Legion Partners Asset Management, LLC v. Underwriters at Lloyds London ( 2020 )

SUPERIOR COURT
OF THE
STATE OF DELAWARE
ABIGAIL M. LEGROW LEONARD L. WILLIAMS JUSTICE CENTER
JUDGE 500 N. KING STREET, SUITE 10400
WILMINGTON, DELAWARE 19801
TELEPHONE (302) 255-0669
October 29, 2020
David J. Soldo, Esquire Carmella P. Keener, Esquire
Patricia A. Winston, Esquire Cooch And Taylor, P.A.
' Morris James, LLP The Nemours Building
500 Delaware Avenue, Suite 1500 1007 North Orange Street, Suite 1120
P.O. Box 2306 P.O. Box 1680
Wilmington, DE 19899 Wilmington, DE 19899
RE: Legion Partners Asset Mgmt., LLC v. Underwriters at Lloyds London
C.A. No. N19C-08-305 AML (CCLD)
Dear Counsel,
On September 25, 2020, this Court issued a memorandum opinion (the
“Opinion”) granting Plaintiff's motion for partial summary judgment in this
insurance coverage dispute.' The Court’s ruling, succinctly stated, was that
Defendant’s duty to advance defense costs was triggered under two separate sections
of the insurance policy (the “Policy”) at issue because the allegations in the
underlying arbitration counterclaim, when read as a whole, asserted a risk within the
Policy’s coverage. The Court found the duty to advance arose under both Sections
1.A.2 and J.A.3 of the Policy.
' Legion Partners Asset Mgmt., LLC v. Underwriters at Lloyds London, 2020 WL 5757341 (Del.
Super. Sept. 25, 2020) (hereinafter, “Op.”).
Legion Partners Asset Mgmt, LLC v. Underwriters at Lloyd’s London
October 29, 2020
Page 2
Defendant filed a timely motion for reargument (the “Motion’”), asserting the
Court erred in three respects. First, Defendant contends it was not afforded an
opportunity to brief whether coverage arose under Section I.A.3 because Plaintiff
did not raise that argument until its reply brief. Second, Defendant argues the Court
misapprehended “the permissible scope of the Arbitration” and based its coverage
analysis “on a breach of fiduciary duty theory not recognized under Delaware law.”
Finally, Defendant asserts the Court’s conclusion that coverage was triggered under
Section I.A.2 misapplies the Policy’s plain language and Delaware law governing
indemnification of officers and directors. Plaintiff filed a timely opposition to the
Motion, contending reargument was neither necessary nor appropriate because
Defendant’s arguments do not meet the standard for reargument under Superior
Court Civil Rule 59(e). Having considered the parties’ arguments, it is apparent that
Defenant’s Motion must be denied.
A motion for reargument will be granted if the Court has “overlooked a
controlling precedent or legal principles, or misapprehended the law or facts such as
would have changed the outcome of the underlying decision.”? Movants neither may
present new arguments nor rehash those already presented.* The movant “has the
2 Def.’s Mot. for Reargument at 1.
3 Radius Servs., LLC v. Jack Corrozi Const., Inc., 2010 WL 703051, at *5 (Del. Super. Feb. 26,
2010) (quoting Lamourine v. Mazda Motor of Am., 2007 WL 3379048, at *1 (Del. Super. Sept.
24. 2007)).
4 Reid v. Hindt, 2008 WL 2943373, at *1 (Del. Super. July 31, 2008).
Legion Partners Asset Mgmt, LLC v. Underwriters at Lloyd’s London
October 29, 2020
Page 3
burden of demonstrating newly discovered evidence, a change in the law or manifest
injustice.”>
First, Defendant argues the Court should permit reargument because Plaintiff
did not make clear until its reply brief that it was seeking coverage under Section
L.A.3 of the Policy. As an initial matter, this is not entirely accurate. Plaintiff's
amended complaint expressly sought coverage under both Sections I.A.2 and I.A.3,
and Plaintiff's opening brief did not expressly limit its coverage argument to only
one of those sections.© More importantly, however, Plaintiffs arguments under
Section I.A.3 plainly were articulated in its reply brief, and Defendant neither sought
the opportunity to submit a sur-reply nor asked to submit a supplemental brief on
that issue after oral argument.’ Defendant addressed coverage under Section I.A.3
at oral argument, and its choice not to pursue those additional options does not make
reargument appropriate.
Defendant next argues the Court should grant reargument because it erred in
concluding that coverage was triggered under Section I.A.3. Defendant advances
several arguments in support of this contention. As to Defendant’s argument that
the allegations in the counterclaim regarding the company leaking confidential
information were mere “background facts,” the record shows that Plaintiff had to
> Id. (quoting State v. Brooks, 2008 WL 435085, *2 (Del. Super. Feb. 12, 2008)).
6 Am. Compl. J 16.
7 Notably, the Court permitted supplemental submissions on another issue, so the opportunity to
make supplemental submissions upon request presumably was apparent to counsel.
Legion Partners Asset Mgmt, LLC v. Underwriters at Lloyd’s London
October 29, 2020
Page 4
defend the merits of those allegations in order to defend the counterclaim. Defendant
next contends that any cause of action for breach of fiduciary duty could not be
brought in the arbitration or against the company directly, but only in the California
litigation and against the company’s officers or directors. This argument is a straw
man. The Court’s conclusion that coverage was triggered under Section I.A.3 was
not based on a finding that the counterclaim asserted a fiduciary duty claim against
the company. As Defendant correctly points out, no such claim is cognizable under
Delaware law. Rather, the Court took pains to explain that the phrase “Wrongful
Act” in the Policy broadly was defined and encompassed, among other things, the
allegations that the Company “violated federal laws and regulations by leaking
material, nonpublic information.”
Defendant further contends it should be permitted to reargue the scope of
coverage under Section I.A.3 because the Court misapprehended the holding in
Ferrellgas Partners L.P. v. Zurich American Insurance Co., a decision neither party
cited in its papers. This argument falters for at least two reasons. First, although
Defendant suggests otherwise, the Court is not limited to relying only on the
authorities the parties cite, and reargument is not warranted simply because the Court
cited an authority that neither party cited despite having ready access to it. Second,
8 Op. at *9. See also id. at *10 (“In sum, Legion incurred defense costs (a Loss) arising from the
Counterclaim (a Claim) that was based on Legion's errors, neglect, acts, or omissions .. . .”).
Legion Partners Asset Mgmt, LLC v. Underwriters at Lloyd’s London
October 29, 2020
Page 5
the Court did not misconstrue Ferrellgas. Rather, the Court relied on Ferrellgas for
its broad construction of the phrase “Wrongful Act.”? As the Court pointed out in
the Opinion, the Ferrellgas Court ultimately concluded coverage was not available
based on other limiting language in the policy that is not present in the Policy at
issue here.!° That holding does not undermine the broad construction the Ferrellgas
Court accorded the term “Wrongful Act.”
Defendant’s last argument relating to Section I.A.3 is that the “potential for
coverage standard under duty to defend policies cannot be reconciled with the
advancement clause of Section V.C. of the Policy ... and the first sentence of the
allocation provision, Section VI.A ....”'! This assertion, which is something of a
non sequitur, appears simply to rehash arguments Defendant previously made. In
any event, the Court’s decision was based on established case law regarding “duty
to advance” policies, and the standard the Court applied based on that case law does
not contradict the Policy’s language.’
Defendant’s third and final basis for seeking reargument is that the Court
“misapprehend[ed] the corporate reimbursement coverage” afforded by Section
I.A.2 of the policy. Again, this argument repeats arguments Defendant raised in
9 See id. at *9; Ferrellgas Partners, L.P. v. Zurich Am. Ins., 2020 WL 363677, at *5, 9 (Del. Super.
Jan. 21, 2020).
10 See Op. at *9, n. 79.
11 Def.’s Mot. for Reargument 4-5.
12 See Op. at *4, 6-7.
Legion Partners Asset Mgmt, LLC v. Underwriters at Lloyd’s London
October 29, 2020
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opposition to the summary judgment motion. As the Opinion explains at length, the
factual allegations in the arbitration counterclaim substantively were the same as
those underlying the claims lodged against Plaintiff's principals in the pending
California litigation. In defending the counterclaim, Plaintiff necessarily had to
defend its principals’ actions, both in order to defeat the counterclaim and because
it was at least possible the arbitration award would have a preclusive effect in the
California litigation. Accordingly, the counterclaim was a claim for Wrongful Acts
by Plaintiffs principals."
For the foregoing reasons, Defendant’s Motion for Reargument is DENIED.
IT IS SO ORDERED.
Sincerely,
A phohX
Abigail M-LeGrow\ Midge
13 Defendant also appears to argue that the duty to advance never was triggered because Defendant
ultimately did not indemnify its principals for any costs. But, again, the duty to advance is
triggered when the claims, as alleged, could result in indemnity. The duplicative factual
allegations in the Counterclaim and the California litigation, coupled with the possibility that the
arbitration award would have preclusive effect, brought Plaintiff's defense of the Counterclaim
within the ambit of Section J.A.2.