Ferrellgas Partners L.P. v. Zurich American Insurance Company ( 2020 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
FERRELLGAS PARTNERS L.P. et al,
Plaintiffs,
C.A. No. N19C-05-275 MMJ [CCLD]
Vv.
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ZURICH AMERICAN INSURANCE _ )
COMPANY and BEAZLEY )
INSURANCE COMPANY, )
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Defendants.
Submitted: September 14, 2020
Decided: September 17, 2020
On Defendant Beazley Insurance Company’s
Application for Certification of Interlocutory Appeal
DENIED
ORDER
Brenton W. Vincent, Esq., Bryan Cave Leighton Paisner LLP, Chicago, Illinois,
David J. Baldwin, Esq., Peter C. McGivney, Esq., Berger Harris, LLP, Wilmington,
Delaware, Attorneys for Plaintiffs Ferrelgas, et al.
Daniel McNeel Lane, Esq., Norton Rose Fulbright US LLP, San Antonio, Texas,
Samantha Miller, Esq., Norton Rose Fulbright US LLP, Washington, D.C., Thomas
G. Macauley, Esq., Macauley, LLC, Wilmington, Delaware, Attorneys for
Defendant Beazley Insurance Company, Inc.
JOHNSTON, J.
1. By Opinion and Order dated August 20, 2020,' the Court granted
the motion of Plaintiffs Ferrelgas Partners L.P. (“FG”), et al. to order Defendant
Beazley Insurance Company (“Beazley”) to advance and reimburse certain defense
costs in compliance with two previous rulings of the Court. The Court directed the
parties to follow a Fitracks-style protocol and awarded Plaintiffs reasonable
attorneys’ fees and other expenses incurred in preparing and prosecuting their
enforcement motion — so-called “fees-on-fees” or “fees-for-fees.”
2. On August 31, 2020, Beazley filed an application for certification of an
interlocutory appeal from the August 20 Order. In its application, Beazley contends
that it has satisfied the criteria of Supreme Court Rule 42 for three reasons. First, it
says that the August 20 Order determines a substantial issue of material importance
that merits appellate review before a final judgment (Rule 42(b)(i)) “because it
compels Beazley to pay millions of dollars in legal and defense costs to Plaintiffs
without a final judgment and without a further order of the Court.” Beazley adds:
“The August 20 Order also directed the payment of fees-on-fees, notwithstanding
that there is no applicable statute authorizing a prevailing party to receive fees.”
3. Second, Beazley says that the August 20 Order “satisfies three of the eight
factors set forth in Rule 42(b)(iii), any one of which independently supports
' Ferrellgas Partners L.P. v. Zurich American Ins. Co., 2020 WL 4908048 (Del. Super.).
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certification.” Beazley goes on to state: “The August 20 Order directs interim
payment of defense costs and payment of fees-on-fees when 8 Del. Code § 145 does
not apply to this dispute. The August 20 Order also creates a question of law as to
the applicability and constitutionality of using 10 Del. C. § 6508 to order the
payment of defense costs for an unliquidated judgment amount (and on an ongoing
basis).” Beazley asserts that the August 20 Order meets the Rule 42(b)(iii)(A), (C),
and (H) factors.
4. Finally, Beazley contends that “the benefits of interlocutory appeal far
outweigh the costs....No trial date has been set and no scheduling order has been
entered in this action. The underlying action remains pending so no issues of
indemnification can be addressed presently. Accordingly, there is nothing for the
Court to address in this action if an interlocutory appeal is taken at this point.” Ina
footnote, Beazley states: “In the event no interlocutory appeal is authorized, the
August 20 Order potentially requires the Court to resolve defense cost invoice
disputes four times a year through exhaustion of limits or resolution of the
underlying Eddystone Litigation, whichever occurs first.”
5. Plaintiffs oppose Beazley’s application on numerous grounds. Plaintiffs
contend that the pending application essentially seeks the same relief as Beazley’s
previous application for certification of interlocutory appeal of the Court’s January
21, 2020 Opinion and Order, wherein the Court found that Beazley is obligated
under the Beazley Policy to advance defense costs incurred by FG in defending its
former officers and directors, Julio Rios and Jeremy Gamboa, in the Eddystone
Litigation.2, According to Plaintiffs: “The Second Application is untimely,
repetitive, and fails to present an “exceptional” issue justifying interlocutory
review.” Plaintiffs observe that, after the Court denied Beazley’s first application
for interlocutory review,’ Beazley did not file a notice of interlocutory appeal with
the Delaware Supreme Court.*
6. Plaintiffs argue that the threshold requirement for an interlocutory appeal
set forth in Rule 42(b)(i) - that “the trial court decide[d] a substantial issue of material
importance that merits appellate review before a final judgment” - is not met here
because the August 20 Order was “collateral” and intended to compel compliance
with the Court’s previous, substantive January 2020 Opinion and Order. Plaintiffs
assert that the Court’s award of fees-for-fees should not be viewed as having decided
a substantial issue of material importance. According to Plaintiffs: “Whether
2 Ferrellgas Partners L.P. v. Zurich American Ins. Co., 2020 WL 363677 (Del. Super.).
3 Ferrellgas Partners L.P. v. Zurich American Ins. Co., Del. Super. C.A. No. N19C-05-275 MMJ CCLD (Feb. 17,
2020) (ORDER).
4 In its pending application, Beazley states, with regard to the Court’s February 17, 2020 denial of its previous
application for certification of interlocutory appeal: “Given the Court’s reasoning, Beazley did not notice an appeal
of the January 21 Order, in part because that interlocutory order did not require immediate (pre-judgment) payment
of defense costs.... While the January 21 Order granted Ferrellgas’s motion for partial summary judgment on
coverage for defense costs under Beazley’s policy, Beazley is of the view that the January 21 Order did not direct
the payment of defense costs.” Jd at9n.4.
4
Beazley’s non-compliance with multiple court orders merits a fee award in FG’s
favor is purely a collateral issue that does not go to the merits.”
7. Plaintiffs contend that none of the Rule 42(b)(iii) factors supports
certification of interlocutory appeal of the August 20 Order. First, Plaintiffs urge
that factor (H) (“serve considerations of justice”) would not be satisfied, since
interlocutory review, if accompanied by a stay, would deprive FG of reimbursement
for real-time advancement of defense costs as favored by Delaware public policy.
8. Second, Plaintiffs assert that the August 20 Order does not satisfy either
factor (A) or factor (C). They contend that factor (A) (“involves a question of law
resolved for the first time in this State”) is not satisfied because, in awarding fees-
on-fees, the August 20 Order relied upon Delaware Supreme Court precedent.
Plaintiffs cite to Delaware authority confirming a trial court’s broad discretion to
award attorneys’ fees when a party violates orders of the court and exposes an
adversary to unnecessary delay and expense.’ Plaintiffs add that, in all events, the
award of fees-on-fees “does not rise to the level of an exceptional matter warranting
interlocutory review.” According to Plaintiffs, “Beazley does not and cannot assert
> Plaintiffs cite Wimbledon Fund LP — Absolute Return Fund Series v. SV Specials Situation Fund LP, 2011 WL
6820362, at *3 (Del. Ch.).
any prejudice in having to wait until [sic] conclusion of the litigation to appeal this
interlocutory order.”
9. Finally, Plaintiffs assert that factor (C) (“question of law relates to the
constitutionality, construction, or application of a statute of this State, which has not
been, but should be settled by this Court in advance of an appeal from a final order”)
has no application to the August 20 Order because the Court had the authority to
order Beazley to comply with its advancement obligations under either the
Declaratory Judgment Act or the Court’s inherent authority to enforce its previous
orders. According to Plaintiffs, there is no novel issue presented by the August 20
Order. Plaintiffs point, in particular, to Sun-Times Media Group., Inc. v. Royal &
Sunalliance Ins. Co. of Canada, 2007 WL 1811265, at *1, 13 (Del. Super.), in which
the court granted the insureds’ motion for summary judgment for advancement of
defense costs, subject to aright of recoupment. Plaintiffs also point to Sider v. Hertz
Global Holdings, Inc., 2019 WL 2501481, at *1, 4-5 (Del. Ch.), in which the court
adopted a Fitracks-style protocol for advancement under Section 145 and rejected
the argument that the defendant was entitled to “immediate appeal” before
advancing any defense costs.
10. The Court’s consideration of Beazley’s pending application for
certification of interlocutory appeal is governed by Supreme Court Rule 42. Rule
42(b)(i) states: “No interlocutory appeal will be certified by the trial court or
accepted by this Court unless the order of the trial court decides a substantial issue
of material importance that merits appellate review before a final judgment.” Rule
42(b)(ii) admonishes: “Interlocutory appeals should be exceptional, not routine,
because they disrupt the normal procession of litigation, cause delay, and can
threaten to exhaust scarce party and judicial resources. Therefore, parties should
only ask for the right to seek interlocutory review if they believe in good faith there
are substantial benefits that will outweigh the certain costs that accompany an
interlocutory appeal.”
11. Assuming that the gating requirement of Rule 42(b)(i) can be satisfied,
viewed through the prism of Rule 42(b)(ii), an application also must meet one or
more of the eight factors set forth in Rule 42(b)(iii). Rule 42(b)(i11) counsels: “After
considering these factors and its own assessment of the most efficient and just
schedule to resolve the case, the trial court should identify whether and why the
likely benefits of interlocutory review outweigh the probable costs, such that
interlocutory review is in the interests of justice. Ifthe balance is uncertain, the trial
court should refuse to certify the interlocutory appeal.”
12. Against this backdrop, and having considered Beazley’s Application and
Plaintiffs’ Opposition, the Court has concluded that it is not appropriate to certify its
August 20 Order for interlocutory review.
13. The bases for this conclusion track Rule 42, as they must.
14. Asa threshold matter, the Court declines to find that Beazley’s application
is untimely. While there is logical appeal to Plaintiffs’ argument that Beazley’s
pending application is an untimely substitute for what could have been Beazley’s
notice of interlocutory appeal from the Court’s January 21 Order, the fact is that the
Court ruled on August 20 and Beazley complied with the requirement of Rule 42
(c)(i) that an application for certification of interlocutory appeal be filed within 10
days of entry of the order from which the appeal is sought.®
15. The Court finds that the August 20 Order did not decide “a substantial
issue of material importance that merits appellate review before a final judgment.”
Rather, the August 20 Order: (i) reiterated the Court’s previous two rulings, finding
entitlement to advancement under the Beazley policy; (ii) directed the parties to
follow a long-established Fitracks-style protocol in connection with that
® Beazley e-filed its application on August 31, 2020. But the previous day was a Sunday. Rule 42(a) states, “All
time periods under this rule should be calculated under Supreme Court Rule 11.” Rule 11(a) states, “The last day of
the period so computed shall be included, unless it is a Saturday or Sunday, or other legal holiday, or other day on
which the office of the Clerk is closed, in which event the period shall run until the end of the next day on which the
office of the Clerk is open.”
advancement; and (iii) awarded fees-on-fees consistent with Delaware law and
public policy in the context of advancement (and other areas). Moreover, even if the
rulings reflected in the August 20 Order were to be viewed as having decided one or
more issues of material importance, none of those rulings merits appellate review
before a final judgment. The continued pendency of the underlying Eddystone
Litigation is undisputed. With Beazley having made no application for a stay, it is
obligated to comply with the August 20 Order — its advancement obligations now
having been confirmed for a fourth time.
16. Even if it could be said that the criteria of Rule 42(b)(i) have been
satisfied, certification still must be denied because none of the factors set forth in
Rule 42(b)(iii) applies to the August 20 Order. In particular, contrary to Beazley’s
position, factor (A) has no application because the August 20 Order did not involve
a question of law resolved for the first time in this State.
17. Factor (C) also has no application because the August 20 Order did not
turn on operation of the Declaratory Judgment Act. Rather, the Court was enforcing
its previous rulings by insisting upon compliance, establishing a going-forward
protocol, and making Plaintiffs whole with an award of fees-on-fees — all consistent
with Delaware precedent.
18. Factor (H) has no application because review of the August 20 at this time
would not serve considerations of justice. To the contrary, at a minimum, review at
this time would result in all of the ills that Rule 42(b)(ii) warns against: disruption
of the normal process of litigation, delay, and exhaustion of scarce party and judicial
resources (especially in the midst of the ongoing pandemic). In addition, review at
this time would deprive FG of the advancement reimbursement to which it is (and
has been) entitled under the Beazley policy and, depending upon FG’s financial
condition, could deprive Rios and Gamboa of any advancement whatsoever as they
continue to defend the Eddystone Litigation.
19. Finally, pursuant to Rule 42(b)(iii), the Court is called upon to “identify
whether and why the likely benefits of interlocutory review outweigh the probable
costs, such that interlocutory review is in the interests of justice.” Pursuant to the
rule: “If the balance is uncertain, the trial court should refuse to certify the
interlocutory appeal.” In this instance, the Court (once again) finds that the likely
benefits of interlocutory review do not outweigh the probable costs and that
interlocutory review is not in the interests of justice. As Rule 42(f) makes clear,
Beazley’s failure to obtain review of the August 20 Order at this time will not bar it
from seeking review of the rulings on appeal from the final order, judgment or decree
in the case. In the meantime, under the Beazley policy, Beazley will be entitled to
recoupment of amounts advanced if it later can be established in connection with the
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underlying Eddystone Litigation that Rios and Gamboa are not entitled to
indemnification.
20. For the foregoing reasons, Beazley’s application for certification of
interlocutory appeal is hereby DENIED.
IT IS SO ORDERED.
orable Mary M. Johnston
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