[00:00:04] Speaker 03:
That brings us to the third case set for argument.

[00:00:11] Speaker 03:
Make sure we get the right one.

[00:00:16] Speaker 03:
So Continental Casualty Company versus Culver.

[00:00:31] Speaker 00:
No, we kept 15 on that.

[00:00:34] Speaker 03:
Okay.

[00:00:37] Speaker 03:
So we'll do Continental Casualty Company versus Culver case number 21-16948.

[00:00:41] Speaker 03:
And I guess you guys will be standing up in two different cases so we'll...

[00:01:12] Speaker 01:
Good morning.

[00:01:13] Speaker 01:
May it please the court?

[00:01:15] Speaker 01:
My name is David Tissel, and I represent the defendant appellants.

[00:01:18] Speaker 01:
My clients were the victims of tortious mishandling of the bodies of their loved ones after death.

[00:01:26] Speaker 01:
They obtained judgments after a state court jury trial against an individual named Stephen Gore, who was an insured of the appellee's Continental Casualty Company.

[00:01:35] Speaker 03:
Yeah, we're aware.

[00:01:36] Speaker 03:
I mean, the facts of these, the underlying facts are

[00:01:39] Speaker 03:
Pretty bad.

[00:01:41] Speaker 03:
And I think the jury reflected that.

[00:01:43] Speaker 03:
Here, of course, as you know, we're here to talk about whether the insurance company needs to cover that or not, right?

[00:01:50] Speaker 01:
Absolutely.

[00:01:51] Speaker 01:
And just as a starting point, in the first action, we're talking about a declaratory judgment action that was filed by Continental Casualty even before the state court action began when my clients were a stranger to the policy.

[00:02:04] Speaker 01:
And in a few minutes, we'll be talking about the second declaratory judgment action

[00:02:08] Speaker 01:
which was then filed after the assignment of Gore's rights some year and a half later after that.

[00:02:13] Speaker 01:
And that's what I'm here to address is actually to whether Continental has an obligation to cover Gore for the judgments in this case.

[00:02:21] Speaker 01:
With my limited time, and I'd like to reserve three minutes of time for rebuttal.

[00:02:26] Speaker 01:
With my limited time, I'd like to address three points of error.

[00:02:31] Speaker 01:
First, it was error for the district court to apply collateral estoppel

[00:02:35] Speaker 01:
of a state court order on vicarious liability about one defendant's liability for the conduct of another, to then decide the separate and distinct contract issue of whether the policy terms of the continental policy provided coverage for gore for these judgments under the policy.

[00:02:54] Speaker 03:
Can I ask about, well, on the first question, I mean, so the vicarious liability is an interesting question.

[00:03:01] Speaker 03:
Because part of, it seems to me, the collateral estoppel

[00:03:05] Speaker 03:
analysis depends on what the district, or excuse me, what the state court did.

[00:03:10] Speaker 03:
And the state court said there's no vicarious liability for the company as to these 13 claimants, correct?

[00:03:27] Speaker 01:
Correct.

[00:03:28] Speaker 01:
And I think maybe what would be helpful is to talk a little bit about the facts that line up with the

[00:03:34] Speaker 03:
issues here from the record so that we're on the same page and a timeline I actually have a timeline in the in the briefing because it seems to me that if this is a different issue then the district court got it wrong in some way and we need to

[00:03:55] Speaker 03:
you know, send it back.

[00:03:56] Speaker 03:
But the state court said there was no vicarious liability.

[00:04:00] Speaker 03:
So why doesn't that answer it?

[00:04:02] Speaker 03:
Why do you get to collaterally attack?

[00:04:04] Speaker 03:
Isn't that the whole purpose of collateral estoppel is to prevent the claimants from collaterally attacking in federal court the state court decision that there was no vicarious liability?

[00:04:15] Speaker 01:
But we are not, Your Honor.

[00:04:17] Speaker 01:
I think that's the critical issue here in this case.

[00:04:19] Speaker 01:
Is that in order for collateral estoppel, thank you, in order for collateral estoppel to apply

[00:04:25] Speaker 01:
The two issues have to be identical in all respects.

[00:04:30] Speaker 01:
I'm not sure they have to be identical in all respects.

[00:04:32] Speaker 01:
Well, Your Honor, I think here the determination of vicarious liability turns under Arizona law on control and whether Platinum had the right to control the means and methods of how Stephen Gore carried out his duties and responsibilities during the time period that applied to my clients.

[00:04:50] Speaker 01:
And that control did not exist

[00:04:52] Speaker 03:
Did not exist during the time period my clients were misused you may be right you may be wrong on that But the state court already said There's no There's no vicarious liability so that the state court already rejected that argument now.

[00:05:11] Speaker 03:
You're coming in with additional arguments and

[00:05:13] Speaker 03:
You may be right, you may be wrong on those arguments, but why should we as a, and I say we in the, I mean all, why should the district court, any federal court, collaterally review that state court judgment because you came in with a new argument?

[00:05:31] Speaker 01:
Your Honor, respectfully, I don't believe that we're asking for collateral review of the state court order.

[00:05:37] Speaker 03:
In fact, we're taking- How are you not?

[00:05:40] Speaker 03:
The state court said there's no vicarious liability.

[00:05:43] Speaker 03:
You are arguing there is vicarious liability.

[00:05:45] Speaker 01:
But we're not, Your Honor.

[00:05:47] Speaker 01:
What we're arguing is that Continental has a duty to cover gore under the policy as an insured.

[00:05:55] Speaker 01:
Gore meets the definition of who is an insured under the policy in various different ways.

[00:06:01] Speaker 01:
Where this district court erred,

[00:06:04] Speaker 01:
is it presumed exactly what your question was, which is that the only way that Continental had a duty to cover Gore was if there was vicarious liability.

[00:06:14] Speaker 01:
And that's not true, Your Honor.

[00:06:16] Speaker 01:
In fact, under the policy, and I think this is critical to the analysis here, in the who is an insured section of the policy, which is in the excerpt of rec.

[00:06:27] Speaker 01:
excerpt of record 64, it defines that Gore is insured as an employee while performing acts within the course and scope of employment, but also, quote, while performing duties related to the conduct of the business.

[00:06:42] Speaker 01:
That does not need vicarious liability.

[00:06:44] Speaker 01:
There is not control necessary for that coverage.

[00:06:47] Speaker 01:
During the time period in a minute, I'll just quickly go through the timeline.

[00:06:51] Speaker 03:
Let's talk about the first one, employee.

[00:06:54] Speaker 03:
Would you agree that that's collaterally, you're collaterally stopped from asserting that there's coverage because he was an employee?

[00:07:01] Speaker 01:
I apologize, John.

[00:07:02] Speaker 01:
I didn't interrupt you.

[00:07:03] Speaker 01:
I would agree that if he was acting as an employee in the scope of his employment such that

[00:07:10] Speaker 01:
the employer had control over him and the means and methods of his actions, then there would be collateral estoppel.

[00:07:16] Speaker 01:
But here, the coverage, and this is the critical part of both of these cases, the coverage that Continental agreed to, they agreed to make Gore an insured in his own right.

[00:07:28] Speaker 01:
Platinum is not one of the underlying arguments that Continental is trying to use here, is that the only way that Gore is covered is if Platinum is also liable.

[00:07:39] Speaker 01:
And that's not true, because he's an insured as an employee, including while performing duties related to the conduct of the business.

[00:07:47] Speaker 01:
That means actions that he's taking that are not within the scope and course of employment

[00:07:53] Speaker 01:
such that vicarious liability would apply.

[00:07:55] Speaker 01:
The other issue is the volunteer worker before he even becomes an employee.

[00:08:01] Speaker 03:
I understand that.

[00:08:01] Speaker 03:
And this seems to be where you're on the weakest footing.

[00:08:04] Speaker 03:
And this is what gives me cause for concern.

[00:08:07] Speaker 03:
Because I don't know how we could rule for you on either of those issues without undermining the heart of what the state court said.

[00:08:15] Speaker 03:
The state court said he was not an employee until May of 2013.

[00:08:23] Speaker 01:
And our argument as to these, but that's why I do think I'm trying to address, and I apologize if I'm not doing so properly.

[00:08:33] Speaker 01:
We have three time periods.

[00:08:34] Speaker 01:
This is a case that started out with numerous plaintiffs.

[00:08:37] Speaker 01:
And I think the timeline is critical to understanding this.

[00:08:40] Speaker 01:
We have a time period before 2011.

[00:08:42] Speaker 01:
At that point in time,

[00:08:44] Speaker 01:
Gore and platinum were strangers everybody agrees no vicarious liability and no claimants fall within that category no none of our claimants fall then on the third on the far end we have we have made forward and none of the claim and arguably I don't want to concede it but I will agree with you arguably if your honors position if we agree with your honors position on this anything after 2013 that would then be collateral is stopped by the state court action

[00:09:09] Speaker 01:
All of my client's bodies were donated and misused in the middle period.

[00:09:14] Speaker 03:
I understand, but if the state court said he was not an employee until May of 2013, then how can you?

[00:09:25] Speaker 01:
Because he can be a volunteer worker.

[00:09:27] Speaker 01:
He can be doing work.

[00:09:28] Speaker 01:
And this is the important part of the difference in the policy, is that he can be, as a volunteer worker, if he's performing duties, if he's assigned duties, but he's not paid for them,

[00:09:38] Speaker 01:
He's not an employee of the company.

[00:09:40] Speaker 01:
And why is this important?

[00:09:42] Speaker 01:
And why do I say this is on a timeline?

[00:09:44] Speaker 01:
Because the relationship of Gore to platinum in terms of the status is a evolving one over time.

[00:09:53] Speaker 01:
And during the middle time period, in the 2012 time period, there's evidence in the record that he was assigned the duties as the director of anatomical operations.

[00:10:02] Speaker 01:
If you remember, he was held out.

[00:10:05] Speaker 01:
to raise money as their director of anatomical operations for two years before he was an employee.

[00:10:10] Speaker 03:
And how many claimants would that have covered?

[00:10:12] Speaker 03:
All of them?

[00:10:13] Speaker 01:
No, but it covers these plaintiffs that are on appeal.

[00:10:18] Speaker 01:
That's what I mean.

[00:10:19] Speaker 03:
What on appeal would all be covered if you were right on that?

[00:10:22] Speaker 01:
I apologize.

[00:10:22] Speaker 01:
I was thinking that you meant the original plaintiffs.

[00:10:24] Speaker 03:
No, no, no.

[00:10:25] Speaker 03:
I know it's confusing.

[00:10:27] Speaker 03:
So what about the owner status or that?

[00:10:34] Speaker 01:
Membership he's all he's also a member and the evidence is that that before he became a Employee of the company he was also a member even we are not under I apologize What was required for him to be a member under Nevada law would it be?

[00:10:50] Speaker 00:
I'm sorry Arizona law Arizona was a Nevada LLC wasn't it it was it was a Nevada LLC Yes, so what so are we applying Nevada or Arizona law to determine whether he was a member of the LLC or it doesn't matter?

[00:11:03] Speaker 01:
Well, he was actually given in the procurement agreement 9% ownership interest in the company.

[00:11:09] Speaker 01:
And Your Honor, I'm not sure if it makes a difference, and I apologize if it does.

[00:11:14] Speaker 00:
When was he given that 9%?

[00:11:16] Speaker 01:
In 2012, before he was an employee in May of 2013.

[00:11:22] Speaker 01:
What's important though, and this again goes to I think a really important point Your Honor is making about

[00:11:27] Speaker 01:
not undermining the state court's action, is that even if you say he can't be insured as an employee for certain time periods, once he becomes a member, the definition of what he's covered for is with respect to the conduct of the business.

[00:11:42] Speaker 01:
There's no need for control.

[00:11:44] Speaker 02:
There's no- So as a practical matter, focusing on this language and the insurance policy, a member who acts with respect to the conduct of the business,

[00:11:54] Speaker 02:
In what aspect would they not be an agent of that business, if you remember acting with respect to the company?

[00:12:01] Speaker 01:
And I think it's because of the unique nature of the facts in this case.

[00:12:04] Speaker 01:
Because in that middle time period, Gore is assigned the job, and I think the word in the policy is the duties, the duties of deciding where the bodies and body parts that Platinum now owns once they're obtained, where they go in terms of which customers and for what purposes.

[00:12:24] Speaker 01:
And that's the decision that made the misuse of the body parts in this case, because people's bodies who were donated with express restrictions not to be used for purposes other than medical science or whatever the restrictions were, were being sent to the Department of Defense to be blown up.

[00:12:41] Speaker 01:
And I'm not here to talk about

[00:12:43] Speaker 01:
The horribles of the case, but I think what's important is I'm not what our argument is not a hypothetical It's talking about the actual circumstances as to these 13th these clients before you

[00:12:55] Speaker 01:
And when it happened, it wasn't when he was an employee, and it wasn't before there was any relationship.

[00:13:01] Speaker 01:
It was when he was actually performing duties, and he did so, and the trial record is clear, he said, I made mistakes.

[00:13:06] Speaker 01:
I didn't track where the bodies were supposed to go.

[00:13:09] Speaker 00:
I apologize, Your Honor.

[00:13:12] Speaker 00:
If he answered Judge Lee's question, I do want, before you run out of time, to ask, are you dropping your argument about the conflict of interest issue in the application of Vagnozzi, or you

[00:13:24] Speaker 00:
still relying on that.

[00:13:26] Speaker 00:
And if so, why didn't you argue it below?

[00:13:29] Speaker 01:
Well, and again, yes, we're still making that argument.

[00:13:34] Speaker 01:
And that did not become an issue until the court made the decision not to even address the issue of coverage under the policy and say, I had what she says in her order and the words that she uses,

[00:13:47] Speaker 00:
Well, there's always a ground for saying collateral estoppel doesn't apply.

[00:13:51] Speaker 01:
Well, we did challenge that collateral estoppel should not apply, that it wasn't fully and fairly litigated, and that it wasn't appropriate in this case.

[00:14:00] Speaker 01:
And it was not until the trial court, remember, I think that's why it's really important to talk about the fact that in Dec.

[00:14:07] Speaker 01:
Action 1, that was filed when we were a stranger to the policy.

[00:14:10] Speaker 01:
We were not standing in Gore's shoes.

[00:14:12] Speaker 01:
We didn't have that.

[00:14:14] Speaker 01:
And we didn't even have judgments at that point in time.

[00:14:16] Speaker 01:
And so here you have a situation where, once the court decides, I'm not going to decide the actual language of the policy.

[00:14:24] Speaker 01:
And I'm going to instead say, you're collaterally stopped from bringing this.

[00:14:28] Speaker 01:
That's the trigger, then, that Vagnazzi now says, you can't do that because you're deciding coverage issues as to this insured from a case like this.

[00:14:37] Speaker 03:
If the collateral estoppel was there, you could have brought Vagnazzi up in the district court.

[00:14:41] Speaker 03:
You never did, right?

[00:14:42] Speaker 01:
I'm sorry.

[00:14:43] Speaker 03:
You could have brought collateral estoppel was an issue that was raised in the district court.

[00:14:49] Speaker 03:
You were arguing.

[00:14:50] Speaker 01:
Correct.

[00:14:51] Speaker 01:
And at that point, and in the first deck action, we were arguing as a stranger to the contract.

[00:14:57] Speaker 01:
We did not have Boer's assignment.

[00:14:59] Speaker 01:
I think what's really important, and I don't have much time, but I do want to make this point.

[00:15:03] Speaker 01:
I think it's important.

[00:15:04] Speaker 01:
The assignment was not before the court,

[00:15:07] Speaker 01:
It didn't happen until the pleadings were closed and long after.

[00:15:10] Speaker 01:
And in fact, Continental then sued us in the second DEC action, which set up that the Gore issues would be handled in that case.

[00:15:17] Speaker 00:
So you're saying that the conflict of interest argument didn't arise until you were assigned and standing in Gore's shoes.

[00:15:26] Speaker 00:
And that didn't happen when you were briefing this collateral stubble issue until after?

[00:15:31] Speaker 01:
No.

[00:15:32] Speaker 01:
What I'm saying is that the conflict of issue didn't become

[00:15:38] Speaker 01:
an issue until the court refused to even rule on the contract issue of coverage in this case.

[00:15:46] Speaker 01:
At that point in time, now they were stepping on Gore's shoes, on Gore's toes in terms of they were eliminating, essentially we have an issue that has not been fully and fairly litigated, which is Gore's rights to coverage under this policy.

[00:16:00] Speaker 01:
And if these rulings were allowed to stand, you end up with a situation where an insured's rights

[00:16:07] Speaker 01:
can be determined against them without them actually having a full and fair litigation on the merits of the issue.

[00:16:13] Speaker 01:
And I think.

[00:16:15] Speaker 01:
We'll give you time.

[00:16:15] Speaker 01:
OK, thank you, Your Honor.

[00:16:27] Speaker 04:
Good morning, Your Honors.

[00:16:27] Speaker 04:
Mark Feldman, the police of the court.

[00:16:30] Speaker 04:
I represent Continental and Valley Forge.

[00:16:33] Speaker 04:
The district court properly applied collateral estoppel and ruled that Continental had no duty to indemnify appellant's judgment against Gore because the issue in the coverage case turned on the exact same issue as that was litigated in the Beecher case.

[00:16:50] Speaker 04:
And the issue was whether Gore was an agent or employee of Platinum.

[00:16:58] Speaker 04:
And although we've used the term collateral estoppel,

[00:17:01] Speaker 04:
I remember that the modern version of that is called issue preclusion.

[00:17:05] Speaker 04:
And what matters is not the legal theory in the case, whether someone is trying to hold a party vicariously liable, or in the second case, whether the ultimate legal theory or the ultimate legal question is insurance coverage, but it's the issue.

[00:17:19] Speaker 03:
And that's my question, because they seem to be parsing it and saying, well, OK, it's one thing to say there's no vicarious liability, but the Beecher action didn't address

[00:17:28] Speaker 03:
Whether he was a member And whether he could have had liability under the insurance contract as a member Do you agree with that that that state court in the Beecher action did not look at that specific issue?

[00:17:42] Speaker 04:
Respectfully I don't agree with that your honor because if you look at the record of the state court action It's the MSJ order which is at 2 ser 353 Judge Thomas and said the salient question therefore

[00:17:58] Speaker 04:
is whether Gore can be characterized as an agent of platinum training, he didn't limit it, as an agent of platinum training whose acts can be attributed to that entity.

[00:18:08] Speaker 04:
And then just Thomas and said, plaintiffs claim that, quote, Gore was an employee and owner of platinum when he committed the acts in question.

[00:18:17] Speaker 04:
So the issue of whether Gore was

[00:18:19] Speaker 04:
An owner of Platinum, or under Nevada law, it's called a member of an LLC, was squarely in front of Judge Thomason in the Beecher action.

[00:18:28] Speaker 03:
But I don't, so I give you that.

[00:18:30] Speaker 03:
There is that, I almost want to call it a straight comment.

[00:18:34] Speaker 03:
Because if you go through the analysis, the analysis of the state court didn't walk through, it focused on employee, I think.

[00:18:45] Speaker 03:
And that agency has an employee and said he was an employee here.

[00:18:50] Speaker 03:
I don't, and point me if I'm wrong, but the state court didn't look at whether he became a member in 2012 or not.

[00:18:58] Speaker 04:
I agree with you, Your Honor, that it didn't specifically talk about member in the written order.

[00:19:03] Speaker 04:
But there are two issues here.

[00:19:05] Speaker 04:
Number one, if the court said that there is some evidence, the Beecher Court said there is some evidence that he became an employee after May of 2023.

[00:19:16] Speaker 04:
Correct.

[00:19:16] Speaker 04:
And the court also ruled

[00:19:18] Speaker 04:
that Platinum could not be vicariously liable for his conduct before that date.

[00:19:24] Speaker 04:
If the court had concluded that there was evidence that Gore was a member of Platinum before that date, the Beecher Court could not have granted summary judgment and could not have ruled.

[00:19:35] Speaker 00:
What is your authority for the fact that Platinum, that the two are exactly the same, that his membership status, you're saying if he was a member, then therefore

[00:19:48] Speaker 00:
platinum would have been vicariously liable.

[00:19:51] Speaker 00:
But I don't know if that's necessarily true.

[00:19:53] Speaker 00:
I mean, there would have to be a legal hook to say just your membership status causes platinum to become vicariously liable.

[00:20:03] Speaker 00:
Even an employee of a company

[00:20:07] Speaker 00:
The company may not be vicariously liable for everything that an employee does.

[00:20:11] Speaker 00:
They have to meet certain standard for there to be vicarious liability.

[00:20:15] Speaker 00:
So I think you're drawing a false equivalency potentially between membership status and vicarious liability.

[00:20:22] Speaker 00:
So unless you have some authority for that.

[00:20:24] Speaker 04:
No, I agree with your point, Your Honor.

[00:20:26] Speaker 04:
But the direction that leads to is this.

[00:20:30] Speaker 04:
In order to be vicariously liable as a member, you have to be acting in furtherance of the business.

[00:20:35] Speaker 04:
That is virtually the same language used in the policy for whether a member qualifies as an insured.

[00:20:43] Speaker 04:
And as Judge Lee pointed out, this is a second level.

[00:20:46] Speaker 04:
It's virtually impossible for a member, an owner, who's acting in furtherance of the business to not render the business vicariously liable.

[00:20:54] Speaker 00:
What in Arizona says any time a member of an LLC is acting in furtherance of the business, the business is vicariously liable for everything that that member does.

[00:21:04] Speaker 04:
I'm sorry, Your Honor.

[00:21:04] Speaker 00:
So you need something that says whenever a member of an LLC is acting in furtherance of the business, the business is vicariously liable for everything that that member did.

[00:21:16] Speaker 00:
Do you have a case or law that says that?

[00:21:19] Speaker 04:
I don't have a case that says that specifically, but very close to it is the actual appellate decision of the Arizona Court of Appeal in this case, where it talked in general.

[00:21:30] Speaker 04:
It didn't parse out employee or member.

[00:21:32] Speaker 04:
But when the Arizona Court of Appeal talked about the standard of vicarious liability as to Gore, and it would have addressed everything that was before the trial court in that case, the court used the following language.

[00:21:52] Speaker 04:
It said platinum could only be vicariously liable for Gore's conduct if he was acting within the scope of his employment

[00:22:02] Speaker 04:
or performing a service in furtherance of platinum's business, which is virtually identical to the language that would render someone an insured if that person were a member.

[00:22:13] Speaker 04:
So the Arizona Court of Appeal in the Beecher action itself equated that standard for vicarious liability for a member with the very standard that would render someone an insured or not an insured under the continental policy.

[00:22:29] Speaker 02:
When did Gore become a member of platinum?

[00:22:33] Speaker 04:
Well, he became a member, Your Honor, in May of 2013, the same time he became an employee.

[00:22:41] Speaker 04:
I will say, and I can... That's true.

[00:22:43] Speaker 03:
I mean, we just heard that it was 2012.

[00:22:45] Speaker 04:
Well, I'll explain that, Your Honor.

[00:22:48] Speaker 04:
I mean, first of all, I would argue that

[00:22:50] Speaker 04:
this court shouldn't be looking at that issue because collateral estoppel applies.

[00:22:54] Speaker 02:
But if the court were to look at the actual record, if I can make my point, I think one of the problems there is the state court's order is a bit unclear about the member status, and that's what we were discussing.

[00:23:08] Speaker 04:
Sure.

[00:23:09] Speaker 04:
If the court were to look at the record, I would direct the court to, it's not in the excerpts of record, but it's in the record of the district court,

[00:23:18] Speaker 04:
It's docket 106-12, page 7, which is the contribution agreement that essentially formed the platinum entities.

[00:23:28] Speaker 04:
It was dated May 24, 2013.

[00:23:29] Speaker 04:
It defined the otos and other people, Martin Dean, as owners, quote unquote.

[00:23:37] Speaker 04:
It listed Mr. Gore separately, not as an owner.

[00:23:41] Speaker 04:
It states that the owners, as defined, are all the owners of platinum medical.

[00:23:48] Speaker 04:
And then it states that Platinum Medical is the sole owner of Platinum Training.

[00:23:54] Speaker 04:
If you follow all of that, it means that as of that date, Mr. Gore was not an owner of Platinum Medical, and he was not an owner of Platinum Training.

[00:24:03] Speaker 04:
And then the employment agreement, which is in the record, it's ER 28, says he became an employee as of May 2013, and it states, per the operating agreement of the same date, Gore is a member of Platinum Training.

[00:24:18] Speaker 04:
So if the court were to independently look at the record itself, it would see that Gore became a member at the same time he became an employee.

[00:24:27] Speaker 02:
What do we do if there's ER 119?

[00:24:29] Speaker 02:
It's a letter dated January 30th, 2013 under Platinum Training letterhead.

[00:24:34] Speaker 02:
It says, Platinum Medical LLC is currently owned by the following named four individuals.

[00:24:39] Speaker 02:
And the last one is Steve Gore, 9%.

[00:24:43] Speaker 04:
I'm glad you pointed that out, Your Honor.

[00:24:46] Speaker 04:
That is not in the district court record in this case.

[00:24:48] Speaker 04:
If the court looks carefully at the excerpts of record, it will see that almost every document has two headers on it from electronic filing, one header from the district court filing and another header from the court of appeal filing.

[00:25:02] Speaker 04:
And if you look at that specific document that you pointed out, Your Honor, it doesn't have one header on top of the other.

[00:25:08] Speaker 04:
It was not before.

[00:25:10] Speaker 04:
Judge Fumatewa on summary judgment.

[00:25:12] Speaker 03:
So where did it come from?

[00:25:13] Speaker 03:
Was it in the state court?

[00:25:14] Speaker 03:
Was it in the Beecher action?

[00:25:17] Speaker 04:
Yes, presumably.

[00:25:18] Speaker 04:
There are lots of documents in the Beecher action that were not the whole reason why there was an attempt to relitigate the issue of Gore's employment in this case.

[00:25:27] Speaker 03:
Because they didn't raise all the arguments in the Beecher action.

[00:25:29] Speaker 04:
Correct, Your Honor.

[00:25:30] Speaker 03:
Well, and that is something I'm struggling with.

[00:25:33] Speaker 03:
I ask that question because it does seem like the member liability

[00:25:38] Speaker 03:
is potentially a different issue.

[00:25:41] Speaker 03:
But it's not clear to me how it's distinct.

[00:25:43] Speaker 03:
And your point is it's not distinct.

[00:25:46] Speaker 03:
But if we say that it's a distinct issue and it wasn't raised, does that matter?

[00:25:50] Speaker 03:
Or do you still have the argument that, look, coverage was an issue in Beecher?

[00:25:54] Speaker 03:
They said there was no coverage.

[00:25:56] Speaker 03:
End of story.

[00:25:57] Speaker 03:
Even if there was a smoking gun that later comes out that says, I mean, presumably if there was a new agreement, then we found out that he was an employee in 2011.

[00:26:08] Speaker 03:
It wouldn't matter.

[00:26:09] Speaker 03:
It'd be collaterally stopped, right?

[00:26:11] Speaker 04:
I agree with that, Your Honor.

[00:26:12] Speaker 04:
And I do believe that even if there was a smoking gun that came out today that said Mr. Gore was an employee before May of 2013 or was a member before May of 2013, they would be collaterally stopped from raising that issue.

[00:26:25] Speaker 03:
Well, but the member is what's difficult, because member was not, I mean, it was mentioned, but it wasn't specifically addressed.

[00:26:33] Speaker 03:
And they didn't walk the

[00:26:36] Speaker 03:
Beecher Court, the state court did not walk through this analysis.

[00:26:41] Speaker 04:
Well, I would reiterate, Your Honor, that it was raised.

[00:26:44] Speaker 04:
I realize it wasn't extensively discussed in that I think the Beecher Court, it said Platinum could not be... But do you have a separate argument?

[00:26:50] Speaker 03:
I guess what I'm looking for is there a separate argument that it doesn't matter?

[00:26:54] Speaker 03:
Because once the district court... I mean, if you pursued three arguments before the state trial court and you lose on all of those and then you come to federal court and raise a fourth argument,

[00:27:06] Speaker 03:
you would still be collaterally stopped, right?

[00:27:08] Speaker 04:
I agree with that.

[00:27:09] Speaker 03:
As long as the issues are the same.

[00:27:11] Speaker 03:
And that's what we have to figure out.

[00:27:15] Speaker 04:
I agree with that, Your Honor.

[00:27:16] Speaker 00:
Can we address the Vagnozzi conflict of interest issue?

[00:27:20] Speaker 00:
I understand that you're arguing that was essentially forfeited below.

[00:27:24] Speaker 00:
If we can put that aside for the moment on the merits of the issue.

[00:27:29] Speaker 00:
My understanding is that Continental was representing platinum.

[00:27:36] Speaker 00:
the time of the Beecher action is that correct and then it was At some point it did also assume responsibility for the defense of gore is that correct?

[00:27:47] Speaker 00:
Yes, yes, and then during the Beecher action It was in platinum's interest to limit its vicarious liability for gore is that correct yes, okay and but it was in gore's interest to

[00:28:05] Speaker 00:
Essentially establish vicarious liability because then that would ensure coverage and defense by continental it was so there was a conflict of interest between platinum and gore with respect to the vicarious liability issue or the scope of it there was a conflict of interest between platinum and gore and so if continental was representing and defending platinum and

[00:28:35] Speaker 00:
Why wasn't there also conflict of interest between Continental and Gore?

[00:28:39] Speaker 04:
Well, there may have been a conflict of interest between Continental and Gore, but I don't think that is enough to vitiate collateral estoppel.

[00:28:48] Speaker 04:
So I'm not reiterating the point about waiver, which I think is valid.

[00:28:52] Speaker 04:
But if you look at the cases, if you look at Bagnasi, and in particular, if you look at the Manzanita Park case from the Ninth Circuit, they emphasize, especially Manzanita Park,

[00:29:01] Speaker 04:
that the reason it doesn't apply, collateral estoppel doesn't apply, it's because one essential element of collateral estoppel is there has to be a full and fair opportunity to litigate the issue.

[00:29:11] Speaker 04:
And in both of those cases, for different reasons, essentially, the lawyers stipulated to things, one in favor of the insured, the other in favor of the insurer, because it basically pushed the case out of coverage.

[00:29:22] Speaker 04:
Here, although what Your Honor said is correct, in the Beecher action,

[00:29:28] Speaker 04:
The issue of Gore's employee member status was vigorously litigated.

[00:29:33] Speaker 04:
It was litigated vigorously by appellants themselves and their counsel, who had a vested interest in establishing that Gore was both an employee and that Platinum was vicariously liable, as well as the fact that Gore would be covered.

[00:29:48] Speaker 04:
And finally, even if you look at Vagnozzi and you give it its broadest application, it applies to

[00:29:57] Speaker 04:
conflict of interest between an insurance company and an insured when there's no opportunity to litigate the issue.

[00:30:03] Speaker 04:
Here, it's appellants, and as they emphasize, they're standing in their own shoes.

[00:30:06] Speaker 04:
Vagnasi does not preclude collateral estoppel against a third party who, to use counsel's terms, is a stranger to the insurance contract.

[00:30:14] Speaker 00:
It does not preclude collateral estoppel against them, especially- Well, they're standing in Gore's shoes at this point, aren't they?

[00:30:22] Speaker 04:
Well, I'm not sure what their position is.

[00:30:24] Speaker 04:
I think they are standing in Gore's shoes.

[00:30:28] Speaker 04:
If you look at the briefing in the bad faith case, I don't have time to address it here.

[00:30:33] Speaker 04:
We cited authority that says, on an estoppel theory, if you are estopped in your own right, you cannot circumvent an estoppel by acquiring someone else's rights through an assignment.

[00:30:46] Speaker 04:
Estoppel does not work that way.

[00:30:47] Speaker 04:
Once you're estopped, you're estopped.

[00:30:49] Speaker 04:
You can't circumvent it with an assignment of rights, which is essentially what appellants are trying to do here.

[00:30:55] Speaker 02:
You came to represent Gore during the trial in state court, right?

[00:31:00] Speaker 02:
I'm sorry, you represented Gore Continental represented provided the defense the defense yet before the trial and For the appeal to the Arizona Court of Appeals that with the April 2021 order did Continental also represent Gore in that appeal it did it hired the attorney to Appeal well, yeah paid for the council.

[00:31:19] Speaker 02:
Well was the issue of whether Gore was an agent Yeah, I think those are partial summary judgment did the lawyer there argued that on an appeal

[00:31:30] Speaker 04:
Continental had provided an attorney to represent Gore at the time of the appeal, but but but that attorney appealed He appealed the verdict the post trial verdict so that that earlier that was that was separate So the earlier summary judgment on the issue of agency was not appealed Before the Arizona Court of Appeal no it was appealed, but they were separate in the

[00:31:57] Speaker 04:
I apologize if I'm misremembering, but there were separate issues.

[00:32:00] Speaker 04:
In other words, the issue of whether Gore was an agent of Platinum was appealed.

[00:32:06] Speaker 04:
The Arizona Court of Appeal affirmed the trial court's ruling, finding that there was no evidence that he was an employer or agent, and also with an alternative finding that even if there were evidence, there was no evidence that he was acting within the course and scope or in the furtherance of Continental's business.

[00:32:22] Speaker 04:
Separately, the Court of Appeal addressed the issue, the trial issue,

[00:32:26] Speaker 04:
where there was a late filing of a post-trial motion.

[00:32:30] Speaker 04:
And that was reversed.

[00:32:33] Speaker 02:
Doesn't that then potentially implicate the Vagnasi issue here?

[00:32:37] Speaker 02:
Because if a lawyer provided by Continental is appealing the agency issue on behalf of Gore, there may have been a conflict of interest with respect to the later declaratory judgment action, because you don't want Gore to be found as an agent.

[00:32:54] Speaker 02:
Unless I'm misunderstanding the facts of what happened.

[00:32:58] Speaker 04:
The lawyers were representing Platinum at the time that that issue was appealed.

[00:33:03] Speaker 02:
If I can clarify, did a lawyer paid by Continental represent Gore on the agency issue before there was on a court of appeal?

[00:33:14] Speaker 04:
I believe the lawyer was hired by Continental, but he was not arguing on Gore's behalf because that was contrary to what they were arguing on behalf of Platinum, and it was only an appeal on that issue.

[00:33:26] Speaker 02:
the summary judgment motion brought by platinum training so I'm saying with that potential implicated was there a potential conflict of interest because for your declaratory judgment action you don't want a finding of agency and if you're appealing that issue that implicates gore you wouldn't want the lawyer there with potential of a conflict of interest I agree that lawyer would have a

[00:33:52] Speaker 04:
potential conflict of interest.

[00:33:53] Speaker 04:
But that's why Continental hired separate attorneys to represent Platinum and then a separate firm to represent Gore.

[00:34:01] Speaker 04:
And by the time it hired an attorney to represent Gore, that issue of vicarious liability had already been resolved.

[00:34:07] Speaker 02:
But if we read Vagnozzi broadly, that would potentially implicate it, because the idea is the lawyer, even though you have separate counsel, the lawyer would be beholden to Continental, as Continental is paying its bills.

[00:34:19] Speaker 02:
Isn't that kind of the point of Vagnozzi?

[00:34:22] Speaker 04:
It is, Your Honor, but the lawyer would be beholden and would be trying to advance the interests of Platinum.

[00:34:26] Speaker 04:
But Mr. Gore, that issue had been decided.

[00:34:29] Speaker 04:
It wasn't in a conflict position vis-a-vis Mr. Gore, because those lawyers were only representing Platinum.

[00:34:35] Speaker 04:
They were trying to advance Platinum's interests.

[00:34:37] Speaker 04:
There's a separate attorney representing Mr. Gore.

[00:34:40] Speaker 00:
But in Vagnoz, didn't the Arizona Supreme Court say, it doesn't matter whether the insurance company actually provides the defense or not.

[00:34:47] Speaker 00:
We're going to resolve this messy problem.

[00:34:51] Speaker 00:
That we have and we're just going to say categorically if there's a conflict of interest in the prior litigation between the insured and the insurance company We're not going to imply collateral estoppel It did say that it doesn't matter whether the insured is being defended or not that that's correct Okay, I think we've taken you over which is fine all right.

[00:35:12] Speaker 03:
Thank you.

[00:35:12] Speaker 03:
Thank you honor will submit And we'll give you two minutes for rebuttal thank you

[00:35:23] Speaker 01:
First of all, I just want to reemphasize that coverage was not an issue in the underlying Beecher action.

[00:35:28] Speaker 01:
The insurance policy was not in front of the court.

[00:35:31] Speaker 01:
They were not determining whether Gore was covered under the policy, only whether Platinum could be vicariously liable, which I agree is a subset of what he can be covered as an insured for, but it is not all that he is covered for under the policy.

[00:35:46] Speaker 00:
Can you respond to the argument that

[00:35:50] Speaker 00:
necessarily the breacher action made a ruling that core was not acting in the in furtherance of platinum's business at any time before 2013.

[00:35:59] Speaker 01:
But the issue before the court in the beacher action was were they acting in furtherance of the business on

[00:36:08] Speaker 03:
Matters for which there can be vicarious liability for platinum That's that was the issue that the issue he was determining was not whether gore was covered otherwise The issue in Beecher, and I don't know whether you were were you in Beecher I was in I was in the trial yes, so the district that the state court in Beecher clearly had the member liability was brought up

[00:36:38] Speaker 01:
Right?

[00:36:40] Speaker 01:
Right.

[00:36:41] Speaker 01:
The issues that were not raised were, or the issue before the Beecher Court was, did the platinum have sufficient control over gore for the conduct that caused the harm so that they could be vicariously liable?

[00:36:57] Speaker 01:
Exactly.

[00:36:59] Speaker 01:
What our clients what these you're not coming in and saying yeah, but there's something else There's more that the contract gives broader coverage What I'm arguing is consistent with the beacher order consistent with the beacher order that for anything after May of May of 2013 is when you were an employee and

[00:37:21] Speaker 01:
We're not arguing that they're an employee.

[00:37:24] Speaker 03:
But the state court also said there's no vicarious liability prior to that.

[00:37:33] Speaker 01:
And we're arguing that there is coverage without vicarious liability based upon that?

[00:37:39] Speaker 03:
I understand that's your argument.

[00:37:40] Speaker 03:
I'm not sure that I see the daylight there.

[00:37:44] Speaker 01:
But I think the importance is to look at the actual language of the policy itself and the coverage, and the fact that it's talking about actions that are related to, which is broader than- Why was member brought up?

[00:37:57] Speaker 03:
Because the struggle here is that the district court, the Beecher court, the state court, did not address the question that seems to be the elephant in the room, which is, did Gore become a member before he became an employee?

[00:38:13] Speaker 03:
the state trial court did not address that issue.

[00:38:16] Speaker 03:
And yet it seems like that was raised, wasn't it?

[00:38:19] Speaker 01:
No, but that issue was not determined.

[00:38:21] Speaker 01:
It was not the issue.

[00:38:22] Speaker 01:
The issue was, when did he become an employee such that vicarious liability would attach?

[00:38:29] Speaker 03:
Why wouldn't you have wanted him to have vicarious liability under member status?

[00:38:35] Speaker 01:
The issue is the key is what was the issue that was being determined We have gore who is insured under the policy as a member There's no need to try to get platinum and try to fit a square peg into a round hole at that point He could be a member acting in furtherance of Platinum's business

[00:38:55] Speaker 00:
and platinum would not be vicariously liable for his actions.

[00:38:59] Speaker 01:
Not unless they controlled the means under Engler, under the Arizona law, not unless they controlled the means and methods of how he performed his work.

[00:39:08] Speaker 01:
And here, he made the decision as to which bodies and body parts would go to what places.

[00:39:13] Speaker 01:
And that was crucial and critical to the misuse of the body parts in the case.

[00:39:21] Speaker 03:
Yes, that's what the Beecher Court ruled, Your Honor.

[00:39:31] Speaker 01:
He's still covered under the terms of the policy.

[00:39:33] Speaker 01:
Thank you, Your Honor.

[00:39:35] Speaker 00:
And if the terms of the policy are unclear, what is the rule?

[00:39:38] Speaker 01:
And if the terms of the policy are unclear, you read it in favor of coverage for the insured, which here would be Stephen Gore.

[00:39:45] Speaker 01:
And I know I'm over time, and I apologize.

[00:39:48] Speaker 01:
You're over time, but you're going to get 10 minutes.

[00:39:49] Speaker 03:
I'm going to be right back up here.

[00:39:54] Speaker 03:
Thank you.

[00:39:55] Speaker 03:
That gets us through, hopefully, the most thorny issues.