MARK W. BENNETT, District Judge.
TABLE OF CONTENTS I. INTRODUCTION .......................................................... 927A. Factual Synopsis ................................................... 927B. Progressive's Declaratory Judgment Action .......................... 927C. The FDIC-R's Lawsuit ............................................... 928D. The Pending Motions ................................................ 928II. PROGRESSIVE'S MOTION TO STRIKE ........................................ 929A. Factual Background ................................................. 9291. The affiant ..................................................... 9292. The challenged statements ....................................... 9293. Other discovery responses ....................................... 930B. Arguments Of The Parties ........................................... 932C. Analysis ........................................................... 9341. Applicable standards ........................................... 9342. Application of the standards ................................... 9353. Summary ......................................................... 936III. THE CROSS-MOTIONS FOR SUMMARY JUDGMENT ................................ 936A. Factual Background ................................................. 9371. Vantus Bank and the D & O Defendants ........................... 9372. The Vantus Policy and the Discovery Period (Activation) ......... 9373. Closure of Vantus Bank and the FDIC-R's claims .................. 940B. Applicable Legal Standards ......................................... 9401. Summary judgment standards ..................................... 9402. Standards for interpretation and construction of an insurance contract ..................................................... 941C. The Effect Of The "Insured Vs. Insured Exclusion" .................. 9441. Arguments of the parties ........................................ 9442. Analysis ........................................................ 946a. Interpretation ............................................... 946b. Construction ................................................. 950
3. Summary ......................................................... 952D. The Effect Of The "Investment Loss Carve-Out" ...................... 9521. Arguments of the parties ........................................ 9522. Analysis ........................................................ 954a. Interpretation ............................................... 954b. Construction ................................................. 9583. Summary ......................................................... 959E. The Effect Of The Dispositions Above On The D & O Defendants' Counterclaims .................................................... 9591. Arguments of the parties ........................................ 9592. Analysis ........................................................ 9613. Summary ......................................................... 962IV. CONCLUSION ............................................................ 962
Plaintiff Progressive Casualty Insurance Company (Progressive) filed this action, on April 25, 2012, seeking a declaration that there is no coverage under a Directors & Officers/Company Liability Insurance Policy
In this action for declaratory judgment, Progressive named as defendants the FDIC-R and the D & O Defendants. In three separate counts of its Complaint (docket no. 2), Progressive seeks declarations that three separate provisions of the Vantus Policy bar coverage for the FDICR's claims. I will describe those provisions as the "insured vs. insured exclusion," the "loan loss carve-out," and the "investment loss carve-out." In a fourth count, Progressive "reserved all of its rights under the Policy and applicable law."
The FDIC-R filed its Answer, Affirmative Defenses And Jury Demand (docket no. 17) in this lawsuit on June 26, 2012. On July 3, 2012, the D & O Defendants filed their Answer To Plaintiff's Original Complaint; Affirmative Defenses; Counterclaim; And Jury Demand (docket no. 19). In their Counterclaim, the D & O Defendants assert the following claims against Progressive: in Count I, a claim for breach of contract; in Count II, a claim
The FDIC-R eventually filed a separate lawsuit, on May 20, 2013, against the D & O Defendants, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1811 et seq., alleging the D & O Defendants' gross negligence, negligence, and breach of fiduciary duty. See FDIC v. Dosland, C 13-4046-MWB (N.D.Iowa). The FDIC-R's claims are based primarily on its allegations that the D & O Defendants caused Vantus Bank to use $65 million — 120 percent of its core capital — to purchase fifteen high risk collaterized debt obligations backed by Trust Preferred Securities (CDO-TruPS) without due diligence and in disregard and ignorance of regulatory guidance about the risks of and limits on purchases of such securities, resulting in losses of some $58 million. The claims ultimately made by the FDIC-R in its Complaint have limited the dispute in this declaratory judgment action by Progressive to the effect of the "insured vs. insured exclusion" and the "investment loss carve-out" in the Vantus Policy.
On February 27, 2014, this case was transferred to me. See Order (docket no. 57). This case is now before me on the following cross-motions for summary judgment: (1) the FDIC-R's September 5, 2014, Motion For Summary Judgment (docket no. 118); (2) Progressive's September 5, 2014, Motion For Summary Judgment (docket no. 120); and (3) the D & O Defendants' September 5, 2014, Motion For Summary Judgment (docket no. 125). The cross-motions for summary judgment were all duly resisted and replies in further support of them were duly filed.
This case is also before me on Progressive's September 29, 2014, Motion To Strike And Exclude, In Part, The Affidavit Of Arlene Curry (Motion To Strike) (docket no. 145). The affidavit in question had been offered by the FDIC-R and the D & O Defendants as part of their Joint Appendix in support of their Motions For Summary Judgment, and they relied upon it as record evidence supporting their Joint Statement Of Undisputed Facts. On October 23, 2014, the FDIC-R filed its Opposition (docket no. 171) to Progressive's Motion To Strike and the D & O Defendants
The movants all requested oral arguments on their Motions For Summary Judgment — in the case of the FDIC-R, by separate Motion (docket no. 123). My crowded schedule does not allow me to accommodate the parties' requests for oral arguments on the present motions in a timely manner. More importantly, I find that the parties' briefing adequately addresses all pertinent issues and that holding oral arguments on the motions would only unnecessarily increase the cost to the parties and unnecessarily delay the proceedings. Therefore, I will consider the parties' cross-motions for summary judgment, as well as Progressive's Motion To Strike, fully submitted on the parties' written submissions.
Progressive's September 29, 2014, Motion To Strike concerns the record that I may properly consider on the parties' cross-motions for summary judgment. Therefore, I deem it appropriate to consider the Motion To Strike before considering the cross-motions for summary judgment.
Progressive seeks an order striking and excluding certain paragraphs of the affidavit of Arlene T. Curry, one of the D & O Defendants, offered in support of the FDIC-R's and the D & O Defendants' Motions For Summary Judgment. Specifically, Progressive challenges paragraphs 15, 16, and 20-22 of Ms. Curry's affidavit.
Arlene T. Curry, a citizen of South Dakota, was a Director of Vantus Bank from 2002 until the OTS closed the Bank on September 4, 2009. Indeed, she was the Chair of the Board from October 27, 2005, to September 4, 2009. Ms. Curry is the only D & O Defendant to offer an affidavit in support of or resistance to any party's Motion For Summary Judgment.
In the challenged paragraphs of her affidavit, Ms. Curry avers as follows:
Affidavit Of Arlene Curry, Defendants' Joint Appendix, Part I (docket no. 118-3), 6-7 of 647.
Progressive argues that these averments must be compared with the D & O Defendants' responses to certain interrogatories. Progressive points to the parts of the D & O Defendants' answer to Interrogatory No. 2 stating that "Michael Dosland . . . was the primary individual who had direct contact with Holmes Murphy representative Diane Coughlin regarding the application and purchase of D & O insurance" and that "Arlene Curry . . . had no direct contact with Holmes Murphy or Progressive other than in relation to meetings of the Board of Directors."
In support of its Motion To Strike, Progressive contends that Ms. Curry relies solely on the minutes of several Vantus Board meetings and correspondence with Holmes Murphy, the insurance broker, to support her averments about what all members of the Board and Mr. Moderski "reasonably believed" or "reasonably concluded." Progressive argues, however, that none of the minutes or correspondence contain any discussion of the coverage provided by the Vantus Policy. Thus, Progressive contends that Ms. Curry's affidavit fails to set forth facts demonstrating her personal knowledge, so that it does not meet the admissibility requirements of Rule 56(c)(4) of the Federal Rules of Civil Procedure. Indeed, Progressive argues that it is unclear how one can determine from the records cited by Ms. Curry what the beliefs of any, let alone every, member of the Board might be regarding coverage under the Vantus Policy, where there is no indication in those records that the Board or the insurance broker discussed that issue. Progressive contends that simply attributing statements to Ms. Curry's "information and belief" is also inadequate. Progressive argues that, because Ms. Curry has no personal knowledge, the challenged parts of her affidavit must rely on inadmissible hearsay. Progressive argues that there is no exception for the hearsay in question, because the "state of mind" exception in Rule 803(3) of the Federal Rules of Evidence does not exempt statements of memory or belief to prove the fact remembered or believed, i.e., that the Policy did provide coverage consistent with
The FDIC-R and the D & O Defendants counter that there is sufficient indication of the factual basis for Ms. Curry's challenged averments from her statements about her service on the Board, participation in its meetings, and review of pertinent business documents. The FDIC-R and the D & O Defendants point out that an affiant's conclusions may be based on personal observations and review of business records in the affiant's official capacity. They then argue that Ms. Curry's review of materials provided by Progressive prior to the March 23, 2006, meeting at which the Board approved the purchase of the Vantus Policy, which Ms. Curry states provided part of the basis for her averments, included documents setting out precisely the matters to which Ms. Curry avers. They also argue that the minutes of Board meetings do adequately indicate discussions of pertinent issues to support Ms. Curry's personal knowledge of the matters to which she avers.
The FDIC-R and the D & O Defendants also argue that Ms. Curry's averments about the shared beliefs and expectations of the Board members are based on specific representations that Progressive made to the entire Board regarding the purchase of the Vantus Policy in 2006 and the extended Discovery Period coverage in 2009. The FDIC-R also argues that portions of interrogatory answers not cited by Progressive also support such shared beliefs and expectations. The FDIC-R contends that, because Ms. Curry was involved in pertinent Board meetings, she has not based her challenged averments simply on inadmissible hearsay. Similarly, the D & O Defendants argue that Ms. Curry was in a position to know and understand the circumstances and to observe the relations of the parties. The FDIC-R argues that Rule 803(3) makes admissible statements such as those challenged by Progressive regarding the expectations of Ms. Curry's fellow board members, because those statements are indicative of Ms. Curry's and the other D & O Defendants' then-existing state of mind. The FDIC-R argues that the matter for which the statements are offered is precisely to show Ms. Curry's and the other D & O Defendants' state of mind or understanding regarding coverage, not to prove that the Vantus Policy did actually provide the coverage that Ms. Curry and the other D & O Defendants expected. Similarly, the D & O Defendants argue that an affiant may properly state what the affiant believed another's state of mind was, based on the affiant's observations of the other's statements or conduct. As to Ms. Curry's averments concerning the "insured vs. insured exclusion," the FDIC-R and the D & O Defendants argue that Ms. Curry did have personal knowledge about what statements Progressive did not make, as well as what statements Progressive did make, and did not simply rely "upon information and belief."
In reply, Progressive argues that the sources of information cited by Ms. Curry for the challenged averments do not demonstrate a factual basis for her specific averments, because they do not indicate any discussion or mention of the matters to which Ms. Curry avers. Progressive also argues that "to my knowledge" is not a magic phrase that demonstrates personal knowledge for any and every fact stated. Because the challenged averments are not based on personal knowledge, Progressive argues that they must be based on inadmissible hearsay about the beliefs of others
The Eighth Circuit Court of Appeals "review[s] the admission of evidence for consideration at the summary judgment stage for an abuse of discretion." Gannon Int'l, Ltd. v. Blocker, 684 F.3d 785, 793 (8th Cir.2012) (citing Warner Bros. Entm't, Inc. v. X One X Prods., 644 F.3d 584, 591 (8th Cir.2011)). Rule 56(c)(2) provides, "A party may object that the material cited to support or dispute a fact [at the summary judgment stage] cannot be presented in a form that would be admissible in evidence." FED.R.CIV.P. 56(c)(2). When an objection is made to evidence relied on at summary judgment, "the burden is on the proponent of the evidence to show that the material is admissible as presented or to explain the admissible form that is anticipated." Gannon Int'l, Ltd., 684 F.3d at 793 (citing FED.R.CIV.P. 56, advisory committee's note).
Rule 56(c)(4) provides, "An affidavit or declaration used to support or oppose a motion [for summary judgment] must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." FED.R.CIV.P. 56(c)(4). Thus, "`[w]hen an affidavit contains an out-of-court statement offered to prove the truth of the statement that is inadmissible hearsay, the statement may not be used to support or defeat a motion for summary judgment.'" Jenkins v. Winter, 540 F.3d 742, 747 (8th Cir.2008) (emphasis added) (quoting Brooks v. Tri-Systems, Inc., 425 F.3d 1109, 1111 (8th Cir.2005)). Similarly, statements in an affidavit based on what the affiant "learned" or "heard" about a decision or a decision-making process are hearsay and do not satisfy the "personal knowledge" requirement. Ward v. International Paper Co., 509 F.3d 457, 462 (8th Cir.2007).
In contrast, statements in an affidavit that are the affiant's own and based on his or her own personal knowledge may be considered on summary judgment. Brooks, 425 F.3d at 1111; FED.R.CIV.P. 56(c)(4). The Eighth Circuit Court of Appeals has held that an affiant "certainly" possesses "personal knowledge" of his or her own reasons for making a particular decision. Brannon v. Luco Mop Co., 521 F.3d 843, 847-48 (8th Cir.2008); Aucutt v. Six Flags Over Mid-Am., Inc., 85 F.3d 1311, 1317 (8th Cir.1996). Also, an affidavit is admissible if it states the affiant's personal knowledge or perception acquired through review of records prepared in the ordinary course of business. See Eckelkamp v. Beste, 315 F.3d 863, 872 (8th Cir.2002) (citing Burlington N. R.R. Co. v. Nebraska, 802 F.2d 994, 1004 (8th Cir. 1986)).
In addition, I have explained,
Guinan v. Boehringer Ingelheim Vetmedica, Inc., 803 F.Supp.2d 984, 992 (N.D.Iowa 2011) (quoting Helm Fin. Corp. v. Iowa N. Ry. Co., 214 F.Supp.2d 934, 953 (N.D.Iowa 2002)). Thus, "[t]he test for admissibility is whether a reasonable trier of fact could believe the witness had personal knowledge." Id.
I have also recognized that the "personal knowledge" requirement does not necessarily
Finally, purported inconsistencies between statements in an affidavit and other discovery responses do not make the affidavit inadmissible at summary judgment, if the affidavit appears to clarify and not contradict the prior discovery responses. See Brannon, 521 F.3d at 847.
Progressive's Motion To Strike appears to rely, in the first instance, on alleged inconsistencies between Ms. Curry's challenged averments and the D & O Defendants' responses to certain interrogatories. When the responses to the interrogatories are viewed in full, however — as they are set forth in the margins, above — it is readily apparent that the affidavit clarifies, but does not contradict, the basis for Ms. Curry's knowledge of the process that the Vantus Board went through in selecting the Vantus Policy. Thus, those interrogatory responses do not make the challenged averments inadmissible at summary judgment. See Brannon, 521 F.3d at 847. Indeed, as the FDIC-R and the D & O Defendants argue, a review of the interrogatory responses in conjunction with Ms. Curry's affidavit, read as a whole, would lead a reasonable trier of fact to believe that Ms. Curry had personal knowledge of the matters to which she avers in the challenged paragraphs of her affidavit. See Guinan, 803 F.Supp.2d at 992 (stating this as the test for admissibility of an affidavit at summary judgment).
As to the challenged statements of Ms. Curry's own beliefs regarding what the Vantus Policy would cover and her reasons for approving that Policy, Ms. Curry "certainly" possessed "personal knowledge." See Brannon, 521 F.3d at 847-48; Brooks, 423 F.3d at 1111; Aucutt, 85 F.3d at 1317; FED.R.CIV.P. 56(c)(4). The affidavit properly avers that Ms. Curry acquired such "personal knowledge," inter alia, from her review of records prepared in the ordinary course of business at the pertinent times — before selecting the Vantus Policy in 2006 and before obtaining the Discovery Period coverage in 2009. See Eckelkamp, 315 F.3d at 872. Contrary to Progressive's assertions, the fact that specific minutes of Board meetings and some documents do not reflect discussion of the specific matters to which Ms. Curry avers does not demonstrate that there is no adequate factual basis for her averments. Although affidavits must include enough factual support that the affiant possessed personal knowledge, see Guinan, 803 F.Supp.2d at 992 (citing El Deeb, 60 F.3d at 428), the FDIC-R and the D & O Defendants have pointed to documents that Ms. Curry states that she reviewed that demonstrate a factual basis for her understanding of the coverage under the Vantus Policy and the Discovery Period
Nor do I find Ms. Curry's averments about the state of mind or beliefs of other D & O Defendants to be inadmissible at summary judgment. Such averments are not necessarily inadmissible. See Marsh, 79 F.Supp.2d at 1074 (citing Kehoe, 995 F.2d at 119 n. 3). Here, Ms. Curry plainly participated in the decision-making process with the other D & O Defendants and had more than adequate opportunity to observe their statements and conduct and the statements and conduct of the insurance broker's representative. Her participation and observations are sufficient to give her "personal knowledge" of the beliefs and understanding of the other D & O Defendants and the reasons for their decisions at the time of those decisions. See id. Again, Ms. Curry's involvement in the decision-making process and the pertinent meetings would lead a reasonable trier of fact to believe that Ms. Curry had personal knowledge of the beliefs, understanding, and reasoning of the other D & O Defendants at the pertinent times. See id. (stating this as the test for admissibility of an affidavit at summary judgment).
Finally, Progressive's "hearsay" objection is unavailing. First, Ms. Curry does not aver to what she merely "learned" or "heard" about the decisions of others, compare Ward, 509 F.3d at 462, nor are her averments based merely on "information and belief." See Guinan, 803 F.Supp.2d at 992 (averments based on "information and belief" are inadequate to demonstrate "personal knowledge"). Rather, Ms. Curry states her own state of mind at the time and her summary of her impressions of the state of mind of the other D & O Defendants at the time. See Marsh, 79 F.Supp.2d at 1074 (citing Kehoe, 995 F.2d at 119 n. 3). Also, Progressive's arguments concerning the applicability of Rule 803(3) are wrong-headed, not least because it appears to me that the FDIC-R and the D & O Defendants have not offered Ms. Curry's statements of the state of mind of others to prove that the Vantus Policy provides coverage for the FDIC-R's claims. Rather, they have offered those statements to prove the D & O Defendants' expectations and beliefs about coverage, which falls squarely within the Rule 803(3) exception.
In short, Progressive's September 29, 2014, Motion To Strike is denied in its entirety. Consequently, I may consider Ms. Curry's affidavit, in its entirety, in my analysis of the parties' cross-motions for summary judgment.
In their cross-motions for summary judgment, the parties contest the applicability of two provisions of the Vantus Policy, the "insured vs. insured exclusion" and the "investment loss carve-out." Progressive also asserts that resolution of these two issues, as well as other undisputed facts or matters of law, require summary judgment in its favor on the D & O Defendants' counterclaims. I will consider these distinct issues in turn. First, however, I
I find that a much more circumscribed statement of facts — disputed and undisputed — than the parties have offered is sufficient to put in context the parties' arguments concerning their cross-motions for summary judgment. Indeed, I find that the nucleus of facts most relevant to disposition of the cross-motions for summary judgment involves little more than the pertinent terms of the Vantus Policy and the nature of the claims in the related lawsuit by the FDIC-R against the D & O Defendants, FDIC v. Dosland, C 13-4046-MWB (N.D.Iowa). Unless I indicate otherwise, the facts set out here are undisputed.
Although the fact is not set out in any parties' statement of undisputed facts, it appears from the record that no party would dispute that Vantus Bank was a federal savings bank with its home office in Sioux City, Iowa, and that it was, at one time, known as First Federal Bank. It also appears from the record that no party would dispute that Michael Dosland, now a citizen of Wisconsin, was Vantus Bank's Chief Executive Officer and President, as well as a member of the Board of Directors, from January 2006 until he resigned in July 2008; Michael S. Moderski, also now a citizen of Wisconsin, was the Bank's Chief Financial Officer and Controller from April 2006 until the Office of Thrift Supervision (OTS) closed Vantus Bank on September 4, 2009; Barry E. Backhaus, a citizen of Iowa, was a Director from 1987 until the OTS closed the Bank, and the Bank's Interim President from July 2008 to December 2008; Arlene T. Curry, a citizen of South Dakota, was a Director from 2002 until the OTS closed the Bank; Gary L. Evans, a citizen of Iowa, was a Director from 1989 until the OTS closed the Bank; Ronald A. Jorgenson, a citizen of Iowa, was a Director from July 2005 until the OTS closed the Bank; Jon C. Cleghorn, a citizen of South Dakota, was a Director from 1998 until the OTS closed the Bank; and Charles D. Terlouw, a citizen of Iowa, was a Director from July 2006 until the OTS closed the Bank. These are the individuals described herein as the D & O Defendants.
As stated at the outset of this decision, Vantus Bank's Board of Directors purchased Directors & Officers/Company Liability Insurance Policy For Financial Institutions Policy No. 100322780-01 (the Vantus Policy) from Progressive in 2006 for the period April 13, 2006, to April 13, 2009. The Vantus Policy was created by Progressive. In quoted portions of the Vantus Policy, terms in bold in the original indicated that those terms were defined in the Policy.
There does not appear to be any dispute that, as used in the Vantus Policy,
Vantus Policy, § IV(E), Defendants' Joint Appendix II at 207. Item 1 of the Declarations lists the following entities: Vantus Bank, First Federal Bankshares, Inc., First Federal Bank, First Financial Corporation of Sioux City, Sioux Financial Company, United Escrow, Inc., Equity Services, Inc., Sioux Abstract Company, and Rerick Abstract Company. Vantus Policy, Amendment To Declarations (effective 09/04/2007), Defendants' Joint Appendix II at 204. The Discovery Period (Activation) endorsement expressly replaces the definition of
Vantus Policy, Discovery Period Activation, Amendment to § IV(E), Defendants' Joint Appendix at 198. Item 1 of the Declarations Page for the Discovery Period (Activation) endorsement lists the identical entities as the original Vantus Policy, although "Vantus Bank" has been handwritten into the list. Vantus Policy, Discovery Activation, Declarations Page, Item 1, Defendants' Appendix II at 200.
The Vantus Policy provides for Insured Persons Liability Coverage as follows:
See Vantus Policy, § I(A), Defendants' Joint Appendix II at 205.
Vantus Policy, § IV(C)(1) and (2), Defendants' Joint Appendix II at 207. There does not appear to be any dispute that the FDIC-R's claims, as asserted in the Demand Letter and the separate lawsuit, as described below, are
Vantus Policy, § IV(X), Defendants' Joint Appendix II at 210.
The definition of
Vantus Policy, § IV(N)(6), Defendants' Joint Appendix II at 209.
In addition to the definition and limitation on
Vantus Policy, § V(J), Defendants' Joint Appendix II at 212.
There is no dispute that the Vantus Policy does not include any provision expressly identified as an exclusion of coverage for "regulatory" claims or any provision that expressly excludes "regulatory" claims, such as claims by the FDIC-R, as sometimes appear in comparable director and officer liability policies from Progressive and other insurers.
On September 4, 2009, during the extended Discovery Period for the Vantus Policy, the OTS closed Vantus Bank and appointed the FDIC-R as Receiver. On May 7, 2010, also during the extended Discovery Period for the Vantus Policy, counsel for the FDIC-R sent a letter (the Demand Letter) via certified and overnight mail to the D & O Defendants, copying Progressive, demanding money damages caused by the D & O Defendants' negligence, gross negligence, and/or breaches of fiduciary duties or other wrongful acts. Progressive has not disputed that the FDIC-R's Demand Letter asserted
As explained above, the FDIC-R eventually filed a separate lawsuit, on May 20, 2013, against the D & O Defendants, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1811 et seq. See FDIC v. Dosland, C 13-4046-MWB (N.D.Iowa). In that lawsuit, the FDIC-R asserts claims against the D & O Defendants for their gross negligence, negligence, and breach of fiduciary duty. Progressive has not asserted that these claims are inconsistent with claims in the Demand Letter, although, as explained above, at page 5 and note 2, the claims in the lawsuit are narrower than the claims in the Demand Letter as to the wrongful conduct in question. Somewhat more specifically, the FDIC-R's claims in its lawsuit are based primarily on its allegations that the D & O Defendants caused Vantus Bank to use $65 million — 120 percent of its core capital — to purchase fifteen high risk collaterized debt obligations backed by Trust Preferred Securities (CDO-TruPS) without due diligence and in disregard and ignorance of regulatory guidance about the risks of and limits on purchases of such securities, resulting in losses totaling some $58 million. The FDIC-R's claims do not allege wrongdoing concerning loans. Progressive contends that the claims by the FDIC-R in its lawsuit fall outside of the coverage provided by the Vantus Policy, but only on the basis of the "insured vs. insured exclusion" and the "investment loss carve-out."
Summary judgment is only appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." FED. R.CIV.P. 56(c) (emphasis added); see Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir.2005) ("Summary judgment is appropriate if viewing the record in the light most favorable to the nonmoving party, there are no genuine issues of material fact and the moving party is entitled
When the parties have met their burden, the district judge's task is as follows:
Torgerson, 643 F.3d at 1042-43.
"Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Ryan v. Capital Contractors, Inc., 679 F.3d 772, 776 (8th Cir.2012). However, summary judgment is particularly appropriate when only questions of law are involved, rather than factual issues that may or may not be subject to genuine dispute. See, e.g., Cremona v. R.S. Bacon Veneer Co., 433 F.3d 617, 620 (8th Cir.2006).
As mentioned just above, summary judgment must be determined in light of the "governing law." See, e.g., Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The "governing law" here necessarily relates to the interpretation and construction of an insurance contract. Notwithstanding references by the parties to decisions outside of this state and federal circuit, there does not appear to be any dispute that Iowa law governs my interpretation and construction of the Vantus Policy.
The most recent comprehensive discussion of insurance policy interpretation and construction under Iowa law is set out in Boelman v. Grinnell Mutual Reinsurance Company, 826 N.W.2d 494 (Iowa 2013). In Boelman, the Iowa Supreme Court observed, first, that there are "differences between interpretation and construction of an insurance policy." 826 N.W.2d at 501. Specifically, "[i]nterpretation requires [the court] to give meaning to contractual words in the policy." Id.; see also Hagenow v. American Family Mut. Ins. Co.,
As the Iowa Supreme Court explained in Boelman, "Policy interpretation is always an issue for the court, unless [the court is] required to rely upon extrinsic evidence or choose between reasonable inferences from extrinsic evidence." Id. (citing Connie's Constr. Co. v. Fireman's Fund Ins. Co., 227 N.W.2d 207, 210 (Iowa 1975)). The court then identified several rules of "interpretation." First, "[i]f the policy does not define a term, [the court must] give the word its ordinary meaning." Id. (citing Interstate Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 754 (Iowa 1999)); accord Farm Bureau Life Ins. Co. v. Holmes Murphy & Assocs., Inc., 831 N.W.2d 129, 134 (Iowa 2013) ("When words are left undefined in a policy, we give them their ordinary meanings — meanings which a reasonable person would give them."). More specifically, "[i]n searching for the ordinary meanings of undefined terms in insurance policies [Iowa courts] commonly refer to dictionaries." Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134. Second, "[t]he plain meaning of the insurance contract generally prevails." Boelman, 826 N.W.2d at 501 (citing Thomas, 749 N.W.2d at 682). Third, the court must "read the policy as a whole, . . . not seriatim by clauses," because "`[w]ords in an insurance policy are to be applied to subjects that seem most properly related by context and applicability.'" Id. (quoting Jones v. State Farm Mut. Auto. Ins. Co., 760 N.W.2d 186, 188 (Iowa 2008)); accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 ("We read the insurance contract in its entirety, rather than reading clauses in isolation, to determine whether a policy provision is subject to two equally proper interpretations."). Fourth, the court "will not interpret an insurance policy to render any part superfluous, unless doing so is reasonable and necessary to preserve the structure and format of the provision." Id. at 502 (citing Thomas, 749 N.W.2d at 685). Fifth, the court must "interpret the policy language from a reasonable rather than a hypertechnical viewpoint." Id. (citing Steel Prods. Co. v. Millers Nat'l Ins. Co., 209 N.W.2d 32, 36 (Iowa 1973)); accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 ("We do not typically give [undefined terms] meanings only specialists or experts would understand.").
"If an insurance policy and its exclusions are clear, the court `will not "write a new contract of insurance"' for the parties." Boelman, 826 N.W.2d at 502 (quoting Thomas, 749 N.W.2d at 682, in turn quoting Cairns v. Grinnell Mut. Reins. Co., 398 N.W.2d 821, 824 (Iowa 1987)); accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 ("Ultimately, if there is no ambiguity, the court will not rewrite the policy for the parties."). An "ambiguity" arises, however, applying an "objective test," "if the language is susceptible to two reasonable interpretations," reading the policy as a whole. Id. at 501 (emphasis in the original); see also Hagenow, 846 N.W.2d at 377 ("We have said `[a]n ambiguity exists when, after application of our relevant rules of interpretation, a genuine uncertainty results as to which of two or more meanings is proper.'" (quoting American Family Mut.
Although "interpretation" is an issue for the court in most circumstances, "construction" — determining the "legal effect" of policy language, as interpreted — "is always a matter of law for the court." Id. at 501. As the Iowa Supreme Court explained in Boelman,
Boelman, 826 N.W.2d at 501; accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 133-34.
As to "exclusions" of coverage in insurance policies — the provisions specifically at issue on the parties' cross-motions for summary judgment in this case — the Iowa Supreme Court explained in Boelman, "`"An insurer assumes a duty to define any limitations or exclusionary clauses in clear and explicit terms."'" Id. (quoting Thomas, 749 N.W.2d at 682, in turn quoting Hornick v. Owners Ins. Co., 511 N.W.2d 370, 374 (Iowa 1993)). Thus, courts must "strictly construe exclusions against the insurer." Id. (citing Ferguson v. Allied Mut. Ins. Co., 512 N.W.2d 296, 299 (Iowa 1994)). Doing so is appropriate, "because insurance policies constitute adhesion contracts." Id. (citing Allied Mut. Ins. Co. v. Costello, 557 N.W.2d 284, 286 (Iowa 1996)).
The first provision that I must interpret and construe on the parties' cross-motions for summary judgment concerning coverage is the "insured vs. insured exclusion." Because this case is before me on cross-motions for summary judgment, I find it most appropriate to summarize all of the respective arguments by the FDIC-R and Progressive
The FDIC-R argues that the "insured vs. insured exclusion" does not bar coverage in this case, because the definition of
The FDIC-R also rejects Progressive's contention that the FDIC-R merely "steps into the shoes" of the failed Bank, because the FDIC-R contends that it has statutory rights and responsibilities beyond acting as a mere instrumentality or representative of the failed Bank. For example, the FDIC-R argues that it has the specific power to bring "gross negligence" claims against directors and officers of failed institutions "on behalf of, . . . [and] for the benefit of, the [FDIC]," pursuant to 12 U.S.C. § 1821(k). The FDIC-R argues that O'Melveny & Myers v. FDIC, 512 U.S. 79, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994), on which Progressive relies for its
The FDIC-R contends that several courts have found that the "insured vs. insured exclusion" at issue here, or ones like it, are inapplicable to the FDIC-R, both in the wake of the banking crisis in the late 1980s and early 1990s, and in the wake of the "Great Recession" in the first decade of this century. The FDIC-R argues that the purpose of the "insured vs. insured exclusion" was to protect against "collusive cases" by bank insiders for the benefit of the bank, not to preclude actions by the FDIC-R. The FDIC-R points out that courts have also held that the "shareholder derivative exception" to the "insured vs. insured exclusion" applies, because, among other claims, the FDIC-R brings such claims on behalf of shareholders.
Progressive argues that the "insured vs. insured exclusion" applies on its face. First, Progressive argues that the FDIC-R's claims are "by or on behalf of" the Bank, because it "steps into the shoes" of the failed Bank, as explained in O'Melveny & Myers v. FDIC, 512 U.S. 79, 86-87, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994). Progressive argues that, no matter how many "hats" the FDIC-R claims to wear, it is plainly pursuing against the D & O Defendants claims that "belonged" to the Bank and seeks to recover losses that the Bank suffered as a result of the D & O Defendants' wrongful acts. Progressive also argues that § 1821(k) merely establishes a "liability floor" for director and officer misconduct, but does not create a claim different from the Bank's state-law claim against the directors and officers for mismanagement. Progressive also argues that the "shareholder derivative exception" does not apply to the FDIC-R's claims, because the FDIC-R's suit is not a shareholder derivative action.
As to pertinent case law, Progressive argues that O'Melveny & Myers supersedes any cases from the banking crisis in the 1980s and 1990s concerning the effect of the "insured vs. insured exclusion," because it expressly holds that the FDIC-R "steps into the shoes" of the failed Bank and that any defenses good against the failed Bank are good against the FDIC-R. Progressive also argues that the purpose of the "insured vs. insured exclusion" is not simply to foreclose "collusive cases," but whatever the "intent" of the clause was, that "intent" is irrelevant to the applicability of the clause to particular claims.
The parties also assert numerous arguments that I find it unnecessary to reach. Among those arguments, the parties dispute whether extrinsic evidence demonstrates that the "insured vs. insured exclusion" was intended to bar claims such as the FDIC-R has brought against the D & O Defendants and whether extrinsic evidence can be considered at all. They also dispute whether the "reasonable expectations" of the D & O Defendants demonstrate that the "insured vs. insured exclusion" does or does not apply and whether such "reasonable expectations" are even relevant. They also dispute whether the industry practice demonstrates that "regulatory exclusions," rather than "insured vs. insured exclusions," are used when the insurer intends to bar coverage for claims
I must first "interpret" the "insured vs. insured exclusion" — that is, "give meaning to contractual words in the policy" — "`read[ing] the policy as a whole,'" not just this exclusion in isolation. Boelman, 826 N.W.2d at 501 (quoting Jones, 760 N.W.2d at 188). The focus of the parties' dispute is on the meaning of the phrase "
First, I must look to the Vantus Policy itself for express definitions of any terms in the "insured vs. insured exclusion." The definitions of
Reading the Vantus Policy "as a whole," by looking to provisions addressing "`subjects that seem most properly related by context and applicability,'" see Boelman,
In short, as a matter of either "interpretation" or "construction," I conclude that the "intent of the parties," at the time that they entered into the Vantus Policy, determined "by looking at what the policy itself says,'" compare id. (identifying "intent of the parties" as a principle of "construction" (quoting Thomas, 749 N.W.2d at 682)); with Hagenow, 846 N.W.2d at 376-77 (identifying "intent of the parties" as a principle of "interpretation"), was that
Not too surprisingly, then, the parties' focus shifts to the phrase "on behalf of, or at the behest of the
Progressive has not argued that the FDIC-R's claims were made "at the behest" of the
Thus, the real "fighting issue" is whether the FDIC-R has brought its claims "on behalf of" Vantus Bank. As a matter of
http://www.oed.com ("behalf," definition 1.c.). This is the appropriate interpretation, "from a reasonable rather than a hypertechnical viewpoint." See Boelman, 826 N.W.2d at 501 (citing Steel Prods. Co., 209 N.W.2d at 36); accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 ("We do not typically give [undefined terms] meanings only specialists or experts would understand."). Furthermore, this interpretation is appropriate, based on reading the Vantus Policy "as a whole" and looking to provisions addressing "`subjects that seem most properly related by context and applicability.'" See id. (quoting Jones, 760 N.W.2d at 188). No party has suggested, and I have not found, any other provision of the Vantus Policy that would either shed light on or conflict with this interpretation.
On the other hand, I find no basis to graft onto this interpretation of "on behalf of . . . the
Also, there is nothing ambiguous about "on behalf of . . . the
One of several problems with Progressive's reliance on O'Melveny & Myers as establishing the equivalence of "on behalf of" in the Vantus Policy and "step[ping] into the shoes of" is that the United States Supreme Court never so much as mentioned such an equivalence, or even the word "behalf," in that decision. Another problem is that supplying the meaning of "on behalf of" from O'Melveny & Myers seems to me to be the sort of "hypertechnical viewpoint" eschewed under Iowa law. Boelman, 826 N.W.2d at 501. Yet another problem is that interpreting "on behalf of" as "step[ping] into the shoes of," based on O'Melveny & Myers, would seem to be tantamount to creation of federal common
The biggest problem, however, is that, in O'Melveny & Myers, the Court did not purport to interpret, let alone construe, any "insured vs. insured exclusion," and certainly did not address the one at issue here. Rather, in O'Melveny & Myers, the Court addressed the question of whether, in a suit by the FDIC, as receiver of a federally insured bank, a federal-law rule or a state-law rule of decision governs the tort liability of attorneys who provided services to the bank. 512 U.S. at 80, 114 S.Ct. 2048. The case in O'Melveny & Myers also involved a receivership by the FDIC that began in 1986, asserting claims that arose earlier, but FIRREA — the authority for the FDIC-R's claim in its lawsuit against the D & O Defendants — was not even enacted until 1989, and the Court declined to view it as "self-evident" that FIRREA would have taken effect in time to be relevant to the case then before it. 512 U.S. at 87, 114 S.Ct. 2048. In O'Melveny & Myers, then, the Court certainly did not hold that, as a matter of law, "step[ping] into the shoes of" is equivalent to or a proper interpretation of "on behalf of" in the "insured vs. insured exclusion" in the Vantus Policy, contrary to Progressive's contentions.
At most, in O'Melveny & Myers, the Court opined that the language in 12 U.S.C. § 1821(d)(2)(A)(i) — a provision of FIRREA, stating, in part, that "the [FDIC] shall, . . . by operation of law, succeed to . . . all rights, titles, powers, and privileges of the insured depository institution. . . ." — "appears to indicate that the FDIC as receiver `steps into the shoes' of the failed S & L, obtaining the rights `of the insured depository institution' that existed prior to receivership." 512 U.S. at 86, 114 S.Ct. 2048 (emphasis added) (internal citation omitted); see also id. at 87, 114 S.Ct. 2048 (stating, "It is hard to avoid the conclusion that § 1821(d)(2)(A)(i) places the FDIC in the shoes of the insolvent S & L, to work out its claims under state law, except where some provision in the extensive framework of FIRREA provides otherwise," but declining to assume that FIRREA would have taken effect in time to have any effect on the case before the Court). Opining as to indications of — but not deciding as a matter of law that there was — an equivalence in meaning between different statutory language and "step[ping] into the shoes of" certainly is not deciding that there was such an equivalence between "on behalf of" in the Vantus Policy and "step[ping] into the shoes of." Furthermore, in O'Melveny & Myers, the United States Supreme Court stated only that "in litigation by the FDIC asserting the claims of the S & L — in this case California tort claims potentially defeasible by a showing that the S & L's officers had knowledge — `"any defense good against the original party is good against the receiver."'" Id. (emphasis in the original) (quoting the case below, in turn quoting Allen v. Ramsay, 179 Cal.App.2d 843, 854, 4 Cal.Rptr. 575, 583 (1960)). Thus, the Court did not hold, as Progressive asserts, that the claims by the FDIC necessarily are claims of or that belonged to the failed bank. The Court only explained that the FDIC-R "steps into the shoes of" the bank when the FDIC is asserting the claims of the bank.
Finally, in O'Melveny & Myers, the Court did not even address the effect of the remainder of § 1821(d)(2)(A)(i), providing that the FDIC-R succeeds to the
12 U.S.C. § 1821(d)(2)(A)(i) (emphasis added). Nor did the Court consider whether § 1821(k) — which authorizes the FDIC to pursue an action for liability of directors and officers of failed institutions where such "action is prosecuted wholly or partially for the benefit of the Corporation" — only authorizes a suit by the FDIC-R "step[ping] into the shoes of" the failed bank, rather than a suit by the FDIC-R on its own "behalf." Indeed, for all the noise that Progressive makes about the Supreme Court's decision in O'Melveny & Myers providing controlling law here, I find that decision is all but irrelevant to the disposition of any issue in this case.
Thus, I must still decide the "construction" — that is, the "legal effect" — of the "insured vs. insured exclusion," as I have interpreted it, and that is a question of law for the court. See Boelman, 826 N.W.2d at 501. Here, because I have found no ambiguity, I must apply "[t]he cardinal rule of construing insurance policies," which is that "the intent of the parties must control, and the court determines the intent of the parties by looking at what the policy itself says." Id.
I need not "strain the words or phrases of the policy," see id. ("We will not strain the words or phrases of the policy in order to find liability that the policy did not intend and the insured did not purchase." (quoting Thomas, 749 N.W.2d at 682)), to conclude that the Vantus Policy itself makes clear that the intent of the "insured vs. insured exclusion" was to preclude collusive suits by and among the
Indeed, statutory provisions, including § 1821(d)(2)(A)(i) and § 1821(k), concerning the authority of the FDIC-R to "wear many hats," which is controlling in this case filed after FIRREA was enacted in 1989, demonstrate conclusively that the FDIC-R's claims were not brought "in the name of, as the agent or representative of, on account of, for, [or] instead of" Vantus Bank. See http://www.oed.com ("behalf," definition 1.c). This is so, because, once a bank is closed and the FDIC-R is appointed as receiver, the FDIC-R has the exclusive right to bring the claims at issue here. See, e.g., In re Beach First Nat'l Bancshares, Inc., 702 F.3d 772, 780 (4th Cir. 2012) (with the exception of "direct claims," involving unique damages to the claimant, the FDIC has the exclusive right to bring claims flowing from acts and harm at the bank level, pursuant to § 1821(d)(2)(A)(i)); Levin v. Miller, No. 1:11-cv-1264-SEB-TAB, 2012 WL 1982287, *4 (S.D.Ind.2012) (citing § 1821(d)(2)(A)(i)); Lubin v. Cincinnati Ins. Co., Civil Action No. 1:09-CV-2985-RWS, 2010 WL 5313754, *12 (N.D.Ga. 2010) (same), aff'd, 677 F.3d 1039 (11th Cir.2012). Because the FDIC-R's right to bring the claims is exclusive, it plainly is not bringing the claims "on behalf of" the
Thus, the "insured vs. insured exclusion" does not bar coverage for the FDIC-R's claims.
As a matter of law, the "insured vs. insured exclusion" does not bar coverage for the D & O Defendants for the FDIC-R's claims. Consequently, the FDIC-R and the D & O Defendants are entitled to summary judgment to that effect, and Progressive's Motion For Summary Judgment for a contrary declaration is denied.
The second provision of the Vantus Policy that I must interpret and construe on the parties' cross-motions for summary judgment concerning coverage is the "investment loss carve-out." Vantus Policy, § IV(N)(6), Defendants' Joint Appendix II at 209; see, supra, beginning on page 939 (definition of
The FDIC-R contends that, to be excluded from coverage under the "investment loss carve-out," it is clear that any investment loss must be "unrelated" to any
The FDIC-R also argues that Progressive's construction of the "investment loss carve-out" is contrary to its representations to the D & O Defendants and contrary to insurance industry custom and practice. The FDIC-R also argues that, in information provided to the D & O Defendants, Progressive included as an example of covered claims a shareholder derivative claim for alleged mismanagement. Somewhat more specifically, the FDIC-R argues that Progressive amended the definition of
Progressive argues, however, that the Vantus Policy was not designed to make it the guarantor of the Bank's unwise investment decisions and that the only recovery that the FDIC-R seeks from the D & O Defendants is the amount that the securities at issue depreciated in value. Thus, Progressive argues that the FDIC-R's claims fall squarely within the "investment loss carve-out." Progressive argues that the FDIC-R improperly separates the phrase "unrelated to a
Progressive contends that extrinsic evidence is simply not relevant, but if it is considered somehow relevant, it cannot be used to give no effect to unambiguous policy language. Progressive also argues that the addition of the "investment loss carve-out" in the midst of other amendments relating to "entity liability" only demonstrates that there is a single definition of
As I did with the "insured vs. insured exclusion," I must first "interpret" the "investment loss carve-out"—that is, "give meaning to contractual words in the policy"—"`read[ing] the policy as a whole,'" not just this provision in isolation. Boelman, 826 N.W.2d at 501 (quoting Jones, 760 N.W.2d at 188). I begin by looking in the Vantus Policy itself for express definitions of any of the constituent terms of the "investment loss carve-out."
The definition of
Progressive argues that, just as plainly, the "investment loss carve-out" carves out of the definition of
The only other term in the "investment loss carve-out" that is defined in the Vantus
Although certain terms in the "investment loss carve-out" are not in bold and, thus, are not expressly defined in the Vantus Policy, their "context" is adequate to interpret their meaning. See Boelman, 826 N.W.2d at 501 ("`Words in an insurance policy are to be applied to subjects that seem most properly related by context and applicability.'" (quoting Jones, 760 N.W.2d at 188)). As a matter of "context," it is clear that "investment product" is the general category of items at issue in the "investment loss carve-out" and that the word "including" before a list of other items—"securities, commodities, currencies, options or futures"—means that those other items are a non-exclusive list of examples of "investment products." More importantly, there does not appear to be any dispute that the collaterized debt obligations backed by Trust Preferred Securities (CDO-TruPS) at issue in the FDICR's claims against the D & O Defendants are "investment products" within the meaning of the "investment loss carve-out."
Another undefined term in the "investment loss carve-out" is "depreciation." The "ordinary" or "plain" meaning of this term is drawn from dictionaries. See Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 ("In searching for the ordinary meanings of undefined terms in insurance policies [Iowa courts] commonly refer to dictionaries."). For example, the on-line edition of the OED defines "depreciation," in the sense relevant here, as "[l]owering of value; fall in the exchangeable value (of money)." See http://www.oed.com ("depreciation," definition 1.a.). This "ordinary" meaning appears to me to be reinforced, in "context," by the immediately following prepositional phrase "of any investment product" and adjectival phrase "due to market fluctuation." From the context, I must assume that the adjectival phrase "due to market fluctuation" modifies "depreciation . . . in value of any investment product." In that phrase, the "ordinary" or "dictionary" meaning of "fluctuation," in the sense relevant here, is "[a]n alternate rise and fall in amount or degree, price or value, temperature, etc." See id. ("fluctuation," definition 2.b., with emphasis added); see also id. ("fluctuation," definition 2.a., "The action or condition of passing more or less rapidly and suddenly from one state to another; an instance of this; repeated variation, vicissitude. In pl. `ups and downs.'").
Taking a closer look at the adjectival phrase "due to market fluctuation," the undefined phrase "due to" must also be given its "ordinary," "dictionary" meaning. Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134. As the OED explains, "due to" is a prepositional phrase meaning "owing to," see http://www.oed.com ("due," definition 9.d. "due to"), where "owing to,"
There are two critical issues for interpretation of this provision yet to be addressed, one grammatical and one definitional. As to the grammatical issue, pursuant to the "investment loss carve-out," what is "carved out" of the definition of
More specifically, does "unrelated to any
Progressive argues that interpreting "unrelated to any
Consequently, I conclude that the "investment loss carve-out" "is susceptible to two reasonable interpretations." Boelman, 826 N.W.2d at 501 (emphasis in the original). The first interpretation is that
Yet, even if Progressive's reading of the "investment loss carve-out," in which "unrelated to any
Progressive seeks to give the word "unrelated" a meaning comparable to the meaning of "due to"—that is, that there is no coverage pursuant to the "investment loss carve-out" if the
Thus, as to the two critical interpretive issues concerning the "investment loss carve-out," I conclude, first, that there are two reasonable interpretations of what the second adjectival phrase—"unrelated to any
Next, I must decide the "construction"—that is, the "legal effect"—of the "investment loss carve-out," as I have interpreted it, which is a question of law for the court. Id. at 501. I recognize that, because of the ambiguity discovered above, I must construe the provision against Progressive and in favor of coverage for the FDIC-R's claims against the D & O Defendants. Id. Moreover, even assuming that there is no ambiguity in the "investment loss carve-out," and that Progressive's interpretation of what the second adjectival phrase modifies is plainly correct, it is appropriate to construe the "investment loss carve-out" narrowly, on the basis of the interpretation of the carve-out as requiring that the "market fluctuation" have no connection to "any
The construction favorable to the D & O Defendants because of the ambiguity requires me to construe "unrelated to any
Yet, even if "unrelated to any
As a matter of law, the "investment loss carve-out" does not bar coverage for the D & O Defendants for the FDIC-R's claims. Consequently, the FDIC-R and the D & O Defendants are entitled to summary judgment to that effect, and Progressive's Motion For Summary Judgment for a contrary declaration is denied.
In its Motion For Summary Judgment, Progressive also asserts that resolution of the issues concerning the interpretation and construction of the "insured vs. insured exclusion" and the "investment loss carve-out," as well as other undisputed facts or matters of law, require summary judgment in its favor on the D & O Defendants' counterclaims. Because the resolution of the interpretation and construction issues concerning the exclusions on which Progressive relied are actually contrary to Progressive, I need only consider additional factual and legal arguments concerning the D & O Defendants' counterclaims. Although the parties have made separate arguments concerning summary judgment on each of the D & O Defendants' non-declaratory claims, I find that, in light of my resolution of the declaratory issues above, I need not address separately the D & O Defendants' breach-of-contract claim and breach-of-implied-warranty claim.
Progressive argues that, because it has not, in fact, failed to pay any
In addition, Progressive points out that the D & O Defendants' breach-of-implied warranty claim is based on the lack of coverage under the Vantus Policy and the consequent alleged unfitness of the Policy for the purpose for which the Policy was purchased. Progressive argues that there is no evidence to support the allegation that the D & O Defendants purchased the Policy for any particular purpose, however. Progressive argues that no reasonable person could have believed that the Policy provided coverage for any and all claims that might be asserted against the D & O Defendants for decisions or other actions taken in their capacities as directors and officers of the Bank. This is so, Progressive argues, because the Policy included a section labeled, in bold and all capital letters, "
In response, the D & O Defendants contend that, not only should Progressive's Motion For Summary Judgment be denied as to their counterclaims, but that those claims are ripe for summary adjudication in their favor.
To the extent that there is no coverage under the Policy, the D & O Defendants argue that Progressive cannot avoid liability on their breach-of-implied-warranty counterclaim by arguing that the D & O Defendants could not have relied on representations by Progressive. They point out that a reasonable person would expect that a policy entitled "
I find it useful to begin by summarizing the D & O Defendants' breach-of-contract and breach-of-implied-warranty claims. In their breach-of-contract claim, the D & O Defendants allege that Progressive's failure to pay claims asserted by the FDIC-R is a breach of the Policy and the implied covenant of good faith and fair dealing; that they have performed their obligations under the Policy; and that, as a direct and proximate result of Progressive's breach of the Policy, they have suffered "damages," including costs associated with their efforts to effect Progressive's coverage, including reasonable attorneys' fees and costs. The D & O Defendants expressly pray for relief on this claim consisting of damages, interest on damages, costs and attorney's fees, and "such other and further relief as the Court deems just and proper." D & O Defendants' Answer And Counterclaim (docket no. 19), Counterclaim, Count I. In their breach-of-implied-warranty counterclaim, the D & O Defendants expressly allege, "To the extent there is no coverage under the Policy for the claims asserted by the FDIC[-R], the Policy was not fit for the purpose for which it was purchased." Id. at Counterclaim, Count II. The D & O Defendants pray for the same relief on this counterclaim as they seek on their breach-of-contract counterclaim. Id.
This summary of the claims suffices to demonstrate that neither counterclaim is, at least in the first instance, a "declaratory" claim, because the primary relief expressly requested on each counterclaim is damages. The D & O Defendants might argue that "an affirmative ruling finding coverage is warranted," as relief on their breach-of-contract counterclaim, because it falls within the "catchall" prayer for "such other and further relief as the Court deems just and proper" on that counterclaim, but they have not expressly done so. Moreover, such relief is entirely duplicative of the declaratory relief that they seek—and to which I have determined they are entitled—on their separate declaratory judgment counterclaim. Thus, I conclude that a declaration that "coverage is warranted" is not necessary or proper relief on the D & O Defendants' breach-of-contract counterclaim.
The D & O Defendants contend that the only controversy that exists as to the elements of their breach-of-contract counterclaim—as a claim for damages—is whether the Bank had a
In other words, the D & O Defendants have failed to generate any genuine issues of material fact on the "breach" element of their breach-of-contract counterclaim. Torgerson, 643 F.3d at 1042 (explaining that, in response, "[t]he nonmovant `must do more than simply show that there is some metaphysical doubt as to the material facts,' and must come forward with `specific facts showing that there is a genuine issue for trial.'" (quoting Matsushita Elec. Indus. Co., 475 U.S. at 586-87, 106 S.Ct. 1348)). Progressive is entitled to summary judgment on the D & O Defendants' breach-of-contract counterclaim. Id.; FED. R.CIV.P. 56.
I also find that the breach-of-implied-warranty counterclaim is expressly contingent on a declaration that there is no coverage under the Vantus Policy for the claims asserted by the FDIC-R against the D & O Defendants. In the disposition of the cross-motions for summary judgment on the coverage issues, however, I concluded that there is, as a matter of law, coverage for those claims. Thus, I conclude that the D & O Defendants' breach-of-implied-warranty counterclaim is moot as a matter of law, because the declarations on coverage that I find are required as a matter of law eliminate the prerequisite for this counterclaim. Indeed, this counterclaim is plainly an "alternative" claim, and my disposition of coverage issues deprives the parties of any concrete or continuing interest in pursuing this counterclaim. See, e.g., First Union Nat'l Bank ex rel. Southeast Timber Leasing Statutory Trust v. Pictet Overseas Trust Corp., Ltd., 351 F.3d 810, 816 (8th Cir. 2003) ("Mootness applies in cases in which one or both of the parties plainly lack a continuing interest, as when the parties have settled or a plaintiff pursuing a non-surviving claim has died, [but] [a]s long as the parties have a concrete interest in the outcome of the litigation, the case is not moot notwithstanding the size of the dispute." (internal quotation marks and citations omitted)); but see Outdoor Central, Inc. v. GreatLodge.com, Inc., 643 F.3d 1115, 1119 (8th Cir.2011) (an alternative claim may not be moot, if it has not been abandoned in the event of a remand).
In light of the disposition of the declaratory issues concerning coverage under the Policy, I find that the D & O Defendants' breach-of-implied-warranty counterclaim is moot as a matter of law, and that Progressive is entitled to summary judgment to that effect. I also find that the D & O Defendants have not generated a genuine issue of material fact on any breach of the Policy at issue, where Progressive has paid
Upon the foregoing,
2. The parties' requests for oral arguments on their cross-motions for summary judgment, including the FDIC-R's separate Motion (docket no. 123) for such oral arguments, are
3. The FDIC-R's September 5, 2014, Motion For Summary Judgment (docket no. 118) is
4. The D & O Defendants' September 5, 2014, Motion For Summary Judgment (docket no. 125) is
5. Progressive's September 5, 2014, Motion For Summary Judgment (docket no. 120) is
Furthermore, because this ruling disposes of all claims and counterclaims, judgment shall enter in accordance with the dispositions above.
Order at 420.
Declaration of Matthew J. Dendinger, Exhibit 2 (docket no. 146-3), Former D & O Defendants' Answers, With Objections, To Plaintiffs' First Interrogatories.
Declaration of Matthew J. Dendinger, Exhibit 2 (docket no. 146-3), Former D & O Defendants' Answers, With Objections, To Plaintiffs' First Interrogatories.
Declaration of Matthew J. Dendinger, Exhibit 2 (docket no. 146-3), Former D & O Defendants' Answers, With Objections, To Plaintiffs' First Interrogatories.