaerner.
Liberty Mutual agreed to pay $6 million Please return a
to IPSCO. countersigned copy of this
letter.
Immediately after the Liberty
Mutual Settlement was reached, IPSCO (App. at 334.)
mailed a letter to Kvaerner which read:
Kvaerner refused to consent to the
As you know, pursuant to Liberty Mutual Settlement because it felt
Section 4.04(x) of the that the $6 million settlement was
PMA, Kvaerner has been insufficient in light of the negotiated
acting as agent and judgment of $26 million. When
litigation manager for Kvaerner made it known that it would
IPSCO in the Pennsylvania not consent to the Liberty Mutual
legal proceedings against Settlement of $6 million, IPSCO filed a
Blaine and related motion in the District Court asking the
insurance coverage District Court Judge to: (i) reopen the
6
Construction and Coverage Actions; (ii) motions in their entirety, thereby
approve the Liberty Mutual Settlement approving the Liberty Mutual and Marsh
of $6 million; and (iii) dismiss all of the Settlement Agreements and dismissing
claims in the Construction and Coverage both actions. The District Court
Actions except those involving Marsh. concluded that Kvaerner could not
Kvaerner opposed the motions, arguing unilaterally veto or affect the Settlement
that IPSCO had no right to force it to Agreements because, under the PMA, it
accept a settlement agreement to which it was required to “protect IPSCO’s
did not agree.1 interests” in any litigation with project
suppliers. The District Court held that:
F. Marsh Settlement (i) Kvaerner had a fiduciary duty as
IPSCO’s agent to act for IPSCO’s
Shortly before the District Court benefit; (ii) IPSCO had the right to
was scheduled to hear oral argument on control the resolution of disputes and
IPSCO’s motions, IPSCO reached a litigation; and (iii) Kvaerner was
settlement with Marsh on the remaining contractually obligated to follow any
claims (the “Marsh Settlement”). In instructions by IPSCO. In short, the
exchange for a release of all claims in District Court found that the agency
the Coverage Action, Marsh agreed to relationship prohibited Kvaerner from
pay IPSCO $500,000. Two days before placing its own financial interests ahead
oral argument, IPSCO filed a motion to of IPSCO’s interests. The District Court
approve the Marsh Settlement in the therefore approved the Liberty Mutual
District Court. and Marsh Settlements and dismissed the
Construction and Coverage Actions.
G. District Court Ruling
Kvaerner thereafter filed these
Following oral argument, the appeals. We have jurisdiction to hear the
District Court granted both of IPSCO’s appeals pursuant to 28 U.S.C. § 1291.
The District Court’s factual findings will
not be reversed unless the record
1
Lexington Insurance Company demonstrates that they are clearly
(“Lexington”), which had issued a erroneous. See Fed. R. Civ. P. 52(a).
professional liability policy to Kvaerner, Conclusions drawn with respect to the
also opposed the proposed settlement, legal effect of any agreement are,
although it was not a party to either however, questions of law and therefore
action. Lexington has filed a separate subject to plenary review. See Linder v.
appeal, which we also decide today. See Inhalation Therapy Servs., Inc., 834 F.2d
IPSCO Steel (Alabama) Inc. v. Blaine 306, 310 (3d Cir. 1987).
Constr. Corp., at Docket Nos. 03-
3109/3110, -- F.3d -- (3d Cir. 2004). II.
7
The crux of the issues on appeal The District Court’s finding is
is whether the District Court erred when supported by the PMA. The PMA gives
it approved the two Settlement Kvaerner “primary responsibility” for
Agreements, notwithstanding Kvaerner’s disputes between IPSCO and its
objection. The answer turns primarily Suppliers, but requires Kvaerner to
on the question of whether Kvaerner was protect IPSCO’s interests “at all times”
IPSCO’s agent for purposes of the and reserves final settlement approval to
lawsuits and whether Kvaerner IPSCO.3 Thus, IPSCO assigned certain
contracted to protect IPSCO’s interests. authority to Kvaerner, but it retained the
right to control the manner in which
Under Alabama law, “[a]gency is Kvaerner managed disputes and it
generally a question of fact to be [IPSCO] retained the right to control
determined by the trier of fact.”2 Thrash settlements of disputes.
v. Credit Acceptance Corp., 821 So. 2d
968, 972 (Ala. 2001). The existence of a Kvaerner contends that it is not
principal-agent relationship normally the agent of IPSCO for purposes of the
turns on whether the alleged principal contested settlements. First, Kvaerner
reserved a right of control over the argues that, “[t]he fact that IPSCO (and
manner of the alleged agent’s Blaine and Liberty Mutual) conditioned
performance.
Id. “The right-of-control the effectiveness of the [Liberty Mutual
test requires that the right be reserved, Settlement] on Kvaerner’s consent
not that the right be actually exercised.” demonstrates that those parties
Id. “How the parties characterize the themselves view the rights subject to
relationship is of no consequence; it is dismissal as belonging, at least in part, to
the facts of the relationship that control.” Kvaerner in its own right.” Under
Id. Alabama law, however, the right-of-
control need only be reserved, not
The District Court found that exercised. See Thrash, 821 So. 2d at
Kvaerner was contractually obligated to 972.
act as IPSCO’s agent and litigation
manager for purposes of disputes arising
between IPSCO and IPSCO’s suppliers
and subcontractors on the project. 3
Kvaerner reaffirmed its duty to
protect IPSCO’s interests when it
entered into the Amending Agreement
2
The PMA has a choice-of-law with IPSCO, which provided that IPSCO
clause stating that the “Agreement shall and Kvaerner’s respective roles in the
be interpreted and construed in litigation against Blaine, Liberty Mutual,
accordance with the laws of the State of and Marsh would be governed by
Alabama.” (App. at 207.) Section 4.04(x) of the PMA.
8
Thus, it is of no consequence that duty of loyalty, good faith, and fair
IPSCO instructed Kvaerner to give its dealing.”). That duty of loyalty required
consent to the settlements. Kvaerner, as Kvaerner to protect IPSCO’s best
IPSCO’s agent and pursuant to its interests. Once IPSCO made it known
agreement to protect IPSCO’s interests, that it had reached a settlement with
was required to do IPSCO’s bidding, Liberty Mutual and Marsh, Kvaerner
which included Kvaerner’s consenting to was under a duty to effectuate IPSCO’s
the two settlements. Moreover, it was wishes and consent to the settlements.
understood that IPSCO conditioned the See Am. Armed Servs. Underwriters, Inc.
effectiveness of the settlements on v. Atlas Ins. Co., 108 So. 2d 687, 694-95
obtaining Kvaerner’s consent because (Ala. 1958) (“An agent sustains a
Kvaerner was a named party in the position of trust toward his principal and
Construction and Coverage Actions. in all transactions affecting the subject of
his agency, the law dictates that he must
Second, Kvaerner contends that act in the utmost good faith . . . .”).
the District Court grossly exaggerated
Kvaerner’s agency role because the Kvaerner’s duty of loyalty
PMA assigned to Kvaerner “the primary surmounted what could be considered as
responsibility for the management and a conflict of interest. The “conflict”
resolution of claims and disputes arose because Liberty Mutual had issued
between Suppliers and with Suppliers.” a wasting policy. At the time that
Yet that statement serves only to confirm IPSCO entered into the proposed
Kvaerner’s agency status in the settlements with Marsh and Liberty
Construction and Coverage Actions Mutual, Liberty Mutual had already paid
because Blaine clearly falls within the out approximately $5 million under the
definition of Supplier.4 policy to Kvaerner to reimburse it for
defense costs that Kvaerner had incurred
As IPSCO’s agent, Kvaerner in the Alabama litigation. Because the
owed IPSCO a duty of loyalty. See Alabama litigation had not yet ended,
Miller v. Jackson Hosp. & Clinic, 776 Kvaerner had a self-interest in ensuring
So. 2d 122, 124 (Ala. 2000) (“The that funds remained available under the
principal-agency relationship is fiduciary policy to continue paying for Kvaerner’s
in nature and imposes upon the agent a future defense costs. Because it was a
“wasting” policy, however, each dollar
spent on Kvaerner’s defense costs
4
The PMA defines “Suppliers” reduced the $20 million policy dollar-
as persons, firms or corporations for-dollar. At the same time, IPSCO was
performing, providing or delivering fully aware that the amount available
services, supplies, or labor on the under the policy to pay for any judgment
project. (App. at 206.) that might be rendered in the Coverage
9
Action was decreasing on a daily basis. Kvaerner is permitted to place its own
Indeed, as we have noted, Liberty interests ahead of IPSCO’s interests,
Mutual’s policy was already depleted by even if Kvaerner believed that IPSCO
$5 million and only $15 million was settling for too little.5
remained. Thus, it was in IPSCO’s
interests to reach a settlement with Courts have, in somewhat
Liberty Mutual sooner rather than later. analogous situations, approved
Even though such a settlement was settlements over the objections of named
adverse to Kvaerner’s interests, parties. Of course, motions to approve
Kvaerner was required, as the protector settlements most often arise in the class
of IPSCO’s interests, to resolve any such
conflicts in IPSCO’s favor.
5
Kvaerner believes that IPSCO
Kvaerner contends, however, that, settled with Liberty Mutual for an
even apart from the defense costs, it had inadequate amount ($6 million) because
an independent financial interest in the the Construction Action Settlement had
outcome of the Construction and provided that IPSCO and Kvaerner
Coverage Actions and therefore could could enter a $26 million judgment
not be forced to consent to the against Blaine if the arbitration panel
settlements. Kvaerner emphasizes that ruled that Blaine was liable. Blaine was
any funds recovered by IPSCO in a judgment proof and therefore any funds
settlement or a court judgment would be to pay for the $26 million judgment
applied, under the Construction Action would have to come from Blaine’s
Settlement, as a credit against the insurers (i.e., Liberty Mutual).
“Aggregate Cost.” Because the
Aggregate Cost of the project will At the time of the settlements, the
ultimately determine whether Kvaerner maximum possible recovery against
must pay IPSCO a penalty for exceeding Liberty Mutual was already limited to
the $182 million Guaranteed Maximum $15 million ($20 million policy limit
Price, Kvaerner contends that the size of minus $5 million spent on Kvaerner’s
the settlement with Liberty Mutual and defense costs). But in order for IPSCO
Marsh will ultimately have a financial to recover from Liberty Mutual, two
effect on Kvaerner: it will either things had to happen. First, the
decrease the penalty Kvaerner must pay arbitration panel had to find that Blaine
to IPSCO or it will increase the bonus was liable and, second, Blaine had to
IPSCO must pay to Kvaerner. succeed in its lawsuit against Liberty
Mutual. Given the risks inherent in
We acknowledge that the size of those two events and the $15 million
the settlement will have an indirect effect cap, a $6 million settlement does not
on Kvaerner, but it does not follow that strike us as unreasonably small.
10
action context, but they occasionally Kvaerner contends that the
come up in “ordinary” lawsuits as well. Liberate decision is “readily
For example, in Liberate Technologies distinguishable” on the ground that,
LLC v. Worldgate Communications, Inc., unlike the original patent holder in
133 F. Supp. 2d 357 (D. Del. 2001), a Liberate, Kvaerner “never relinquished
company by the name of SMI Holdings, its claims against Blaine.” We cannot
Inc. filed a patent infringement suit agree. First, not only had Kvaerner
against Worldgate Communications, Inc. agreed in the PMA that it would place
in the District of Delaware.
Id. at 358. IPSCO’s interests ahead of its own with
While the lawsuit was pending, SMI respect to managing litigation with
Holdings sold the patents to Liberate suppliers, but it had unequivocally
Technologies LLC and asked the District agreed that it would protect IPSCO’s
Court to substitute Liberate interests as it concerned liens and
Technologies as the plaintiff.
Id. at 359. disputes. Second, both the Amending
SMI Holdings remained a party to the Agreement and the Construction Action
action, however, because of certain Settlement specifically state that any
counterclaims that had been filed against funds recovered against Blaine or its
it by Worldgate Communications.
Id. at insurers would be paid directly and only
358 n.1. to IPSCO.
Some time later, Worldgate Thus, notwithstanding Kvaerner’s
Communications and Liberate inclusion in the caption of the
Technologies settled the patent Construction Action Complaint as a co-
infringement claims, but SMI Holdings plaintiff, the real, and indeed the only,
refused to allow the lawsuit to be party-in-interest in the Construction and
dismissed because it objected to the Coverage Actions was IPSCO and
settlement agreement. Even though it no Kvaerner could not veto or affect the
longer held title to the patents, SMI Settlement Agreements.
Holdings argued, among other things,
that it was not adequately represented in III.
the settlement negotiations. The District
Court found this argument unpersuasive, Kvaerner complains that the
noting that there was “strong evidence” District Court approved IPSCO’s motion
that SMI Holdings had given Liberate to approve the Marsh Settlement without
the sole right “‘to not only try and settle giving Kvaerner a reasonable
out the patent claims but to settle out the opportunity to respond. As we
counterclaims that were brought.’” Id. at previously mentioned, IPSCO filed the
359. Consequently, the district court motion to approve the Marsh Settlement
granted the motion to approve the two days before oral argument was to be
settlement.
Id. at 360. held on IPSCO’s previously-filed motion
11
to approve the Liberty Mutual Marsh Settlement should not be
Settlement. approved. As a consequence, the
District Court’s failure to give Kvaerner
District courts must give a party more time to respond to IPSCO’s motion
notice and an opportunity to respond to approve the Marsh [Coverage]
before disposing of a case. See Settlement constitutes harmless error.
Neiderhiser v. Borough of Berwick, 840
F.2d 213, 216 n.6 (3d Cir. 1988) IV.
(criticizing district court for not giving
parties opportunity to respond before For the foregoing reasons, we will
dismissing lawsuit for lack of subject affirm the District Court’s two orders
matter jurisdiction); Anthuis v. Colt dated June 6, 2003, which approved the
Industries Operating Corp., 789 F.2d Liberty Mutual [Construction and
207, 211 (3d Cir. 1986) (criticizing Coverage] Settlement and Marsh
district court for granting summary [Coverage] Settlement and which
judgment without giving certain parties dismissed the Construction and
opportunity to respond). Coverage Actions.
In this case, we believe the
District Court should have given
Kvaerner an opportunity to file a brief in
response to IPSCO’s motion to approve
the Marsh Settlement. It does not
necessarily follow, however, that the
District Court’s chosen course of action
constitutes reversible error. Kvaerner
had an opportunity to respond to the
Marsh motion, albeit a limited one, at the
previously scheduled oral argument on
the Liberty Mutual Settlement.
Moreover, IPSCO’s motion to approve
the Marsh [Coverage] Settlement raised
essentially all the same issues that were
raised by IPSCO’s motion to approve the
Liberty Mutual [Construction and
Coverage] Settlement. Hence, by
presenting arguments as to why the
Liberty Mutual Settlement should not be
approved, Kvaerner’s attorney was also
presenting arguments as to why the
12
