[00:00:01] Speaker 04:
Okay, Mr. Sheppard, please proceed.

[00:00:03] Speaker 00:
Good morning, Your Honors.

[00:00:04] Speaker 00:
May it please the Court, Steven Sheppard for Appellant EB Holdings.

[00:00:08] Speaker 00:
I'd like to reserve four minutes of my time for rebuttal.

[00:00:10] Speaker 00:
Okay.

[00:00:11] Speaker 00:
Watch the clock.

[00:00:13] Speaker 00:
Your Honors, Illinois National's position is that when an insured with a long-standing relationship with the company submits a reapplication for insurance, the 39th reapplication since 1975,

[00:00:30] Speaker 00:
and forgets to submit one document.

[00:00:34] Speaker 00:
That act of forgetfulness gives a risk-free cancellation option to the insurance company.

[00:00:41] Speaker 00:
They can say nothing, issue the policy, collect the premium payment, and then years later deny coverage and win summary judgment on the affirmative defense that that act of forgetfulness

[00:00:58] Speaker 00:
constituted a material in this representation.

[00:01:01] Speaker 04:
I appreciate your argument on that.

[00:01:04] Speaker 04:
What frankly baffles me about this case is both parties seem to be going back and forth about Texas law, and that's a big deal in this case.

[00:01:13] Speaker 04:
In your case, you did say Texas law govern, and yet later on you suggested that Nevada law govern.

[00:01:20] Speaker 04:
What was your reasoning on that, and which is it at this point from your perspective?

[00:01:24] Speaker 00:
Thank you, Your Honor.

[00:01:26] Speaker 00:
For this affirmative defense for which we are here today, Texas law clearly governs.

[00:01:31] Speaker 00:
That's based on the language of the policy that indicates the parties chose Texas law.

[00:01:36] Speaker 00:
The document in the record cited by Illinois National talking about Nevada law was from far before summary judgment.

[00:01:44] Speaker 00:
And I'd also note the district court

[00:01:46] Speaker 00:
noted quite clearly there was a dispute over choice of law for this particular issue.

[00:01:51] Speaker 04:
On some issues, you seem to have agreed that Nevada law applied.

[00:01:55] Speaker 04:
What issues were those?

[00:01:57] Speaker 00:
There's no affirmative statement that Nevada law applied as to any issue.

[00:02:02] Speaker 00:
For most of the issues briefed on summary judgment,

[00:02:05] Speaker 00:
We cited, and the other party cited, cases from both Texas and Nevada because there was no conflict between the laws as to those issues.

[00:02:16] Speaker 04:
Did you argue that the entire contract was governed by Texas law?

[00:02:21] Speaker 04:
And if so, where on the record?

[00:02:27] Speaker 00:
On page 51 of the summary excerpts, Your Honor, is our argument on this issue.

[00:02:35] Speaker 00:
And we stated that the parties intended for Texas law, this line 19, to govern the underwriting process, which is what we are concerned about in this affirmative defense.

[00:02:47] Speaker 04:
And as to that, you mean the entire contract, right?

[00:02:50] Speaker 00:
Not just the... We specifically referred to the underwriting process that led to this affirmative defense.

[00:02:56] Speaker 00:
We did not take a position as to whether Nevada law would govern for other issues.

[00:03:01] Speaker 01:
And this is on whether the elements of intent to deceive and the 90-day notice are applicable under Texas law or not.

[00:03:12] Speaker 01:
That's the most germane reason, that's the most germane difference that we're faced with here.

[00:03:18] Speaker 01:
Am I right?

[00:03:19] Speaker 00:
Yes, Your Honor.

[00:03:20] Speaker 00:
The 91-day notice requirement and the requirement of proof of an intent to deceive, which Texas requires.

[00:03:27] Speaker 00:
The document that Judge Smith referred to earlier in which we mentioned Nevada law was a motion near the outset of the case in which we moved for leave to amend the complaint in order to add a claim under Texas law for unfair claims practice handling.

[00:03:45] Speaker 00:
That had to do with the later claims handling practices that occurred after the underlying litigation arose.

[00:03:56] Speaker 00:
Texas law matters and is governing because of the policy language, which is conclusive under section 187 of the restatement.

[00:04:05] Speaker 00:
The endorsement number two to the policy is entitled Texas Amendatory Endorsement.

[00:04:11] Speaker 00:
It deals with, and I quote, when the insurance company is allowed to cancel the policy based on, quote, fraud in obtaining coverage, end quote.

[00:04:23] Speaker 00:
And addendum B to the blue brief sets out side by side the language of that endorsement and the Texas statutes.

[00:04:30] Speaker 00:
They're nearly verbatim identical.

[00:04:33] Speaker 00:
There's no reference in the policy to Nevada law.

[00:04:37] Speaker 00:
And Illinois National has not cited a single case from any court looking at policy language like this and deciding that the law of some other state should govern.

[00:04:47] Speaker 00:
The Baum case decided by the Eighth Circuit is on all fours with this one.

[00:04:51] Speaker 00:
and under section 187 of the restatement, the party's choice of law, demonstrated through the repeated references to Texas, is controlling.

[00:05:02] Speaker 00:
The district court's error was first to simply ignore section 187.

[00:05:07] Speaker 00:
We cited these policy provisions, we stated that the parties intended Texas law to apply, we cited section 187

[00:05:14] Speaker 00:
There's nothing in the order.

[00:05:16] Speaker 02:
Is there any case under Nevada choice of law, case law, that relies on the commentary to 187 to infer an intent to adopt the law of a state where there isn't an explicit statement that the law of this state shall govern?

[00:05:37] Speaker 00:
We did not find a Nevada case holding exactly that, Judge Collins.

[00:05:41] Speaker 00:
But what we did find, and what the other side doesn't dispute, is that Nevada courts routinely rely on this section and the other sections of the restatement.

[00:05:49] Speaker 01:
So there's nothing disclaiming comment A?

[00:05:53] Speaker 00:
Correct, Judge Bennett, absolutely.

[00:05:55] Speaker 00:
And we cited even comment A, which goes to this point.

[00:05:58] Speaker 00:
to the district court.

[00:06:00] Speaker 00:
The district court's error was to go immediately to the significant relationship analysis in section 188 and that's error because it says in paragraph two of section 188 that that significant relationship test only applies in the absence of an effective choice of law by the parties and that choice of law happened here.

[00:06:21] Speaker 04:
You cited lay pink versus real properties

[00:06:25] Speaker 04:
when you were trying to convince the district court that Nevada law, like Texas law, requires an omission to be made with intent to defraud in order to get the court to go along with your affirmative defense argument.

[00:06:39] Speaker 04:
That case is distinguishable, is it not?

[00:06:41] Speaker 00:
It is distinguishable, Your Honor.

[00:06:45] Speaker 00:
Our strongest argument is that Nevada law, like Texas law, requires materiality of the omission.

[00:06:52] Speaker 00:
And to turn to that, which is the District Court's second error requiring reversal, the District Court held as a matter of law that what happened here was a material misrepresentation.

[00:07:05] Speaker 00:
There was no affirmative misrepresentation at all.

[00:07:09] Speaker 00:
The document cited by the District Court for that proposition

[00:07:13] Speaker 00:
is at page 279 of the record.

[00:07:17] Speaker 00:
It is the first page of the reapplication form that the insureds submitted.

[00:07:22] Speaker 00:
There is a chart that asks for total financial information of many metrics, assets, revenues, cash, and liabilities.

[00:07:30] Speaker 00:
The insureds left the chart blank.

[00:07:33] Speaker 00:
They didn't make a representation about any of those financial metrics that was asked for.

[00:07:40] Speaker 02:
It says C financials, doesn't it?

[00:07:42] Speaker 00:
It doesn't use the verb see your honor the the very first row says based on and there's a colon That's from the template and then the insureds wrote in attached financials and a particular date Yeah

[00:07:58] Speaker 02:
It says based on financial statements, and then it has listed underneath total assets, total liabilities, total revenues, contributions, and at the top it just says 1231-2014 attached financials.

[00:08:14] Speaker 02:
One would reasonably read that as meaning that the things listed there that are being requested are included in that document, but of course the total liabilities is not listed in those documents.

[00:08:29] Speaker 00:
Respectfully, Your Honor, that might be an argument for the jury.

[00:08:32] Speaker 00:
What I would tell the jury is that in many prior years, the document that appears to have been omitted in 2015 was repeatedly submitted.

[00:08:44] Speaker 00:
It was in Illinois National's underwriting files that we obtained in discovery.

[00:08:49] Speaker 00:
For example, in the year 2013, just two years before, EB Holdings, which is the company that has the long-term debt we're concerned about, submitted its balance sheet.

[00:09:01] Speaker 00:
It's in the insurance company's files.

[00:09:04] Speaker 00:
There's also from an earlier year a financial statement from 2008, which sets out the date the loan was taken out, the principal amount, the interest amount, and the maturity date in 2017.

[00:09:18] Speaker 00:
This debt was so well known to Illinois National that in 2014, the year before this reapplication, Illinois National waived the requirement that EB Holdings submit any financial information.

[00:09:33] Speaker 00:
Respectfully, Your Honor, an up-to-date balance sheet from EB Holdings would not have materially added to the information that was already present in Illinois National's files.

[00:09:46] Speaker 04:
So let me be sure.

[00:09:47] Speaker 04:
that I understand this correctly.

[00:09:50] Speaker 04:
As you well know, when you apply for insurance and certain information is requested, presumably you present that, you seem to be saying that because this insurance company and a lot of subsidiaries, I gather, had information in its file from which it could have determined, maybe even the same underwriter was involved, that there was still debt

[00:10:15] Speaker 04:
That nonetheless exculpates you from filling in the material that my colleague has referred to here?

[00:10:23] Speaker 00:
If this had mattered, Your Honor, to the insurance company, it was certainly within their rights to say, we're not going to issue you your policy until you fill out this chart that's on our form.

[00:10:35] Speaker 00:
Or to say, we're not going to issue you this policy.

[00:10:38] Speaker 00:
We don't see the up-to-date balance sheet from EB Holdings.

[00:10:41] Speaker 04:
Well, as you well know, things change.

[00:10:44] Speaker 04:
from year to year, especially in a very volatile situation we have of late.

[00:10:50] Speaker 04:
So what was true two years, three, four years ago may not be still true.

[00:10:55] Speaker 04:
So why are we to understand that because the insurance companies collectively knew about this very large billion-dollar debt in the past, that that somehow impregnated them with the knowledge of its current status.

[00:11:14] Speaker 00:
Because it makes a dispute of fact as to whether the failure to attach that balance sheet was a material omission in 2015, and for two reasons.

[00:11:26] Speaker 00:
Not only did they have the information from prior years, we know what they did in prior years.

[00:11:32] Speaker 00:
Not only did they issue the same policy without putting on a bankruptcy exclusion, they even lowered the premiums that were charged.

[00:11:41] Speaker 04:
Let's just say hypothetically, again, this is not what happened, but say AB Holding doubled its debt to $2 billion.

[00:11:48] Speaker 04:
Would that make a difference?

[00:11:49] Speaker 04:
And the fact that they had previous debt, would that somehow exculpate you from having to disclose currently

[00:11:56] Speaker 00:
What is owed?

[00:11:58] Speaker 00:
That would be a much different case, Your Honor, and a much more difficult one for me, because in that hypothetical, where the debt had increased significantly, that's new information that's not in their prior files.

[00:12:09] Speaker 00:
Here, the increase in the total balance was right in line with what simple math would tell you.

[00:12:14] Speaker 00:
What was it, one point, how much billion?

[00:12:17] Speaker 00:
1.6 billion.

[00:12:18] Speaker 04:
So, just the interest alone would

[00:12:21] Speaker 04:
make that go up and down, maybe by several hundreds of thousands of dollars, I would think that would be material, isn't it?

[00:12:27] Speaker 00:
And the interest rate was disclosed.

[00:12:30] Speaker 00:
So what would have been disclosed in an up-to-date balance sheet?

[00:12:33] Speaker 04:
Well, it was disclosed previously, but not here.

[00:12:36] Speaker 00:
Not in 2015?

[00:12:37] Speaker 00:
No, Your Honor.

[00:12:38] Speaker 04:
Right.

[00:12:38] Speaker 04:
That's what I'm struggling with is I get the point that the underwriters and the insurance companies had this past information, but that's a lot of money, at least by my standards.

[00:12:48] Speaker 04:
And you have insurance, I mean interest rates go up and down,

[00:12:51] Speaker 04:
could be hundreds and hundreds of thousands of additional dollars of debt.

[00:12:56] Speaker 04:
It's not mentioned.

[00:12:57] Speaker 00:
Why isn't that material?

[00:13:00] Speaker 00:
Two additional reasons I haven't been able to talk about yet on materiality.

[00:13:03] Speaker 00:
One, what happened in 2015?

[00:13:06] Speaker 00:
The underwriter in this case, Ms.

[00:13:08] Speaker 00:
Hobson, I took her deposition.

[00:13:10] Speaker 00:
She did not remember the details of this account.

[00:13:12] Speaker 00:
She didn't remember much.

[00:13:13] Speaker 00:
What she did remember was it was her practice to review financial statements that were submitted and it was her practice to ask for more information if there was something missing

[00:13:23] Speaker 00:
which was important.

[00:13:25] Speaker 00:
She's the one who waived the requirement to even see this balance sheet the year before.

[00:13:29] Speaker 00:
If she'd wanted it in 2015, she would have asked.

[00:13:33] Speaker 00:
From her deposition testimony and the failure to ask to see this balance sheet, that would allow the jury to conclude it's not material.

[00:13:41] Speaker 00:
And the third category of non-materiality evidence, what happened after 2015?

[00:13:47] Speaker 00:
In August 2017, Illinois National denied coverage.

[00:13:52] Speaker 00:
in a eight-page single-space letter.

[00:13:55] Speaker 00:
That letter talks about the debt that Your Honor was raising.

[00:13:58] Speaker 00:
It was relevant to the Golden Tree action below.

[00:14:01] Speaker 00:
It does not mention any material misrepresentation.

[00:14:06] Speaker 00:
And our expert will tell the jury.

[00:14:09] Speaker 00:
It's industry standard practice.

[00:14:12] Speaker 00:
If the insurance company believes there was a material misrepresentation, you point that out in the denial letter.

[00:14:18] Speaker 00:
And that's why Texas law is so important to you, right?

[00:14:21] Speaker 00:
One element of Texas law is that notice requirement.

[00:14:24] Speaker 04:
We've used a bit of your time, so do you want to save any of this for rebuttal?

[00:14:29] Speaker 04:
Yes, thank you, Your Honor.

[00:14:32] Speaker 04:
Okay, so we're going to start with Mr. Cooper, I believe, right?

[00:14:36] Speaker 05:
That's correct.

[00:14:41] Speaker 05:
May it please the court, my name is Ben Cooper, I represent Illinois National, but for these 13 minutes, I'm speaking for all three of the insurance defendants.

[00:14:52] Speaker 05:
This is not a case about a home mortgage.

[00:14:54] Speaker 05:
It's not a case about ordinary people seeking an insurance policy for auto or home.

[00:14:59] Speaker 05:
These are sophisticated insurers who are dealing with debt ranging from $29.9 million that was disclosed, or over 50 times that, $1.6 billion.

[00:15:10] Speaker 05:
They have to turn square corners.

[00:15:12] Speaker 04:
They have to- I get all that.

[00:15:13] Speaker 04:
We get all that.

[00:15:14] Speaker 04:
Right.

[00:15:15] Speaker 04:
But what I don't get is how the district court

[00:15:18] Speaker 04:
determined that Nevada not Texas law governed.

[00:15:22] Speaker 04:
This place is, all the documents are Texas, Texas, Texas.

[00:15:26] Speaker 04:
How do you get there?

[00:15:28] Speaker 05:
Very simply, Your Honor.

[00:15:29] Speaker 05:
What's interesting is the district court had very little to go on because the plaintiff here, the plaintiffs, did their choice of law analysis in a rather cryptic manner.

[00:15:38] Speaker 05:
Whether or not it amounts to absolute waiver, it's certainly waiver in the details.

[00:15:42] Speaker 04:
Let's assume for a moment they didn't waive it.

[00:15:43] Speaker 05:
What's your best argument?

[00:15:44] Speaker 05:
Very easy.

[00:15:45] Speaker 05:
First of all, Section 187, which Mr. Sheppard focused on, deals with choice of law, where the parties make a choice.

[00:15:53] Speaker 05:
It is not just a matter of stray references that are geographical.

[00:15:56] Speaker 05:
It has to do with whether someone is choosing law.

[00:15:59] Speaker 05:
First, there is no express choice of law.

[00:16:01] Speaker 05:
There's no provision that says the parties agree the Texas law shall govern.

[00:16:05] Speaker 04:
You started the position and the litigation was that Texas law applied, right?

[00:16:10] Speaker 05:
I don't believe that's correct, Your Honor.

[00:16:11] Speaker 04:
I think that's right.

[00:16:13] Speaker 04:
Maybe your counsel can tell us that.

[00:16:15] Speaker 05:
Once we got to summary judgment and we were talking about what the choice of law in this case about what applied, we clearly argued that Nevada law applied.

[00:16:23] Speaker 05:
And I think if you look at the policy, the policy doesn't say that Texas law applies, which leads you to...

[00:16:29] Speaker 02:
That went to my question about the restatement because the comment in the restatement addresses this very specific question.

[00:16:38] Speaker 02:
And it says, when the parties have made such a choice, they will usually refer expressly to the state of the chosen law in their contract.

[00:16:46] Speaker 02:
And this is the best way of ensuring that their desires will be given effect.

[00:16:50] Speaker 02:
But even when the contract does not refer to any state, the forum may nevertheless be able to conclude from its provisions that the parties did wish to have the law of a particular state apply.

[00:17:03] Speaker 02:
So that's the question, whether that applies and whether that standard met.

[00:17:08] Speaker 02:
And here we have Texas amendatory endorsement cancellation and non-renewal.

[00:17:13] Speaker 02:
And the subject of this amendment is, now I understand this isn't a cancellation, but it says the insurer may cancel this policy at any time during the term of the policy for the following reasons, fraud and obtaining coverage.

[00:17:29] Speaker 02:
So it deals with exactly the sort of misconduct at issue here in the context of cancellation

[00:17:36] Speaker 02:
And clearly signals that it's governed by Texas law, does it not?

[00:17:41] Speaker 05:
No, I would disagree with Your Honor.

[00:17:43] Speaker 05:
I would say all four of the attachments, two of them are not endorsements and then two are mandatory endorsements.

[00:17:49] Speaker 05:
Say Texas at the top, not that headings under the policy have any significance.

[00:17:54] Speaker 05:
But they don't choose Texas law.

[00:17:56] Speaker 05:
Now compare this to the George K. Baum case that they cite.

[00:18:00] Speaker 05:
In that case, the text actually referred to provisions of New York state law.

[00:18:07] Speaker 05:
The parties had indicated, there was testimony that the parties wanted New York state law to govern.

[00:18:13] Speaker 05:
And if you looked at Restatement Comment, the illustration, it talks about referring to unique doctrines of the state law.

[00:18:22] Speaker 05:
Now, Mr. Shepard's argument is, well, if you do a red line of this against the Texas statute, they look really similar, but nothing on the face of this endorsement says.

[00:18:34] Speaker 05:
by reference, by implicit choice, that Texas law will govern.

[00:18:39] Speaker 05:
It's one thing to say, well, you know, if you're in Texas, you can call our loss control program to maybe reduce your exposure.

[00:18:46] Speaker 05:
Or maybe if you're in Texas, the default location for ADR would be Texas, but you can choose one of five other cities.

[00:18:54] Speaker 05:
And here,

[00:18:55] Speaker 05:
You have a series of provisions.

[00:18:56] Speaker 05:
Maybe they're taken from Texas.

[00:18:58] Speaker 05:
Maybe they're taken from another state.

[00:19:00] Speaker 05:
Maybe they're the lowest common denominator that works in every state.

[00:19:04] Speaker 05:
But nothing on the face of this endorsement says, we are applying Texas law.

[00:19:10] Speaker 01:
But you would agree, I assume, as you have to, that the only state that's mentioned here with regard to a mandatory endorsements notice, et cetera, is Texas, right?

[00:19:21] Speaker 01:
That's correct.

[00:19:22] Speaker 01:
Then there's nothing that

[00:19:24] Speaker 01:
would be similar or even arguably similar that says Nevada, right?

[00:19:29] Speaker 05:
That's correct.

[00:19:30] Speaker 05:
But that's what thrusts you into a Section 188 analysis where there is no effective choice of law.

[00:19:36] Speaker 05:
You can use the word Texas in a policy or a contract.

[00:19:41] Speaker 05:
That doesn't mean Texas law governs.

[00:19:43] Speaker 05:
And that's why there's a five factor analysis under Section 188 that gets you to the correct answer where there is no choice of law as opposed to choice of geography or just

[00:19:57] Speaker 05:
you know, Texas forms got used.

[00:19:59] Speaker 01:
And your view is that that would be the case even if we looked to comment A of 187?

[00:20:07] Speaker 05:
Yes.

[00:20:07] Speaker 05:
I don't believe this rises to the level of 188, of 187 comment A. The George K. Bound case at the plaintiff's site does rise to that level because you have all the indicia that the mandatory endorsement specifically called out Texas law and said, yes, we are called up New York law and there was additional

[00:20:27] Speaker 01:
testimony to support it saying that you would agree that what we are looking at if we were to look at this comment is the language that says the forum may nevertheless be able to conclude from its provisions that the parties did wish to have the law of a particular state applied.

[00:20:43] Speaker 05:
That's correct, but I don't think one can get that from geographical references.

[00:20:48] Speaker 05:
I think one needs as in the George K. Bound case references to the law of the state.

[00:20:53] Speaker 05:
pertaining to that policy in some way.

[00:20:56] Speaker 04:
Why did you object to the request for admissions from the insured on the basis that Texas law should have applied?

[00:21:04] Speaker 05:
Your Honor, I think both parties at various times in the case, there was somewhat lack of certainty and parties were picking and choosing.

[00:21:14] Speaker 05:
But when they got to summary judgment... The lawyers disagreed?

[00:21:17] Speaker 05:
I'm sorry?

[00:21:18] Speaker 05:
That's shocking.

[00:21:19] Speaker 05:
It is shocking.

[00:21:20] Speaker 05:
It's outrageous and unprecedented.

[00:21:25] Speaker 05:
But I think the questions were fairly put to the district court about what the choices of law were and what the facts were that were being offered to show whether or not Section 187 or 188 applied.

[00:21:37] Speaker 04:
Let's just say, this is all arguendo, let's just say that the panel looks at this and we see Texas everywhere.

[00:21:45] Speaker 04:
If we say Texas law applies, where does that put you?

[00:21:49] Speaker 04:
Does that adversely impact you?

[00:21:52] Speaker 04:
What's your objection to applying Texas law?

[00:21:55] Speaker 05:
We think that, well, first of all, we think the standard is more appropriate.

[00:21:58] Speaker 05:
I understand that, but... Right.

[00:22:00] Speaker 05:
I think we prevail under Texas law because Mr. Myers, Harold Myers, you know, signed off on the application and he was aware of the $1.6 billion in debt.

[00:22:12] Speaker 04:
You would be successful under Texas law as well as the federal law, right?

[00:22:15] Speaker 02:
We believe so.

[00:22:17] Speaker 05:
We believe that, well, there's obviously a conflict.

[00:22:20] Speaker 05:
The Southern District of Texas has said it doesn't apply where it's a defense to a particular claim rather than a ground for cancellation.

[00:22:29] Speaker 05:
There are intermediate appellate decisions going the other way.

[00:22:31] Speaker 05:
The easiest way to resolve what Texas law is would

[00:22:35] Speaker 05:
for this court would be, if there's an issue and this court doesn't follow the Southern District, is to certify it to the Texas Supreme Court.

[00:22:43] Speaker 05:
But we don't have a dispositive ruling from the Texas Supreme Court.

[00:22:47] Speaker 01:
So you would urge us not to go by what the Texas intermediate

[00:22:53] Speaker 01:
appellate court has said?

[00:22:56] Speaker 01:
I would not.

[00:22:57] Speaker 01:
And instead, the district court?

[00:23:00] Speaker 05:
I would follow the district court.

[00:23:02] Speaker 05:
I think it's a fairer reading of what the text of the statute says.

[00:23:06] Speaker 05:
And if the court has any concern about that, it could always have the authority to certify this to the Texas Supreme Court.

[00:23:12] Speaker 05:
But we believe that the text of the statute, fairly read, supports the limitation imposed by the Southern District of Texas.

[00:23:20] Speaker 04:
Do you agree that under our Ninth Circuit case law, that to the degree we are construing state law, and there's no definitive Supreme Court of the state law, that we are to follow the intermediary court's rulings, as we understand them, as opposed to district courts?

[00:23:39] Speaker 05:
This court has showed an increasing

[00:23:43] Speaker 05:
inclination to seek a dispositive ruling from the state Supreme Court by certification.

[00:23:48] Speaker 05:
I think that would be appropriate here, particularly when one has a conflict in precedent coming out of coming out of Texas between federal and state courts as to what state court.

[00:23:57] Speaker 04:
But you would want us to do that with the Supreme Court of Texas, not the Supreme Court of Nevada.

[00:24:02] Speaker 05:
Well, we think it's not necessary to reach Texas law, so we would say you don't need to certify.

[00:24:10] Speaker 05:
How about Illinois?

[00:24:12] Speaker 05:
If this court is trying to decide what Texas law is, and the 90-day rule is a creature of Texas law, the one would certify that's a Texas report.

[00:24:20] Speaker 05:
Now, we don't think one gets there at all because

[00:24:23] Speaker 05:
there's no case law cited to the court under Section 187 common aid that says simply having some endorsements that say Texas at the top without facts that rise to the level of George K. Baum is enough to equal a choice of law by the parties, whether implicit or explicit.

[00:24:44] Speaker 05:
That's not a choice of law.

[00:24:45] Speaker 05:
There's no indication from that that the party's thought Texas law was going to be applied.

[00:24:50] Speaker 04:
What role does the restatement play in our analysis from your perspective?

[00:24:54] Speaker 05:
I'm an Arizona lawyer and then the restatement in an Arizona case would have this positive status, but in the Nevada Supreme Court has indicated it follows the restatement in this area.

[00:25:06] Speaker 05:
So that's certainly guidance.

[00:25:08] Speaker 05:
But the question is what that means in application.

[00:25:11] Speaker 05:
What does it mean, absent an express choice of law, to have enough of the issue that the parties intended that they wished to have a law of a particular jurisdiction?

[00:25:20] Speaker 05:
I would submit that the stray references to Texas in the headings are not enough to equal a choice of Texas law.

[00:25:27] Speaker 02:
Why do you think you would win under 188?

[00:25:30] Speaker 05:
because if one looks at the facts as presented to the district court, I think those are, the district court's holdings were correct.

[00:25:37] Speaker 02:
Well, the district court seemed to get the residents wrong, right?

[00:25:41] Speaker 05:
Well, if one looks at what the plaintiffs told the district court when it came to choice of law, all they said was,

[00:25:50] Speaker 05:
that was a Texas mailing address that the policy was delivered.

[00:25:53] Speaker 05:
They never attended on page 51 of the ER, which is, I believe, Mr. Sheppard was correct about that.

[00:26:00] Speaker 05:
They never say, oh, well, our principal place of business was in Texas.

[00:26:05] Speaker 05:
That's not what was told to district court.

[00:26:07] Speaker 05:
They said it was delivered to them.

[00:26:09] Speaker 05:
The domicile or principal place of business was represented in the verified bankruptcy petition as being in the District of Nevada, not in Texas.

[00:26:18] Speaker 04:
The insurance companies?

[00:26:20] Speaker 05:
No, in the bankruptcy of the petition filed by the plaintiffs in this case, represented that their domicile was in the District of Nevada.

[00:26:31] Speaker 02:
What was represented in the complaint?

[00:26:33] Speaker 02:
This is a diversity case?

[00:26:37] Speaker 05:
It was a diversity case, but the defendants are not Nevada corporations.

[00:26:43] Speaker 05:
There's diversity whether they're in Texas.

[00:26:45] Speaker 02:
What was represented as to citizenship in the complaint?

[00:26:49] Speaker 05:
I have to say, Your Honor, I don't recall.

[00:26:52] Speaker 05:
I would have to look that up as well.

[00:26:53] Speaker 04:
The insurance companies are based in Texas, right?

[00:26:55] Speaker 05:
No, no they're not.

[00:26:57] Speaker 05:
AIG, Illinois National.

[00:27:00] Speaker 04:
The ones involved in this particular case.

[00:27:03] Speaker 05:
Illinois National is not a Texas firm.

[00:27:06] Speaker 05:
It happens to have one employee

[00:27:10] Speaker 05:
resides in Texas as many insurance companies.

[00:27:13] Speaker 05:
It's not domiciled here.

[00:27:15] Speaker 05:
But the representation made on page 51 was solely that the policy was delivered in Texas.

[00:27:23] Speaker 05:
And it cites to the docket where it says listing to the docket entry where it listing Dallas address.

[00:27:30] Speaker 05:
That's it.

[00:27:31] Speaker 01:
I think the operative complaint says that both plaintiffs

[00:27:36] Speaker 01:
were organized under the laws of Nevada with their principal office in Dallas.

[00:27:41] Speaker 05:
Right.

[00:27:41] Speaker 05:
But when one gets to some rejudgment motions, one expects arguments to be made and preserved.

[00:27:46] Speaker 05:
And that was not the argument that was made to the district court.

[00:27:49] Speaker 05:
What was made to the argument, the argument made to the district court was based solely on a mailing address.

[00:27:56] Speaker 04:
OK.

[00:27:56] Speaker 04:
Your time is up.

[00:27:56] Speaker 04:
Let me ask my colleagues.

[00:27:57] Speaker 04:
Do I have additional questions for Mr. Cooper?

[00:28:00] Speaker 04:
Very well.

[00:28:00] Speaker 04:
Thank you, Mr. Cooper.

[00:28:01] Speaker 04:
Mr. Simpson, I believe, has two minutes.

[00:28:08] Speaker 03:
Thank you.

[00:28:09] Speaker 03:
May it please the court, Richard Simpson, on behalf of Continental Casualty Company, which is one of the excess carriers.

[00:28:15] Speaker 03:
We join in the arguments by Illinois National.

[00:28:18] Speaker 03:
I'm speaking separately because there's an important provision of the excess policies that this court, we believe, should consider if it decides to remand the case otherwise.

[00:28:31] Speaker 03:
And that is the antitrust sublimit exclusion.

[00:28:34] Speaker 03:
And the reason it's important for this court to consider that alternative grounds for affirmance.

[00:28:39] Speaker 03:
as to the excess policies are twofold.

[00:28:42] Speaker 03:
First, it's straightforward.

[00:28:44] Speaker 03:
It's as clear-cut a coverage issue as one can get.

[00:28:47] Speaker 03:
And second, a ruling in favor of the excess carriers dramatically changes the scope of the litigation with which the district court has to deal on remit.

[00:28:57] Speaker 04:
But with respect, I get your point about the exclusion.

[00:29:00] Speaker 04:
But wouldn't that be something, arguing, though, if we applied Texas law and it went back to the district court,

[00:29:06] Speaker 04:
wouldn't that be an issue decided at the district court level at that point as opposed to us?

[00:29:12] Speaker 03:
Well, this court has discretion in that regard.

[00:29:15] Speaker 04:
I understand that, but normally that's what would happen, right?

[00:29:17] Speaker 04:
Go back to district court.

[00:29:19] Speaker 03:
That often happened to our on remand.

[00:29:22] Speaker 03:
It would be considered and could be considered, but this court has discretion and often exercises it to consider an alternative ground.

[00:29:30] Speaker 03:
And if you look at this particular alternative ground, it eliminates three of the policies at issue, all three excess policies.

[00:29:37] Speaker 03:
It eliminates two of the parties entirely, Continental, Casualty, and Federal.

[00:29:41] Speaker 03:
And it cuts the coverage claim from $40 million.

[00:29:44] Speaker 04:
Do we have enough information as a panel to make that judgment?

[00:29:49] Speaker 03:
Yes, and that's the other reason we urge the panel to consider it.

[00:29:54] Speaker 03:
It's a very straightforward, simple matter of insurance contract interpretation.

[00:30:00] Speaker 03:
Doesn't matter whether Texas law applies or Nevada law applies.

[00:30:05] Speaker 03:
You look at the language of this provision, it applies to, it defines an antitrust claim.

[00:30:10] Speaker 03:
If it's an antitrust claim,

[00:30:12] Speaker 03:
then that's the end of it.

[00:30:13] Speaker 03:
There's no coverage.

[00:30:14] Speaker 03:
Any claim alleging, arising out of, based upon, or attributable to, or in any way involving, either directly or indirectly, and then a list of antitrust, anti-competitive, unfair competition type conduct.

[00:30:30] Speaker 03:
If you look at this complaint, every cause of action, whether you break it down by cause of action or you treat it as one claim as it should be treated,

[00:30:39] Speaker 03:
antitrust, rather, anti-competitive conduct is the very core.

[00:30:45] Speaker 04:
Your time is up.

[00:30:45] Speaker 04:
Let me ask colleagues additional questions.

[00:30:47] Speaker 04:
All right, thanks gentlemen.

[00:30:49] Speaker 04:
Appreciate it.

[00:30:50] Speaker 04:
So Mr. Shepard, you have a little time left.

[00:30:55] Speaker 00:
Thank you, your honor.

[00:30:56] Speaker 00:
Mr. Cooper said there are no unique doctrines of Texas law.

[00:30:59] Speaker 00:
Endorsement two prohibits canceling the policy solely based on status as an elected official.

[00:31:06] Speaker 00:
That's pretty close to unique to Texas.

[00:31:08] Speaker 00:
Footnote one of the blue brief shows that there's only one other state in the union with that as part of its law.

[00:31:14] Speaker 00:
Mr. Cooper said that

[00:31:17] Speaker 00:
The notice requirement doesn't apply because of a magistrate judge decision in federal court.

[00:31:22] Speaker 00:
The text of the Texas statute expressly refers to this notice being required before an insurance company makes a defense.

[00:31:31] Speaker 00:
Three different intermediate Texas Court of Appeals have held that it is an essential element of the defense.

[00:31:36] Speaker 00:
And finally, on the domicile point, the district court was not fooled by this.

[00:31:41] Speaker 00:
On pages six and seven of the record, the district court finds correctly the principal office of the insurance is in Texas.

[00:31:50] Speaker 00:
On page 211 of the further excerpts of record, we cited the district court to declarations establishing that at the relevant time, the headquarters of the insurance was in Texas.

[00:32:01] Speaker 00:
And with the courts indulged.

[00:32:04] Speaker 04:
I think your time is up.

[00:32:06] Speaker 04:
Thank you.

[00:32:06] Speaker 04:
Thank you very much.

[00:32:07] Speaker 04:
Thanks to all counsel for your argument.

[00:32:09] Speaker 04:
I've got to say that we have a number of insurance cases.

[00:32:13] Speaker 04:
This is pretty an interesting case.

[00:32:15] Speaker 04:
And some of them are less so, shall I say.

[00:32:17] Speaker 04:
This one is, though.

[00:32:19] Speaker 04:
Thank you both.

[00:32:19] Speaker 04:
I think all three of you, rather.

[00:32:21] Speaker 04:
The case just argued is submitted.

[00:32:24] Speaker 04:
Thank you.