[00:00:11] Speaker 05:
Good morning, and may it please the court.

[00:00:14] Speaker 05:
Christopher Passage with McGuire Woods on behalf of defendant appellant Amber Heard.

[00:00:18] Speaker 05:
I'd like to reserve two minutes for rebuttal.

[00:00:20] Speaker 03:
Okay, counsel, keep track of your own time, please.

[00:00:22] Speaker 03:
Thank you.

[00:00:23] Speaker 05:
Thank you.

[00:00:24] Speaker 05:
Northern Insurance v. Allied Mutual sets the stage for this entire appeal.

[00:00:29] Speaker 05:
Standing on its own, this court's opinion in Northern more than 30 years ago is dispositive of the independent counsel analysis that this court should conduct under Section 2860.

[00:00:39] Speaker 05:
under Northern and construing the factual allegations in the light most favorable to Ms.

[00:00:43] Speaker 05:
Heard, the district court's order must be reversed for three reasons.

[00:00:46] Speaker 05:
First, California has a strong interest in seeing California insurance coverage law and Section 2860 applied to protect California insurance and the rights of parties to California insurance contracts negotiated and executed here.

[00:01:01] Speaker 05:
Second, in light of Ms.

[00:01:02] Speaker 05:
Heard's well-planned allegations and New York Marine's admissions in this litigation,

[00:01:07] Speaker 05:
New York Marine's reservation of rights was a reservation as to Insurance Code Section 533.

[00:01:12] Speaker 05:
And third, because Ms.

[00:01:13] Speaker 05:
Hurd's alleged conduct could be characterized as intentional in the depth of litigation, and because Ms.

[00:01:18] Speaker 05:
Hurd's ability to obtain coverage turned on the characterization of that in that action, New York Marine's reservation on Section 533 triggered Ms.

[00:01:26] Speaker 05:
Hurd's right to independent counsel under Section 2860.

[00:01:28] Speaker 02:
Okay, let me just ask a couple preliminary questions, so I'm sure I have the dramatist person I straight in this case.

[00:01:38] Speaker 02:
To whom—I take it you're claiming that your client paid money to counsel that Marines should pay her.

[00:01:45] Speaker 02:
That's the only issue in this case right now, right?

[00:01:47] Speaker 02:
You're not worried about indemnification for the judgment, because that was taken care of.

[00:01:51] Speaker 05:
Well, this case solely deals with defense.

[00:01:54] Speaker 02:
That's right.

[00:01:54] Speaker 02:
So what we're dealing with is with the defense costs.

[00:01:57] Speaker 05:
Yes, that's correct.

[00:01:57] Speaker 02:
To which of the very many firms in the case was this money paid?

[00:02:04] Speaker 05:
By Miss Heard?

[00:02:06] Speaker 02:
By Miss Heard.

[00:02:07] Speaker 05:
By Miss Heard.

[00:02:08] Speaker 05:
There were several different firms that was paid.

[00:02:11] Speaker 05:
It was multiple different costs.

[00:02:14] Speaker 02:
Tell me the firms to whom it was paid.

[00:02:16] Speaker 02:
I don't care what amounts.

[00:02:17] Speaker 05:
I don't have the names before me in the record right here.

[00:02:20] Speaker 02:
I'm trying to straighten out your claim in this case.

[00:02:23] Speaker 02:
As I understand it, there was a period of time when Miss Heard was represented by two sets of counsel.

[00:02:30] Speaker 02:
Yes, correct.

[00:02:31] Speaker 05:
That's correct.

[00:02:31] Speaker 02:
By Cameron McElvoy and then the various council hired by travelers.

[00:02:35] Speaker 05:
Correct.

[00:02:36] Speaker 02:
So she couldn't have incurred costs because of the absence of second council during that time period for which you claim reimbursement, can she?

[00:02:47] Speaker 05:
So the problem is, Your Honor, is that not all of her costs were incurred.

[00:02:50] Speaker 05:
Travelers didn't pay fully for all of her costs.

[00:02:51] Speaker 02:
No, I understand.

[00:02:52] Speaker 02:
I understand.

[00:02:53] Speaker 02:
With respect to at least

[00:02:55] Speaker 02:
There's some point in time when she's got two councils.

[00:02:57] Speaker 02:
So you're not complaining about absence of independent counsel in that period.

[00:03:02] Speaker 02:
What you're complaining about is that travelers only agreed to pay half her costs.

[00:03:08] Speaker 05:
So we're complaining about the absence of independent counsel vis-a-vis New York Marine.

[00:03:11] Speaker 05:
And it's both of those things.

[00:03:13] Speaker 02:
Well, but why aren't the counsel that travelers appointed independent counsel vis-a-vis New York Marine?

[00:03:20] Speaker 05:
because Travelers specifically granted them the ability to have independent counsel.

[00:03:24] Speaker 05:
So Travelers, when it reserved its rights, did put forth a reservation of rights as to 533.

[00:03:29] Speaker 02:
That may be that the counsel that Travelers appointed had conflicts under your view of the law vis-a-vis Travelers, but I don't see how those lawyers had any conflicts vis-a-vis New York Marine.

[00:03:45] Speaker 05:
So when New York Marine ended up presenting, when New York responded to Ms.

[00:03:50] Speaker 05:
Hurd's tender, that's when it's provided its reservation of rights under.

[00:03:53] Speaker 02:
I understand all that.

[00:03:54] Speaker 02:
Tell me how the Kaplan firm, and later is it the Charleston firm, how those lawyers had any conflicts at all in representing Ms.

[00:04:06] Speaker 02:
Hurd vis-a-vis New York Marine.

[00:04:10] Speaker 02:
Vis-a-vis New York Marine, that reservation of rights still triggered that conflict.

[00:04:20] Speaker 02:
The conflict of interest deals with the tripartite system.

[00:04:27] Speaker 05:
So with respect to the underlying counsel, they had to represent both misheard

[00:04:31] Speaker 05:
and travelers in the underlying litigation.

[00:04:33] Speaker 02:
And I understand how you might have a claim against travelers for appointing people that had dual interests.

[00:04:39] Speaker 02:
I'm trying to figure out why those, the case was tried after McEvoy left the firm.

[00:04:45] Speaker 02:
Correct.

[00:04:45] Speaker 02:
By the firms, by the people travelers appointed.

[00:04:48] Speaker 02:
And I'm trying to figure out why you think that any of those people posed a conflict of interest vis-a-vis the interests of New York Marine.

[00:04:58] Speaker 05:
After that point in time, there was no conflict of interest because Ms.

[00:05:02] Speaker 05:
Hurd had independence in that council.

[00:05:04] Speaker 02:
Okay, so therefore she was not entitled to another set of lawyers once Travelers had brought in somebody who had no conflict vis-à-vis New York Marine, isn't that correct?

[00:05:15] Speaker 05:
Well, the problem is that conflict still exists vis-à-vis New York Marine.

[00:05:18] Speaker 02:
But you're not answering my question.

[00:05:20] Speaker 02:
Your complaint in this case is, I should have had another lawyer who didn't have a conflict vis-à-vis New York.

[00:05:27] Speaker 02:
Whether the premise is right, I'll give up after this and my colleagues can explore.

[00:05:33] Speaker 02:
But it seems to me that from the beginning of the case, you did have a lawyer.

[00:05:37] Speaker 02:
with no conflict vis-a-vis New York Marine.

[00:05:40] Speaker 02:
Now, you may have a complaint that New York Marine was supposed to pay half the costs of them.

[00:05:44] Speaker 02:
I understand that.

[00:05:47] Speaker 02:
But I don't understand your conflict argument.

[00:05:49] Speaker 02:
You were always represented—you just misheard—was always represented by a lawyer who had no relationship to New York Marine at all and wasn't being paid by New York Marine.

[00:05:59] Speaker 02:
So where is the conflict that triggers CUMUS?

[00:06:03] Speaker 05:
So when we have, so I'll start with respect to the first part, the point in time prior to New York Marines involvement in the case.

[00:06:09] Speaker 05:
Because then you have travelers, they're the one who is providing counsel, they're paying the defense costs up to that point, and everything is fine through that point in time.

[00:06:17] Speaker 05:
The problem is when New York Marine inserts itself and provides that reservation there, and obviously we'll have a discussion about whether or not that's a reservation under 533, when they provide that reservation, that is what creates the potential conflict there.

[00:06:31] Speaker 03:
Yeah, but you're saying it creates a potential conflict.

[00:06:33] Speaker 03:
And I think the question is, what is the actual conflict?

[00:06:37] Speaker 05:
I misspoke.

[00:06:37] Speaker 05:
It does create an actual conflict there, Your Honor.

[00:06:39] Speaker 05:
And the reason is, it is the insertion of the coverage issue and the crossover between that with the coverage issue and the underlying litigation.

[00:06:48] Speaker 01:
But let me try one more time.

[00:06:49] Speaker 01:
It was just a generic reservation.

[00:06:51] Speaker 01:
That doesn't create a conflict under California law.

[00:06:54] Speaker 05:
Your honor, at the pleading stage where we are at right now, there is evidence that that does create a specific reservation of rights that does create a conflict.

[00:07:02] Speaker 05:
And there are two reasons for that in our briefing and in what we have before the court today.

[00:07:06] Speaker 02:
Well, let me try one more time.

[00:07:09] Speaker 02:
This is an important point for me, and you still haven't quite answered my question, I think.

[00:07:15] Speaker 02:
Let's assume there was a conflict, and it triggered the right to have independent counsel appointed.

[00:07:23] Speaker 02:
Travelers provided you with counsel independent of New York Marine, correct?

[00:07:30] Speaker 02:
Correct.

[00:07:30] Speaker 02:
So you had independent counsel.

[00:07:33] Speaker 02:
Now, you may have a complaint that New York Marine was somehow obligated to step up and cover the part of their bills that travelers wouldn't cover.

[00:07:42] Speaker 02:
Put that aside for a second.

[00:07:43] Speaker 02:
I still don't understand.

[00:07:45] Speaker 02:
There doesn't seem to be any point in this case in which your client was deprived of counsel independent of New York Marine.

[00:07:52] Speaker 05:
Deprived of counsel entirely no the problem already.

[00:07:56] Speaker 02:
I mean there was no lawyer

[00:07:58] Speaker 02:
There was no point in this case where your client was not represented by at least one firm completely independent of New York Marine, correct?

[00:08:06] Speaker 05:
That's correct.

[00:08:07] Speaker 02:
So what's the problem?

[00:08:10] Speaker 05:
The problem is that Ms.

[00:08:11] Speaker 05:
Hurd is entitled to a defense between both.

[00:08:13] Speaker 05:
What do you mean between both?

[00:08:16] Speaker 05:
Ms.

[00:08:16] Speaker 05:
Hurd is entitled to a defense from Travelers.

[00:08:18] Speaker 05:
Ms.

[00:08:18] Speaker 05:
Hurd is entitled to a defense from New York Marine.

[00:08:20] Speaker 05:
And just because she got a defense from Travelers,

[00:08:23] Speaker 05:
which wasn't a complete defense of everything that she had paid in the case.

[00:08:27] Speaker 05:
It doesn't obviate New York Marine's obligations under California law to provide defense.

[00:08:31] Speaker 01:
Is she entitled to two lawyers, two defenses?

[00:08:33] Speaker 01:
Is that what you're telling us?

[00:08:34] Speaker 05:
No, she's entitled to one full defense, and she has not obtained all of her fees that she incurred in the debt litigation.

[00:08:41] Speaker 02:
But she's not suing Travelers, right?

[00:08:42] Speaker 05:
I'm sorry?

[00:08:43] Speaker 02:
She's not suing Travelers.

[00:08:44] Speaker 05:
That is correct.

[00:08:45] Speaker 01:
So the person who owes the money, under your theory?

[00:08:50] Speaker 05:
No, because what travelers did in this case, and what New York Marine did not do, is travelers issued a reservation specific as to intentional conduct, and then when they did that, agreed to appointment of independent counsel.

[00:09:03] Speaker 05:
And that is what New York Marine did not do.

[00:09:05] Speaker 02:
So if New York Marine had paid the other half of the bill for independent counsel, you would not be here, correct?

[00:09:11] Speaker 05:
If New York Marine had paid all of its fees, we'd not be here because it wouldn't be anything we need.

[00:09:14] Speaker 02:
No, no, no, don't you stop.

[00:09:15] Speaker 02:
Answer the question I ask, not the one you'd like me to ask.

[00:09:19] Speaker 02:
If New York Marine had paid all the, together with Travelers, had satisfied

[00:09:26] Speaker 02:
Travelers Council's bills.

[00:09:28] Speaker 02:
You would not be here, correct?

[00:09:31] Speaker 02:
So your complaint is not about the absence of independent counsel.

[00:09:36] Speaker 02:
Your complaint is about New York Marine's failure to reimburse your client for the amount of money she was out of pocket with respect to the People Travelers Complaint, right?

[00:09:48] Speaker 05:
Yes.

[00:09:49] Speaker 02:
So tell me why then New York Marine was obligated to pay that portion of the bill.

[00:09:56] Speaker 05:
your brain was obligated to pay that portion of the bill of the bill in light of the conflict that they raise and the reason for that is because when they raise when they raise that reservation of rights they triggered a duty to basically remove themselves and provide independent counsel to misheard under section 20 so now we get back to judge parker's question which i'm interested in yes does the reservation of rights in a general reservation of rights in and of itself automatically trigger an obligation to

[00:10:26] Speaker 02:
pay for independent counsel?

[00:10:28] Speaker 05:
A general reservation of rights?

[00:10:29] Speaker 05:
No.

[00:10:30] Speaker 05:
This case was not a general reservation of rights, and the reason why it was not general reservation of rights is the two things that we raised in our briefing.

[00:10:38] Speaker 05:
First, on motion to dismiss standard, we have the allegation that that was a specific reservation of rights, and it references the reservation in- It still sounds like what you're saying is that there's a per se conflict once that there was a reservation of rights, not that you're describing what the actual

[00:10:54] Speaker 03:
conflict is.

[00:10:54] Speaker 03:
So let me take you a step further.

[00:10:56] Speaker 03:
If we find that New York Marine owed no duty to provide independent counsel under California law, then can your breach of contract claim survive?

[00:11:05] Speaker 05:
They owed no duty to provide independent counsel, then no, we wouldn't have a claim.

[00:11:09] Speaker 05:
But the issue here with the reservation, and if I may return to that briefly, is that with respect to the pleadings, the allegations in Ms.

[00:11:17] Speaker 05:
Hurd's counterclaim,

[00:11:19] Speaker 05:
The first thing is that there is an indication that it was a reservation as 533 made in October 2019, and that persisted until Cameron Mecklen was not there.

[00:11:28] Speaker 02:
How were you harmed by the reservation in this case?

[00:11:31] Speaker 02:
At the end of the day, you're not complaining about their reservation was, we'll provide you with a defense, but we're not sure we'll indemnify you for the judgment.

[00:11:40] Speaker 02:
You're not complaining about lack of indemnification for the judgment.

[00:11:45] Speaker 02:
It's a reservation.

[00:11:47] Speaker 05:
It seems to me in this case couldn't have injured your client I can actually give you a specific example as to some way which it could have injured the client had there been Specific counsel directed by New York Marine here in this case one of the examples that kumas actually points out is the potential for defense counsel to control a special verdict form for example, so the way it's described is

[00:12:06] Speaker 02:
I understand potentially how it might prejudice your client.

[00:12:11] Speaker 02:
The problem is that as I understand it, the record's not entirely clear on this, but you're not complaining about the judgment not being settled and paid off.

[00:12:20] Speaker 02:
And so the damage that might have resulted to you from a reservation of rights by New York Marine

[00:12:26] Speaker 02:
was that we'll defend you, but we won't pay off the judgment.

[00:12:29] Speaker 02:
But the judgment has been paid.

[00:12:31] Speaker 02:
So what's your damage from the reservation of rights?

[00:12:34] Speaker 05:
The damages in terms of the ability to control the defense, they can actually control.

[00:12:38] Speaker 02:
But it doesn't matter.

[00:12:39] Speaker 02:
I mean, whether you controlled it or not, your client has no liability resulting from the defense, except the payment of these fees.

[00:12:48] Speaker 02:
So I understand your argument that somehow they should have paid the fees, although it doesn't seem to be the argument you developed

[00:12:57] Speaker 02:
or in front of us, but I don't understand the argument that she was somehow damaged by this reservation of right, because the only reservation was not to pay off the judgment, and the judgment's been paid off by somebody else.

[00:13:09] Speaker 05:
But that reservation is what triggers under California law, under Cumis, the ability to have the reservation.

[00:13:14] Speaker 02:
Let me assume you're right about that.

[00:13:16] Speaker 02:
I don't think you are, but let me assume you're right about that.

[00:13:19] Speaker 02:
What was your damage from the reservation?

[00:13:23] Speaker 05:
The damages or the damage?

[00:13:25] Speaker 05:
Because the damages were the actual fees there.

[00:13:29] Speaker 02:
But the damages were, I take it, because they refused to cover the other half of the bill.

[00:13:35] Speaker 02:
The Travelers said, we'll cover only part of the bill for these lawyers.

[00:13:38] Speaker 02:
And we think New York Marine should cover the rest.

[00:13:42] Speaker 02:
New York Marine won that lawsuit.

[00:13:44] Speaker 02:
But the damage is that travelers only paid for half of it, right?

[00:13:50] Speaker 02:
The damage is not the reservation of right.

[00:13:52] Speaker 02:
The damage in this case is that you think New York Marine should have covered the other half of the fees, correct?

[00:14:00] Speaker 05:
Yeah, they should have covered the outstanding fees.

[00:14:02] Speaker 02:
Yeah, the outstanding.

[00:14:02] Speaker 02:
Maybe it's half or whatever now.

[00:14:04] Speaker 02:
And so, good.

[00:14:05] Speaker 02:
OK.

[00:14:06] Speaker 01:
If Virginia

[00:14:10] Speaker 01:
If Virginia conflict principles are the relevant principles, can you prevail?

[00:14:18] Speaker 05:
If we're applying Virginia law as opposed to California for conflicts?

[00:14:21] Speaker 05:
Correct.

[00:14:22] Speaker 05:
No.

[00:14:22] Speaker 05:
No.

[00:14:22] Speaker 05:
If it's under California law, that is the methodology by which misheard prevails in this case.

[00:14:28] Speaker 01:
And this is a $600,000 case.

[00:14:30] Speaker 04:
And remind me, the 600th, is that correct?

[00:14:32] Speaker 04:
That is not correct.

[00:14:33] Speaker 05:
Obviously, we don't have the record of specific invoices and total costs here before us, but it is a pretty substantial amount of costs that have not been yet repaid in this case.

[00:14:44] Speaker 01:
Sorry?

[00:14:45] Speaker 05:
It is a fairly substantial number of costs that have not yet been repaid in this case.

[00:14:49] Speaker 04:
Yeah, so how much?

[00:14:50] Speaker 04:
What's the number?

[00:14:51] Speaker 04:
It's in the millions, Your Honor, by our calculations.

[00:14:58] Speaker 04:
Where'd you get the number?

[00:15:00] Speaker 04:
by summing up all of the invoices that we have.

[00:15:02] Speaker 02:
You're her lawyer.

[00:15:04] Speaker 02:
I mean, it's not in the record.

[00:15:05] Speaker 02:
You might as well tell us.

[00:15:06] Speaker 05:
No, it's through a summation of the total amounts of the invoices that have not been repaid.

[00:15:11] Speaker 02:
But they're invoices from?

[00:15:13] Speaker 02:
From whom?

[00:15:13] Speaker 02:
Which firm?

[00:15:14] Speaker 05:
From multiple firms, from multiple defense.

[00:15:16] Speaker 02:
From which multiple firms?

[00:15:17] Speaker 02:
There's only three firms in the case.

[00:15:18] Speaker 02:
So tell us which firms they're from.

[00:15:21] Speaker 05:
I don't have the names of those firms.

[00:15:22] Speaker 02:
Well, they can't be from the McEvoy firm, correct?

[00:15:24] Speaker 05:
Well, no, the McAvoy firm was paid for a portion of it, but I believe it was only things other than the McAvoy firm.

[00:15:30] Speaker 02:
Right, because you weren't entitled to have stuff reimbursed before you tendered the case.

[00:15:35] Speaker 02:
Correct.

[00:15:35] Speaker 02:
And after the moment you tendered the case, you had two sets of lawyers.

[00:15:39] Speaker 05:
Yes.

[00:15:39] Speaker 02:
OK, so it was either the Kaplan firm or the Charleston firm.

[00:15:43] Speaker 02:
The Kaplan firm was there only briefly.

[00:15:45] Speaker 02:
Does she owe money to the Kaplan firm?

[00:15:48] Speaker 05:
I believe she's paid money to the Kaplan firm that has not been reimbursed.

[00:15:51] Speaker 02:
And she's seeking reimbursement for money paid to the Kaplan firm.

[00:15:54] Speaker 02:
And the bulk of it, however, is the Charleston firm.

[00:15:57] Speaker 05:
I believe that's correct.

[00:15:58] Speaker 02:
OK.

[00:16:00] Speaker 05:
Sorry, I'm not sure if there was additional question pending.

[00:16:03] Speaker 05:
No, no.

[00:16:04] Speaker 05:
OK.

[00:16:05] Speaker 05:
No, so in returning to the 533 point briefly, Your Honor, and the concern about control of defense in this case, there was a way in which you have defense counsel who control the case that may not be independent that would result in the conflict between Ms.

[00:16:18] Speaker 05:
Heard, Ms.

[00:16:19] Speaker 02:
Heard- I'm still talking about indemnification.

[00:16:21] Speaker 02:
You're missing me here.

[00:16:23] Speaker 02:
There's only two possibilities.

[00:16:25] Speaker 02:
Maybe she had another set of counsel and would have won, in which case she would have had no personal liability.

[00:16:30] Speaker 02:
Or with another set of counsels, you still would have lost, and there would have been a judgment to be paid.

[00:16:35] Speaker 02:
It was paid.

[00:16:37] Speaker 02:
So I'm still trying to figure out how this conflict of interest led to any monetary loss on your client's behalf, other than paying for, let's say, the Charleston firm.

[00:16:48] Speaker 05:
It's only the defense cost.

[00:16:50] Speaker 05:
That's the only thing that would have been resolved.

[00:16:52] Speaker 02:
So the conflict itself.

[00:16:54] Speaker 02:
It wouldn't matter in this case if you had independent counsel.

[00:16:59] Speaker 02:
You'd still be out of pocket for paying for them given the arrangement that New York Marine and Travelers had.

[00:17:08] Speaker 05:
Mr. Herd would be out of pocket regardless of what the outcome of the interest is.

[00:17:10] Speaker 02:
Yeah, so your argument is really that New York Marine had the obligation to pay for the part of counsel's fees that Travelers didn't pay for.

[00:17:19] Speaker 02:
Correct, yes.

[00:17:20] Speaker 02:
Okay.

[00:17:21] Speaker 03:
Would you like to reserve the balance of your time?

[00:17:23] Speaker 05:
Yes, I'll reserve the balance of time.

[00:17:24] Speaker 05:
Thank you.

[00:17:31] Speaker 00:
Good morning, Your Honor.

[00:17:32] Speaker 00:
Cheryl Orr on behalf of New York Marine.

[00:17:35] Speaker 00:
I'd like to clarify a couple of things for the court certification.

[00:17:40] Speaker 00:
The claim by Amber Heard is for about $4.4 million and this delta between what was reimbursed

[00:17:50] Speaker 00:
by travelers and what she paid her independent counsel.

[00:17:54] Speaker 00:
And I believe that we submitted that in our supplemental excerpts of record, and it should be within the Rule 26 disclosure by Herd's counsel that we attached to one of the documents.

[00:18:04] Speaker 02:
But we're on a motion to dismiss here, so can we look at all that?

[00:18:08] Speaker 00:
Well, we attached it as part of the motion to dismiss.

[00:18:13] Speaker 02:
Yes, but the judge didn't.

[00:18:15] Speaker 02:
He didn't transform it into a Rule 56 motion.

[00:18:18] Speaker 02:
He ruled on a basis of law.

[00:18:19] Speaker 00:
So I'm not sure that that stuff is... Well, I'm just wanting to clarify.

[00:18:22] Speaker 00:
It is in the record because it was presented in opposition to the motion to dismiss New York General's, New York Marine's first amended complaint.

[00:18:31] Speaker 03:
So it is in the record.

[00:18:32] Speaker 03:
So what is that total amount that you're referencing that is at issue?

[00:18:35] Speaker 00:
This is the 4.4 million is the delta between what travelers reimbursed heard

[00:18:41] Speaker 00:
for her independent council fees for all of the independent council she had in representing her in the debt lawsuit.

[00:18:49] Speaker 00:
The $600,000 figure that we reference is a different amount.

[00:18:54] Speaker 00:
That's the amount that travelers

[00:18:58] Speaker 00:
I'm sorry, that we paid travelers to represent 50% of the share.

[00:19:05] Speaker 03:
Are you saying that the difference between $4.4 million and $600,000 is the amount that is being sought in reimbursement in this lawsuit?

[00:19:13] Speaker 00:
No.

[00:19:14] Speaker 00:
In the traveler's case, Travelers was seeking some

[00:19:17] Speaker 00:
amount.

[00:19:18] Speaker 00:
It wasn't expressed.

[00:19:21] Speaker 00:
In our cross complaint or counterclaim in the travelers case, we asserted that we had paid over $600,000 to travelers as a 50% share of the independent council fees for some period of time.

[00:19:37] Speaker 00:
at that point during that period of time of the defense.

[00:19:40] Speaker 02:
And so they're claiming that she was out of pocket some amount more than that $600,000.

[00:19:45] Speaker 00:
Right.

[00:19:45] Speaker 00:
But this $600,000 was just a 50% share of what travelers had already paid.

[00:19:50] Speaker 00:
Now, what travelers paid, the total amount that travelers paid was probably in the, it's alleged to be $5 million.

[00:19:58] Speaker 00:
But this 4.4 is above the 5 point.

[00:20:01] Speaker 02:
Let me ask you the question that troubles me from your side of the case.

[00:20:05] Speaker 02:
You undertook, put aside independent counsel for a moment, you undertook to defend Herd, New York Marine, correct?

[00:20:14] Speaker 02:
Correct.

[00:20:14] Speaker 02:
Under a Reservation of Rights.

[00:20:16] Speaker 02:
And when you undertook to defend Herd, that meant you would pay for a lawyer.

[00:20:21] Speaker 02:
Put aside whether you pay for, how to pay for two.

[00:20:24] Speaker 02:
At some point, the lawyer that you were paying withdrew.

[00:20:32] Speaker 02:
Now she had another lawyer hired by travelers.

[00:20:36] Speaker 02:
Why didn't you have the obligation to pay the fees for that lawyer since you had the obligation, having undertaken the defense, to provide her with a lawyer?

[00:20:47] Speaker 00:
Well, first of all, when

[00:20:50] Speaker 00:
Herd retained her counsel, Mr. McEvoy.

[00:20:53] Speaker 00:
She retained Mr. McEvoy.

[00:20:54] Speaker 02:
Understand.

[00:20:55] Speaker 02:
You retained Mr. McEvoy when the case was tendered.

[00:20:58] Speaker 00:
No, we disagreed that he could continue to represent her.

[00:21:01] Speaker 02:
He had been retained before.

[00:21:03] Speaker 00:
He had been retained before by Herd.

[00:21:05] Speaker 02:
And they're not complaining about your failure to pay him.

[00:21:08] Speaker 00:
Now, at that point, they said, when we reissued the reservation, it's a general reservation.

[00:21:12] Speaker 00:
All we said is, we may not indemnify you.

[00:21:14] Speaker 00:
We may not.

[00:21:15] Speaker 00:
Then, at this point, travelers had already assumed the defense.

[00:21:19] Speaker 02:
Same time you'd, roughly the same time.

[00:21:21] Speaker 00:
Before, OK?

[00:21:22] Speaker 00:
So travelers then assumed the defense.

[00:21:23] Speaker 00:
At that point in time, the insurer does not have an obligation or a right to a further or second defense.

[00:21:30] Speaker 02:
I'm fine with that.

[00:21:31] Speaker 02:
OK, you're missing my question.

[00:21:33] Speaker 02:
At some point in time, McElvoy withdraws.

[00:21:36] Speaker 00:
Correct.

[00:21:37] Speaker 02:
She only has one lawyer.

[00:21:39] Speaker 00:
Correct.

[00:21:39] Speaker 00:
That's independent counsel.

[00:21:41] Speaker 02:
It's independent counsel.

[00:21:43] Speaker 02:
You guys should stop using that term.

[00:21:47] Speaker 02:
They're not independent of anyone, but forget that.

[00:21:51] Speaker 02:
She has a lawyer.

[00:21:52] Speaker 00:
She has a lawyer.

[00:21:53] Speaker 02:
It's either Kaplan for a little while or the Charleston.

[00:21:55] Speaker 00:
Correct.

[00:21:57] Speaker 02:
I'm trying to figure out why, having undertaken her defense,

[00:22:02] Speaker 02:
you don't have the obligation to make sure she has a lawyer.

[00:22:06] Speaker 02:
And once you undertake that obligation, why aren't you required to, together with travelers, cover all of that lawyer's fees?

[00:22:15] Speaker 00:
Well, under 2860F, there's a limitation.

[00:22:19] Speaker 00:
When an insurance company is forced to appoint independent counsel, the limitation in 2860F is that you will only pay the amount that you normally pay your panel defense counsel.

[00:22:33] Speaker 00:
And so in any 2860 case, the insurance company only- But that's not the affirmative.

[00:22:38] Speaker 02:
That's not the way the- I understand if the district court said, look, the $600,000 that you tendered was completely discharged your obligation.

[00:22:46] Speaker 02:
But the district court didn't say that.

[00:22:48] Speaker 02:
The district court said you had no obligation to pay for second counsel.

[00:22:54] Speaker 02:
And I can't figure out why at least you don't have the obligation, having undertaken her defense, to make sure that counsel are paid.

[00:23:02] Speaker 00:
Okay, I just think that we need to separate out there two different questions.

[00:23:06] Speaker 00:
We moved to dismiss on two different bases.

[00:23:10] Speaker 00:
that the reservation of rights didn't create the right to independent counsel, and a second argument under 2860 and the San Gabriel Water case that said she does not have standing to seek this delta amount.

[00:23:24] Speaker 02:
But the district court didn't rule on that basis.

[00:23:26] Speaker 00:
The district court did not rule on that, but you all may as well turn it around.

[00:23:30] Speaker 02:
Is that argument in your briefs?

[00:23:31] Speaker 00:
It is in our briefs.

[00:23:32] Speaker 00:
And you may rule on that because that's a pure issue of law.

[00:23:34] Speaker 00:
2860F says that panel counsel rate limitation

[00:23:39] Speaker 00:
is all that you are entitled to.

[00:23:43] Speaker 02:
Can we tell from this record on a motion to dismiss, assuming you're right, that you paid

[00:23:50] Speaker 02:
ordinary and reasonable fees?

[00:23:53] Speaker 00:
That's the traveler's piece of it.

[00:23:55] Speaker 02:
I understand.

[00:23:56] Speaker 02:
And I understand there's a previous litigation.

[00:23:58] Speaker 02:
I want to look at it.

[00:23:59] Speaker 02:
But I still want you to answer my question.

[00:24:01] Speaker 02:
And put aside whether or not you've already paid the fees that you're supposed to to Travelers Council.

[00:24:07] Speaker 02:
You do agree that you had an obligation to make sure during this litigation that she was represented by counsel.

[00:24:13] Speaker 02:
And she was.

[00:24:14] Speaker 02:
OK.

[00:24:17] Speaker 02:
So what you're saying is we may have also had an obligation to pay that counsel, but we discharged it by paying that counsel the $600,000.

[00:24:28] Speaker 00:
And then if the only person who can complain about that under California law is travelers, if they didn't get there, 50%... Here's my problem with it.

[00:24:40] Speaker 02:
You're relying on travelers to provide her with counsel.

[00:24:44] Speaker 02:
You have an obligation to provide her with counsel.

[00:24:46] Speaker 00:
And she was represented.

[00:24:47] Speaker 02:
And you're relying on the counsel of the travelers appointed, but you're saying, gee, if travelers won't pay for that counsel, we don't have any obligation to either.

[00:24:57] Speaker 02:
And that's my difficulty with the case.

[00:24:59] Speaker 00:
But travelers did pay for that counsel.

[00:25:02] Speaker 00:
And she admits in paragraphs 25 and 26 of her counterclaim that she received a defense from travelers.

[00:25:10] Speaker 00:
Once you receive a defense from travelers under 2860, you do not have a right to a second defense from any other insurance carrier.

[00:25:19] Speaker 02:
We're missing each other.

[00:25:20] Speaker 02:
And it's probably my fault.

[00:25:22] Speaker 02:
But so because I think it's my fault, let me try again.

[00:25:26] Speaker 02:
OK.

[00:25:26] Speaker 02:
You agree that typically in a case when you agree to defend someone, they get a free defense from you.

[00:25:34] Speaker 00:
if they accept a panel of counsel.

[00:25:37] Speaker 02:
Don't worry about this case.

[00:25:38] Speaker 02:
Normal run-of-the-mill case, you say, we agree to defend you.

[00:25:41] Speaker 02:
You pay the lawyer, right?

[00:25:43] Speaker 00:
If it's an appointed defense counsel.

[00:25:45] Speaker 02:
Yeah, OK, appointed defense counsel.

[00:25:47] Speaker 00:
And the insurer doesn't pay anything.

[00:25:48] Speaker 02:
The insurer doesn't pay anything.

[00:25:49] Speaker 00:
But in a 2860 case, that doesn't happen.

[00:25:52] Speaker 02:
My difficulty is that there's not two sets of lawyers here.

[00:25:55] Speaker 02:
There's only one set.

[00:25:57] Speaker 02:
After McEvoy leaves, there's only one set of lawyers.

[00:26:01] Speaker 02:
That's why I think talking about independent and second counsel in this case doesn't make any sense.

[00:26:07] Speaker 02:
There was a set of lawyers.

[00:26:08] Speaker 02:
You were relying on that set of lawyers to discharge your obligation.

[00:26:12] Speaker 02:
to defend her, I understand that, and I kind of think you're probably right.

[00:26:16] Speaker 02:
You didn't need to go out and find another set.

[00:26:18] Speaker 02:
I'm just figuring out why you didn't have to make sure that she didn't incur a financial obligation to be defended under a policy under which you agreed to defend her.

[00:26:28] Speaker 00:
And the key to that is this 2860F limitation.

[00:26:33] Speaker 00:
This is fully recognized under California law, that when there is a reservation of rights, and it implicates the right to

[00:26:40] Speaker 00:
I'll call it independent counsel because that's what the cases call it.

[00:26:44] Speaker 00:
You are only allowed to receive reimbursement for the panel counsel rate up to that cap.

[00:26:51] Speaker 00:
And no matter how many insurance companies also insure you, you are not entitled to get more than that.

[00:26:58] Speaker 00:
That's the San Gabriel Water case.

[00:27:00] Speaker 00:
And we cited these cases at pages 65 and 66 of our brief.

[00:27:05] Speaker 00:
And this was argued in the trial court in the motion.

[00:27:08] Speaker 02:
But not decided on that basis.

[00:27:09] Speaker 00:
It was not decided, but it is the key to answering your question because this is rote law that when an insurance company

[00:27:18] Speaker 00:
accepts the defense of an insured, and there are multiple other insurance companies out there that may owe a defense, the insurance company that steps up and assumes the defense under 2860, that insurance company then has the right to seek contribution from the other insurance companies for what they pay to the insurer.

[00:27:38] Speaker 02:
Now, let me ask you a question about the previous litigation between you and Travelers, for which she's not bound, obviously.

[00:27:46] Speaker 02:
Was that the reason?

[00:27:47] Speaker 02:
See, that previous litigation seems to also have been decided on the same basis that Judge Wu decided this case, which he said there was no obligation to appoint an independent.

[00:27:57] Speaker 00:
Right.

[00:27:57] Speaker 00:
That's how the court decided that case, but that... But it didn't decide it on this basis.

[00:28:01] Speaker 00:
Decided he did not decide it on this basis, but that would not have prevented No, no, I just want to make sure there's not another case out there resolving this issue Because we cite the cases the ringler and associates case is a perfect example That's a case where an insurance company has a duty to defend another insurance company has a duty to defend one accepts and then the other Cannot be sued

[00:28:24] Speaker 00:
for breach of contract or bad faith like Hurd has sued here, because she's already receiving the defense.

[00:28:30] Speaker 00:
She's already receiving the peace of mind.

[00:28:32] Speaker 00:
And she's only entitled to a single defense from one insurance carrier.

[00:28:36] Speaker 00:
She has no standing to seek any bad faith.

[00:28:41] Speaker 02:
Well, but you see, this gets back to my original question.

[00:28:43] Speaker 02:
I'm not doubting that she's entitled to more than one defense.

[00:28:47] Speaker 02:
But it seems to me she's entitled to a free defense.

[00:28:50] Speaker 00:
No, not under 2860.

[00:28:51] Speaker 02:
I understand.

[00:28:54] Speaker 02:
2860 does.

[00:28:57] Speaker 02:
But at the end of the day, she didn't get a free defense.

[00:29:01] Speaker 00:
And that's the thing, is 2860 allows you to have independent counsel, but does not impose on the insurance company.

[00:29:09] Speaker 01:
What I'll show you is that that provision caps the amount that can be paid to the insurer.

[00:29:15] Speaker 00:
It does.

[00:29:16] Speaker 00:
And then after, once the one defense, one

[00:29:19] Speaker 00:
The defending insurer has accepted the defense.

[00:29:22] Speaker 00:
Travelers, the right to seek recovery for those defense fees has shifted now in terms of equity to the defending insurer.

[00:29:33] Speaker 00:
The insurer does not have any breach of contract or bad faith claims against the insurance company that has not accepted under 2860.

[00:29:41] Speaker 01:
The court didn't reach that issue?

[00:29:42] Speaker 00:
The court did not reach that issue.

[00:29:44] Speaker 00:
I say that this is all a tempus in a teapot, because that is the legal issue that

[00:29:49] Speaker 00:
that determines that she has no standing.

[00:29:52] Speaker 02:
But the cases that deal with this all deal with fights between the two insurers.

[00:29:58] Speaker 02:
My quick look at them suggests they're not cases where the insured is saying, I got stuck with the bill.

[00:30:06] Speaker 02:
When you say only the two insurers have standing, that's because in most cases, nobody bills the insured for the delta.

[00:30:14] Speaker 00:
No, this is exactly the St.

[00:30:15] Speaker 00:
Gabriel Water case.

[00:30:16] Speaker 00:
In the St.

[00:30:16] Speaker 00:
Gabriel Water case, the insured had multiple insurance companies that were supposedly obligated to defend.

[00:30:23] Speaker 00:
And they said, well, 2860 only caps what one insurance company owes me.

[00:30:29] Speaker 03:
Point me to the language that you're referring to in 2860 that essentially deprives the defendant in this case, Amber Heard, with the right of action to seek

[00:30:40] Speaker 03:
the reimbursement of fees, and I think what you're saying is that only Travelers now has standing to seek reimbursement.

[00:30:48] Speaker 00:
Where is that?

[00:30:50] Speaker 00:
I don't have the full language in front of me.

[00:30:54] Speaker 00:
It is 2860 Subdivision F.

[00:30:58] Speaker 00:
And we cited on page 65 the cases that say that once one insurer assumes the defense cost, the right to sue the other.

[00:31:10] Speaker 03:
Yeah, I'm looking at subsection F, and it doesn't say.

[00:31:13] Speaker 03:
I mean, I understand your argument, and I think that you are reading, perhaps, into subsection F this shift in terms of who

[00:31:25] Speaker 03:
now carries the right

[00:31:40] Speaker 03:
is the cap or the limitation on panel counsel rates that the insured does not receive the full- Let's assume we agree with you there, but the other point you're making is a different argument, and I think you would need us to reach that argument in order for us to rule alternatively on 2860.

[00:31:59] Speaker 03:
Correct.

[00:31:59] Speaker 00:
And I will refer you to the case as the Emerald Bay case.

[00:32:02] Speaker 00:
The Ringler Associates case, that's the greatest case that says that the second insurer's refusal... Can you give me the site of both of those cases, please?

[00:32:11] Speaker 00:
Sure.

[00:32:12] Speaker 00:
It's Emerald Bay is 130 Calop 4th, 1078.

[00:32:16] Speaker 00:
The pertinent language is at 1088 and 1089.

[00:32:20] Speaker 00:
And the Ringler Associates case is 80 Calop 4th, and the pertinent language appears at 1187, 1188.

[00:32:28] Speaker 00:
and 1093.

[00:32:29] Speaker 00:
I'm going to ask you to say both of those sites again.

[00:32:32] Speaker 00:
Oh, I'm sorry.

[00:32:32] Speaker 02:
I spoke too quickly.

[00:32:34] Speaker 02:
It would be helpful to, I think, the panel if you just file the 28-J letter with both of them.

[00:32:39] Speaker 02:
Are they in your- They're in my brief.

[00:32:41] Speaker 01:
Are they in your brief?

[00:32:41] Speaker 01:
Yes.

[00:32:42] Speaker 01:
In your table of authorities?

[00:32:43] Speaker 00:
Yes.

[00:32:44] Speaker 00:
They're pages 65 and 66 of our brief.

[00:32:48] Speaker 02:
Now I see them.

[00:32:48] Speaker 00:
Sorry.

[00:32:51] Speaker 00:
Again, the Horace Mann case is another case that says the failure of one insurer to defend is of no consequence to an insured whose representation is already provided by another insurer.

[00:33:01] Speaker 02:
So... Yeah, that's why I think... That's why I'm assessing the question.

[00:33:06] Speaker 02:
To me, this case comes down in the end to whether or not you had an obligation to cover the extra money that she was billed.

[00:33:15] Speaker 02:
And so I'm not worried about the breach of the duty to defend

[00:33:19] Speaker 02:
or conflicts of interest, because at the end of the day they didn't hurt her.

[00:33:23] Speaker 02:
She got indemnified.

[00:33:24] Speaker 02:
She didn't get indemnified.

[00:33:26] Speaker 02:
You might be in trouble.

[00:33:28] Speaker 02:
But I'm still trying to figure out why she's not entitled to a free defense.

[00:33:34] Speaker 02:
Is it a traveler's problem, not yours?

[00:33:39] Speaker 00:
An insured is entitled to a defense.

[00:33:43] Speaker 00:
And if the insurer points defense counsel, it will be free because they appoint their panel counsel and they pay panel counsel who agree to accept the lower rate.

[00:33:58] Speaker 02:
The Charleston firm didn't agree to accept the lower rate.

[00:34:01] Speaker 00:
Right.

[00:34:01] Speaker 00:
$2,860 caps the panel council rate that the defending insurer pays, and it caps it for all defending insurers.

[00:34:09] Speaker 01:
OK, now, this is all a serious thing.

[00:34:11] Speaker 01:
How did these millions and millions of dollars in unpaid fees get run up?

[00:34:16] Speaker 01:
Who ran the money?

[00:34:17] Speaker 01:
Because Amber heard- Who performed the services and who wasn't paid?

[00:34:21] Speaker 00:
Amber Heard's attorneys that she chose.

[00:34:25] Speaker 00:
Which ones?

[00:34:26] Speaker 00:
The two law firms that represented her after McEloid.

[00:34:33] Speaker 00:
Those two firms, I don't have their names in front of me right here, but those two firms who represented her after

[00:34:41] Speaker 00:
that this fellow, he withdrew in November of, I'm sorry, November of 1920, after he withdrew, and it includes all their attorney's fees.

[00:34:55] Speaker 00:
But those were Herb's counsel's fees.

[00:34:57] Speaker 02:
What you're saying is that what Traveler should have done, what it contracted with these new firms as independent counsel, was to remind them that they were limited to

[00:35:11] Speaker 02:
a panel cap?

[00:35:15] Speaker 00:
Well, they did agree to a cap at some point.

[00:35:19] Speaker 00:
There are some allegations, and I don't want to go too far afield, but they're allegations in the consolidated action, the traveler's case, that talk about what the arrangement was between travelers and these independent counsel firms that heard wanted to have her defend her.

[00:35:35] Speaker 00:
But the point is that they only agreed to

[00:35:40] Speaker 00:
They didn't agree to the hourly rates and the amounts that travelers paid, so Herd then assumed the obligation to pay those.

[00:35:49] Speaker 01:
I thought you said this rule was imposed not by negotiation or by consent, but by 2860, so there wasn't anything to talk about.

[00:36:00] Speaker 00:
No, if I misled you and I misspoke, I'm sorry.

[00:36:05] Speaker 00:
The rule is that, yes, an insured can have independent counsel, but it will only get reimbursed by the defending insurer up to the panel counsel rate specified in 2860F.

[00:36:18] Speaker 01:
That means the new insurer can't keep the meter running day and night.

[00:36:24] Speaker 00:
No, the defense counsel have to make an agreement with the insured that the insured will then pay the difference between what their hourly rate is and what the cap is that travelers is going to pay.

[00:36:36] Speaker 01:
And did that happen here?

[00:36:38] Speaker 00:
She obviously assumed that responsibility because now she wants to recover that delta.

[00:36:43] Speaker 03:
Well, I think you're saying she obviously assumed the responsibility, but maybe what you mean is that that negotiation or that arrangement was never achieved.

[00:36:51] Speaker 03:
Maybe she assumed it.

[00:36:54] Speaker 00:
Well, I assume that she agreed to pay defense counsel the delta between what- But the understanding that she was going to get reimbursed for it.

[00:37:04] Speaker 00:
No.

[00:37:05] Speaker 00:
That's not how 2860 works.

[00:37:07] Speaker 03:
But that is obviously her understanding.

[00:37:11] Speaker 03:
Otherwise, we wouldn't be here today with her claim seeking reimbursement for that amount.

[00:37:17] Speaker 00:
Well, I would submit, Your Honor, that in such a situation that where the defense is being provided under 2860 and case law under 2860 is clear since 2860 was enacted.

[00:37:30] Speaker 02:
Only if California law applies.

[00:37:34] Speaker 02:
You're arguing California, at least one of your arguments is California law doesn't apply.

[00:37:38] Speaker 00:
But her counsel would- So you want California law to apply with vis-a-vis 2860 but not vis-a-vis the- No, I'm happy that 2860 applies because I believe the 2860F rate limitation and the San Gabriel case says that a California insured can never expect

[00:37:56] Speaker 00:
to have more than a panel counsel rate when she hires independent counsel.

[00:38:00] Speaker 00:
She gets independent counsel, but she has to pay for the difference if she doesn't want panel counsel.

[00:38:06] Speaker 03:
Okay, counsel, you're out of time.

[00:38:07] Speaker 03:
Maybe you want to make a concluding statement.

[00:38:09] Speaker 00:
With respect to the original case, I don't believe that this was any type of error with respect to the conflict of law choice.

[00:38:18] Speaker 00:
The court applied 2860 as plaintiff wished it to be applied, and then determined that this generic reservation did not create the right to independent counsel.

[00:38:29] Speaker 00:
I want to note that the key flaw here is that Amber Heard never showed how there could be an actual conflict, how this defense by the Virginia defense attorney could in any way be in the interest of the insurance company.

[00:38:45] Speaker 00:
Thank you.

[00:38:56] Speaker 05:
I'll briefly respond to a few of the arguments raised by New York Marines Council.

[00:39:04] Speaker 05:
First of all, with respect to the case law cited, I would like to point the court to another case that was cited by New York Marine.

[00:39:11] Speaker 03:
Are you talking about the 2860 issue?

[00:39:13] Speaker 05:
Correct, correct.

[00:39:14] Speaker 05:
And in council reference, a few cases, one of which was the San Gabriel Valley Water case.

[00:39:19] Speaker 05:
The case that they cited in addition to that was the MGA case, which talks about how when there's not insured that's actually insured is not defending under 2860, they shouldn't be able to get a windfall of that rate that might otherwise apply under 2860.

[00:39:34] Speaker 05:
With respect to the other two cases referenced, the Emerald Bay case and the Ringler case, both those are factually distinguishable.

[00:39:41] Speaker 05:
Ringler talks about how the insurer acknowledges that it was protected having to pay any of its own costs as opposed to Ms.

[00:39:48] Speaker 05:
Hurd, who was not offered a similar protection.

[00:39:51] Speaker 05:
And in Emerald Bay, the parties agreed that there were no other damages available in that case.

[00:39:55] Speaker 02:
Did your client have a contract with

[00:40:01] Speaker 02:
the firms.

[00:40:02] Speaker 02:
Did she retain those firms that she now claims?

[00:40:05] Speaker 05:
She retained those firms, yes.

[00:40:07] Speaker 02:
She retained those firms.

[00:40:07] Speaker 03:
Did she make an agreement, as your friend on the other side suggests that she did, where she agreed to pay the difference between the cap that is provided for in 2860 and the fees that were ultimately incurred?

[00:40:19] Speaker 05:
I'm going, I'm showing a bit outside the record here.

[00:40:21] Speaker 05:
My recollection is that there was some cap that was arranged for some, but it was not across the board for

[00:40:27] Speaker 05:
for everything, but I would have to take a look back at the different invoices to confirm on that.

[00:40:33] Speaker 05:
But the concern is still that you have one insurer that is stepping up

[00:40:38] Speaker 05:
and is paying rates, and they're entitled to perhaps a different rate under 2860.

[00:40:42] Speaker 05:
Ensure that does not follow the obligations of 2860 here is not offered that same entitlement.

[00:40:48] Speaker 05:
They did not step up and defend because they issued that reservation of rights.

[00:40:51] Speaker 05:
They're not entitled to the protections of 2860 in the same way as, say, Travelers is in this case.

[00:40:57] Speaker 02:
So is it your contention that your client was entitled to another set of lawyers other than the lawyers to which Travelers provided her?

[00:41:07] Speaker 05:
She's entitled to the full defense that she can get in this case.

[00:41:13] Speaker 02:
That's a legal principle.

[00:41:14] Speaker 02:
We all agree with the legal principle.

[00:41:16] Speaker 02:
My question was,

[00:41:17] Speaker 02:
Do you think your client was entitled in this case to have lawyers other than the lawyers that travelers appointed?

[00:41:26] Speaker 02:
Yes.

[00:41:26] Speaker 02:
Or you do?

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

[00:41:28] Speaker 05:
Why?

[00:41:29] Speaker 05:
Well, if it's a reasonable cost incurred in the defense, there are multiple cases.

[00:41:34] Speaker 05:
It doesn't have to just be one specific firm.

[00:41:36] Speaker 05:
You can have defenses conducted by multiple firms, multiple vendors, multiple defense counsel, et cetera, like that.

[00:41:42] Speaker 05:
And this was obviously a very high stakes case that we had in the debt.

[00:41:46] Speaker 01:
She could lawyer up as much as she wanted?

[00:41:48] Speaker 01:
That doesn't make sense.

[00:41:50] Speaker 05:
It still has to be reasonable, Your Honor.

[00:41:52] Speaker 05:
It can't be 300 different firms, obviously.

[00:41:56] Speaker 01:
Judge, I needed these five law firms, I needed these seven law firms, and here's why.

[00:42:01] Speaker 01:
Is that something you litigate out of here?

[00:42:05] Speaker 05:
We've litigated reasonableness as to multiple different firms, Your Honor.

[00:42:09] Speaker 05:
If I may briefly respond to the argument raised on Northern.

[00:42:13] Speaker 03:
You're out of time, so go ahead, but you can make whatever concluding statement you want.

[00:42:17] Speaker 03:
However you want to use your time, I'll give you 20 seconds.

[00:42:19] Speaker 05:
I'll just refer the court back to Northern as being the key stone in this case.

[00:42:23] Speaker 05:
It states that California law applies.

[00:42:25] Speaker 05:
It indicates how the court should conduct an analysis under 2860.

[00:42:27] Speaker 05:
It indicates that there should not be an out-of-state law or the law of the underlying litigation that applies here.

[00:42:33] Speaker 05:
It should simply be California law.

[00:42:35] Speaker 03:
Thank you, counsel.

[00:42:35] Speaker 03:
Thank you.

[00:42:36] Speaker 03:
Thank you both for your argument this morning, and this court now stands for recess.