N.Y. Marine And Gen. v. Lafarge North Am. Inc

Decision Date15 March 2010
Docket NumberNo. 09-1149- cv (CON),No. 09-1104-cv (CON),No. 09-1139-cv (CON),No. 09-1153-cv (CON).,No. 08-5504-cv (L),08-5504-cv (L),09-1104-cv (CON),09-1139-cv (CON),09-1149- cv (CON),09-1153-cv (CON).
Citation599 F.3d 102
PartiesNEW YORK MARINE AND GENERAL INSURANCE COMPANY, PlaintiffCounter-Defendant-Appellee-CrossAppellant, v. LAFARGE NORTH AMERICA, INC., Defendant-Counter-PlaintiffAppellant-Cross-Appellee. American Steamship Owners Mutual Protection and Indemnity Association, Inc., Plaintiff-Counter-DefendantAppellee, v. Lafarge North America, Inc., Defendant-CounterPlaintiff-Appellant. The Northern Assurance Company of America and American Home Assurance Company, Plaintiffs-CounterDefendants-Appellants-Cross-Appellees, New York Marine and General Insurance Company, Intervenor PlaintiffCounter-Defendant-Appellee-CrossAppellant, v. Lafarge North America, Inc., Defendant-Counter-Plaintiff-AppellantCross-Appellee-Appellee-Cross-Appellant, American Steamship Owners Mutual Protection and Indemnity Association, Inc., Defendant-Appellee.*
CourtU.S. Court of Appeals — Second Circuit

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Anthony J. Pruzinsky, John J. Sullivan Robert G. Clyne, Hill Rivkins & Hayden LLP, New York, NY, for Lafarge North America, Incorporated.

John A.V. Nicoletti, Nooshin Namazi Kevin J.B. O'Malley, Nicoletti Hornig &amp Sweeney, New York, NY, for The North-ern Assurance Company of America and American Home Assurance Company.

David H. Fromm and Michael P. Naughton, Brown Gavalas & Fromm LLP, New York, NY, for New York Marine and General Insurance Company.

John M. Woods and John R. Stevenson Clyde & Co. U.S. LLP, New York, NY, for American Steamship Owners Mutual Protection and Indemnity Association, Incorporated.

Before MINER and STRAUB, Circuit Judges.**

MINER, Circuit Judge:

Insured defendant-counter-plaintiff-appellant-cross-appellee Lafarge North America, Inc. ("Lafarge"), intervenor and primary-insurer plaintiff-counter-defendant-appellee-cross-appellant New York Marine and General Insurance Company ("NYMAGIC" or the "primary insurer") and excess-insurers plaintiffs-counter-defendants-appellants-cross-appellees Northern Assurance Company of America ("NACA") and American Home Assurance Company ("AHAC" or, collectively with NYMAGIC, in its additional capacity as excess insurer, and NACA, the "excess insurers"), appeal from an order entered on January 29, 2007, and summary judgments entered on October 27, 2008, and February 19, 2009, in the United States District Court for the Southern District of New York (Haight, J.). The District Court, inter alia, (1) dismissed all causes of action brought against insurer plaintiffcounter-defendant-appellee American Steamship Owners Mutual Protection and Indemnity Association, Inc. (the "American Club" or the "Club"); (2) granted Lafarge the fees and expenses of two of the three law firms it retained without the knowledge or consent of the primary insurer; (3) denied Lafarge's motion for attorneys' fees incurred in defending against the insurers' motions for summary judgment; and (4) denied Lafarge's motion to transfer the American Club action to the United States District Court for the Eastern District of Louisiana. For the reasons that follow, we affirm in part and vacate in part the District Court's judgments.

I. BACKGROUND
A. Barge ING 4727

On August 29, 2005, Hurricane Katrina made landfall in New Orleans, Louisiana. The levee protecting the Lower Ninth Ward of New Orleans failed during the hurricane, causing the Mississippi River to flood the area. Widespread devastation and death ensued. In the course of the disaster, Barge ING 4727, which was one of hundreds of barges and vessels to break away from their moorings during the storm, came to rest against a house on the land side of the levee.

On September 9, 2005, the Wall Street Journal published an article entitled "Still Unknown: Did a Barge Breach the Levee?" In that article, the Army Corps of Engineers was quoted as stating "that one possible cause of this breach is that [Barge ING 4727] smashed through [the levee]." The article identified Ingram Barge Company ("Ingram") as Barge ING 4727's owner, and Lafarge as the operator responsible for the terminal to which Barge ING 4727 was moored when the hurricane struck. Ingram was quoted as stating that "it would have been the terminal's responsibility to secure [Barge ING 4727] in advance of the storm." Lafarge, which was contacted the day before by the reporter preparing the article, stated only that it was "not yet able to provide additional information regarding the terminal or its related transportation operations." It thus was brought to public attention that Barge ING 4727 may not have been merely a casualty of Hurricane Katrina but in fact may have caused the flooding of the Lower Ninth Ward. Further, the article implied that Lafarge may have failed to properly moor Barge ING 4727 during the storm and that Lafarge was therefore responsible for the devastation to the Lower Ninth Ward.

Lafarge, one of the largest suppliers of construction materials in the United States and Canada, was well aware that the exposure to potential liability created by Barge ING 4727 threatened the existence of the company. Thus, upon receiving the initial inquiry from the Wall Street Journal reporter on September 8, 2005, and thereby first becoming aware of a potential causal connection between Barge ING 4727 and the breached levee, Lafarge retained Goodwin Procter LLP ("Goodwin Procter"), which Lafarge described as "a top law firm with a national reputation [that] had represented [Lafarge] in class action/mass tort and other complex litigation [in the past]." Lafarge also retained Holland & Knight LLP ("H & K"), which according to Lafarge, had a "prominent maritime investigation and litigation practice." The next day, on September 9 2005, after being advised by Goodwin Procter about the need for local counsel, Lafarge retained the New Orleans law firm Chaffe McCall LLP ("Chaffe"), which also had a sizable maritime practice. The law firms immediately began their work: "Goodwin [Procter] had primary responsibility for oversight, communication, and all legal issues dealing with potential mass tort liability; H & K had the lead on maritime issues and investigation[;] and Chaffe provided necessary local support." Although Goodwin Procter and Chaffe would continue to remain on the case, H & K was discharged in early 2006 after the firm completed its reports on the initial investigation "into the circumstances of the breakaway [B]arge ING 4727 and the failure of the... levee structures."

Meanwhile, on September 9, 2005, Lafarge had notified its primary insurer, NYMAGIC, about Barge ING 4727 and the possibility of claims against Lafarge.1At that time, Lafarge advised NYMAGIC only that it had retained H & K. In a facsimile transmission dated September 13, 2005, NYMAGIC responded that it had "set up a file and [would] await further details or other developments." NYMAGIC also noted in the transmission that "we have good counsel in New Orleans, Messrs. Sutterfield and Webb [ ("Sutterfield")], who we would like to involve should there be any significant claim against [Lafarge] in this matter." It was not until September 20, 2005, that Lafarge notified NYMAGIC that it had retained Goodwin Procter and Chaffe, in addition to H & K. Lafarge never obtained NYMAGIC's prior consent to the appointment of any of these law firms. In a response dated September 22, 2005, NYMAGIC advised Lafarge that "we cannot commit to paying for public relations or lobbying efforts" and that "[f]or defense, we wish to assign one of the Louisiana firms on our 'Panel Counsel' list." The response included the names of six New Orleans lawfirms, including Sutterfield, specializing in maritime litigation.

Lafarge, however, did not respond to NYMAGIC's offered list of counsel, and it became clear that Lafarge "would not consent to any of the six law firms proposed by NYMAGIC and... that they intended to continue to employ Goodwin Proct[e]r, Chaffe... and [H & K]." In an e-mail dated September 28, 2005, NYMAGIC advised Lafarge that "[we] can agree to the costs of the experts and surveyors but [we] cannot agree to pay for the three sets of attorneys on the case, none approved by us." In a separate e-mail dated the same day, NYMAGIC also informed Lafarge that "[w]e have decided to appoint Sutterfield & Webb as defense counsel in Louisiana." Lafarge then instructed Goodwin Procter to "cooperate with Sutterfield and to bring Dan Webb, of that firm, up to speed."

On November 3, 2005, the first action against Lafarge was filed in the United States District Court for the Eastern District of Louisiana. See In re Katrina Canal Breaches Consol. Litig., No. 05-1182, 2008 WL 4401970, at *8 (E.D.La.2008). The action then was predictably enlarged and rapidly mutated into litigation of substantial magnitude and complexity:

No fewer than four separate class action complaints have been filed against Lafarge, some with putative classes as large as 40, 000 members, seeking damages as high as $100 billion. No fewer than 900 docket entries were made in the Katrina Barge Litigation when it was pending before Chief Judge Berrigan, and no fewer than 16, 000 docket entries have been made in the consolidated Katrina Litigation pending before Judge Duval. At least 28 other parties, including insurers as direct action defendants, are or have been co-defendants of Lafarge in the Katrina Barge Litigation.

N.Y. Marine and Gen. Ins. Co. v. Lafarge N. Am., Inc., 598 F.Supp.2d 473, 495 (S.D.N.Y.2009) (internal quotation marks and alteration omitted). Although the merits of Lafarge's liability (the "barge litigation") will be adjudicated in the Louisiana District Court, Lafarge's insurers commenced three separate actions giving rise to this appeal in the United States District Court for the Southern District of New York. Id. at 476-78. In those actions the insurers sought...

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