In re Cooper Mfg. Corp.
| Decision Date | 07 February 2001 |
| Docket Number | No. 84-01061-W.,Adv. No. 94-0282.,No. 94-C-901-BU.,84-01061-W.,94-C-901-BU. |
| Parties | In re: COOPER MANUFACTURING CORP., and its Affiliates; Challenger Rig & Manufacturing, Inc.; Cooper Offshore Systems, Inc.; and Cooper Sales Corp., Debtors, Jon A. Barton, Liquidating Trustee, Plaintiff, v. The Home Indemnity Company; et al., Defendants. The Home Indemnity Company, Third Party Plaintiff, v. The Holmes Organisation, Inc.; and Kent A. Bogart, Third Party Defendants. |
| Court | U.S. District Court — Northern District of Oklahoma |
William Robert Grimm, J. Patrick Mensching, Jr., William Brad Heckenkemper, Barrow Gaddis Griffith & Grimm, Tulsa, OK, Burton J. Johnson, Bradley Kent Donnell, Looney Nichols & Johnson, Oklahoma City, OK, Neil J. Dilloff, Brett Ingerman, Catherine M. Simmons, Piper Marbury Rudnick & Wolfe LLP, Baltimore, MD, Stephen R. Mysliwiec, Piper & Marbury, Washington, DC, Katresa J. Riffel, Gungoll Jackson Collins & Box PC, Enid, OK, for Home Ins. Indemnity CO.
Thomas G. Wolfe, Raymond Edward Zschiesche, Gerald F. Pignato, Phillips McFall McCaffrey McVay & Murrah, Robert E. Manchester, Shannon K. Emmons, Raymond Thompson Cooper, Manchester & Pignato, Oklahoma City, OK, Kent A. Bogart, Steven Ernest Holden, Bruce Alvin McKenna, Stephen J. Capron, Holden Glendening & McKenna, Tulsa, OK, for Holmes Organisation, Inc.
On June 2, 2000, United States Magistrate Judge Sam A. Joyner issued a Report and Recommendation, wherein he recommended that Third-Party Defendant, The Holmes Organisation, Inc.'s motion for summary judgment be denied. On June 20, 2000, Third-Party Defendant, The Holmes Organisation, Inc., filed a motion requesting Magistrate Judge Joyner to reconsider his Report and Recommendation. Magistrate Judge Joyner denied Third-Party Defendant's motion by Order filed June 22, 2000.
Presently before the Court are the objection and supplemental objection of Third-Party Defendant, The Holmes Organisation, Inc., to the Report and Recommendation, the objection of Third-Party Defendant, Kent A. Bogart, to the Report and Recommendation and the objection of Third-Party Defendant, The Holmes Organisation, Inc., to Magistrate Judge Joyner's Order denying its motion to reconsider.1 Pursuant to 28 U.S.C. § 636(b), the Court has conducted a de novo review of the matter. Having done so, the Court finds that the objections are without merit. The Court accepts the Report and Recommendation and the Order denying the motion to reconsider in their entirety.
Third-Party Defendant, The Holmes Organisation, Inc., in its objection, and Third-Party Defendant, Kent A. Bogart, by separate application, request the Court to certify certain questions of law to the Oklahoma Supreme Court. The Court, upon due consideration, finds that such requests should be denied. The Court finds that the added delay and expense resulting from certification is unwarranted.
Accordingly, the Report and Recommendation issued by United States Magistrate Judge Sam A. Joyner (Docket Entry # 322) is AFFIRMED. The Order issued by United States Magistrate Judge Sam A. Joyner (Docket Entry # 336) denying Third-Party Defendant, The Holmes Organisation, Inc.'s Motion to Reconsider is also AFFIRMED. The Motion for Summary Judgment of Third-Party Defendant, The Holmes Organisation, Inc. (Docket Entry # 247) is DENIED. The Unopposed Application for Oral Argument filed by Third-Party Defendant, Kent A. Bogart (Docket Entry # 334) is also DENIED. The Request of Third-Party Defendant Kent A. Bogart for Certification of Questions of Law (Docket Entry # 337) and request of Third-Party Defendant, The Holmes Organisation, Inc., for certification of questions of law are also DENIED.
TABLE OF CONTENTS
I. FACTUAL/PROCEDURAL SUMMARY ............................................ 1242
A. THE RELATIONSHIP BETWEEN HOME, HARBOR, HOLMES AND COOPER ........... 1242
B. COOPER DISCOVERS DEFECTIVE STEEL IN ITS WORKOVER RIGS. ............. 1242
C. COOPER, FACING NUMEROUS PRODUCT LIABILITY LAWSUITS FOR SELLING
DEFECTIVE WORKOVER RIGS, FILES FOR BANKRUPTCY .................... 1243
D. COOPER'S COVERAGE CASE IN THE BANKRUPTCY COURT ..................... 1244
E. THE UNDERLYING BAD FAITH CASE IN THIS COURT ........................ 1244
F. HOME'S INDEMNITY AND CONTRIBUTION CLAIMS AGAINST HOLMES ............ 1245
1. Prior Appeal to the Tenth Circuit ............................... 1245
2. Current Motion for Summary Judgment ............................. 1246
II. SUMMARY JUDGMENT STANDARDS ............................................ 1246
III. CHOICE OF LAW ......................................................... 1247
IV. COUNT I — THERE ARE MATERIAL QUESTIONS OF DISPUTED
FACT WHICH PRECLUDE THE ENTRY OF SUMMARY JUDGMENT
ON HOME'S INDEMNITY CLAIM ........................................... 1247
A. HOME'S FAULT ....................................................... 1248
1. Holmes' Alleged Failure to Notify ............................... 1249
2. Holmes'/Mr. Bogart's "No Coverage" Opinion ...................... 1250
3. Conclusion ...................................................... 1251
V. COUNT I — HOME NEED ONLY ESTABLISH POTENTIAL, NOT ACTUAL
LIABILITY TO COOPER FOR ITS ALLEGED PRE-BANKRUPTCY
FAILURE TO DEFEND COOPER ............................................ 1252
A. THE RULE — AN INDEMNITEE MAY SETTLE THE INJURED PARTY'S CLAIM AND
SEEK INDEMNIFICATION FROM A PUTATIVE INDEMNITOR WITHOUT HAVING
TO ESTABLISH ITS ACTUAL LIABILITY TO THE INJURED PARTY AS LONG AS
THE INDEMNITOR WAS ON NOTICE OF THE INJURED PARTY'S CLAIM AND
GIVEN AN OPPORTUNITY TO PARTICIPATE IN SETTLEMENT NEGOTIATIONS
AND OBJECT TO THE SETTLEMENT ..................................... 1252
B. APPLICATION OF THE RULE — HOME NEED ONLY PROVE THAT IT WAS
POTENTIALLY LIABLE TO COOPER BECAUSE HOLMES WAS ON NOTICE OF
COOPER'S CLAIM AND HOLMES HAD AN OPPORTUNITY TO PARTICIPATE IN
SETTLEMENT NEGOTIATIONS AND TO OBJECT TO THE SETTLEMENT .......... 1252
VI. COUNT II — THERE ARE MATERIAL QUESTIONS OF FACT WHICH
PRECLUDE THE ENTRY OF SUMMARY JUDGMENT ON HOME'S
CONTRIBUTION CLAIM .................................................. 1257
A. PRO RATA SHARE ............................. 1258
B. REASONABLENESS OF THE $7.5 MILLION SETTLEMENT ...................... 1258
VII. WHAT EVIDENCE MAY HOLMES' PRESENT AT TRIAL IN AN ATTEMPT
TO ESTABLISH THE UNREASONABLENESS OF THE $7.5
MILLION SETTLEMENT? ................................................. 1259
RECOMMENDATION ............................................................. 1259
OBJECTIONS ................................................................. 1259
The Holmes Organisation, Inc.'s ("Holmes") motion for summary judgment is now before the Court. [Doc. No. 247]. Holmes' motion has been referred to the undersigned for a Report and a recommendation pursuant to 28 U.S.C. § 636 and Fed.R.Civ.P. 72. The undersigned heard oral argument on Holmes' motion at a hearing on May 15, 2000. With its motion, Holmes seeks summary adjudication of Counts I and II in Plaintiff's "Second Amended Third-Party Complaint."1 [Doc. No. 260]. For the reasons discussed below, the undersigned recommends that Holmes' motion for summary judgment be DENIED.
Home is a New Hampshire corporation in the business of underwriting insurance policies. Holmes is an Oklahoma corporation in business as a broker for the purchase and sale of insurance policies. At all relevant times, Holmes was an authorized broker/agent for Home. See Doc. No. 277, Exhibit "14." Holmes acted as Home's agent in connection with the sale, payment, performance, cancellation and other matters regarding insurance policies written by Home in Oklahoma.
At all relevant times, Kent A. Bogart was the president of Holmes. Beginning in 1979, Holmes became an insurance agent for Cooper Manufacturing Corporation ("Cooper"), providing Cooper with various forms of insurance coverage. As Cooper's agent, Holmes routinely received notices and demands from Cooper and transmitted them to Home in connection with Cooper's insurance policies. All parties agree that during the relevant period, Holmes was the dual agent of Cooper and Home.
By the late 1970's and early 1980's, Cooper had established itself as a prominent manufacturer and supplier of workover drilling rigs. A workover drilling rig consists of a steel derrick or mast, mounted on a mobile truck or carrier. From 1979 through October 1984, George Hug was the Chief Financial Officer and Risk Manager for Cooper, and Jon Barton was Cooper's President and Chief Executive Officer. Mr. Hug handled Cooper's insurance matters.
Cooper's primary insurance coverage consisted of comprehensive general liability ("CGL") policies purchased from Home through Holmes, Home's authorized agent.3 Cooper obtained secondary insurance coverage through umbrella and excess liability ("UEL") policies purchased from Harbor Insurance Company ("Harbor") through Holmes. When a claim arose against Cooper which was potentially covered by one of its CGL or UEL policies, Mr. Hug would routinely forward the relevant claim information to Holmes with a transmittal letter.
In early 1984 Cooper discovered that certain of its workover rigs had been manufactured with defective steel purchased from several suppliers, including Babcock & Wilcox ("B & W").4 This discovery immediately raised the issue of whether Cooper had insurance coverage for any potential claims related to defective workover rigs sold by Cooper. On May 18, 1984, Mr. Barton, as Cooper's President, sent a letter to Cooper's...
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