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Category: Fees & Insurance Policy

Six Flags Wants Insurer to Cover $2.89M in Attorney Fees

May 19, 2021

A recent Texas Lawyer story by Angela Morris, “Six Flags Wants Insurer Travelers Casualty to Cover $2.89 Million in Attorney Fees, reports that the Texas-based theme park filed new litigation seeking to force its insurance company to reimburse millions of dollars in attorney fees that it paid to some of the nation’s largest law firms—like Kirkland & Ellis and Perkins Coie.  In the new federal court lawsuit in Dallas, Six Flags Entertainment Corp. has alleged that its insurer, Travelers Casualty and Surety Co. of America, has wrongfully denied the park its insurance coverage for attorney fees and legal expenses.

Six Flags spent the money to defend itself from a probe by the U.S. Securities and Exchange Commission into its business dealings in China, and from a class action and shareholder litigation related to the China dealings.  Six Flags operates 26 parks in the U.S., Mexico and Canada, including four parks each in California and Texas, and two parks each in Georgia, New Jersey and New York, according to its website.

But COVID-19 has hit Six Flags hard: $82 million revenue in the first quarter of 2021 represents a 38% drop compared to the same time period in 2019, according to the company’s most recent performance report.  The park’s legal troubles started in February 2020 with the SEC subpoena, according to the complaint in Six Flags Entertainment Corp v. Travelers Casualty and Surety Co. of America, filed in the U.S. District Court for the Northern District of Texas.

Six Flags had to pay more than $2.5 million in fees to law firms Kirkland & Ellis, Lionbridge, Parker Lynch and Fayer Gipson to defend itself against the subpoena, which asked for information about a partnership with a Chinese real estate developer regarding Six Flags parks in China, and a negative $15 million revenue adjustment.  Insurance coverages for directors and officers and for organizational liability should have covered the company’s legal expenses, the complaint said.

Also in February 2020, two securities class-action complaints were filed against the company and two former executives over the same partnership and negative revenue adjustment.  Substantively the same allegations arose in shareholder derivative lawsuits in federal and state courts against the company, executives and board members, said the complaint.  Six Flags had to spend more than $290,000 in fees for lawyers at Perkins Coie to represent two company executives who were defendants in a class action, since there could be a conflict if the same attorneys represented the company and those individuals.

According to a search of federal court records on PACER, plaintiffs filed three shareholder derivative lawsuits that were consolidated into one case, and U.S. District Judge Mark Pittman on April 28 granted a motion to dismiss by Six Flags in the case, In Re Six Flags Entertainment Corp. Derivative Litigation. The defendants—Six Flags’ executives and board members—were represented by Kirkland & Ellis lawyers Jeremy Fielding of Dallas, and New York-based Daniel Cellucci, Sandra Goldstein and Stefan Atkinson.  Pittman on March 3 granted Six Flags’ motion to dismiss in a consolidated class action matter, according to an opinion and order in that case, Electrical Workers Pension Fund v. Six Flags Entertainment Corp.  Those defendants–Six Flags and two executives–had the same Kirkland & Ellis attorneys, said PACER.

In a different case—unrelated to the Chinese Six Flags parks–Six Flags had told its insurance company about a “crucial event matter” dealing with a potential proxy fight with a shareholder. Six Flags tapped Kirkland & Ellis to represent it, and the matter eventually reached an amicable agreement, said the complaint.  Six Flags incurred more than $100,000 in legal fees for this outcome, and the complaint alleged that Travelers has refused coverage.

Aside from these legal actions, the complaint alleged that at other times, Travelers has tried to recharacterize and reallocate legal fees and expenses, that should have been covered by insurance. It alleged the insurer looked to lessen exposure and to decrease policy benefits paid to Six Flags.

The theme park company is suing its insurer for breach of contract, violation of a Texas insurance law that requires prompt and fair payment of claims, and breach of the duty of good faith and fair dealing.  Six Flags has asked the court for a declaratory judgment that finds the Travelers policy should cover attorney fees and legal expenses.  In addition to recovering those amounts from Travelers, it wants to be paid back for the legal fees it is spending to sue the insurance company, said the complaint.

Wyoming Supreme Court: Sinclair Can Seek Attorney Fees From Insurer

May 10, 2021

A recent Reuters story by Debra Cassens Weiss, “Wyoming Top Court Sides With Sinclair Refinery On Fee Award Question” reports that a Sinclair refinery can seek attorneys’ fees from Swiss insurer Infrassure under Wyoming law even though the policy was not issued in Wyoming or physically delivered in the state, the Wyoming Supreme Court held in answer to a certified question from the 10th U.S. Circuit Court of Appeals.

In its first interpretation of a fee award statute that applies only to insurance policies “delivered” or “issued for delivery in” Wyoming, the high court found the law “clearly and unambiguously provides that an insurance contract is issued for delivery in Wyoming if the policy issued is intended to protect an insured in Wyoming against risks in Wyoming.”

The decision paves the way for Sinclair Wyoming Refining Company’s second appellate win following a 2013 fire and explosion that slowed production for seven months.  The 10th Circuit last year affirmed that Infrassure must pay its contractual share of the business-interruption loss, but asked the Wyoming Supreme Court for input on the fee-award statute.  According to the Wyoming Supreme Court’s order, the refinery was an additional named insured under coverage obtained its parent company, The Sinclair Companies, and underwritten by 18 insurers on the London market.

After the 2013 explosion, the refinery sought $100 million from its insurers but agreed to a $60 million settlement.  By 2015, all the insurers had paid their shares except for Infrassure, which demanded arbitration.  The arbitration panel independently concluded that the loss was $60 million and ordered Infrassure to pay its $4.5 million share. U.S. District Judge Nancy Freudenthal confirmed the arbitration award in 2018.

However, Freudenthal dismissed the refinery’s claim for attorneys’ fees for wrongful denial under Wyoming’s insurance code.  She concluded that the statute did not apply because Infrassure had “issued” its policy in London or Zurich and there was no evidence the policy had ever been physically “delivered.”  Although both The Sinclair Companies and Sinclair Wyoming Refining Co are Wyoming corporations, Freudenthal found it more significant that the only address mentioned in the policy was for the parent company’s risk-management offices in Utah.

Like Freudenthal, the Wyoming Supreme Court acknowledged that courts “are split on whether statutory language referencing an insurance policy be ‘delivered’ or ‘issued for delivery’ should be construed strictly or liberally.”  The justices, however, adopted the more liberal view of the New York Appellate Division, which considers two factors – the location of the insured, and the location of the risk to be insured – to determine whether a policy was “issued for delivery” in New York.

That reading is consistent with the Wyoming law’s purpose “to protect public welfare and Wyoming residents from being taken advantage of by sophisticated insurance companies,” the opinion says.  “(A)bsent an insurance contract unambiguously stating otherwise, if the location of the insured and the location of the risk to be insured are both in Wyoming, an insurance policy is intended to be delivered and is ‘issued for delivery’ in Wyoming, the court concluded.

Quinn Emanuel Defends Billing Practices, Expenses

May 5, 2021

A recent Law 360 story by Rachel Schart, “MiMedx Slams Quinn Emanuel Fees As 2 Other Firms Settle,” reports that MiMedx has accused Quinn Emanuel of seeking unreasonable fees, including for lawyers' luxury hotel stays and fine dining, as part of the cost of defending two former company executives who were convicted of securities fraud.  The allegation, in court papers, comes after the life sciences company settled claims with two other law firms seeking payment of fees as part of the same dispute.

Quinn Emanuel Urquhart & Sullivan LLP, Freshfields Bruckhaus Deringer LLP and Kobre & Kim LLP initially filed suit in New York state court on April 15 alleging MiMedx Group Inc. shirked its obligations to indemnify the firms' clients, company President William Taylor and ex-CEO Parker "Pete" Petit.  Both men were sentenced to a year in prison in February after being convicted of one of two counts each at trial.

Freshfields and Kobre & Kim said in court filings that they had settled their claims against MiMedx.  Without disclosing the terms, the firms wrote in similar notices that their "claims in this proceeding do not make, and never were intended to make, a charge of deception against MiMedx or its general counsel, Butch Hulse, and that the filed action in this matter was a good faith fee dispute, which now has been swiftly and amicably resolved."

But Quinn Emanuel has yet to drop its claims in the lawsuit, and MiMedx took aim at the law firm in an answer filed in a related Florida state court legal fee dispute with the former executives.  In response to the men's counterclaims seeking additional fees to appeal their convictions, MiMedx accused Quinn Emanuel of overbilling Petit and Taylor and then unfairly attempting to collect from the company.

"Quinn Emanuel will have to explain its billing and expense practices," MiMedx wrote.  "These include staffing its trial team with over ten professionals, mostly from out-of-town despite having a large New York office within a few miles of the courthouse; staying in a luxury boutique hotel; having meals catered by a Michelin-starred chef (and supplementing them with separate orders of crab legs and sushi to boot); and charging MiMedx tens if not hundreds of thousands of dollars on a 'last-minute' motion to adjourn the trial that the court found 'border[ed] on the frivolous.'"

MiMedx said Quinn Emanuel has refused to provide it with invoices for its expenses in the case, and that it and the other criminal defense firms have already been paid more than $18 million for their work defending the former executives.  MiMedx's counsel told Law360 that the company has indemnified its former executives where required, but that the law firms can't force it to pay unwarranted fees.  "The company has been reasonable.  It paid pursuant to the indemnity," said Louis M. Solomon of Reed Smith LLP.  "It always reserved the right to make sure that the fees were reasonable, and even now with the convictions in place, we're not obliged to advance any more costs."

Quinn Emanuel's in-house counsel defended the firm's billing practices to Law360.  "Quinn Emanuel tried this case during the pandemic and achieved an acquittal for its client on the most serious count," Marc Greenwald, who is representing the law firm in the New York case, said.  "Quinn Emanuel expects to get paid at the rates that MiMedx agreed, and our work was outstanding.  All the charges were appropriate and reasonable."

MiMedx lodged its Florida state court claims against Petit and Taylor in January seeking permission to stop indemnifying the former executives upon sentencing, as well as reimbursement for millions of dollars in already paid fees.  Petit and Taylor fired back with counterclaims soon after they were sentenced, arguing in April that the company must continue indemnifying them in the upcoming appeal.  Quinn Emanuel, Freshfields and Kobre & Kim filed their separate New York state court suit in April, alleging that MiMedx has violated its contractual duty to pay Petit and Taylor's criminal defense costs.

Safeco Tells Eleventh Circuit Attorney Fees Aren’t Damages

May 3, 2021

A recent Law 360 story by Brett Barrauquere, “Safeco Tells 11th Circ. Atty Fees Aren’t Damages,” reports that Safeco Insurance wants the Eleventh Circuit to affirm a lower court ruling that another insurer is time-barred from seeking attorney fees on a $1.6 million judgment stemming from a fatal motorcycle accident.  Safeco Insurance of Illinois and Safeco Insurance Co. of America said in a brief said that Endurance American Specialty Insurance Co. waited eight months too long to request attorney fees.

Endurance should have either sought attorney fees within 14 days of the judgment as the prevailing party or presented evidence at trial to claim them as damages, Safeco argued.  Because it did neither, Endurance isn't entitled to anything, Safeco said.  "Endurance cannot circumvent the time requirement of the federal and local rules by arguing its fees were damages, either," Safeco said.

Endurance asked the federal appeals court in April to overturn a lower court decision that the insurer says improperly adopted recommendations by a magistrate judge that said Endurance had waited too long to argue it was due attorney fees.  A federal jury that had sided with Endurance decided that another insurer had violated an agency agreement, which included an indemnity provision that forces it to pay attorney fees to Endurance, according to the company's brief.  That jury finding supports Endurance's fee request, it says.

Safeco argues that under the controlling Florida law, attorney fees aren't recoverable as damages and that they are an ancillary claim based on a contractual provision.  And Endurance has no legal way of beating the 14-day deadline for claiming attorney fees, Safeco said.

Endurance didn't present evidence to back up its claim for attorney fees at trial, and it failed to move to appeal the final judgment and claim that the fees were wrongly excluded, Safeco said.  "Because Endurance never argued it's attorney's fees were damages to the magistrate judge, the district court was within its discretion to decline to consider the argument," Safeco said.

U.S. Magistrate Judge Christopher P. Tuite had issued a report and recommendation saying that Endurance filed its motion for fees almost a year after judgment was entered. The judge said the company "provides no rationale for its belated filings."  Judge Tuite's first denial was based on Florida statute.  The second one at issue is for recovery of fees "expended in enforcing the agency agreement's indemnification provision."  Judge Tuite said it looked like Endurance filed the second motion "after it gleaned from the [first report and recommendation] that it might not prevail on its first motion."

TX Justices Toss Class Action Fee Award in Insurance Cases

April 18, 2021

A recent Texas Lawyer story by Greg Land, “Texas Justices Toss Class Action Ruling Against Insurer and $3.5M Fee Award,” reports that the Texas Supreme Court has ruled an insurer that stopped issuing “all risk” homeowners policies because it was paying out too much in mold claims did not violate the contracts of some 400,000 policyholders, and does not have to pay more than $3 million in attorney fees and nearly $487,000 in costs a jury awarded to the plaintiffs lawyers. 

Ruling in a class action that’s been percolating through the courts for nearly 20 years, the justices sent the fee award back to a Jefferson County judge with instructions to consider what is “equitable and just” to Farmers Insurance, given that the named plaintiff and class “have not prevailed in any regard and have obtained no favorable results.”  The April 9 ruling written by Justice Jimmy Blacklock overturns a 2019 ruling by the Thirteenth Court of Appeals that upheld the fee award and also said the plaintiffs in separate, though related litigation should have been allowed to intervene in order to seek their own fees. 

Farmers is represented by a team of Norton Rose Fulbright lawyers including Houston-based partners Layne Kruse, Carlos Rainer, Katherine Mackillop and Scott Incerto.  Lawyers for plaintiff Sandra Geter and the class are John Werner of Reud Morgan & Quinn and DeWayne Layfield of the Law Office of L. DeWayne Layfield, both in Beaumont.

As detailed in the order and other filings, the case began in 2000 when Farmers and other insurers sought permission from the Texas Department of Insurance to stop writing the all-risk policies and instead offer a less comprehensive “named peril” policy.  A Farmers executive told the TDI the move was necessary because of “dramatic increases that we have experienced for water, mold and foundation claims, and the resultant underwriting losses.”    

The decision was approved, and in 2002 Farmers sent all holders of the policies a notice that they would not be renewed but that the named peril policy would still be offered.  In 2002, policyholder Geter filed a class action seeking declaratory judgment that Farmers’ non-renewal violated the clause of her policy stating: “We may not refuse to renew this policy because of claims for losses resulting from natural causes.”

She also argued that the non-renewal notice was void because it “was based on a prohibited reason for non-renewal.”  The trial court granted Geter summary judgment, ruling that Farmers breached the contract by not renewing the policies.  Also in 2002, another class action was filed in Travis County claiming that Farmers “wrongfully raised premiums despite offering less coverage when it replaced the HO-B policy” with the slimmed-down coverage.  Claims mirroring Geter’s were later added to that suit as well.  In 2016 the Travis County suit settled with Farmers agreeing to compensate policyholders in “a package valued at over $100 million.”  But the non-renewal claims were carved out of that litigation, and the Geter case continued with both sides filing for summary judgment.  

The trial court granted summary judgment to the plaintiffs, ruling that Farmers breached its agreement by not renewing the policies and that each member should be allowed to renew their HO-B policy at a premium set by the trial court.  While that decision was on appeal, in 2016 the trial judge held a jury trial on attorney fees that ended with a jury awarding the plaintiffs lawyers $3,046,247 in fees and $486,790 in expenses.  The plaintiffs in the Travis County action filed to intervene for their attorney fees, arguing that their case benefitted the Geter class members.

The trial judge denied the motion, and both they and Farmers appealed.  The court of appeals affirmed the trial court’s holding that Farmers had breached its policyholders’ contracts and the fee award, but reversed the rulings denying the Travis County plaintiff’s motions to intervene and ordering Farmers to issue HO-B policies at a determined premium. 

Blacklock’s opinion said the key to the case was the interpretation of the policies’ bar to renewal “for losses resulting from natural causes.”  “The dispute comes down to what paragraph 6(a) of the policy means by ‘claims for losses,’” Blacklock wrote.  “If the language refers to ‘claims’ and ‘losses’ of the individual policyholder, then Farmers is correct that the policy does not preclude an insurer from terminating the policy’s use statewide because of systemic losses that make continued use of the policy financially untenable,” he said.  “If ‘claims’ and ‘losses’ also refers to statewide or systemic ‘claims’ and ‘losses,’ then Geter is correct that the policy prohibited Farmers from deciding to non-renew.”

The justices find it “highly implausible” that Farmers or the TDI would agree to language that would “undermine TDI’s regulatory authority to react to changing circumstances in the insurance industry and would bind Farmers to suffer statewide underwriting losses in perpetuity.”

“Because the individual plaintiff and class members were not entitled to a renewal of their HO-B policies, all the plaintiffs’ claims fail, and summary judgment for Farmers was proper,” the opinion said.  It follows, Blacklock wrote, that neither Geter nor the would-be intervenors are entitled to any award of fees.