Conduent State Healthcare, LLC v. AIG Specialty Ins. Co.

• Decision Date: 14 February 2023
• Docket Number: C. A. N18C-12-074 MMJ CCLD
• Parties: CONDUENT STATE HEALTHCARE, LLC, f/k/a/ XEROX STATE HEALTHCARE, LLC, f/k/a ACS STATE HEALTHCARE, LLC, Plaintiff, v. AIG SPECIALTY INSURANCE COMPANY, f/k/a CHARTIS SPECIALTY INSURANCE COMPANY, et. al., Defendants.
• Court: Delaware Superior Court

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CONDUENT STATE HEALTHCARE, LLC, f/k/a/ XEROX STATE HEALTHCARE, LLC, f/k/a ACS STATE HEALTHCARE, LLC, Plaintiff, v. AIG SPECIALTY INSURANCE COMPANY, f/k/a CHARTIS SPECIALTY INSURANCE COMPANY, et. al., Defendants.

C. A. No. N18C-12-074 MMJ CCLD

Superior Court of Delaware

February 14, 2023

Submitted: November 21, 2022

On Plaintiff's Renewed Motion for Judgment as a Matter of Law Pursuant to Rule 50, To Set Aside/Amend/Alter the Judgment Under Rule 59(d), and/or for a New Trial Under Rule 59(a)

Adam S. Ziffer, Esq., (Argued), Robin L. Cohen, Esq., Keith McKenna, Esq., Cohen Ziffer Frenchman &McKenna LLP, New York, New York; Jennifer C. Wasson, Esq., David A. Seal Esq., Carla M. Jones, Esq., Potter Anderson &Corroon LLP Wilmington, Delaware; Alanna G. Clair, Esq., Craig M Giometti, Esq., Shari L. Klevens, Esq., Dentons US, LLP; Attorneys for Plaintiff

Neal M. Glazer, Esq., Izak Weintraub, Esq., London Fischer, LLP; Robert J. Katzenstein, Esq., Julie O'Dell, Esq., Smith Katzenstein &Jenkins, LLP; Maaren A. Shah, Esq., Michael B. Carlinsky, Esq., (Argued), Quinn Emanuel Urguhart Sullivan; Robert S. Harrell, Esq., (Argued), James B. Danford, Jr., Esq., Mayer Brown; Peter H. Kyle, Esq., John L. Reed, Esq., DLA Piper LLP (US); Attorneys for Defendants

OPINION

JOHNSTON, J.

In almost 20 years on this bench, I have never set aside a jury verdict.^[1] Jury verdicts are entitled to great deference. Altering a jury's decision should only be done under circumstances in which justice otherwise would be denied.^[2]

STANDARDS OF REVIEW

Rule 50 - Judgment as a Matter of Law

Rule 50 provides:

(a) Judgment as a matter of law.

(1) If during a trial by jury a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the Court may determine the issue against the party and may grant a motion for judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue.

(2) Motions for judgment as a matter of law may be made at any time before submission of the case to the jury. Such a motion shall specify the judgment sought and the law and the facts on which the moving party is entitled to the judgment.

(b) Renewal of motion for judgment after trial; alternative motion for new trial. Whenever a motion for a judgment as a matter of law made at the close of all the evidence is denied or for any reason is not granted, the Court is deemed to have submitted the action to the jury subject to a later determination of the legal questions raised by the motion .... If a verdict was returned, the Court may, in disposing of the renewed motion, allow the judgment to stand or may reopen the judgment and either order a new trial or direct the entry of judgment as a matter of law.

A renewed motion for judgment as a matter of law only may be made on grounds raised in a Rule 50(a) motion.^[3]

Rule 59-New Trial, Alter or Amend Judgment

Rule 59 provides:

(a) Grounds. A new trial may be granted as to all or any of the parties and on all or part of the issues in an action in which there has been a trial for any of the reasons for which a new trials have heretofore been granted in the Superior Court....

....

(d) Motion to alter or amend a judgment. A motion to alter or amend the judgment shall be served and filed not later than 10 days after entry of the judgment.

To prevail on the Rule 59(d) motion in this case, plaintiff Conduent must show "the need to correct clear error of law or to prevent manifest injustice."^[4]

A jury verdict will not be upset "unless the evidence preponderates so heavily against the jury verdict that a reasonable jury could not have reached the result."^[5] The Court will not substitute its opinion for that of the jury "where any margin for reasonable difference of opinion exists."^[6] A verdict should be set aside only for "exceptional circumstances . . . when the verdict is manifestly and palpably against the weight of the evidence, or for some reason, justice would miscarry if the verdict were allowed to stand."^[7]

ANALYSIS

Pretrial Opinions Narrowed Issues for the Jury

In the course of this litigation, the Court considered numerous substantive and procedural motions. In addition to multiple bench rulings, the Court has issued six written opinions. By Opinion dated June 24, 2019, the Court found that the Texas Attorney General's investigation triggered the duty to pay defense costs under the relevant insurance policies.^[8] On summary judgment motions, the Court held that Defendants had a duty to defend against the Medicaid-Related Claims; and that Conduent had established a prima facie case that Defendants have a duty to indemnify.^[9] However, there were certain factual questions that remained for the jury. The purpose of the trial was to resolve those questions of fact. The first factual issue related to whether Conduent breached its duty to cooperate with Defendants and to seek consent for purposes of settlement with the Texas Attorney General.^[10]The jury also was asked to determine what the settlement actually was for. The jury considered the question of whether Conduent and the Attorney General conspired to misrepresent the terms of the settlement for the sole purpose of enabling Conduent to obtain insurance coverage, coverage that otherwise would not have existed. If the parties did not conspire, the next issue was whether Conduent tricked or otherwise convinced the Attorney General to misrepresent terms of the settlement for the sole purpose of obtaining otherwise-unavailable insurance coverage.

The Settlement Agreement and Release ("Settlement Agreement") was executed in February 2019.

The Jury's Factual Findings

The trial lasted six days. The jury heard the testimony of eight witnesses. In excess of one hundred exhibits were presented and admitted-many over and over again to several witnesses.

The jury answered ten specific questions.

VERDICT FORM

Duty to Cooperate

1. Conduent had a duty to cooperate with and help the Insurers in connection with the State Action Settlement. Did Conduent prove by a preponderance of the evidence that the duty to cooperate and help was relieved because cooperation would have been pointless or futile?

YES: ___ NO: X

2. Have the Insurers proved by a preponderance of the evidence that Conduent breached the duty to cooperate with and help any of the Insurers in connection with the State Action Settlement?

YES: X NO: ___

3. If you answered "YES" to Question 2, check each Insurer who proved by a preponderance of the evidence that Conduent breached the duty to cooperate with and help in connection with the State Action Settlement.

X AIG Specialty Insurance Company

X AIG American Insurance Company

X Lexington Insurance Company

Duty to Seek Consent

4. Conduent had a duty to seek the Insurers' prior written consent in connection with the State Action Settlement. Did Conduent prove by a preponderance of the evidence that seeking the Insurers' prior written consent would have been futile?

YES: ___ NO: X

5. Did Conduent prove by a preponderance of the evidence that Conduent took reasonable steps to seek to obtain the Insurers' written consent in connection with the State Action Settlement?

YES: ___ NO: X

6. Did Conduent prove by a preponderance of the evidence that any of the Insurers' failure to provide written consent was unjustifiable or in bad faith?

YES: ___ NO: X

7. If you answered "YES" to Question 6, check each Insurer who Conduent proved by a preponderance of the evidence failed to provide written consent in connection with the State Action Settlement unjustifiably or in bad faith.

___AIG Specialty Insurance Company

___AIG American Insurance Company

___Lexington Insurance Company

Fraud

7. Have the Insurers proved by clear and convincing evidence that Conduent engaged in fraud in connection with the State Action Settlement?

YES: X NO: ___

Collusion

8. Have the Insurers proved by a preponderance of the evidence that Conduent engaged in collusion in connection with the State Action Settlement?

YES: ___ NO: X

Good Faith

9. Have the Insurers proved by a preponderance of the evidence that Conduent did not settle with the State of Texas in good faith?

YES: X NO: ___

Reasonableness

10. Have the Insurers proved by a preponderance of the evidence that Conduent's settlement with the State of Texas was not reasonable?

YES: ___ NO: X

The Winter Submission

The first problem with the trial involved an unusual document. The Office of the Texas Attorney General declined to provide any witness for deposition (or to otherwise cooperate in any manner) in this case. After much negotiation, the parties agreed to put certain written questions to Raymond Winter ("Winter"), as the lone representative of the Texas Attorney General's Office.^[11]

The Winter Submission clearly is inadmissible hearsay, indeed double and triple hearsay. Winter was not subject to cross-examination. The trial was replete with testimony from other witnesses about Winter's credibility and alleged bias. Nevertheless, the parties had agreed before trial that this document could be used at trial. Against my better judgment, I acquiesced to the parties' agreement. This is the generally-accepted practice in Superior Court civil cases. If the parties agree to admissibility, the Court will not interpose its own judgment. However, the red flags were there. From my many years of experience, I suspected that this document could create a ripple effect of thorny evidentiary issues, for the very reasons that the hearsay rule is designed to...