Medical Care America v. National Union Fire Ins.
| Decision Date | 05 August 2003 |
| Docket Number | No. 01-10324.,01-10324. |
| Citation | 341 F.3d 415 |
| Parties | MEDICAL CARE AMERICA, INC., Plaintiff-Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
James Ellis Davis (argued), Mark D. Johnson, Davis Munck, Dallas, TX, for Plaintiff-Appellant.
Frank G. Jones, William Joseph Boyce (argued), Fulbright & Jaworski, Houston, TX, Jonathan B. Skidmore, Michael Swartzendruber, Fulbright & Jaworski, Dallas, TX, for Defendant-Appellee.
Appeal from the United States District Court for the Northern District of Texas.
Before WIENER, BENAVIDES, and DENNIS, Circuit Judges.
Following a precipitous decline in stock value, shareholders sued () the director and officers of a Texas corporation formed through merger. After the suit settled, the corporation sued its insurer for coverage under its directors and officers liability policy. At issue was whether the policy covered the directors and officers' post-merger wrongful acts that were the same as or related to their pre-merger wrongful acts. A jury concluded that there was no coverage. The corporation now appeals the district court's pretrial grant of partial summary judgment, its rulings on three motions for judgment as a matter of law at the close of the evidence, and its judgment on the verdict. We AFFIRM.
In the Summer of 1992, Medical Care International, Inc. ("MCI") and Critical Care America ("CCA") announced that they would merge to become wholly owned subsidiaries of a new company, Medical Care America, Inc. ("Medical Care"). The companies issued statements trumpeting expectations for Medical Care's increased earnings. On August 3, 1992, they filed a joint proxy-prospectus with the Securities and Exchange Commission ("SEC") and sent copies of the filing to their shareholders. The merger became final on September 9, 1992, at which time the directors of MCI and CCA became the directors of Medical Care.
In anticipation of the merger, Medical Care's risk management director, Theresa Major-Gable, consulted Larry Waldie, an insurance broker employed by Marsh & McLennan, Inc. ("Marsh"), about purchasing directors and officers ("D&O") liability insurance for Medical Care "going forward" from the date of the merger. In conjunction with this consultation, Medical Care appointed Marsh its exclusive agent of record. Acting on Medical Care's behalf, Waldie solicited quotes from several insurance companies, including National Union Fire Insurance Company ("National Union"). Major-Gable subsequently instructed Waldie to bind National Union's quote. On September 4, 1992, National Union sent Waldie a letter that represented a temporary conditional binder outlining its agreement to provide Medical Care with $10 million worth of D&O coverage from September 9, 1992, to September 9, 1993. The temporary conditional binder conditioned coverage on National Union's receipt, review, and acceptance of certain information from Medical Care, including a completed application. It explained that the policy would be issued with ten endorsements, including one for "prior acts as of September 9, 1992."1 Waldie summarized the temporary conditional binder in a separate binder ("Binder") he sent to Major-Gable on September 15, 1992. The Binder indicated that the policy would exclude "all prior acts prior to policy inception date." On September 28, 1992, Medical Care satisfied the conditions of the temporary conditional binder.
The pre-merger expectations for Medical Care proved overly optimistic, and on September 25, 1992, the new company announced flat earnings. The announcement caused share value to plummet over 50% in one day, at which point the New York Stock Exchange suspended trading of Medical Care stock. In response, at least 15 shareholder class action lawsuits were filed against Medical Care, CCA, MCI, and the directors and officers. The lawsuits were consolidated into a single action in the United States District Court for the Northern District of Texas. The consolidated suit alleged violations of §§ 10(b)and 20(a) of the Securities Exchange Act of 19342 and of SEC Rule 10b-5.3 The complaint alleged that the defendants made misrepresentations and failed to make necessary disclosures in public statements and filings.
On January 30, 1993, National Union issued the D&O liability policy that Medical Care had applied for the previous September. Endorsement # 7 of the policy provided:
In consideration of the premium charged, it is hereby understood and agreed that this policy only provides coverage for Loss arising from claims for alleged Wrongful Acts occurring on or after September 9, 1992 and prior to the end of the Policy Period and otherwise covered by this policy. Loss(es) arising out of the same or related Wrongful Act(s) shall be deemed to arise from the first such same or related Wrongful Act.
By letter dated January 27, 1993, National Union denied coverage for the claims asserted in the class action based on the related acts language of the second sentence of Endorsement # 7. On March 9, 1993, the class action plaintiffs filed an amended complaint. National Union restated its denial of coverage by letter dated May 21, 1993, repeating its reliance on Endorsement # 7.4
The shareholder suit was settled in principle pursuant to court-ordered mediation for $60 million and the full release of all claims asserted against the defendants. Medical Care advised National Union of the settlement, asking it to reconsider its denial of coverage and to participate in the settlement, which had not yet been funded or approved by the court. National Union reiterated its previous position. After the district court approved the settlement, the $60 million was paid to the class action plaintiffs and the claims against Medical Care, MCI, CCA, and their respective officers and directors were released. In February 1995, the defendants entered into an agreement that allocated responsibility for the $60 million settlement among five of the six defendants. Under that agreement, Medical Care owed a contribution to the settlement but its directors and officers, who were separate defendants in the shareholder suit, did not.5 In May 1996, however, the defendants revised their allocation agreement, requiring Medical Care's directors and officers to contribute $10 million to the settlement.6 Because Medical Care had indemnified its directors and officers, it ultimately bore responsibility for that $10 million.
Medical Care filed the present lawsuit in November 1996 after National Union denied coverage under the D&O policy. It stated claims for breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code.7 The district court granted in part and denied in part the parties' competing motions for summary judgment. Of relevance to this appeal, the court ruled for Medical Care in holding that "the binder agreements are the controlling contracts of insurance at issue in this case"; ruled against Medical Care in finding that there was a triable issue as to whether National Union was estopped from relying on the related acts exclusion; and ruled for National Union in dismissing with prejudice Medical Care's extracontractual claims.
Medical Care's remaining claim for breach of contract was tried to a jury. At the close of the evidence, both parties filed motions for judgment as a matter of law ("JMOL"). The court denied Medical Care's motion in toto. Of relevance here, it held that Medical Care had not shown that it was due coverage as a matter of law. The court granted National Union's motion in part, ruling that the insurance contract included a "related acts" exclusion and that National Union was not equitably estopped from relying on that "related acts" exclusion. The jury returned a take-nothing verdict for Medical Care, finding that Medical Care proved that its directors and officers had incurred loss arising from the shareholders' claims about their alleged wrongful acts occurring on or after September 9, 1992, and that Medical Care had indemnified its directors and officers for such loss. The jury found, however, that National Union proved that all the directors' and officers' wrongful acts occurring after September 9, 1992, were the same as or related to wrongful acts occurring prior to September 9, 1992.
After the court denied its motion for a new trial and its renewed motion for JMOL, Medical Care appealed.
We review summary judgment de novo, following the same standard applied by the district court.8 Summary judgment is appropriate only if the movant demonstrates that there are no genuine issues of material fact and that it is entitled to a judgment as a matter of law.9
We also review judgment as a matter of law de novo.10 JMOL is appropriate when "a party has been fully heard with respect to an issue and there is no legally sufficient evidentiary basis for a reasonable jury to have found for that party with respect to that issue."11 In reviewing the record, we draw all reasonable inferences in favor of the nonmovant, make no credibility determinations, and do not weigh the evidence.12 We give credence to evidence supporting the movant only if it "is uncontradicted and unimpeached, at least to the extent that that evidence comes from disinterested witnesses." If, after reviewing the evidence in this manner, "the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of [JMOL] is proper."13 But "if there is substantial evidence opposed to [JMOL], that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, [JMOL] should be denied."14
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