327 F.3d 448 (6th Cir. 2003), 01-1729, Northland Ins. Co. v. Stewart Title Guar. Co.

Docket Nº:01-1729
Citation:327 F.3d 448
Party Name:Northland Ins. Co. v. Stewart Title Guar. Co.
Case Date:April 25, 2003
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 448

327 F.3d 448 (6th Cir. 2003)

NORTHLAND INSURANCE COMPANY, Plaintiff-Appellee,

v.

STEWART TITLE GUARANTY COMPANY, Defendant-Appellant,

Cailu Title Corporation, Donald G. Sare, Jr., and Kelly L. Sare, Defendants.

No. 01-1729.

United States Court of Appeals, Sixth Circuit

April 25, 2003

Argued: Oct. 15, 2002.

Page 449

[Copyrighted Material Omitted]

Page 450

Steven B. Galbraith (briefed), Galbraith & Booms, Southfield, MI, James G. Gross (argued and briefed), Gross, Nemeth & Silverman, Detroit, MI, for Plaintiff-Appellee.

William E. Hosler, III (argued and briefed), Williams, Williams, Ruby & Plunkett, Birmingham, MI, for Defendants-Appellants.

Before: BATCHELDER and COLE, Circuit Judges; GRAHAM, District Judge. [*]

OPINION

GRAHAM, District Judge.

This is a diversity action for declaratory judgment brought by an insurer, Northland Insurance Company ("Northland"), against its insured, Cailu Insurance Corporation ("Cailu"); Donald G. Sare, Jr., Kelly L. Sare and Tyrone Johnson, who are individuals associated with Cailu; and Stewart Title Guarantee Company ("Stewart").

Cailu is a Michigan corporation. Donald Sare, Jr. is president of Cailu, and he and his wife, Kelly Sare, are joint owners of Cailu. Tyrone Johnson is a former employee of Cailu.

In 1997, Northland issued a claims-made Title Agent, Abstracter and Escrow Agent Errors and Omissions Liability Policy No. CG002017 ("the policy") to Cailu. The coverage under the policy also extended to the executive officers and employees of Cailu.

According to the terms of the policy, Northland agreed to "pay those sums that the insured becomes legally obligated to pay as damages because of a negligent act, error or omission in the rendering of or failure to render professional services as a title agent, abstracter, escrow agent and notary public [.]" However, the policy contained specific exclusions to the provided coverage, including:

Contractual Liability

Any damages for liability of others which the insured has assumed under any oral or written contrz`act or agreement, except that this exclusion does not apply to liability for damages that the insured would have had in the absence of the contract or agreement.

* * *

Criminal Acts

Any damages arising out of any dishonest, fraudulent, criminal or malicious act or omission by or on behalf of or at the direction of any insured.

This exclusion does not apply to any insured who acted without knowledge of the dishonest, fraudulent, criminal or malicious nature of the act or omission, or who did not personally commit, personally participate in, personally acquiesce to, or who remained passive after having knowledge of such act or omission.

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* * *

Non-Monetary Damages

Any damages arising out of any 'claims' seeking relief or redress in any form other than money damages

Non-Compensatory Damages

Any punitive and exemplary damages, fines, penalties or multiplied damages.

* * *

Illegal Profit

Any damages arising out of any gain, profit, or advantage to which the insured is not legally entitled.

* * *

Handling of Funds

Any damages arising out of the commingling, conversion, misappropriation or defalcation of funds or other property.

Stewart is a national title insurance underwriter headquartered in Texas. On or about October 19, 1998, Stewart entered into a title insurance underwriting agreement with Cailu, whereby Cailu became an agent of Stewart.

Subsequently, Stewart became aware of problems with Cailu's mortgage payoffs. On two occasions, Chase Manhattan Mortgage Corporation received checks that were returned for insufficient funds. Although this problem was corrected, Stewart continued to investigate and determined that Cailu's escrow account was short approximately $300,000. Subsequently, other Cailu checks were returned for insufficient funds.

Stewart filed suit against Cailu, the Sares, and Johnson in the Circuit Court of Eaton County, Michigan, alleging breach of the title insurance underwriting agreement, breach of statutory fiduciary duty and the Michigan Insurance Code, embezzlement and defalcation, conversion, and commingling of funds. See Stewart Title Guaranty Co. v. Cailu Title Corp., No. 99-954 (Eaton County Circuit Court). Northland initially agreed to provide the insureds with a defense, subject to a full reservation of rights. Then, in April, 2000, Northland filed the instant declaratory action in the United States District Court for the Western District of Michigan seeking to determine its obligations under its policy with Cailu. Two months after this action was filed in district court, Stewart filed an amended complaint in the state court action. The amended complaint repeated the allegations asserted in the original complaint and added a claim of negligence.

Cailu and the Sares did not file an answer to Northland's complaint, and an entry of default was filed on June 12, 2000. On September 14, 2000, Northland moved for summary judgment on its complaint for declaratory judgment. On November 6, 2000, Johnson was dismissed as a party without prejudice by stipulation. Stewart opposed Northland's motion for summary judgment. On November 8, 2000, Stewart filed a motion to dismiss or in the alternative to stay the case. On February 2, 2001, the district court granted Northland's motion for summary judgment and denied Stewart's motion. On February 16, 2001, the district court entered a declaratory judgment in favor of Northland, holding that the policy issued to Cailu did not provide coverage for the conduct of the insureds, and that Northland had no duty to defend the insureds in the state court action or to indemnify the insureds for any judgment or settlement against them in that action. On March 1, 2001, Stewart filed a motion for reconsideration of the order granting summary judgment to Northland, and the district court denied the motion for reconsideration on April 25, 2001.

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Stewart timely perfected an appeal to this court.

I. Discussion

A. Incorporation by Reference

In its Final Brief, Stewart presents us with three issues for review, but it actually briefs only the third issue. For its first issue, Stewart purports to incorporate by reference a motion for reconsideration filed with the district court and found in the joint appendix; for its second issue, Stewart would incorporate three different documents it filed with the district court.

Stewart, in other words, invites us to unearth its arguments lodged here and there in the joint appendix, leaving it to us to skip over repetitive material, to recognize and disregard any arguments that are now irrelevant, and to harmonize the arguments in the various documents. Stewart also attempts by this incorporation maneuver to add forty-two pages to the twenty-six page brief it filed with this Court. For the reasons we shall explain, we hold that Stewart has failed to brief its first two issues, and therefore it has waived its argument on these issues. See United States v. Elder, 90 F.3d 1110, 1118 (6th Cir. 1996) ("[I]t is a 'settled appellate rule that issues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived.' ") (quoting United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)).

The incorporation by reference of arguments made at various stages of the proceeding in the district court does not comply with the Federal Rules of Appellate Procedure. See Fed. R.App. P. 28(a)(9) (instructing that a component of the brief is "the argument, which must contain ... [the] appellant's contentions and the reasons for them, with citations to the authorities and parts of the record on which the appellant relies [.]") (emphasis added); 6th Cir. R. 30(a) ("The purpose of the appendix is to assist the judges in reviewing the briefs and in preparing for oral argument by providing to them those parts of the record necessary for effective understanding of the issues raised in the briefs.") (emphasis added); 6th Cir. R. 30(f)(1)(E) ("Except where they have independent relevance, memoranda of law filed in the proceedings below shall not be included in the joint appendix."). This practice has been disallowed by this circuit, albeit in an unpublished opinion, see Snyder v. United States, 23 Fed.Appx. 212, 213 (6th Cir. 2001) ("Snyder's attempt to merely incorporate his district court claims by reference does not serve as an appellate argument."), and by the vast majority of the other circuits, see DeSilva v. DiLeonardi, 181 F.3d 865, 866-67 (7th Cir. 1999) ("Petitioners direct us to a document filed in the district court, but we have not read it because adoption by reference amounts to a self-help increase in the length of the appellate brief. Even when a litigant has unused space ..., incorporation is a pointless imposition on the court's time. A brief must make all arguments accessible to the judges, rather than...

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