[00:00:03] Speaker 01: Circuit. [00:00:04] Speaker 01: Judge Krista and I are happy to welcome Judge Liberty, a district judge from Arizona, who's helping us today. [00:00:11] Speaker 01: We'll take the case. [00:00:13] Speaker 01: It's in the order of [00:01:22] Speaker 00: of jury trial to be submitted on the briefs, absent questions from the panel. [00:01:26] Speaker 00: What about the jurisdictional issue? [00:01:28] Speaker 00: Is that something we should be concerned about? [00:01:32] Speaker 00: Well, it's certainly within the court's purview to rule on the jurisdictional issue. [00:01:36] Speaker 00: The motions panel denied the motion to remand. [00:01:41] Speaker 00: This court could revisit it. [00:01:42] Speaker 00: I don't think that's necessary. [00:01:43] Speaker 00: But yes, the court could address it. [00:01:46] Speaker 00: I assume the court's referring to the Rule 59 [00:01:52] Speaker 00: the district judge. [00:01:57] Speaker 00: It was a funny sequence of events. [00:02:00] Speaker 00: Both sides filed Rule 59 motions. [00:02:03] Speaker 00: Our side also filed Rule 62 motion. [00:02:09] Speaker 00: Before the district judge ruled on that, a bankruptcy was declared by the plaintiff, the district judge, incorrectly. [00:02:36] Speaker 02: Is it your position now that – I'm conscious of your time. [00:02:41] Speaker 02: Sure. [00:02:41] Speaker 02: Is it your position that we don't have a final judgment? [00:02:44] Speaker 00: No chart position. [00:02:45] Speaker 00: You do have a final judgment, Your Honor. [00:02:46] Speaker 00: Okay. [00:02:46] Speaker 02: I just wanted to be clear. [00:02:47] Speaker 02: Yes. [00:02:47] Speaker 02: Because the sequence is laid out, so is there any more you wanted to add to that? [00:02:53] Speaker 00: No, Your Honor. [00:02:53] Speaker 00: I think we've briefed it adequately. [00:03:02] Speaker 00: on the merits disposed of the motions. [00:03:05] Speaker 00: We were only able to find one case nationally that was out of the Fifth Circuit, which said, doesn't matter. [00:03:32] Speaker 00: revisit those motions and that indicate whether you wanted to make an indicative ruling. [00:03:36] Speaker 02: He declined that opportunity. [00:03:37] Speaker 00: He expressly declined it. [00:03:38] Speaker 00: Yes. [00:03:39] Speaker 02: So you don't have anything other than the briefing? [00:03:41] Speaker 02: You lead to the sequence, but you briefed that and you're good with the briefing? [00:03:45] Speaker 00: Yes, I think the briefing. [00:03:46] Speaker 00: Okay. [00:03:46] Speaker 00: I misunderstood you. [00:03:47] Speaker 00: Okay. [00:03:47] Speaker 00: Yeah. [00:03:49] Speaker 00: So then let me turn to that first substantive issue, which is the – essentially the burden [00:04:03] Speaker 00: to satisfy us on an accidental exception to a pollution exclusion. [00:04:11] Speaker 00: This circuit in the Zurich [00:05:23] Speaker 01: that the [00:05:51] Speaker 00: and its recognition of the point that the appellant here has seized upon, that's us, in its footnote, I think 23, embracing the reasoning of the Sacramento plating case. [00:06:06] Speaker 00: We have two electroplating cases. [00:06:07] Speaker 02: I've had several electroplating cases, and those complaints were so very different because they alleged that, you know, the dipping and the moving of the ongoing day-to-day operations. [00:06:17] Speaker 02: So what about the allegations in this complaint? [00:06:27] Speaker 00: Let me draw back to those two plating cases because they are informative of the allegations here. [00:06:33] Speaker 00: If you look at the allegations in A.H. [00:06:36] Speaker 00: Plating, where the District Department, where the California Court of Appeal found that a duty to defend existed and that a potential had been established, there was no evidence of an ongoing, years-long pattern in [00:07:39] Speaker 00: but they ran a clean job and they had a couple of incidents. [00:08:52] Speaker 01: in your view. [00:08:55] Speaker 00: Nothing eliminates the possibility or the question is who has the burden of establishing it in the first place. [00:09:00] Speaker 02: But if we were to use the plaintiff in the trial court, the plaintiff did. [00:09:07] Speaker 02: When we look at the First Amendment Complaint, it is not as detailed as the other [00:09:31] Speaker 02: The way I read it is at the end of the day, at the end of the period, of 19 different substances. [00:09:36] Speaker 02: And it also alleges that each tenet contributed to the soup. [00:09:42] Speaker 02: So why does that eliminate, to get to Judge Ikuta's question, if you could, why does that eliminate the possibility that there was a sudden release on lats, during lats tenancy? [00:09:54] Speaker 00: The question, Your Honor, is not whether it eliminates the possibility and the abstract. [00:09:58] Speaker 00: Hypothetically, the question [00:10:03] Speaker 00: by the city against their lake terminals created the possibility of those in the first instance. [00:10:09] Speaker 00: Your Honor has asked for citations on that. [00:10:11] Speaker 02: I'd be happy to... No, no, I'm not. [00:10:12] Speaker 02: I'm accepting that standard. [00:10:13] Speaker 02: I'm trying to figure out why you think that the allegations... Maybe I'm not asking him very well, sir, but I'm trying to figure out why the allegations in the first amendment complaint don't do that. [00:10:21] Speaker 02: I think AIG excess carrier thought they did, and I'm just trying to get... You don't get to be in the conference room with us. [00:10:27] Speaker 02: I'm trying to get your very best response to this question. [00:10:30] Speaker 00: It's hard to say. [00:10:31] Speaker 00: I don't know what AIG thought or what its rationale [00:10:52] Speaker 02: said that you're interpreted as a day-to-day, but I don't think the complaint says, first amendment complaint, says day-to-day. [00:11:01] Speaker 00: It does not use the words day-to-day. [00:11:03] Speaker 00: You're correct. [00:11:03] Speaker 00: You're right. [00:11:04] Speaker 02: So what it tells us is, again, it's much more sparse, to be sure. [00:11:09] Speaker 02: But why isn't that enough? [00:11:11] Speaker 02: There were so many. [00:11:11] Speaker 02: All four tenants are alleged to have contributed 19 different types of substances. [00:11:19] Speaker 02: So we're envisioning premises where [00:11:29] Speaker 02: possibility that there was a sudden release on. [00:12:00] Speaker 00: Along those lines, Your Honor, and I should add, in additional response to Judge Christin's question, yes, it was several, it was several entities that polluted over many years. [00:12:10] Speaker 00: LA Terminals came on the, came on the site in 1981, but in the, under the permit it signed, it took responsibility for all of the prior, all the way from, from Hooker, Chemical to Oxdell, Chemical to Ashcross Evans, it was right there in its, in its, [00:12:42] Speaker 00: of pollution. [00:12:45] Speaker 00: I don't see it. [00:12:46] Speaker 00: There's no real distinction between this case and, for example, Sacramento Plating. [00:12:52] Speaker 02: I know you want to get on to other issues. [00:12:54] Speaker 02: Can I just ask you one final question? [00:12:56] Speaker 02: You're saying long, you're saying day to day, ongoing. [00:13:20] Speaker 02: different toxic substances were found. [00:13:23] Speaker 00: Oh, well, they were handling plenty of toxic substances. [00:13:26] Speaker 02: That doesn't particularly... So it's a 10-4 law that means they don't have any indication, and I guess I think your answer is the one you gave to Judge Akuta, which is you think the standard is wrong. [00:13:34] Speaker 02: So maybe we could let it go. [00:13:35] Speaker 02: Right. [00:13:36] Speaker 00: And I'd refer the Court back to the description of [00:14:26] Speaker 00: property damage was not sudden and accidental, the court concluded that Ironshore failed to carry its burden of showing that the exception to the exclusion did not apply. [00:14:36] Speaker 00: And so do you have a California case that says that? [00:14:39] Speaker 00: The McMillan case is one that this court cited in Zurich, and it made the same prediction. [00:14:45] Speaker 00: That was one of the reasons this court... Was that a federal case? [00:14:49] Speaker 00: It's a state case. [00:14:50] Speaker 00: State case. [00:14:51] Speaker 00: McMillan versus... I apologize. [00:14:53] Speaker 00: I can't remember which one. [00:14:56] Speaker 00: It's also, the court also cited the late Walter Kroszky's treatise, which also predicted the same thing about California law, which is what we had to rely on as well in the course of these proceedings. [00:15:09] Speaker 00: On that standard, let me, it's a little frustrating because actually the bigger money issue is the, is the, [00:15:43] Speaker 00: national through attorney John Brighton was inappropriate because, and the court had two reasons, one, and was in breach one. [00:15:54] Speaker 02: May I interrupt? [00:15:55] Speaker 02: Your brief talks about this being improper, and you just use the word inappropriate. [00:15:58] Speaker 02: I'm just taking that, and I'm not trying to give you a hard time, but I'm taking this as your position, my understanding it correctly, is that by tendering, offering this lawyer that your client's position is that they did perform and fulfilled their duty [00:16:38] Speaker 00: in Civil Code Section 2860, which says that if a reservation of rights creates a conflict between the insurer and the insured, the insured has the opportunity to select independent counsel at the insurer's expense. [00:16:54] Speaker 00: There are lots of limitations to that rule, and the narrow issue that was reserved here was the suddenness of the alleged pollution. [00:17:04] Speaker 00: The insurer conceded the accidental nature [00:17:10] Speaker 00: briefs there were a couple of allegations that they were negligent in the course of polluting the harbor and the California courts have acknowledged that negligence is sufficiently close to accidental to satisfy that and so the insurers simply focused [00:17:54] Speaker 00: rationales, both of which are embraced by the appellee. [00:18:00] Speaker 00: One is that the exclusion requires both, and that sudden means all sudden contemplates unexpected and accidental damage by itself, which is a position that was rejected long ago in the Shell Oil case. [00:18:13] Speaker 00: The two prongs of the exception to the exclusion are distinct. [00:18:40] Speaker 00: on an issue and that's simply contrary to [00:19:17] Speaker 01: I'm sure, I'm not, could the, could the court repeat the question? [00:19:21] Speaker 01: I'm not sure I caught it properly. [00:19:22] Speaker 01: I, the reason, as I understand it, opposing counsel says the restoration of rights, um, could, could cause the, um, a conflict of interest is because counsel could build a case that, uh, would show the pollution was, um, was not the [00:19:53] Speaker 00: was not an issue in any of the underlying litigation. [00:19:56] Speaker 00: In order to create a conflict, the issue over which counsel has control has to be something that's actually litigated at issue in the underlying case. [00:20:06] Speaker 00: You just have a few seconds left. [00:20:08] Speaker 00: Do you want to keep it for rebuttal? [00:20:10] Speaker 01: I will, Your Honor. [00:20:12] Speaker 01: Thank you so much. [00:20:13] Speaker 01: Thank you. [00:20:15] Speaker 01: We'll hear from the other side. [00:20:38] Speaker 04: This court has recognized numerous times California law imposes an extraordinarily strong broad duty to defend. [00:20:49] Speaker 04: Once an insurer attend as a complaint the insurer must defend the lawsuit if quote that raises the possibility that the insurer to be liable for losses covered by the policy or the complaint might be amended to give rise to liability that will be covered under the policy that's from Montrose and as this court described it in anthem [00:21:11] Speaker 04: complaint can, by no conceivable theory, raise a single issue which could bring it within the policy coverage. [00:21:42] Speaker 04: The allegation there is the marine chemical terminal storage facility. [00:21:47] Speaker 04: Terminals of the site involve transportation of certain hazardous materials that leaked from storage tanks, pipes, spilled or were disposed of on the ground into the soil and seeped into the groundwater. [00:21:57] Speaker 04: I mean a leak from a storage tank is the quintessential sudden and accidental release. [00:22:03] Speaker 04: And so the allegations and the complaint are absolutely consistent with the idea that some of this could have been sudden and accidental. [00:22:11] Speaker 04: And as Judge Christen, as you said, we're talking about a 10-year period between 1982 and 1992 that needs to just have been a single instance of a sudden and accidental release to create the possibility of coverage. [00:22:25] Speaker 04: That's what the California Supreme Court said in BUSS. [00:22:34] Speaker 04: one instance of one of the 19 chemicals leaking. [00:22:37] Speaker 04: That makes it a mixed case, and in a mixed case, an insurer still has a duty to defend. [00:22:43] Speaker 04: The insurer is supposed to go in, defend, and then if it finds out that in fact none of the pollution at all was sudden and accidental, then it has the right [00:23:01] Speaker 04: But what it cannot do is what it did in this situation, which is to stay at the outset, try to have a fight about whether there's coverage. [00:23:08] Speaker 04: And this is the quote from Buss, to defend immediately, it must defend entirely. [00:23:12] Speaker 04: It cannot pass the claims, dividing those that are at least potentially covered from those that are not. [00:23:18] Speaker 04: And the reason, of course, is in that situation, you have collateral litigation all the time against your insurer at the outset. [00:23:33] Speaker 03: It denied, no it- Well at some point it approved coverage but reserved rights, isn't that right? [00:23:40] Speaker 03: It did that in April 2018, but it refused to provide independent counsel. [00:23:45] Speaker 03: Okay. [00:24:02] Speaker 04: or another as to whether they were sudden accidental leaks. [00:24:06] Speaker 04: I mean, it's certainly, I think it's completely consistent with the complaint, but the complaints with that were subsequently amended to even note that there were sudden accidental releases, and of course that's, you know, the insurer here comes back in a year later and basically does effectively a mere culprit and says, we actually should have been defending it, it must have been possible, because they agree it was possible, they came in and- Can you move to that? [00:24:29] Speaker 02: We do have in the record that the underlying litigation has resolved. [00:24:35] Speaker 04: it's no it's still stayed there is a settlement it's it's the settlement in [00:24:58] Speaker 02: But as of, that's his position, the DSAS. [00:25:00] Speaker 04: Correct. [00:25:01] Speaker 04: And so the most straightforward grounds to resolve that is that what was happening there was they refused to provide independent counsel, even though they were ensuring both the plaintiff and the defendant in the underlying suit. [00:25:12] Speaker 04: And there is no case in California law that has ever remotely suggested that it would be permissible to do that. [00:25:19] Speaker 04: Obviously, in the Amaro case, it says the guiding principles, and these were all [00:25:34] Speaker 02: days before comparative negligence, so what is your response to that? [00:25:37] Speaker 04: Yeah, I mean, that's not at all correct. [00:25:39] Speaker 04: The question is whether or not there is a conflict that, you know, whether or not the, the, the, the deal sort of obligations that council would have to both the insurer and to the, until the client create a conflict. [00:25:52] Speaker 02: And I can think of at least two when you have- Right, so you talk about insuring two. [00:26:02] Speaker 02: This goes back to Judge Ikuta's question. [00:26:05] Speaker 02: There would have been an incentive for a single attorney to favor a certain theory that might have inured to the benefit of the insurer and not to the insurer. [00:26:16] Speaker 02: That's the conflict you're interested in. [00:26:18] Speaker 04: Right. [00:26:18] Speaker 04: So I'll give you at least two examples, I think. [00:26:20] Speaker 04: So one is, you know, so they're both plaintiffs and defendants. [00:26:23] Speaker 04: They're both basically seeking damages from each other and not just like an MBL seeking an apportionment of who's responsible. [00:26:32] Speaker 04: the city as a landowner is saying, you have to pay remediation costs to me. [00:26:37] Speaker 04: And LA Terminals is saying, we have response costs, investigation costs, all kinds of things they're seeking as damages from the city. [00:26:47] Speaker 04: So both sides are seeking damages against each other. [00:26:49] Speaker 04: Obviously, the insurer in that situation has an incentive to diminish damages on both sides. [00:26:56] Speaker 04: you know, wants to show that, you know, LAT didn't actually have that many response costs. [00:27:01] Speaker 04: They want to show that the damage caused to the city wasn't actually that high because it's going to lose money if those damages amount to highs. [00:27:08] Speaker 04: That's a very... [00:27:10] Speaker 04: Exactly. [00:27:10] Speaker 04: And then a second one here, I think it's even more clear in this situation because you have a bunch of third party defendants. [00:27:16] Speaker 04: So, you know, it might well be the case that the strongest thing for LAT is to say the city did it. [00:27:21] Speaker 04: The city is the big polluter. [00:27:23] Speaker 04: And that's the most compelling theory and the most likely to get LAT off the hook. [00:27:28] Speaker 04: But that theory is a problem for the insurer because if that theory prevails, then [00:27:33] Speaker 04: the city is going to have to pay and the insurer is insuring the city so they don't want that. [00:27:38] Speaker 04: So instead they might direct a theory towards one of the other third party defendants even though the case against them is much weaker and LAT might end up recovering less in that situation. [00:27:48] Speaker 04: So these are just two very obvious conflicts of interest that can arise when you do something remarkable like ensure both sides of the V. There is no case where I've seen an insurer even try to do this. [00:27:58] Speaker 04: The case [00:28:01] Speaker 04: try to even attempt but the leading insurance traders in California says there's a large block of authority recognizing that this is a relatively [00:28:11] Speaker 04: ensure both sides of the V, and it's consistent with the pronouncements in O'Mara where all this comes from, that is contrary to public policy for a person to control both sides of litigation, and quote, a full and fair examination of the merits of the case cannot be had when one person controls counsel for both sides. [00:28:29] Speaker 04: So it's just the most fundamental conflict imaginable, and of course, when they arrive and say, oh yeah, we're gonna now flip the bill, but we're actually also defending, we're also ensuring the other side, [00:28:40] Speaker 04: We said it's absolutely unacceptable, and we've already got our council, which we have a significant reliance interest in keeping our council, and the only reason we have that council is because you refused to defend us from the beginning. [00:28:53] Speaker 04: So that's another alternative ground, which is the full feature ground. [00:28:57] Speaker 04: But I think the most straightforward ground is just the conflict that arises from ensuring both sides of the day. [00:29:05] Speaker 04: I'm happy to talk about the other two grounds if there are questions on those. [00:29:10] Speaker 02: Well, you have quite a bit of time left, so maybe I'll ask about that. [00:29:45] Speaker 02: of equity, but I'm not suggesting that's binding in any way. [00:29:49] Speaker 02: It's just that we're dealing with this odd animal and the right to jury trials, of course, very important. [00:29:54] Speaker 02: So I'm trying to figure out what the nature of the relief sought here and whether it is indeed equitable or legal. [00:30:00] Speaker 02: You've read the briefing on this. [00:30:01] Speaker 02: So do you want to answer your client's take on this? [00:30:04] Speaker 02: Right. [00:30:05] Speaker 04: I think it is honestly a tricky question. [00:30:18] Speaker 04: actions primary purposes to basically bring the insurer in and get them to fulfill their duty to defend what is a current and ongoing litigation. [00:30:28] Speaker 04: I think the other side would at least accept that in that situation the forward-looking relief that the part which says you have to pay our lawyers fees tomorrow, that is injunctive relief. [00:30:40] Speaker 04: I think what they might be suggesting is [00:30:43] Speaker 04: the backward-looking component is damages. [00:30:46] Speaker 04: And I think that's a very odd way to splice it up because in a situation like this, you know, whether you have a bill from the lawyer that's for yesterday's work or a bill for the lawyer that's for tomorrow doesn't really make a huge difference. [00:30:58] Speaker 02: I'm sure it doesn't. [00:30:59] Speaker 02: So let's see if you could slow down a little bit. [00:31:01] Speaker 02: So if we're in federal court, which we were, and we're looking to vindicate the Seventh Amendment, right, I think it's very clear because of the authorities relied upon by the district court. [00:31:16] Speaker 02: But in federal court, I'm struggling to figure out exactly what the right answer is, because I think it's very important that it was interlocutory, right? [00:31:25] Speaker 02: And so the judge had ordered, I think, well, very clearly had ordered United that it needed to pay. [00:31:32] Speaker 02: But as you say, we're a year in by the time that hearing took place. [00:31:35] Speaker 02: So there was an arrearage that had been quantified. [00:31:50] Speaker 02: Have you seen any case law where that has been subdivided and dealt with in that way? [00:31:57] Speaker 04: Well, we've not seen it. [00:31:58] Speaker 02: It's kind of fair why they wouldn't have a right to a jury trial for the arrearage. [00:32:00] Speaker 02: It seems to me that's a clearly an injunctive component going forward. [00:32:04] Speaker 04: Right. [00:32:05] Speaker 04: And I think the question is, does it qualify as incidental intertwined with the injunctive relief, basically, and is similar to have a back hit? [00:32:13] Speaker 04: Exactly. [00:32:14] Speaker 04: What's the closest authority on that? [00:32:15] Speaker 04: I mean, I think that while there's a case that's [00:32:26] Speaker 04: There's no doubt about that. [00:32:27] Speaker 04: The question is, when the ongoing litigation is ongoing and you're dragging the insurer in, and then that case cites this West Star Energy versus Lake case from the 10th Circuit. [00:32:35] Speaker 04: That's a 552, F3215. [00:32:39] Speaker 04: And that case basically seems to treat as in it's really dealing with the question of whether there's an appellate jurisdiction for preliminary injunction, but it does treat the forward-looking and the backward-looking component as both parts of injunctive relief under the sort of rationale we're describing, which is that, you know, [00:32:56] Speaker 04: When you have a lawyer that's saying, I've got some bills due, and I also have got to defend you in the future. [00:33:03] Speaker 04: And what the insurer should have been doing is defending the whole way through. [00:33:06] Speaker 04: They can't just come in and pay tomorrow's bills, let those bills due go, because that's not really fulfilling a duty to defend. [00:33:14] Speaker 04: The lawyer might say, I'm going to leave this litigation and leave you in the wind, because you're not paying the bills that were due yesterday, too. [00:33:21] Speaker 04: So part of assuming a defense is not just paying bills going forward, it's paying the past bills. [00:33:33] Speaker 02: There was this hearing where there was going to be a question about quantifying the rearage and I think opposing counsel's position, but he was caught off guard a little bit about what he thought he was there for. [00:33:44] Speaker 02: And then an offer to request for a jury trial, an offer to forego that if they could be sent to mediation, they weren't sent to mediation. [00:34:06] Speaker 02: I think that had to do with the entire order. [00:34:09] Speaker 02: I don't think it was sort of subdivided as I have indicated. [00:34:12] Speaker 02: But do I have that right, or is that court perhaps taking a misunderstanding of the record on that? [00:34:16] Speaker 04: That's my understanding as well of the record. [00:34:18] Speaker 04: I mean, I think counsel might have a different understanding. [00:34:21] Speaker 04: But my understanding is that you did characterize this as injunctive relief. [00:34:24] Speaker 04: And I think that the district court understood it as injunctive relief. [00:34:27] Speaker 02: Well, in part, I think it certainly was. [00:34:28] Speaker 02: But it does seem to me that the district court, this wasn't teed up for the district court in the way that it is now on appeal. [00:34:34] Speaker 02: So I'm just trying to get my arms around [00:34:39] Speaker 04: I think that's the closest case that seems to treat the backward looking component of the, and we cite a couple other cases in our brief, one from the district of DC, but that's the closest Court of Appeals case. [00:34:56] Speaker 04: I mean, it's an unusual situation. [00:34:59] Speaker 04: I think it is fair, Your Honor, to say that this is not exactly how it looked, or that this was not fully vetted. [00:35:05] Speaker 04: These are not new arguments, but these are definitely arguments that were making that, I think, explain the rationale in more detail. [00:35:12] Speaker 02: So at the time of this order being entered, I do think that's important. [00:35:15] Speaker 02: At the time the order being entered, the underlying suit was [00:35:29] Speaker 02: about six months later, the bad faith claim hadn't settled yet either. [00:35:35] Speaker 02: I don't think anything in the litigation does. [00:35:37] Speaker 02: The bad faith claim didn't settle until May of 2022. [00:35:41] Speaker 02: This order was issued in September of 2020. [00:35:44] Speaker 02: So that sort of helps me understand the position the parties were in at the time. [00:35:49] Speaker 04: Right. [00:35:50] Speaker 04: And all of this was happening in the backdrop of, you know, this was a lawsuit that we filed in January 2019. [00:35:57] Speaker 04: sure to come in and pay our fees that our clients went into bankruptcy, you know, in part as a result of these sorts of litigations. [00:36:07] Speaker 04: And it is now 20, 25, not one dollar has been paid. [00:36:13] Speaker 04: You know, there were multiple orders. [00:36:15] Speaker 04: There was a motion to dismiss order that found, you know, that effectively it was due to defend. [00:36:20] Speaker 04: judgment order that found there's a duty to defend. [00:36:22] Speaker 04: And the typical procedure in California law is that once that court has kind of made that judicial determination, that at least shows the possibility of coverage. [00:36:30] Speaker 04: You start defending, and then you seek a recoupment action. [00:36:33] Speaker 04: They just steadfastly refuse to do any of that. [00:36:36] Speaker 02: And it's led to the- Even though there was a pending bad face claim at that point. [00:36:39] Speaker 04: Right. [00:36:40] Speaker 04: And so, you know, I guess I sort of think that that, I think that district court's order reflects that frustration a little bit, where it sort of says this is partly, this is an injunctive relief, I could have believed, to effectuate the fact that at the moment you're not complying with orders. [00:36:53] Speaker 04: And so what it is, is we're going to drag you into litigation and we're not going to let you say, well, I'm going to, [00:36:58] Speaker 04: pay the future cost but I'm not going to pay the past cost and let's have a long jury trial about that by the time you know that's over obviously you know. [00:37:05] Speaker 02: When the judge entered the order he recognized there may be a dispute about the reasonableness of fees and there was a dispute about the reasonableness of fees. [00:37:13] Speaker 02: So what is your position about how that ought to be vindicated? [00:37:15] Speaker 04: Well I mean under California law when it did insure a breach it's usually [00:37:22] Speaker 04: And the dispute really was late breaking. [00:37:24] Speaker 04: I mean, throughout, they didn't really dispute them as they were ongoing. [00:37:27] Speaker 04: It was only in this sort of summary judgment damages phase where they said, we now have a dispute. [00:37:32] Speaker 04: So, you know, but I think that the court is allowed to adjudicate as a matter of equitable relief whether they were reasonable. [00:37:38] Speaker 04: And that's kind of what he did here. [00:37:40] Speaker 04: He sort of said they were presumptively reasonable because of [00:37:47] Speaker 04: I think it's a hard question. [00:37:53] Speaker 04: I don't think there's a lot of law in it, but I do think that it would be I think very unusual to sort of [00:38:00] Speaker 04: to the perspective relief. [00:38:02] Speaker 04: It's saying basically pay yesterday's fees as well as tomorrow's. [00:38:06] Speaker 04: And I do think that falls within the two tests that this court has identified. [00:38:09] Speaker 04: One is an attempt to give plaintiff what he is entitled as opposed to a substitute for a consequential loss. [00:38:15] Speaker 04: This is not a substitute. [00:38:16] Speaker 04: We're saying pay that bill. [00:38:18] Speaker 04: It's what we're entitled. [00:38:19] Speaker 04: We were entitled to you being with us from the beginning, paying the bill. [00:38:22] Speaker 04: bills as they were going forward. [00:38:23] Speaker 04: And then the other test from Bayer is incidental to or intertwined with injunctive relief. [00:38:28] Speaker 04: So we think it meets the legal tests. [00:38:30] Speaker 04: There's not a clear case. [00:38:32] Speaker 04: This court is going to have to sort of figure that out in the first instance. [00:38:36] Speaker 04: Thank you. [00:38:36] Speaker 04: Thank you, Your Honor. [00:38:40] Speaker 01: We'll give you a minute for rebuttal. [00:38:49] Speaker 00: Thank you, Your Honors. [00:39:25] Speaker 00: There is no third-party plaintiff in the sense that the federal government nor the state government agencies did not file a suit. [00:39:33] Speaker 00: They simply issued orders to which LA terminals and other participants in the [00:39:55] Speaker 00: original damages. [00:39:56] Speaker 00: The situation here is identical to those other cases, which is why the court in the MBL decision, the California State Court, found that it was perfectly fine for [00:40:25] Speaker 02: opportunity to see the other claims file. [00:40:29] Speaker 02: And in this instance, a senior litigation attorney sent the report, the city's report, to the claims file. [00:40:35] Speaker 00: She did, and it was mistakenly included, don't they? [00:40:39] Speaker 02: She said, I sent it there so you could get a look. [00:40:41] Speaker 02: We've got the email. [00:40:42] Speaker 02: What about that? [00:40:42] Speaker 00: Yeah, she made a mistake. [00:40:43] Speaker 00: She made a mistake. [00:40:43] Speaker 02: It wasn't administrative error. [00:40:44] Speaker 02: It wasn't clerical error. [00:40:45] Speaker 02: It's a senior environmental attorney who sent it and said, I sent it so that you could get a look at [00:40:56] Speaker 02: And I appreciate it was a mistake. [00:40:57] Speaker 02: I'm not attributing ill intent, but it is what it is in the record that we have. [00:41:01] Speaker 02: And the case law standard is whether or not they allowed access. [00:41:06] Speaker 02: They have to not allow access. [00:41:09] Speaker 00: Actually, that's not entirely true, Your Honor. [00:41:11] Speaker 00: That's the way the two counts. [00:41:13] Speaker 00: It's used in one of the, if you look closely at the MPL case, there was even one insurer that had a single adjuster supervising the defense of two defendants, and the court found that to be okay.