[00:00:01] Speaker 05: May it please the court. [00:00:03] Speaker 05: Donald Brown, Cummington & Burling here for repellent, McKesson Corporation. [00:00:07] Speaker 05: I'd like to reserve three minutes for rebuttal, if I may. [00:00:10] Speaker 03: OK. [00:00:10] Speaker 03: Keep your eyes back, please. [00:00:11] Speaker 05: OK. [00:00:13] Speaker 05: Companies, businesses buy liability insurance to protect the businesses and their shareholders against third-party liability claims for two distinct reasons. [00:00:23] Speaker 05: Yes, the fallacies promise to indemnify the company should it become liable for a covered loss. [00:00:30] Speaker 05: But the policies separately make a much broader standalone promise to defend the company against any suit that includes any claim, even if just a single claim that potentially just might possibly be covered. [00:00:44] Speaker 05: As the California Supreme Court has said, so long as a complaint, quote, has a bare potential or possibility of coverage, unquote, the insurer must defend. [00:00:54] Speaker 05: This is true even if the complaint includes allegations of deliberate wrongdoing. [00:01:00] Speaker 05: This is true even if such non-covered claims predominate, even if they greatly predominate. [00:01:06] Speaker 05: And this is true even if ultimately the insured at trial is found liable in such a way that there is no coverage. [00:01:12] Speaker 03: Counsel, with respect, I mean, you're all very sophisticated counsel here, so let's maybe just cut right to the chase. [00:01:20] Speaker 03: We're talking about words, accident, occurrence, bodily injury. [00:01:25] Speaker 03: So let's talk about those. [00:01:28] Speaker 03: Reading your complaint, or reading our complaint, your appeal, excuse me, it seems like what you say is an accident would cover anything, anything they did. [00:01:42] Speaker 03: It really wouldn't matter. [00:01:43] Speaker 03: You seem to exclude any intentional acts. [00:01:47] Speaker 03: Don't the complaints, your exemplar complaints, don't they all allege intentional acts on the part of McKesson? [00:01:57] Speaker 03: there are a lot of allegations in there there are allegations in there that are not covered and that are not accidents okay and what specific allegations i know you refer to negligence but doesn't california law suggest that you're looking really at the problem and of the complaint and they all deal with the same facts the alleged facts which all suggest that these are intentional acts on the part of your client doesn't that take the negligence claim [00:02:25] Speaker 03: off the table in terms of duty to defend? [00:02:29] Speaker 05: Not given the actual allegations we have here. [00:02:32] Speaker 05: The actual allegations we have here, on which I'm focused, given the test I just mentioned, find one, even if there's $4,700. [00:02:41] Speaker 05: Oh, yeah. [00:02:42] Speaker 03: OK, you get that. [00:02:42] Speaker 03: We all get that. [00:02:43] Speaker 03: You get that. [00:02:43] Speaker 03: But the point is, we have to look at the complaints, the exemplar complaints. [00:02:49] Speaker 03: As I read them, it just filled with allegations of deliberate misconduct by McKesson. [00:02:55] Speaker 03: knowing understanding state and local authorities and don't do this i'll do this f a f t a everybody telling you not to do it you did it anyway i'm not saying it's right i'm just saying that's what the allegations are but how do you get around that that's not all that's there what's also there and then i'll tell you how the district court mishandled what i'm about to read out loud what's also there are allegations that mckesson [00:03:21] Speaker 05: You use two words, deliberate wrongdoing. [00:03:24] Speaker 05: I get it that negligence can be negligent, but it's not deliberate wrongdoing in the sense that you set out to commit a wrong. [00:03:31] Speaker 05: The allegations include that McKesson was negligent. [00:03:34] Speaker 05: That word is used in four, failing to control its, I'm quoting, failing to control its supply lines to prevent diversion. [00:03:43] Speaker 05: Quote, failing to monitor and or report suspicious orders of opioids. [00:03:48] Speaker 03: failing to guard against diversion of opioids. [00:04:07] Speaker 05: there are allegations we intentionally did those things, there are allegations we negligently did those things that we should have known didn't know but should have known even the allegations on which the district court placed so much undue emphasis the allegations that mckesson knowingly oversupplied [00:04:23] Speaker 05: the market knowing that was more than was legitimately needed. [00:04:27] Speaker 05: Even as to those allegations, the plaintiffs alternatively alleged that even if McKesson did not knowingly oversupply the market, McKesson nonetheless should have realized the market was oversupplied and was negligent in not doing so. [00:04:42] Speaker 05: And I refer the court to paragraph 557 of the summit complaint, 540 of the Cuyahoga complaint, [00:04:49] Speaker 05: Quote, McKesson flooded communities with opioids in quantities that they knew or should have known exceeded any legitimate market for opioids. [00:04:58] Speaker 03: Just to be specific, what paragraphs in the example are complaints? [00:05:05] Speaker 03: Would you like us to refer to as, if you will, drawing in a duty to defend based upon the allegations of the complaints overall? [00:05:15] Speaker 03: What specific paragraphs do you want us to look at? [00:05:19] Speaker 05: We laid them out in our briefs. [00:05:22] Speaker 05: But I've got a great sampling here, and they are 5ER967, paragraph 89, 3R393 to 394, paragraph 486. [00:05:39] Speaker 05: There's a lot of them. [00:05:41] Speaker 05: Page 399 of the same [00:05:44] Speaker 05: Pleading 501 to 502 paragraphs. [00:05:47] Speaker 04: Are these the should have known references that you're giving us our page numbers here? [00:05:53] Speaker 04: There were several should have known references to example our complaints. [00:05:58] Speaker 05: There are negligent counts that basically are that we failed to control. [00:06:05] Speaker 05: That's the core allegation. [00:06:06] Speaker 05: I understand that Judge Corley seized upon the one I just summarized. [00:06:09] Speaker 04: I don't know that that is the core allegation. [00:06:12] Speaker 04: That's the problem we have. [00:06:14] Speaker 04: No question, the complaints include language like that. [00:06:21] Speaker 04: But if you look at what the allegation is, McKesson's not facing liability, which led it to reach its settlement, because it might have sold the pills that led to the disaster that we've come to known as the opioid crisis. [00:06:37] Speaker 04: McKesson's facing liability, [00:06:42] Speaker 04: not because it was sleep at the switch, but because it sold in such quantities that more than should have known, must have known that, gee, we're selling how many pills to each resident of this county? [00:06:58] Speaker 04: That's the thrust of this case. [00:06:59] Speaker 05: Thrust core. [00:07:00] Speaker 05: I use the word core. [00:07:01] Speaker 05: You use the word thrust. [00:07:03] Speaker 05: I don't agree with that. [00:07:04] Speaker 05: But assuming that is the thrust of the case, so what? [00:07:08] Speaker 05: The law is that there is anything in there [00:07:12] Speaker 05: If that's what the court or the jury hangs it, then there's a duty to defend. [00:07:15] Speaker 04: That's true. [00:07:15] Speaker 04: The law is quite as lenient. [00:07:17] Speaker 04: I mean, plaintiffs are motivated to get insurance coverage triggered. [00:07:21] Speaker 04: So if you drop the word negligence on a complaint, does that automatically mean that insurance coverage for any act, even if plainly intentional, is triggered? [00:07:32] Speaker 05: Two-part answer. [00:07:33] Speaker 05: Ledesma directly holds that negligence equals an accident. [00:07:38] Speaker 05: Second part, but courts will look at the allegations to see if there's anything in there at all that really is negligence as opposed to intentional arrest. [00:07:46] Speaker 04: And after Ledezma, what did the California Supreme Court do with the District Court of Appeal decision and activists? [00:07:54] Speaker 05: They remanded it back to the court, which didn't do anything. [00:07:57] Speaker 05: And it didn't need to do anything, because it had already ruled that the products liability exclusion precluded the claim altogether, and that everything else was moot. [00:08:05] Speaker 04: Well, apparently the Supreme Court didn't think what it said in La Desma required correction of what the Court of Appeals said in activists. [00:08:12] Speaker 04: I think activists is the problem that you're facing here. [00:08:16] Speaker 05: Activists is perfectly consistent with our position. [00:08:19] Speaker 05: Activists were two complaints against a manufacturer, Watson, that only alleged deliberate wrongdoing, to use a phrase we used earlier today. [00:08:31] Speaker 05: That is, there were only intentional wrongs alleged. [00:08:35] Speaker 05: It was a skew of deceiving doctors, deceiving patients, deceiving the public at large, into thinking that opioids were not as addictive as had been thought, and into thinking that opioids could be used long term without having to up the dosage, which was also a lie. [00:08:51] Speaker 05: The court there looked at that complaint and said, which did not allege negligence, ever. [00:08:57] Speaker 05: There were no should have knowns in there, and said, that's not an accident. [00:09:02] Speaker 05: And when cases involving distributors with the failure to control supply lines allegations in it were cited, the court and activists said, that's appreciably different. [00:09:14] Speaker 05: That's not what we have here. [00:09:16] Speaker 05: That would be something else. [00:09:19] Speaker 05: And Judge Rogers, I don't have it right here, but yes, I do. [00:09:29] Speaker 05: a federal district court judge in the Zoganex, Z-O-G-E-N-I-X case that we cite in our briefs. [00:09:36] Speaker 05: She held that exactly these sorts of negligence allegations, this is post-lesnima, made against the normal period manufacturer, do constitute claims for liability caused by an accident, saying there could be, as to these failure to control supply lines types of allegations, quote, no credible dispute about that, citing Ledesma. [00:09:58] Speaker 05: Let me ask you one thing. [00:10:00] Speaker 04: What was the case you just said, Ed? [00:10:01] Speaker 04: That one has eluded me. [00:10:04] Speaker 05: It's a federal district court case, Z-O-G-E-N-I-X, Inc. [00:10:08] Speaker 05: versus federal. [00:10:10] Speaker 05: 2022 Westlaw 3908529. [00:10:16] Speaker 03: You've attempted in your briefs to distinguish activists on the grounds that that case involved a manufacturer, whereas McKesson is a distributor. [00:10:26] Speaker 03: What difference, if any, should that make? [00:10:29] Speaker 05: It's, that's the first half of the sentence, the second half of the sentence. [00:10:32] Speaker 05: It's a manufacturer who is at his own class. [00:10:36] Speaker 05: of all the manufacturers were accused of a deceptive marketing campaign in which they lied to the public, but more particular to doctors about opioids, as I just described. [00:10:47] Speaker 05: That was the manufacturer case. [00:10:49] Speaker 05: Distributors are more sued about failing to control the supply. [00:10:54] Speaker 05: Yes, there are allegations in the complaint that we did that knowing it would be diverted. [00:10:59] Speaker 05: There was also allegations in the complaint that we may not have known, but we should have known, and we were negligent in not knowing, [00:11:06] Speaker 05: And we were negligent in not putting in place and enforcing controls to make sure that didn't happen. [00:11:13] Speaker 03: OK. [00:11:13] Speaker 03: Yeah, it's up to you, counsel, but you're under your four minute mark. [00:11:16] Speaker 03: Do you want to save your time or you want to go forward right now? [00:11:20] Speaker 05: I just want to. [00:11:21] Speaker 05: I'll save my three minutes, but I just want to say that what the district court got wrong is you can't look to the core. [00:11:28] Speaker 05: You can't look to the thrust. [00:11:30] Speaker 05: You can't look to the predominant. [00:11:33] Speaker 05: The California Supreme Court has said in these cases where there's 18 causes of action and only one is possibly covered, that it doesn't matter what predominates. [00:11:42] Speaker 03: So from your perspective, negligence kind of conquers everything. [00:11:45] Speaker 03: The fact that these other allegations of intentionality are there doesn't matter. [00:11:48] Speaker 05: Two things conquer everything. [00:11:50] Speaker 05: One, it's negligence. [00:11:52] Speaker 05: And it's not someone saying they self-defended negligently when obviously they're lying, which was what Delgado was. [00:12:00] Speaker 05: Self, the negligence is an accident per Lidesma. [00:12:03] Speaker 05: It says it three times, even in its last sentence. [00:12:07] Speaker 05: Claimants expect coverage for all other negligence claims in addition. [00:12:11] Speaker 05: But the second half is everyone agrees that if there's some intervening act, [00:12:17] Speaker 05: that you act deliberately, but some intervening happening is the word that Merced used in 89 and it keeps being used, then if the insurer didn't intend that happening, [00:12:29] Speaker 05: It's an accident from the insurer's perspective, celi-desma, and therefore there's coverage. [00:12:33] Speaker 05: And we have a long causal history here, going through the doctors who misprescribed, the pharmacists who misdispensed, the black marketers who stole it and used it, the abusers themselves who overdosed. [00:12:48] Speaker 05: That's what caused the injury. [00:12:49] Speaker 05: All those things caused the injury. [00:12:51] Speaker 05: There are allegations in these complaints that allow for the conclusion that we didn't intend that, and that from our perspective, [00:12:58] Speaker 05: the injuries were accidents within the meaning of California law. [00:13:04] Speaker 03: You want to save the balance of your time? [00:13:05] Speaker 05: Yes, please. [00:13:06] Speaker 03: Very well. [00:13:07] Speaker 03: All right. [00:13:07] Speaker 03: Mr. Boutros, you've got eight minutes, and Mr. Hacker has seven. [00:13:11] Speaker 03: I assume you're going first. [00:13:12] Speaker 03: Is that correct? [00:13:13] Speaker 00: Yes, Your Honor. [00:13:13] Speaker 00: Thank you very much. [00:13:14] Speaker 00: Please proceed. [00:13:15] Speaker 00: May it please the court. [00:13:16] Speaker 00: I'm going to address the accident issue, and Mr. Hacker is going to address the bodily injury issue, and I'm representing National Union. [00:13:23] Speaker 00: As the California Court of Appeal [00:13:25] Speaker 00: uh... decision activist in the district court's decision made clear here the exemplar suits did not seek to recover based on accident the government's seek uh... sued mckesson because it of its deliberate conduct the allegations not the predominant claim it is the claim it's that [00:13:43] Speaker 00: mckesson allegedly deliberately knowingly flooded the market with opioids in the face of government investigations congressional hearings everybody knew what was happening and and and the complaint certainly sound that way but your opposing council has made the point that when it comes to a duty to defend if there's anything in the complaint into which [00:14:08] Speaker 03: negligence or non-intentional conduct can fit, then you've got to defend. [00:14:14] Speaker 03: What's your response to that? [00:14:16] Speaker 00: My friend on the other side is grossly overstating that principle. [00:14:19] Speaker 00: First of all, La Desma did not hold that negligence equates with accident, and in fact, it applied the exact same standard [00:14:27] Speaker 00: as uh... actavis which is the first point is was there deliberate conduct we all know from law school that deliberate conduct can be deemed negligence but you didn't intend the harm uh... so the question is first is it deliberate conduct and then the second part of the and clearly here it is there's no question that the allegation is deliberate flooding of the market with opioids well the manufacturing of [00:14:53] Speaker 02: these kind of drugs is always deliberate, right? [00:14:56] Speaker 02: I mean, they have to crank it up and produce it and sell it and do all this. [00:15:01] Speaker 00: That's correct, Your Honor. [00:15:02] Speaker 00: And that's where the second part of the test comes in. [00:15:04] Speaker 00: Deliberate isn't enough. [00:15:06] Speaker 00: The question then is, was there an independent, additional, unexpected, unforeseen happening that caused the harm? [00:15:16] Speaker 00: And as Actavis said, that is not the case here. [00:15:20] Speaker 00: And Actavis makes this a very simple case for this court. [00:15:23] Speaker 00: It's about as close to being directly on point as one could imagine. [00:15:27] Speaker 00: And the distinction between manufacturer and distributor doesn't hold water. [00:15:32] Speaker 00: That's not what the court in Actavis was focused on. [00:15:36] Speaker 00: It was focused on the different legal standards. [00:15:39] Speaker 00: in that were involved in those two cases that cited, which they were very different than California law, as Actavis pointed out. [00:15:47] Speaker 00: There, and this council's, I think, sort of seeking to get this court to adopt those rules, there had to be proof both either that there was intentional conduct [00:15:59] Speaker 00: and intent to cause harm. [00:16:02] Speaker 00: I mean, not either, both of those things. [00:16:04] Speaker 00: Here in California, as Octavius points out, there's no, an accident, there's, even if you don't intend to cause harm, if there was deliberate conduct and the results were not unforeseen, unexpected, it's not an accident. [00:16:18] Speaker 00: And here, just to put it in perspective, you made the point at the beginning, Judge Smith, let's talk about the definitions. [00:16:25] Speaker 00: It's very simple. [00:16:27] Speaker 00: Has anyone ever heard of a 20-year accident? [00:16:31] Speaker 00: That's what these allegations are. [00:16:32] Speaker 00: The allegations are that for 20 years, and this is the allegations, we're not taking a position whether they're true or not, but the allegations for 20 years, the company in the face of knowledge of the harms that could occur, of the risks, of the problems, [00:16:47] Speaker 00: they continue to oversupply opioids around the United States and here with the exemplars in Ohio and Oklahoma. [00:16:55] Speaker 00: That's the allegation. [00:16:57] Speaker 00: It's not enough to just label a claim negligence. [00:16:59] Speaker 00: That's what Octavius said. [00:17:01] Speaker 00: Delgado, it was a negligence cause of action. [00:17:03] Speaker 04: But why isn't, should have known a real element here? [00:17:07] Speaker 04: Because if, again, we're not saying what really happened, [00:17:12] Speaker 04: But the plaintiffs have alleged, yes, that McKesson knew what it was doing. [00:17:18] Speaker 04: It desired to flood the market because it wanted to sell as many of those pills as they could. [00:17:23] Speaker 04: But they have also alleged that if they didn't really know, they should have known, negligence language. [00:17:32] Speaker 04: And why isn't that enough to trigger insurance coverage? [00:17:35] Speaker 00: But let me tackle that head on here. [00:17:37] Speaker 00: They have several, I think, [00:17:39] Speaker 00: good responses. [00:17:40] Speaker 00: The first is, as the district court found, the should have known allegations here go to the foreseeability. [00:17:46] Speaker 00: The complaint is saying they should have known this would happen. [00:17:50] Speaker 00: To my mind, that supports our position that these were not those allegations, meaning that these were not unexpected, unforeseen, fortuitous events. [00:17:59] Speaker 00: They should have known. [00:18:00] Speaker 00: Any reasonable person should have known. [00:18:01] Speaker 00: Number two, counsel, I think, said that [00:18:04] Speaker 00: Actavis did not involve should-have-known allegations. [00:18:07] Speaker 00: It absolutely did. [00:18:08] Speaker 00: The complaint is filled with them in the underlying Actavis case. [00:18:12] Speaker 00: And the California Court of Appeal, which this court, applying California law, looks to, to determine what the California Supreme Court would hold, in La Desma, it didn't remand the case. [00:18:21] Speaker 00: It dismissed the case and left it standing, knowing full well, having granted review. [00:18:27] Speaker 00: So, Actavis did have, should have known allegations. [00:18:30] Speaker 00: And then, this goes back to the bigger point, my 20-year accident point. [00:18:35] Speaker 00: It might be one thing if the argument was here that McKesson had shipped one particular shipment and it caused harm and that was the insurance claim was based on that. [00:18:46] Speaker 00: But here, they have said that the occurrence is the 20-year, one big occurrence. [00:18:51] Speaker 00: The accident is for 20 years they engaged in this conduct. [00:18:55] Speaker 03: Um, and let me ask you this, Mr. Boutros, are you aware of any insurance case in California where [00:19:04] Speaker 03: Allegations of conduct over a 20-year period have been found to be, end quotes, accident under California law. [00:19:11] Speaker 00: None. [00:19:12] Speaker 00: Anything close to that? [00:19:13] Speaker 00: Nothing close to it. [00:19:14] Speaker 00: And here, McKesson made the determination to claim one big occurrence because of the retained limits, and that was their choice. [00:19:22] Speaker 00: But then it creates this absurd effort to define accident as something that repeatedly, over and over and over again, happens for 20 years. [00:19:31] Speaker 00: and repeatedly over and over again causes predictable known harm that Congress looked at dating back 20 years, that the DEA and the Justice Department brought actions or got penalties and settlements from McKesson. [00:19:47] Speaker 00: That's not an accident by any definition known to California, to the dictionary, to this court. [00:19:54] Speaker 04: Well the premise there to say it's not an accident and in reality I suspect that's the case. [00:19:59] Speaker 04: But somebody could be selling pills and not paying attention. [00:20:04] Speaker 04: I mean, that's the argument. [00:20:05] Speaker 04: And that's why plaintiffs in these cases do more than just allege intentional act or deliberate act. [00:20:12] Speaker 04: They do allege, should have known, should have been cognizant of the fact that these quantities were beyond belief, but they were asleep at the switch. [00:20:22] Speaker 04: And the plaintiffs will argue, and they're going to be liable anyway. [00:20:27] Speaker 04: It's not a defense for them to say, gee, we didn't realize that we were selling 500 pills to every resident of this county. [00:20:33] Speaker 04: We just to sell them the pills or we're selling them and so forth. [00:20:37] Speaker 04: Why isn't that a basis for liability? [00:20:41] Speaker 04: And if it is a basis for liability, if it's alleged by the plaintiffs, why isn't that enough to trigger a duty to defend? [00:20:47] Speaker 00: I don't think it's a basis for liability. [00:20:49] Speaker 00: It doesn't go to the deliberate intent component. [00:20:52] Speaker 00: As the district court found, it goes to whether it was foreseeable that the harm might result. [00:20:57] Speaker 04: No, I'm drawing the line a little different place. [00:20:58] Speaker 04: It's one thing to say, OK, you're driving down the street. [00:21:02] Speaker 04: You know you're driving. [00:21:03] Speaker 04: and you hit another car, you didn't intend to hit the other car. [00:21:06] Speaker 04: But in this case, you're driving down the street. [00:21:08] Speaker 04: You don't like that guy. [00:21:10] Speaker 04: You're going to ram his car. [00:21:11] Speaker 04: You don't know there's a baby in the backseat. [00:21:13] Speaker 04: You didn't know you're going to injure the baby. [00:21:16] Speaker 04: So there are different places to draw the line. [00:21:18] Speaker 04: In this case, I'm not saying the plaintiffs allege there's liability simply because you didn't know there was a baby in the car. [00:21:25] Speaker 04: The plaintiffs are alleging in this case that even if McKesson didn't realize that it was flooding the market beyond belief, [00:21:35] Speaker 04: It's still liable, because it should have realized it was flooding the market beyond the belief. [00:21:40] Speaker 00: Your Honor, that's a very important distinction. [00:21:42] Speaker 00: They, and counsel suggested that this was an alternative argument, even if they didn't know. [00:21:46] Speaker 00: That's not what they argue. [00:21:48] Speaker 00: They argue that they should- Not what plaintiffs in these cases argue? [00:21:51] Speaker 00: That's not what the sentencing suits argue. [00:21:53] Speaker 00: What they argue and allege is to particular things over this 20-year period. [00:21:58] Speaker 00: For example, [00:21:59] Speaker 00: The allegation in page 579 of the ER, paragraph 1097, it should have known that there were likely to be some orders that were filled, should have, were going to be, some specific orders. [00:22:11] Speaker 00: That's not the claim for insurance. [00:22:13] Speaker 00: The claim is that this 20-year pattern, which there's no question, the complaints do not say that McKesson didn't know that for, or should have known for 20 years it was oversupplying. [00:22:25] Speaker 00: That's the focus of the claim. [00:22:27] Speaker 00: That's the alleged occurrence. [00:22:29] Speaker 00: And I'll finish with no one's ever heard of a 20-year accident. [00:22:33] Speaker 00: Thank you very much. [00:22:34] Speaker 00: Very well. [00:22:35] Speaker 03: All right. [00:22:35] Speaker 03: So Mr. Brown, I believe. [00:22:38] Speaker 03: I'm sorry. [00:22:39] Speaker 03: It's Mr. Hacker. [00:22:41] Speaker 03: Excuse me. [00:22:50] Speaker 01: Good morning, Your Honors. [00:22:51] Speaker 01: May it please the Court? [00:22:52] Speaker 01: not only do the exemplar complaints not allege accidental conduct, they do not seek to establish liability for or because of bodily injury. [00:23:02] Speaker 01: They seek economic losses resulting from a public nuisance and from breach of duties owed only to the counties as governments. [00:23:09] Speaker 01: As multiple appellate courts recently have recognized, including Judge Seiler's Sixth Circuit, in addressing these exact complaints, and courts in California and elsewhere have recognized in other related contexts, [00:23:21] Speaker 01: Claims for economic losses trigger bodily injury coverage, can trigger bodily injury coverage, only if the claims require proof of liability for specific injuries to specific individuals. [00:23:35] Speaker 01: And the losses that are sought are a measure of those specific injuries. [00:23:39] Speaker 03: That's exactly- Let me just ask you this. [00:23:41] Speaker 03: Obviously, the district court here, the trial court did find there was bodily injury, but [00:23:50] Speaker 03: Arguing, though, if we agree with Mr. Boutrous's point that there was no accident, do we even need to get into the bodily injury issue? [00:23:58] Speaker 01: Absolutely not. [00:23:58] Speaker 01: That would be a completely dispositive basis for affirming the decision below. [00:24:03] Speaker 01: We don't argue otherwise. [00:24:04] Speaker 01: But if you disagree. [00:24:07] Speaker 01: I just want to be sure I understood that. [00:24:08] Speaker 01: Absolutely. [00:24:09] Speaker 01: We're not insisting or asking the court reach this issue. [00:24:12] Speaker 01: Whatever else happens, that would be a sufficient basis. [00:24:15] Speaker 01: But what was going on in the AIU case, [00:24:19] Speaker 01: which is essentially the only case, certainly the principal case that McKesson relies on is exactly what I was referring to. [00:24:25] Speaker 01: That case was applying the rule from the California Supreme Court in Getty's 1 and Getty's 2 together. [00:24:31] Speaker 01: In that case, the government, in AIU, the government sought damages for the cost of remediating specific property damage. [00:24:38] Speaker 01: Although the government's own property wasn't damaged, its remediation costs were a measure, that's the key phrase in California law, were a measure of the insured's liability for the specific proven damage at specific locations. [00:24:50] Speaker 01: The complaints here are completely different, Your Honors. [00:24:54] Speaker 03: Counsel, I know this is an exciting subject, the bodily injury and so on, but I'd be very interested in your addressing [00:25:00] Speaker 03: the fallback that your opposing counsel, I assume, is going to address, which is if it doesn't meet what Mr. Boutreaux said, if they can allege additional, I'm quoting, additional unexpected, independent, and unforeseen happenings. [00:25:20] Speaker 03: Is anybody going to address that on your side as to whether any such things occurred? [00:25:25] Speaker 03: that gets them beyond the problem that they would have if Mr. Boutros is correct. [00:25:32] Speaker 01: I think that would fit within Mr. Boutros' sort of category of arguments as to whether or not there are allegations even if they're unforeseen events. [00:25:40] Speaker 01: What I'm focused on is the rule of thumb. [00:25:42] Speaker 04: Then let me take up the bodily injury. [00:25:44] Speaker 04: And I think I understand the distinction you're talking about. [00:25:47] Speaker 04: And yet at root, everything here rests on the consequences of the opioid crisis. [00:25:55] Speaker 04: bodily injury. [00:25:56] Speaker 04: So why do we parse it out to say that, well, yeah, there was a whole lot of bodily injury here. [00:26:02] Speaker 04: There are people dead. [00:26:03] Speaker 04: There are people crippled for life. [00:26:05] Speaker 04: But we're not going to pay attention to that, because these suits are bought by the government units that are paying the price for all the people that suffered bodily injury. [00:26:13] Speaker 04: Why do we split it there? [00:26:15] Speaker 01: So the argument there is that there's a causal connection to all those bodily injuries. [00:26:18] Speaker 01: There's a but for causation, and that's enough. [00:26:20] Speaker 01: I understand that point. [00:26:22] Speaker 01: But the answer is, the sort of two-part answer is, [00:26:25] Speaker 01: Courts have never, not ever held that that's enough, that there's a mere but for causation. [00:26:30] Speaker 01: That's exactly what was going on in Getty's. [00:26:33] Speaker 01: There was property damage, undisputed property damage. [00:26:35] Speaker 04: And logically, why should we? [00:26:37] Speaker 04: I mean, I understand. [00:26:39] Speaker 04: This is a state law question. [00:26:40] Speaker 04: But I've struggled with this question before because all of the injury that is being claimed at whatever level by whatever party rests on the human bodily injury toll of the epidemic. [00:26:54] Speaker 01: Well, it's traceable back in that but for causal sense in the same way that in Getty's, the injury, the damage was traceable directly to property damage. [00:27:03] Speaker 01: But the court said it wasn't because of property damage, because they were seeking economic business losses that were not a measure [00:27:10] Speaker 01: of the property. [00:27:10] Speaker 04: Government's not seeking business losses, they're seeking economic losses because they've had to pay a huge price because of all the broken bodies. [00:27:19] Speaker 01: Right. [00:27:19] Speaker 04: How's that not because of bodily injury? [00:27:22] Speaker 01: Because it's not, the price that they're paying is not a measure of the bodily injuries. [00:27:27] Speaker 01: They don't have to prove that McKesson, excuse me, the plaintiffs, the counties in the exemplar complaints are not seeking to, in any respect, prove that McKesson is liable for causing bodily injury to anybody. [00:27:39] Speaker 01: They're literally required to prove something different to establish their public nuisance claim, which requires the allegation of an injury. [00:27:46] Speaker 04: If there weren't bodily injury, they wouldn't be here in the first place. [00:27:49] Speaker 04: The premise of the state and county claims is that we got all these broken people. [00:27:55] Speaker 04: Without the broken people, it's not just but for. [00:27:57] Speaker 04: That's what's the engine driving the claim. [00:28:00] Speaker 04: And I just have difficulty conceptually understanding how we pretend, well, that's economic injury. [00:28:06] Speaker 04: It's not bodily injury. [00:28:07] Speaker 04: But the economic injury flows directly [00:28:09] Speaker 04: from paying the price of the human toll. [00:28:11] Speaker 01: Two answers. [00:28:11] Speaker 01: I would say that was absolutely true in Getty's, right? [00:28:14] Speaker 01: The only reason anybody was in that case was that there was property damage. [00:28:18] Speaker 01: And the issue was, was the damages that were claimed for property damage because of property damage or because of economic losses. [00:28:25] Speaker 01: And the court said because they weren't measuring the economic loss, the property damage in the sense of [00:28:30] Speaker 01: paying for the actual costs of it, where you had to prove what the property damage was, those other damages that were causally connected to property damage were not because of property damage. [00:28:41] Speaker 01: The second point, as the courts in Quest and Rite Aid and in Acuity have emphasized, is the language of these policies creates what you might think of as a proximate cause requirement, but a particular kind of proximate cause requirement that requires specificity [00:28:56] Speaker 01: of the bodily injury that's at issue, that the plaintiff has to be trying to prove and hold the defendant liable for specific bodily injuries, not for the broad economic budgetary consequences that result from a public nuisance that, yes, is traceable back to bodily injuries. [00:29:13] Speaker 01: I'm not contesting that. [00:29:15] Speaker 01: But the because of here is because of the public nuisance. [00:29:19] Speaker 01: There are six provisions in these policies, six provisions that tell you that it has to be a particularized injury that's at issue. [00:29:28] Speaker 01: The insurance, the insurance agreement itself requires bodily injury sustained by a person or any person. [00:29:33] Speaker 01: The notice provision for bodily injury requires the insurer to provide the name of the victim and the date of the occurrence and the basic facts of the occurrence. [00:29:41] Speaker 01: You couldn't possibly do that if it was just generalized injuries out there that gave rise to a public nuisance, which then gave rise to economic losses. [00:29:50] Speaker 01: There has to be more than that. [00:29:52] Speaker 01: What's alleged here against McKesson [00:29:55] Speaker 01: is solely the economic budgetary consequences of a broad community-wide public nuisance. [00:30:01] Speaker 01: Nowhere do they do what is required to establish damages for bodily injury, which is to allege facts that would permit a court, a jury to hold McKesson liable for causing specific injuries to specific people and seeking damages that are a measure of those specific injuries. [00:30:19] Speaker 03: Okay, your time is up. [00:30:19] Speaker 03: Let me ask whether either of my colleagues has a question. [00:30:22] Speaker 04: We could go on a long time, but I think we get the drift. [00:30:25] Speaker 03: Thank you, Your Honor. [00:30:25] Speaker 03: Very well. [00:30:26] Speaker 03: Thank you. [00:30:27] Speaker 03: All right. [00:30:27] Speaker 03: Mr. Brown? [00:30:34] Speaker 05: I'm going to try to make five points, I think, in my two minutes. [00:30:38] Speaker 05: One, on this 20-year accident thing, the definition of [00:30:43] Speaker 05: comma, including continuous or repeated exposure to conditions over time. [00:30:49] Speaker 05: That was put in there to eliminate any requirement of sudden... Though, from your perspective, 20 years is not a problem. [00:30:54] Speaker 05: No. [00:30:54] Speaker 05: Asbestos cases, 20 years. [00:30:56] Speaker 05: The environmental contamination in AIU, 20 plus years. [00:30:59] Speaker 05: Long-term product exposure cases, they're always 20, 30 years. [00:31:04] Speaker 05: Not always, often. [00:31:04] Speaker 05: So that's a red herring. [00:31:07] Speaker 05: Two, big point, we are seriously prejudging the case against McKesson here in just talking about deliberate knowing over supply of the opioid market. [00:31:20] Speaker 03: But are we not at this point bound by the pleadings? [00:31:25] Speaker 05: But that's not all that's there, as I said before. [00:31:28] Speaker 05: You contributed to the problem by failing to implement controls, even if you didn't realize that you were oversupplying the market. [00:31:36] Speaker 05: What the district court didn't allow for was the prospect that we could go to trial, the jury could find they didn't deliberately oversupply, but they still [00:31:48] Speaker 05: messed up by failing to control the supply line by doing what they were supposed to do in terms of exercising controls reporting suspicious orders training its employees properly were alleged to have not negatively have trained our employees just as the [00:32:04] Speaker 05: employer in Ledesma was accused of negligently hiring and supervising his. [00:32:09] Speaker 03: From your perspective, the case should have gone to trial before a duty to defend was determined. [00:32:14] Speaker 05: No, no, no, no. [00:32:14] Speaker 05: That's why we have this duty to defend rule that you've got to step in if there's any chance so that we don't have these corals. [00:32:21] Speaker 05: And in the meantime, we don't get a defense. [00:32:23] Speaker 05: Defense, boom, you go. [00:32:25] Speaker 05: After the trial, you find out whether there's liability that's covered or not, and you get paid or you don't. [00:32:30] Speaker 05: But defense, it's called a doubt resolution rule. [00:32:34] Speaker 05: You're saying it should be coverage from the start? [00:32:39] Speaker 05: For the defense. [00:32:40] Speaker 05: The indemnity is another day. [00:32:42] Speaker 03: Your time is up. [00:32:43] Speaker 03: I know you want to tell us more. [00:32:46] Speaker 03: I'll tell you what. [00:32:46] Speaker 03: We'll give you an extra minute, because we're excited to hear your additional points. [00:32:52] Speaker 05: You mentioned intervening acts. [00:32:54] Speaker 05: The trial court in the city of Huntington case did. [00:32:57] Speaker 05: That case did go to trial. [00:32:58] Speaker 05: Eight-week trial. [00:32:59] Speaker 05: We won. [00:33:00] Speaker 05: We were exonerated entirely. [00:33:03] Speaker 05: But the point to be made here is we were exonerated because the court found the injuries were caused, quote, by over-prescribing by doctors, dispensing by pharmacists of the excess prescriptions, and diversion of the drugs to illegal usage by others, quoting the court, all effective intervening causes beyond the control of McKesson. [00:33:25] Speaker 05: What the district court failed to allow for was the prospect that we're held liable, but it's for not preventing those intervening causes, which we didn't intend. [00:33:35] Speaker 05: The possibility exists. [00:33:37] Speaker 05: And if we're held liable on that basis for failing to control our supply line, even though we didn't realize the jury finds we didn't realize it was oversupply, the DEA sets the quotas for supply. [00:33:49] Speaker 05: The DEA, not us. [00:33:50] Speaker 05: That claim is covered, and so it may end up that way. [00:33:54] Speaker 05: We may be exonerated, but right now there's a duty to defend because of that doubt. [00:33:59] Speaker 03: Okay, thank you. [00:34:01] Speaker 03: All right, the case just argued is submitted. [00:34:03] Speaker 03: We thank all counsel for argument. [00:34:06] Speaker 03: The court is going to adjourn for the day, but I just want to remind the students who are here, our law clerks are going to be out here to talk to you. [00:34:14] Speaker 03: for a minute and then when we get done with conference we will come out and visit with you as well. [00:34:20] Speaker 03: The court stands adjourned for the day.