Lumbermens Mutual Casualty Co. v. RGIS Inventory Specialists, LLC ( 2009 )

09-0753-cv
Lumbermens v. RGIS Inventory
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
R ULINGS BY SUM M ARY ORD ER DO NO T HAVE PRECEDENTIAL EFFECT . C ITATIO N TO SU M M ARY O RD ERS FILED AFTER
J AN U ARY 1, 2007, IS PERM ITTED AN D IS GOVERNED BY THIS COU RT ’S L O CAL R U LE 0.23 AN D F ED ERAL R U LE O F
A PPELLATE P RO CED U RE 32.1. I N A BRIEF O R O THER PAPER IN W H ICH A LITIGAN T CITES A SUM M ARY O RD ER , IN EACH
PARAGRAPH IN W HICH A CITATION APPEARS , AT LEAST O N E CITATIO N M U ST EITHER B E TO THE F ED ERAL A PPEN D IX O R
BE ACCO M PAN IED BY TH E N O TATIO N : “( SU M M ARY O RD ER ).” U NLESS THE SUM M ARY ORD ER IS AVAILABLE IN AN
ELECTRO N IC D ATABASE W H ICH IS PUB LICLY ACCESSIBLE W ITHO U T PAYM ENT O F FEE ( SU CH AS THE D ATABASE
AVAILABLE AT HTTP ://W W W . CA 2. U SCO U RTS . GO V /), THE PARTY CITIN G THE SU M M ARY O RD ER M U ST FILE AND SERVE A
CO PY O F THAT SU M M ARY O RD ER TOGETH ER W ITH TH E PAPER IN W H ICH THE SU M M ARY O RD ER IS CITED . I F N O CO PY IS
SERVED BY REASO N O F THE AVAILABILITY O F THE O RD ER O N SU CH A D ATABASE , TH E CITATIO N M U ST IN CLU D E
REFERENC E TO THAT D ATABASE AND THE D O CKET NU M BER O F THE CASE IN W H ICH THE O RD ER W AS ENTERED .
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan Courthouse, 500 Pearl Street, in the City of New York, on the 11th
day of December, two thousand and nine.
PRESENT:
AMALYA L. KEARSE,
ROBERT D. SACK,
ROBERT A. KATZMANN,
Circuit Judges.
_______________________________________________
Lumbermens Mutual Casualty Company,
Plaintiff-Counter-Defendant-Counter-Claimant-Appellant,
v. No. 09-0753-cv
RGIS Inventory Specialists, LLC, and Robert M. Birardi,
Defendants-Counter-Claimants-Appellees,
Camrac, Inc., d/b/a Enterprise Rent-A-Car,
Defendant-Counter-Claimant-Counter-Defendant-Appellee.
______________________________________________
For Appellant: THORN ROSENTHAL, for Cahill
Gordon & Reindel LLP, New York, NY
For Appellees RGIS, LLC and Birardi: SANFORD N. BERLAND, for Dickstein
Shapiro LLP, New York, NY
For Appellee Camrac, Inc.: PETER M. KHRINENKO, for Brand, Glick
& Brand P.C., Garden City, NY
UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED AND
DECREED that the appeal be DISMISSED, the district court judgment be VACATED, and the
cause be REMANDED with instructions to determine whether the action is moot.
Plaintiff-Appellant Lumbermens Mutual Casualty Company ("Lumbermens"), an excess
liability insurer, appeals from a decision by the United States District Court for the Southern
District of New York (Harold Baer, Jr., Judge), disposing of Lumbermens' declaratory judgment
action against defendants-appellees RGIS Inventory Specialists, LLC ("RGIS"), Robert Birardi
("Birardi"), and Camrac, Inc., d/b/a Enterprise Rent-A-Car ("Enterprise"), by granting summary
judgment in favor of the defendants. The declaratory judgment action concerned whether
Lumbermens could be bound by the terms of an excess insurance policy it issued to RGIS (the
"excess policy") to contribute to a judgment in a personal injury action filed against the
defendants by David Shore, the brother of one Robert Shore who was injured when he was struck
by a minivan owned by Enterprise and driven by Birardi in the course of his employment with
RGIS. The personal injury action (the "Shore litigation") resulted in an award of damages that
well exceeded the $2.0 million limit on the defendants' primary insurance policy.
The excess policy required the insured to provide notice to Lumbermens of an
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"occurrence," "offense," "claim" or "suit" as soon as practicable "whenever it appears likely" that
the excess policy would be implicated. See Excess Policy, Section V, ¶ 3. The defendants did
not inform Lumbermens of the collision or the resulting Shore litigation until the eve of trial,
approximately five years after the collision and three years after the litigation was filed.
Lumbermens sought a declaratory judgment that it could not be bound by the terms of the excess
policy to contribute to a judgment against the defendants because it received untimely notice of
the Shore litigation, and it was prejudiced by the lateness of the notice. The defendants argued
that notice was timely because it never appeared likely that the excess policy would be implicated
by the collision or the resulting Shore litigation, and in any event, Lumbermens was not
prejudiced by the timing of the notice. The district court concluded that the notice provided to
Lumbermens was timely and that in any event, Lumbermens was not prejudiced by the timing of
the notice. The district court therefore entered summary judgment in favor of the defendants.
See Lumbermens Mut. Cas. Co. v. RGIS Inventory Specialists, LLC, No. 08 Civ. 1316, 2009 WL
137055 (S.D.N.Y. Jan. 21, 2009).
Lumbermens appealed. While the appeal was pending, the Shore litigation settled for
$6.0 million, and Lumbermens paid $4.0 million toward the settlement. See Nov. 17, 2009
Appellant's Letter Br. 1. The defendants argue that Lumbermens could not recoup the money it
contributed toward the settlement even if we decided the merits of this appeal in Lumbermens'
favor; that is, even if we decided that notice to Lumbermens of the Shore litigation was untimely
and Lumbermens was thereby prejudiced. See Nov. 17, 2009 Appellees' Letter Br. 4 ("The
Insureds . . . do not believe Lumbermens has any [] extra-contractual recoupment right . . . .").
Lumbermens disagrees, arguing that the circumstances of the settlement make clear that
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Lumbermens can recoup its money if it wins this appeal, and therefore "the settlement . . . has no
effect on the substantive question raised on this appeal." Nov. 17, 2009 Appellant's Letter Br. 1.
Although the defendants do not say so explicitly, the implication of their argument that
Lumbermens could not recoup the money it contributed to the settlement of the Shore litigation
even if it prevailed on the merits of this appeal is that the declaratory judgment action, and this
appeal, are now moot. See, e.g., Alexander v. Yale Univ., 631 F.2d 178, 183 (2d Cir. 1980) ("A
party's case or controversy becomes moot . . . when it becomes impossible for the courts, through
the exercise of their remedial powers, to do anything to redress the injury."). Because the
question of mootness arose only while this appeal was pending, the district court did not have an
opportunity to consider and rule on the issue. The parties both urge us to decide the issues
presented on appeal without regard to the issue of mootness, see Nov. 17, 2009 Appellant's Letter
Br. 1; Nov. 17, 2009 Appellees' Letter Br. 4, although the defendants appear to request that we
consider the issue of mootness in the event that we decide the merits of the appeal in favor of
Lumbermens, see Nov. 17, 2009 Appellees' Letter Br. 4. However, the issue of whether the
underlying action is moot is not one that can be ignored, irrespective of the wishes of the parties.
See United States v. Alaska S.S. Co., 253 U.S. 113, 116 (1920) (moot question cannot be decided,
"[h]owever convenient it might be," because court "is not empowered to decide moot questions")
(internal quotation marks omitted); see also, e.g., Muhammad v. City of New York Dep't of
Corrections, 126 F.3d 119, 122 (2d Cir. 1997) (raising issue of mootness sua sponte and
explaining that "mootness . . . is a jurisdictional question . . . . Our inability to review a moot case
'derives from the requirement of Art. III of the Constitution under which the exercise of judicial
power depends upon the existence of a case or controversy.'") (quoting DeFunis v. Odegaard,
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416 U.S. 312, 316 (1974) (per curiam)) (internal citations omitted). And because mootness is a
jurisdictional question, it must precede the determination of substantive issues. See Steel Co. v.
Citizens for a Better Environment, 523 U.S. 83, 94 (1998).
Because the question of mootness is, at least in part, factual, dependent as it is on the
terms and circumstances of the settlement, we think it best to leave the question of mootness for
the district court to decide in the first instance. See, e.g., Brocklesby Transport v. Eastern States
Escort Servs., 904 F.2d 131, 133-34 (2d Cir. 1990) (issue that "turns in part on factual questions
not addressed by the district court" better left for decision by district court in the first instance).
We therefore vacate the judgment of the district court and remand for consideration of whether
the action is, in light of the settlement of the Shore dispute, moot. Cf. County of Nassau, N.Y. v.
Hotels.com, L.P., 577 F.3d 89, 91 (2d Cir. 2009) (vacating district court judgment dismissing
complaint for lack of subject matter jurisdiction and remanding cause to district court for
consideration of different jurisdictional concern); In re Tax Refund Litig., 915 F.2d 58, 59 (2d
Cir. 1990) ("[T]he effect of [vacating a judgment when the underlying action has become moot]
is to prevent a judgment, review of which is precluded because the case has become moot, from
'spawning any legal consequences.'" (quoting United States v. Munsingwear, Inc., 340 U.S. 36,
41 (1950))). Should the district court conclude that the action is not moot, it may, of course,
reinstate its grant of summary judgment for the reasons set forth in its January 21, 2009 decision.
For the foregoing reasons, it is ordered that the appeal be hereby DISMISSED, the
district court judgment hereby VACATED, and the cause hereby REMANDED to the district
court with instructions to consider whether the declaratory judgment action is moot. After the
district court has considered the case on remand, jurisdiction may be restored to this Court by
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letter from any party, and the Office of the Clerk of this Court shall set an expeditious briefing
schedule and refer the matter to this panel for further review.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
By:
___________________________
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