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Vol. 8 - Issue 5
May 31, 2019


9th Circuit Rules In That Crazy Cosgrove Case


For the past two years I have had a fascination with the Arizona federal district court’s decision in Cosgrove v. National Fire & Marine Insurance Company.  I have written about it a lot.  The 9th Circuit recently weighed in on it.  It is an important decision for the case and, more importantly, perhaps has wider implications.    

In April 2017, at the outset, an Arizona federal court held that insurer-appointed defense counsel, in a reservation of rights-defended case, used the attorney-client relationship to learn information about his client’s use of subcontractors on a project.  When defense counsel did so, he knew, or had reason to know, that his client’s policy contained a Subcontractors Exclusion and that the insurer may attempt to deny coverage based on the exclusion.  Thus, the court held that the insurer was estopped from asserting the Subcontractor Exclusion as a coverage defense.

Needless to say, this was a very troubling decision for insurers (and appointed defense counsel).  After all, the court reached this decision despite the existence, or not, of subcontractors being a pretty routine, and obvious, and not secret, fact in a construction dispute.
Very shortly after the court’s decision the parties settled.  As part of the settlement, the court agreed that it would vacate and seal the summary judgment decision.  Sure enough, you can’t get the decision on Pacer and the insurer arranged for the decision to be 86ed from Lexis and Westlaw.   I have a copy of the decision if anyone is interested.  It is also on the internet. 

In November 2017 – many months after the case was over -- United Policyholders, a policyholder advocacy group, filed a Motion to Intervene to unseal and reinstate the decision.  UP said in its brief that what the insurer did is an “impermissible tactic” – one “commonly employed by insurers in an attempt to reshape case law in their favor after an adverse ruling.”  UP said that the insurer, faced with an adverse decision, is “seek[ing] to hide the court’s opinion.” 

On January 18, 2018, the court denied UP’s motion to intervene, citing such reasons as lack of jurisdiction, it is not a party to litigation that shares questions of law or fact to the case, untimeliness and prejudice to the parties. 

UP filed a notice of appeal to the Ninth Circuit.  Oral argument was held on April 16, 2019.  I wrote about the oral argument in the current issue of CO. 

On May 6th the speedy Ninth Circuit issued it decision.  It has two parts – one was a win for the insurer and one was a win (for now) for UP. 

On the subject of reinstating the vacated partial summary judgment order, the Ninth Circuit held that the district court did not abuse its discretion in denying UP’s motion to intervene: “United [UP] has no independent basis for jurisdiction, nor does it possess a common question of law and fact with the claims or defenses involved in the main action.  The district court determined that granting permissive intervention would prejudice the parties because the case had been dismissed pursuant to a settlement of the parties.  The district court did not abuse its discretion in denying United permissive intervention for the purpose of attempting to reinstate a vacated order, given that such an action would have ‘prejudice[d] the adjudication of the original parties’ rights.’”

But then comes part 2: Can UP get the order unsealed?  The court’s answer – maybe.  The court stated: “A third party seeking permissive intervention purely to unseal a court record does not need to demonstrate independent jurisdiction or a common question of law or fact.”

The court also noted that “there is a ‘strong presumption’ in favor of the public’s right of access to judicial records.”  This requires a balancing test: “A court must evaluate whether the countervailing interests opposing public disclosure can overcome the presumption in favor of it.”    But since the district court did not undertake this exercise, the Ninth Circuit remanded to the district court to do so.

So the crazy Cosgrove case marches back to Arizona.

UP (presumably they’ll keep at it) will now be seeking to have a vacated order unsealed.  In other words, if successful, you would think that the opinion would return to Pacer and Westlaw and Lexis.

The upshot as I see it:

Based on this Ninth Circuit decision, strangers to a case have a very steep climb to intervene to have a vacated order reinstated.  Even my mother-in-law doesn’t intervene in my life that much. 
However, if “there is a ‘strong presumption’ in favor of the public’s right of access to judicial records,” a stranger may have success in getting a sealed order unsealed.  Of course, what is the value of a vacated opinion (although not vacated on the merits)?  That is a question for litigants and judges.  

Given how anomalistic the Cosgrove decision is, I’m not sure it has a lot of value going forward.  But I could certainly be wrong.  See My mother-in-law.  Id.  Even if I’m not, the Ninth Circuit decision has provided a voice, generally, on the use of sealing and vacating decisions as part of a settlement.
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