Booking v. General Star Mgmt. Co.

• Decision Date: 01 August 2000
• Docket Number: Docket No. 00-9392
• Citation: 254 F.3d 414
• Parties: (2nd Cir. 2001) JANE M. BOOKING, Plaintiff-Appellant, v. GENERAL STAR MANAGEMENT COMPANY and GENERAL STAR INDEMNITY COMPANY, Defendants-Appellees
• Court: U.S. Court of Appeals — Second Circuit

Page 414

254 F.3d 414 (2nd Cir. 2001)

JANE M. BOOKING, Plaintiff-Appellant, v.GENERAL STAR MANAGEMENT COMPANY and GENERAL STAR INDEMNITY COMPANY, Defendants-Appellees.

Docket No. 00-9392

August Term, 2000

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: June 4, 2001

Decided: June 20, 2001

Appeal from a judgment of the United States District Court for the Northern District of New York(Thomas J. McAvoy, Judge), granting defendants liability insurers' motion for summary judgment, and denying plaintiff's cross-motion for summary judgment.The basis of the judgment was that defendants properly disclaimed coverage of their insured's liability for an injury suffered by plaintiff because defendants received defective notice of plaintiff's injury.

We hold, inter alia, that (1) Texas law controls the interpretation of the insurance contract at issue here; (2) under Texas law, a liability insurer may generally disclaim coverage on the basis of defective notice only if it has been prejudiced by the defect; and (3) further development of the record as to prejudice is appropriate.

Vacated and remanded.

[Copyrighted Material Omitted]STEPHEN W. GEBO, Conboy, McKay, Bachman & Kendall, LLP, Watertown, NY, for appellant.

DEBRA A. NORTON, Sliwa & Lane, Buffalo, NY, for appellees.

Before: CABRANES and SACK, Circuit Judges.¹

JOSE A. CABRANES, Circuit Judge:

On this appeal, we review a judgment of the United States District Court for the Northern District of New York(Thomas J. McAvoy, Judge) granting summary judgment to defendants-appelleesGeneral Star Management Company and General Star Indemnity Company(collectively, "General Star"), and denying summary judgment to plaintiff-appellantJane M. Booking("Booking").

General Star is an unlicensed liability insurer, and Booking was allegedly injured by General Star's insured, National Framing Contractors, Inc.("National").Booking obtained a default judgment against National, and initiated this direct action to collect on the judgment against General Star.General Star disclaimed coverage of National's liability for Booking's injury, and moved for summary judgment.Booking cross-moved for summary judgment.

The District Court granted General Star's motion and denied Booking's cross-motion on the ground that General Star had properly disclaimed coverage because the notice that it had received of Booking's injuries was defective under the terms of the relevant insurance contract.

We hold, inter alia, that (1) Texas law controls the interpretation of the insurance contract at issue here; (2) under Texas law, a liability insurer such as General Star may generally disclaim coverage on the basis of defective notice only if it has been prejudiced by such defects; and (3) further development of the record as to prejudice may be appropriate.

Accordingly, we vacate the judgment of the District Court and remand the cause for further proceedings.

I.

The following facts are construed in the light most favorable to Booking.SeeAnderson v. Liberty Lobby, Inc., 477 U.S. 242, 255(1986).

On February 14, 1995, Booking was injured in New York while climbing a staircase that was being dismantled by National employees ("the accident").National then went out of business, and Booking attempted to determine whether National was carrying liability insurance when she was injured.On December 17, 1996, a certificate of insurance was discovered that suggested that National was insured at all relevant times by General Star.By letter dated the next day-December 18, 1996-General Star was notified of the accident.Soon thereafter, however, it disclaimed coverage of National's liability for Booking's injury, citing National's failure to provide the notice of the accident required by the pertinent National-General Star insurance contract ("the policy").²

Booking initiated a tort action against National in New York State Supreme Court, Jefferson County, in March 1996.Following an uncontested trial, judgment was entered in Booking's favor on October 23, 1998("the judgment").Booking served the judgment on General Star, but General Star did not satisfy it.Accordingly, in February 1999, Booking initiated this direct action in New York State Supreme Court, Jefferson County.The action was later removed to the United States District Court for the Northern District of New York pursuant to the federal removal statute, 28 U.S.C.§§1441-1446.

In the District Court, General Star moved for summary judgment, arguing that it was entitled to disclaim coverage because of National's failure to provide adequate notice of the accident.Booking then cross-moved for summary judgment on the ground that General Star had received adequate notice.

The initial memoranda that supported General Star's motion and Booking's cross-motion relied exclusively on New York law.However, in her Reply Memorandum of Law before the District Court, Booking pressed the following argument: (1) Texas law, not New York law, controls interpretation of the policy; (2) under Texas law, liability insurers can disclaim coverage on the basis of notice defects only if they are prejudiced by such defects;³(3) because General Star could not show that it was prejudiced by any defects in the notice it received, it could not disclaim coverage; and (4) General Star was therefore responsible for National's liability to Booking so that Booking was entitled to collect on the judgment against General Star.

Oral argument before the District Court on the summary judgment cross-motions was held on September 11, 2000.A focal point of the argument was the parties' divergent views as to whether New York law or Texas law was controlling.At oral argument, General Star submitted a brief on this choice of law issue, arguing for the application of New York law.Following argument, and at the District Court's request, Booking did so as well, adhering to her revised stance that Texas law should be applied.

By Decision and Order dated September 28, 2000, the District Court granted defendant's motion for summary judgment and denied plaintiff's cross-motion.The District Court held that New York law applied because the parties' opening briefs assumed that such was the case.While observing that Texas law would have governed had the issue been timely raised, the District Court declined to consider the possibility that Texas law was controlling because it believed that new arguments may not be raised for the first time in reply papers.Applying New York law, the District Court held that General Star had not received notice that comported with the requirements of the policy, and that General Star was therefore entitled to disclaim coverage.

Judgment was entered on September 28, 2000 and this timely appeal followed.We have subject matter jurisdiction pursuant to 28 U.S.C. §1291and28 U.S.C. §1332, and we review the District Court's grant of summary judgment de novo.SeeGreater N.Y. Metro. Food Council, Inc. v. Giuliani, 195 F.3d 100, 104(2d Cir.1999).

II.

A.REACHING THE CHOICE OF LAW ISSUE

On appeal, Booking argues that Texas law governs the interpretation of the policy, and General Star contends that New York law controls that question.As noted above, the District Court did not pass on this choice of law issue because it believed that it lacked the discretion to do so because the issue was raised for the first time in Bookings' reply memorandum.Seeante at 417.The basis for this conclusion was apparently an analogy to our practice of not considering arguments raised for the first time in reply briefs.SeeDecision and Orderat 4(stating that "new arguments may not be raised in reply papers," and citing for this propositionErnest Haas Studio, Inc. v. Palm Press, Inc., 164 F.3d 110, 112(2d Cir.1999), in which we declined to consider an argument raised for the first time in an appellant's reply brief).

We are skeptical of this analogy.The courts of appeals generally do not consider arguments raised for the first time in reply briefs because, inter alia, such is the dictate of Rule 28(a) of the Federal Rules of Appellate Procedure, seeKnipe v. Skinner, 999 F.2d 708, 711(2d Cir.1993), and because if an appellant raises a new argument in a reply brief an appellee may not have an adequate opportunity to respond to it.Moreover, by the time an appellate brief is drafted, a case has been percolating in the federal courts for long enough for the appellant's counsel to have selected the arguments that he will rely upon.It is therefore reasonable to expect that he will include all of these arguments in his opening brief.

These considerations, however, do not apply with full force in a district court.Rule 28 of the Federal Rules of Appellate Procedure, for example, has no analogue in the Federal Rules of Civil Procedure, and in most cases trial judges can provide parties with an adequate opportunity to respond to particular arguments by ordering additional briefing or an extra round of oral argument.Accordingly, we doubt that district courts lack all discretion to consider arguments raised for the first time in reply briefs-especially when, as here, they order additional briefing on the argument pressed in the reply brief.

All this said, we need not and do not reach here the question of whether the District Court had discretion to consider Booking's choice of law argument.Answering this question would seem to require that we make new law, and we are reluctant to do so.Accordingly, in determining whether we may address Booking's choice of law argument we will follow a familiar, trod path.

In general, "a federal appellate court does not consider an issue not passed upon below."Singleton v. Wulff, 428 U.S. 106, 120(1976).See generallyRobert J. Martineau, Considering New Issues on Appeal: The General Rule and the Gorilla Rule, 40 VAND. L. REV. 1023, 1026-34(1987)(describing the historical development of this rule and the...