Sun Life Assurance Company of Canada v. WSFS, FSB

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
SUN LIFE ASSURANCE COMPANY )
OF CANADA )
Plaintiff, )
)
v. )
)
WILMINGTON SAVINGS FUND SOCIETY, )
FSB, Solely as Securities Intermediary )
Defendant. )
_____________________________________ ) C.A. No. N18C-08-074
) PRW CCLD
WILMINGTON SAVINGS FUND SOCIETY, )
FSB, Solely as Securities Intermediary )
Counterclaim-Plaintiff, )
)
v. )
)
SUN LIFE ASSURANCE COMPANY )
OF CANADA )
Counterclaim-Defendant. )
Submitted: March 27, 2020
Decided: April 9, 2020
MEMORANDUM OPINION AND ORDER ON REARGUMENT
Upon Plaintiff/Counterclaim-Defendant’s Motion for Reargument,
DENIED.
Simon E. Fraser, Esquire and Thomas Francella, Esquire, Cozen O’Connor,
Wilmington, Delaware, Attorneys for Plaintiff and Counterclaim-Defendant.
Steven L. Caponi, Esquire and Matthew B. Goeller, Esquire, K&L Gates LLP,
Wilmington, Delaware, Attorneys for Defendant and Counterclaim-Plaintiff.
WALLACE, J.
This case concerns Sun Life Assurance Company of Canada’s allegation that
a certain life insurance policy (“the Policy”) upon which Wilmington Savings Fund
Society, FSB (“WSFS”) has demanded payment is void ab initio as a wager on the
life of another.
Cozen O’Connor (“Cozen”) represents Sun Life.
Cozen is also WSFS’s longstanding outside counsel and currently manages an
ongoing matter for WSFS involving life insurance trusts. WSFS immediately
brought this to Cozen’s attention, and the parties resolved and waived that specific
conflict by agreement. But thereafter, WSFS learned that Cozen had previously
advised and represented Ocean Gate Life Settlement Program LP (“Ocean Gate”).
Ocean Gate obtained the Policy by purchase assignment from the original insured
and beneficiary.
Based on the conflict posed by this prior representation, WSFS filed a Motion
to Disqualify Cozen. The Court disqualified Cozen on December 19, 2019.1
I. THE DECEMBER MEMORANDUM OPINION AND ORDER
In granting WSFS’s Motion, the Court made clear its bases for
disqualification. Cozen admitted its prior representation of Ocean Gate, which
necessarily involved investigating the business practices Ocean Gate used in
1
Sun Life Assurance Co. of Canada v. Wilmington Savings Fund Society, 2019 WL 6998156
(Del. Super. Ct. Dec. 19, 2019).
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obtaining life insurance policies similar to the Policy. 2 Cozen’s current client Sun
Life takes a position materially adverse to Ocean Gate3 that the Court found was not
and could not be waived by WSFS. 4
The Court rejected WSFS’s argument that Cozen has an unfair advantage due
to confidential disclosures from Ocean Gate made in the context of an attorney-client
relationship. Cozen promptly instituted an Ethics Screen as soon as the prior conflict
was brought to its attention, and the Court credits that it has vigilantly adhered to the
screen.5
Rather, the Court found that WSFS could potentially have need to seek or
introduce Cozen-generated material fact evidence as to Ocean Gate’s business
practices related to its obtaining and dealing in the type of life insurance policy
transaction at issue here; that evidence, the Court found, could be relevant to whether
the Policy is void or was validly obtained by Ocean Gate.6 In such a circumstance,
2
Id. at *4.
3
Id.
4
Id. at *4-5.
5
Id. at *5.
6
Id. at *6.
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introduction of Cozen attorney work product or even testimony may be properly
sought by one party, while Cozen represents the adverse party.7
This alignment, if realized, would present the “specter of switching sides,”
which is one of the key evils Rule 1.9 is intended to prevent.8 If it reached the jury,
the Court cannot predict what inferences the jurors might draw. Either party might
potentially be prejudiced.9 Irrespective of which party would be disadvantaged, and
even if a jury could be entirely shielded from the knowledge that Sun Life was being
represented by the selfsame firm that represented Ocean Gate, such proceedings to
the Court (not to mention any right-minded observer) are infected with the
“appearance of duplicity” against which the Rules guard.10
Justice must be conducted in a manner that hints at not even an appearance of
impropriety.11
7
Id. at *6-7.
8
Id.
9
Id. at *6.
10
Id. at *6-7.
11
Id. at *7. See also Kabi Pharmacia AB v. Alcon Surgical Inc., 803 F. Supp. 957, 960 (D.
Del. 1992) (“‘The maintenance of the integrity of the legal profession and its high standing in the
community are important . . . factors to be considered in determining [whether disqualification is
called for.] . . . The maintenance of public confidence in the propriety of the conduct of those
associated with the administration of justice is so important a consideration that we have held that
a court may disqualify an attorney for failing to avoid even the appearance of impropriety.’”)
(quoting IBM v. Levin, 579 F.2d 271, 283 (3d Cir. 1978)).
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II. THE TIMELINESS OF THE PARTIES’ POST-DECISION FILINGs
Superior Court Civil Rule 59(e) sets a five-day deadline for any motion for
reargument. Because that deadline is under 11 days, its calculation excludes
weekends and holidays.12 So the deadline for filing was December 30, 2019—
making Sun Life’s filing timely.13 WSFS did not file a response within the five days
permitted by Rule 59(e), instead filing a response in opposition fully thirty-one days
after Sun Life’s filing.14
Superior Court Civil Rule 59(e) sets “draconian” time limitations.15 Untimely
reargument requests cannot be considered,16 and untimely responses should be
stricken.17 WSFS delayed filing its response under the belief that the Motion for
12
Del. Super. Ct. Civ. R. 6(a).
13
State offices were closed by order of the Governor on December 24, 2019. And Rule 6(a)
expressly includes within its definition of “holidays” not to be counted “those days provided by
statute or appointed by the Governor or the Chief Justice of the State of Delaware.” But for this
additional day, Sun Life’s reargument deadline would have been Friday December 27, 2019, and
the Court might then have to consider the effect of the Delaware courts’ work-life balance
recommendations and orders. But the deadline became December 30th, and the Court need not.
14
WSFS Opp’n (D.I. 124).
15
See Pulling v. Original Lincoln Logs, Ltd., 1990 WL 123008, *1 (Del. Super. Ct. Jul. 26,
1990) (“The time limitations in Rule 59(e) can be rather draconian.”).
16
See McDaniel v. DaimlerChrysler Corp., 860 A.2d 321, 323 (Del. 2004) (“The reargument
period cannot be enlarged.”).
17
Tilghman v. Delaware State Univ., 2012 WL 5551233, *2 (Del. Super. Ct. Oct. 16, 2012).
In opposing the Motion to Strike, WSFS relies on precedents refusing to strike a filing under Super.
Ct. Civ. R. 12(f), a rule relating to “redundant, immaterial, impertinent, or scandalous material,”
including Pack & Process, Inc. v. Celotex Corp., 503 A.2d 646, 660 (Del. Super. Ct. 1985);
Phillips v. Delaware Power & Light Co., 194 A.2d 690, 696 (Del. Super. Ct. 1963); and Fowler
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Reargument was governed by the time limitations for routine motions.18 But the
express provisions of Rule 59(e) displace any more generous limitations applicable
to other civil motions.19 Nevertheless, the Court will grant even unopposed requests
only if the Court is persuaded that relief is appropriate.20
III. STANDARD OF REVIEW
Reargument will usually be denied unless Court has (1) overlooked a
controlling precedent or legal principles, or (2) misapprehended the law or facts in a
manner affecting the disposition of the underlying matter.21 To prevail, a party needs
to “demonstrate newly-discovered evidence, a change in the law, or manifest
injustice.”22 As our Supreme Court has described, the “manifest purpose” of
motions for reargument under the rules of each Delaware trial court may be “to
v. Mumford, 102 A.2d 535 (Del. Super. Ct. 1954). Sun Life moves under Rule 59(e), not Rule
12(f).
18
Aff. of Simon E. Fraser ex. A (D.I. 125).
19
E.g., Del. Super. Ct. Civ. R. 78(b) (“Responses in opposition to any motion shall be filed
no later than four days prior to the hearing on the motion . . .”).
20
Tilghman, 2012 WL 5551233, at *2.
21
State v. Brinkley, 132 A.3d 839, 842 (Del. Super. Ct. 2016).
22
Brenner v. Village Green, Inc., 2000 WL 972649, at *1 (Del. Super. Ct. May 23, 2000),
aff’d, 2000 WL 1587998 (Del. Oct. 18, 2000).
.
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afford the Trial Court an opportunity to correct errors prior to appeal” but they aren’t
“intended to rehash the arguments already decided by the Court.”23
IV. ANALYSIS
Sun Life in this Rule 59(e) Motion presents no newly discovered evidence.
Nor does it reveal controlling law or precedent that went overlooked, was
misconstrued, or changed during the pendency of the issue. And it certainly
demonstrates no manifest injustice. Instead, Sun Life’s arguments go to the
substance of the underlying Motion, either raising arguments that the Court
considered and rejected or pressing new arguments or issues that went uncontested
earlier.
A. Sun Life Conceded Ocean Gate is a Prior Cozen Client
In its Motion for Reargument, Sun Life disputes the shared corporate identity
of Ocean Gate and 2018 Life Settlement LP (“2018 LS”), the entity with a continuing
involvement with the Policy. Sun Life insists that “the only evidence WSFS
submitted regarding 2018 LS’s connection to Ocean Gate was a barebones,
conclusory affidavit.”24 This curiously worded qualification sidesteps Sun Life’s
concession of the issue in its own filings when resisting Cozen’s disqualification.
23
Ramon v. Ramon, 963 A.2d 128, 136 (Del. 2008).
24
Sun Life Mot. for Rearg. at 2 (D.I. 123) (italics in original, bold added).
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Sun Life proffered an affidavit from Cozen’s Conflicts Counsel describing
prompt and diligent efforts to detect and mitigate conflicts in the present matter.25
This includes a computer lock-out, Conflict Counsel’s collection and custody of
physical documents, and the firm’s enactment of an ethics screen.26 Conflict
Counsel further noted that—following a series of name changes and changes in
general partner—Ocean Gate is the same entity as 2018 LP.27
Cozen’s records also indicate that its attorney-client relationship was with
Ocean Gate Capital Management, LP.28 This may be a different entity than Ocean
Gate, but the person who submitted the paperwork forming Ocean Gate was a
principal of the ‘Capital Management’ entity.29 While the connection between
Ocean Gate and Ocean Gate Capital Management LP is not entirely clear from the
face of the record, Sun Life described the Conflict Counsel affidavit as establishing
“the prior representation of Ocean Gate.”30 Sun Life claimed no distinction in
25
Aff. of Douglas B. Fox, Esq. (D.I. 86) [Hereinafter “Fox Aff.”].
26
Id. ¶¶ 10-11.
27
Id. ¶¶ 14-16. See also Delaware Dept. of Transportation v. Mactec Engineering and
Consulting, Inc., 2011 WL 6400285, at *1 (Del. Super. Ct. Dec. 14, 2011) (“A change of name by
a corporation has no more effect upon the identity of a corporation than a change of name by a
natural person has upon the identity of such person.”) (quoting 6 FLETCHER CYC. CORP. § 2465).
28
Fox Aff. ¶ 14.
29
Id.
30
Sun Life Br. in Opp’n. at 9 (D.I. 86). In its brief, Sun Life was unambiguous that “Ocean
Gate” was the shorthand for “Ocean Gate Life Settlement Program, LP.” Id. at 1.
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corporate identity between Ocean Gate and Ocean Gate Capital Management, LP.
Sun Life developed no record establishing a true separation between them. No, Sun
Life conceded prior representation. And Sun Life’s mere wish to now change its
earlier factual concession before the Court doesn’t constitute a new factual
development for Rule 59(e) purposes.
B. The interests of Ocean Gate and Sun Life are materially adverse.
Sun Life further argues that WSFS failed to demonstrate by clear and
convincing evidence that Sun Life’s interests are materially adverse to Ocean Gate’s
because the record, as Sun Life characterizes it, does not demonstrate 2018 LS (the
former Ocean Gate) retains any beneficial interest in the Policy.
Sun Life agrees that Cozen’s representation of Ocean Gate related to the use
of the Policy, among hundreds of similar policies, as collateral for loans from the
California Public Employees’ Retirement System (“CalPERS”).31 Sun Life further
claims that all beneficial interest now lies with CalPERS.32 Even if true, Sun Life’s
characterization of the record still amply demonstrates materially adverse interests
between Ocean Gate and Sun Life. A judicial finding that the Policy is void and
worthless potentially exposes Ocean Gate to suit from CalPERS over the
31
Sun Life Mot. for Rearg. at 2 (D.I. 123).
32
Id. at 3.
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transactions by which Ocean Gate exchanged the Policy for value or used it as
collateral—the very transactions for which Cozen was retained.
Thus, once again Sun Life itself concedes the predicate facts establishing the
Rule 1.9 conflict.
C. Cozen Work-Product and Testimony for Ocean Gate is Evidence
as to the Validity of the Policy—a Jury Issue.
Sun Life relies heavily on an argument that the jury will never see the material
from the Ocean Gate representation, because “[I]t is uncontroverted that they are
irrelevant to the primary issue in this case—whether the Policy was void ab initio as
an illegal wager for lack of insurable interest under Illinois law.”33 As Sun Life sees
it, work product produced in 2010 analyzing other life insurance policies Ocean Gate
obtained in other jurisdictions has no relevance to whether the Policy was validly
created under Illinois law years earlier.34 This is neither uncontroverted nor
necessarily accurate.
33
Sun Life Mot. for Rearg. at 5 (D.I. 123).
34
Id.
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Sun Life raised this exact argument prior to the Court’s earlier ruling.35 The
relief a motion for reargument seeks is a chance to reargue.36 But that ask to reargue
is not itself an opportunity to do so.37
As the Court explained, in its work Cozen had to consider the procedures
Ocean Gate regularly undertook in obtaining the policies in its portfolios.38 Precisely
because the material was produced a few years afterwards, Cozen’s work constitutes
evidence of business practice and habit prevailing at the time the Policy was
acquired, admissible to determine how Ocean Gate acted in that acquisition.39
Sun Life’s argument for voiding the Policy is that its facially legitimate
purpose at inception was a “total sham” designed to conceal an investor’s wager.40
Far from being “uncontroverted” that the material is “irrelevant” to that issue and
instead addresses only the equitable remedy of refunding premiums, Cozen’s work
35
See Sun Life Br. in Opp’n. at 16 (D.I. 86) (arguing “The Ocean Gate Matter Is Immaterial”
because the Cozen work product “concerned whether as a general matter the laws of several states
(excluding Illinois), as of October 15, 2010, prohibited the Ocean Gate Program’s general
practice”) (italics in original).
36
See Del. Super. Ct. Civ. R. 59(e) (“The Court will determine from the motion and answer
whether reargument will be granted.”).
37
Schmidt v. Washington Newspaper Pub. Co., LLC, 2019 WL 7000039, *1 (Del. Super. Ct.
Dec. 20, 2019).
38
2019 WL 6998156, at *6.
39
Id. n. 61 (citing Delaware Rule of Evidence 406).
40
Amended Compl. ¶ 37-38.
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goes to the very heart of the case, evidencing how the Policy was obtained by
documenting (and approving of) Ocean Gate’s habitual business behavior at the
relevant time.
Likewise, Sun Life’s speculation that WSFS may not seek introduction of the
Cozen material is unavailing. WSFS raised the possibility of Cozen work product
and attorney testimony becoming evidence in its opening brief, albeit noting that
they might first have to obtain a waiver of privilege.41 Sun Life countered only that
the Cozen work product was irrelevant, leaving unchallenged WSFS’s intent to seek
introduction.42 A losing party cannot, when moving to reargue, retreat to an issue
earlier raised by the victor when that same issue was earlier ignored and uncontested
by the vanquished.43
D. Sun Life’s Proposed Alternative Remedy is Nonresponsive.
Sun Life argues that the jury could be shielded from any appearance of Cozen
standing on both sides of the case by waiting to see if WSFS actually succeeds in
obtaining introduction of the Cozen material, and then bifurcating the issue of unjust
41
WSFS Mot. to Disqualify Op. Br. at 28-29 (D.I. 54).
42
Sun Life Br. in Opp’n. at 16-18 (D.I. 86)
43
Tilghman, 2012 WL 5551233, at *3.
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enrichment into a separate trial with conflict counsel.44 This proposal fails to grapple
with the problems the Court identified in Cozen’s representation in two ways.
First, Sun Life’s theory fails to recognize that Cozen’s work for Ocean Gate
is fact evidence as to the validity of the Policy itself. Cozen obtained confidential
information from Ocean Gate about its business practices and habits. Those habits
are evidence for the jury to consider as to whether Ocean Gate acted as a bona fide
purchaser/assignee of the Policy, or behaved as initial procurer of the Policy using
the insured as a sham and proxy. Bifurcation cannot ameliorate this danger.
Moreover, even if the Court was able to craft another remedy by which to
shield the jury from the combination of knowledge of Cozen’s prior involvement
with Ocean Gate and current involvement with Sun Life for the trial’s duration, it
would be unavailing. The intolerable specter of switching sides here would still
remain; that hazard goes to the heart of the legitimacy of the adjudicatory process
and the legal profession.
E. Sun Life’s Representations (New and Other) in its Motion to
Strike Will Not Be Considered.
In its most recent filing, Sun Life represents to the Court that “it has recently
been brought to the attention of counsel for Sun Life” that that the material from
Cozen’s prior representation of Ocean Gate may no longer be protected by
44
Sun Life Mot. for Rearg. at 6 (D.I. 123).
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privilege.45 Rule 59(e) does not provide for a reply (or any other supplement) by the
movant after the initial five-day window has closed. An initial timely filing does
not keep the window for positing new grounds for reargument open indefinitely.
The novel contents of Sun Life’s motion to strike are time barred.
Sun Life—while arguing WSFS’s answer should be wholly stricken as
untimely—emphasizes what it characterizes as WSFS’s failure therein to dispute the
substance of the arguments Sun Life made in its motion to reargue.46 Arguments
that WSFS must concede were raised and rejected by the Court at the Motion to
Disqualify.47 But Rule 59(e) does not obligate WSFS to recapitulate its earlier
substantive pre-decision argument, nor indeed to respond at all to the reargument
motion.48 And failure to do so will not be viewed as a concession that reargument
should be granted.49
45
Sun Life Mot. to Strike at 4-5 (D.I. 125).
46
Id. at 3-4.
47
Id. at 6.
48
See Del. Super. Ct. Civ. R. 59(e) (“ . . . the opposing party may serve and file a brief answer
to each ground asserted in the motion.”) (emphasis added); Tilghman, 2012 WL 5551233, at *2.
49
Tilghman, 2012 WL 5551233, at *2 (“[E]ven if Plaintiff’s Motion for Reargument is, as he
contends, ‘unopposed,’ this Court has a responsibility to review, and not simply rubber stamp,
Plaintiff’s motion. The Court’s decision to grant reargument remains discretionary.”).
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V. CONCLUSION
Cozen in its prior representation of Ocean Gate collected fact evidence
relevant to the central questions of this litigation. Cozen work product and even
attorney testimony are potentially pivotal evidence affecting every count of both the
Complaint and Counterclaims. At the same time, Cozen represents Sun Life, now
arguing that its former client Ocean Gate was illegally wagering on the lives of
others.
No individual Cozen attorney has participated in both matters. In every
instance, Cozen’s attorneys individually and the firm as a whole promptly
demonstrated the vigilance appropriate to the profession, and undertook precisely
those prophylactic actions necessary to safeguard the confidences of their current
and past clients.
Nevertheless, and without any fault to the firm or its attorneys, the strong
factual relevance of this prior representation is incompatible with Cozen’s continued
representation of Sun Life for the reasons set forth in the Court’s prior Memorandum
Opinion and Order.
IT IS SO ORDERED.
/s/ Paul R. Wallace
Paul R. Wallace, Judge
Original to Prothonotary
cc: All Counsel via File and Serve
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