INSURANCE: Whether accident vehicle was “temporary substitute” for insured vehicle in shop irrelevant to whether insured was occupying covered auto as defined by UIM in light of disputed claim that he told agent to add the accident vehicle to the policy… Christensen.

Calvin Stucky was a named insured under a North Pacific commercial auto policy which included UIM. On 2/20/09 he took his primary ranch vehicle, a red Chevy truck, to Deer Lodge for repairs. It is not clear whether this truck was insured under the policy. It remained in the shop throughout the summer. On 5/27 he purchased a 1980 Ford truck “to fill a need that was previously met by the red truck.” Stuckys claim that he told North Pacific’s agent Pat Greany to add the Ford to the policy; North Pacific disputes this. On 8/12/09, while driving the Ford, he was in a head-on with Seth Schmautz and suffered a severe traumatic brain injury. His damages allegedly exceeded the limits of Schmautz’s State Farm policy. Stucky made a claim for UIM under the North Pacific policy. North Pacific seeks a declaration that there is no coverage for his claim for UIM. Stucky’s wife and 2 daughters were added as UIM claimants in 9/12. Stuckys raised as an affirmative defense in their answer and counterclaim in this declaratory action that the Ford was a “temporary replacement vehicle” for the Chevy that was being repaired. North Pacific asserts that whether or not the Ford is a temporary substitute is irrelevant to whether it must provide UIM to Stuckys. Stuckys contend that the policy is ambiguous as to whether a Named Insured is entitled to UIM if he is in a temporary substitute vehicle at the time damages are incurred by an underinsured motorist, and that this ambiguity must be construed in favor of coverage. North Pacific requests summary judgment on Stuckys’ temporary replacement vehicle defenses.

A Named Insured or any family member need not worry whether he was occupying a covered auto, a temporary substitute auto, or no auto at all when he incurred the damages. If all other requirements are met, the Named Insured must only concern himself with whether or not he was occupying or struck by an owned vehicle that was not a covered auto at the time the damages were incurred. The policy unambiguously provides UIM for a Named Insured or any family member who is occupying or struck by any vehicle, except a vehicle that the Named Insured or family member owned without coverage.

There is no dispute that Stucky sustained damages as a result of “bodily injury” caused by an “accident” arising from Schmautz’s use of an “underinsured motor vehicle,” that Stucky was the only one “occupying” the Ford at the time, and that he was an “insured.” Indeed, he was a “Named Insured.” Thus he is entitled to UIM so long as he was not occupying “any vehicle owned by [Stucky] that [was] not a covered `auto’ for Underinsured Motorists Coverage.” Under this broad coverage, and as a Named Insured, it makes no difference whether he was occupying a temporary substitute vehicle when he incurred damages 8/12/09. The only relevant question as to the vehicle he was occupying at the time of the collision is whether it was an auto that he owned that was not covered. There are disputed facts as to whether the Ford should have been covered per his alleged instructions to Greany. However, any dispute as to whether it was a temporary substitute vehicle is irrelevant and will not affect the outcome of the suit.

Summary judgment for North Pacific as to Stuckys’ temporary substitute vehicle defenses.

North Pacific Ins. v. Stucky, 41 MFR 200, 12/5/13.

John Bohyer & Jesse Beaudette (Bohyer, Erickson, Beaudette & Tranel), Missoula, for North Pacific; Lori Harshbarger (JD Law Firm), Whitehall, for Stuckys.

EXCESSIVE FORCE: Fact issues preclude summary judgment for officers as to whether tasering intoxicated naked man in welfare check was reasonable, whether he was unlawfully restrained… bankruptcy trustee substituted as Plaintiff…Anderson/Christensen.

Magistrate Anderson’s sanctions order.

On 8/12/07 a friend of Soheil Verdi called 911 because he had sent a text which said “I’m done” and he was not answering his phone. Bozeman PD dispatched Sgt. Greg Megargel and Officer Marek Ziegler at 10 p.m. to check on Verdi. They knocked for some time before he opened his door. He appeared intoxicated and was not wearing any clothes. Recordings from a mike worn by Ziegler revealed that either Ziegler or Megargel told Verdi to have a seat and they just wanted to make sure he was OK. Ziegler contends that Verdi lunged at Megargel, prompting Ziegler to tase Verdi. Verdi fell to the deck outside his home, sustained injuries, and was unresponsive. He was handcuffed and told to roll over. Because he was not responsive, an officer asked dispatch to “roll medical.” The 2nd part of the audio begins with an officer asking if they have “got gloves” and the other saying “getting them dude.” They told Verdi, “talk to us,“ “talk to us man,” “talk to us bro.” They then remove the taser darts from Verdi and state that they will “clean them up later.” Ziegler then says, “hey man, he came after to you,” to which Megargel replies, “I shoved him but you got him.” They proceed to cuff Verdi “a little bit better” and there is the sound of a diesel engine and an officer saying Verdi is “breathing but not responsive, he was tased.” Someone then asks the officers to remove Verdi’s handcuffs, at which point the 2nd part of the audio ends. The 3rd recording begins when ambulance personnel are loading Verdi and he starts to mumble and cry. They tell him to calm down. After the ambulance left, Ziegler’s body mike recorded:

Megargel: Now what the fuck?

Ziegler: Yeah, what am I going to clear this as? Fuck, public assistance with a tasing?

Megargel: Fuckin-a-baby, 10-8 medical.

Ziegler: 10-8 what?

Megargel: Medical.

Ziegler: He didn’t commit a crime.

Megargel: No, but he could’ve.

Ziegler: Well, I was afraid for you, dude.

(inaudible segment)

Ziegler: What are we going to, so we’re going to clear it as…

Megargel: 10-8 medical.

Ziegler: Medical.

Megargel: And then we’re going to put it as a medical call.

Verdi sued Bozeman, the PD, Megargel, Ziegler, former Chief Tymrak, and Dep. Chief Kent. He filed Ch. 7 in Utah in 5/10 but failed to list the suit. He received a discharge in 9/10. In 1/11 he moved to reopen to list the claims asserted herein and to claim an exemption under Utah law. His bankruptcy was reopened in 2/11 and Roger Segal was reappointed trustee. Defendants moved for summary judgment that he was judicially estopped from pursuing this action after failing to disclose the suit in his schedules. Segal objected to Verdi’s claim of exemption in any award resulting from this suit, and Verdi withdrew the claim. This Court recommended that Segal be substituted for Verdi as the plaintiff in this case and that Defendants’ summary judgment motion be denied on grounds that their judicial estoppel argument did not extend to Segal. Judge Cebull adopted the recommendations 7/24/12. On 8/16 Segal moved for sanctions for spoliation as to the missing 3-4 minute audio segment between when the ambulance arrived and left. Ziegler hypothesizes that he probably deleted it immediately after making it, but has no recollection of deleting any files that night. He confirmed that he did not delete it by accident because deletion requires a distinct 3-step process. He testified that he would turn his mike off when “there was nothing worthy to record.” He has never had another missing segment. Segal requests a sanction, primarily in the form of a default judgment as to liability, against all Defendants. The Court finds it appropriate to instruct the jury that the missing segment, if it existed, would be damaging to Defendants and relevant & favorable to some or all of Segal’s claims of excessive force. The instruction should explain that the law does not condone intentional destruction of evidence by officers. Defendants should also be precluded from offering any explanation as to how or why the segment was deleted beyond Ziegler’s belief that he likely erased it at the scene.

 

– – – 

Judge Christensen’s rulings on Anderson’s summary judgment findings & recommendations.

Segal objects to Judge Anderson’s finding that Kent and Tymrak investigated the incident. Although it was not as detailed or thorough as Segal would have preferred, the facts show that a satisfactory investigation did occur.

Segal objects to Anderson’s conclusion that “Plaintiff simply fails to offer any plausible explanation as to how the investigation that was completed by Sergeant Benz, Kent and Tymrak is ratification of any excessive force that may have been inflicted when Ziegler used his taser on Verdi.” He argues that the actions of Kent, Tymrak, and BPD amounted to ratification of excessive force because, inter alia, there was lack of documentation as to Ziegler’s taser training and Kent misrepresented his taser qualifications to become a taser instructor. However, Segal does not dispute that Ziegler and Megargel both received over 26 hours of training, including in use of force, and the Court fails to see how a misrepresentation of taser qualifications amounts to “deliberate indifference to the rights of persons with whom the police come into contact.” Canton (US 1989).

Megargel and Ziegler object to Anderson’s conclusion that summary judgment as to excessive force should be denied. They assert that he applied a legal standard which did not exist at the time of the incident, Bryan (9th Cir. 2010), when he should have applied Graham (US 1989). Bryan declared use of a taser as “an intermediate, significant level of force that must be justified by the governmental interest involved.” Following Jackson, an officer who used a taser was entitled to qualified immunity if an objective officer would have believed that use of intermediate force, as opposed to a lesser degree, was reasonable. This is inconsistent withGraham, which found that an officer who used a taser was entitled to qualified immunity if an objective officer believed that some degree of force was reasonable. It is unclear which standard Anderson applied. He did mention that a taser was an intermediate level and concluded that “the fact that use of force by taser, under these circumstances, may not have been objectively reasonable, precludes entry of summary judgment in favor of Ziegler and Megargel on Count I.” In any event, he was correct that summary judgment for the officers should be denied. If force is not needed, any force is constitutionally unreasonable. HFD (9th Cir. 2000). The critical disputed fact is whether Verdi lunged at the officers after opening his door. Adopting Plaintiff’s version — that Verdi was too intoxicated to lunge and did not pose a threat — any force would be unreasonable. From the perspective of a reasonable officer, tasing a naked & intoxicated man who does not pose a threat would not be objectively reasonable. Thus the Court agrees with Anderson that, taking the facts in a light most favorable to Plaintiff, use of force by Megargel and Ziegler was not objectively reasonable.

Megargel and Ziegler contend that Anderson erred by applying a standard that asked if force was justified instead of a standard that asks if an objective officer at the scene could find that force was reasonable under the totality of circumstances. Graham. Although Anderson did state that “a finder of fact could conceivably find that the use of a taser in this case was not justified,” Megargel and Ziegler ignore his multiple references to the objectively reasonable standard. Nor is his use of “reasonable person” rather than “reasonable officer” fatal to his overall conclusion. Adopting Plaintiff’s version — Verdi was too intoxicated to lunge and did not pose a threat — an objective officer at the scene could find that the officers’ conduct was not reasonable.

Megargel and Ziegler argue that Anderson improperly considered Ziegler’s intent or motivation when he deployed his taser. They base this on Anderson’s discussion of the background facts where he discussed the missing audio file and sanctions by Judge Cebull, but Anderson makes no mention of the sanction order in his analysis of whether the conduct was objectively reasonable.

Megargel and Ziegler argue that Anderson improperly relied on inadmissible evidence. The Court does not agree. He cited admissible and undisputed facts in support of his conclusions that Verdi may have been too intoxicated to lunge at the officers and that their conduct could not be viewed by an objective officer as reasonable, including that Verdi had .291 BAC, lack of reasonable suspicion that he had committed or was about to commit a crime, he was never charged with a crime, he did not resist or attempt to evade arrest, and he was unarmed and naked. Although not stated in his analysis section, there are admissible and undisputed facts in the record that support Plaintiff’s argument that Verdi was too intoxicated to lunge, including Ziegler’s recorded comments that he was “stumbling around” when he came to the door; his comments that Verdi’s movements were “very slow, methodical movement at the beginning, kind of dragging his feet, and of course he was naked;” Ziegler’s report that Verdi “appeared to be very intoxicated;” the officers’ recorded comments immediately after the incident that Verdi “did not commit a crime;” Megargel’s deposition statement that in his 13 years with BPD he had never heard where someone allegedly attacked an officer but was not charged with a crime; and Ziegler’s report describing an “incident” rather than a “crime” and that Verdi was a “v” (victim) and not a “defendant.”

Megargel and Ziegler argue that Anderson failed to distinguish between denying summary judgment to Megargel and denying it to Ziegler. They contend that he should have evaluated the conduct of each officer and issued separate findings & recommendations. They failed to cite any law in support. An officer who fails to intervene to prevent another officer’s excessive force may be liable under §1983. Mick (10th Cir. 1996). Anderson’s findings & recommendations are adopted in full as they relate to his recommendation that summary judgment should be denied as to Megargel and Ziegler.

Plaintiff has not alleged sufficient material facts preventing summary judgment for Bozeman and BPD on the issue of negligent hiring & supervision. Anderson’s recommendation on this motion is rejected.

The Court agrees with Anderson that summary judgment for Bozeman should be denied as to the claim of false imprisonment. Bozeman asserts that restraint of Verdi was lawful under MCA 53-24-303, which allows an officer to assist or transport an intoxicated person to a hospital if he is in need of help and in a public place. Verdi was not in need of help or in a public place when he was tased. If force was not lawful, and Verdi was injured and in need of help because of the officers’ unlawful conduct, Bozeman could be held liable under respondeat superior. Adopting Plaintiff’s version of the disputed facts, an objective officer could find that the officers’ conduct was not reasonable.

Anderson found that Bozeman could be liable for punitives under respondeat superior. But applying the plain language of MCA 2-9-105 — “the state and other governmental entities are immune from exemplary and punitive damages” — the Court is compelled to agree with Bozeman that it is immune from punitives.

Segal v. Bozeman et al, Anderson’s order 41 MFR 169, 1/23/13, Christensen’s order 41 MFR 182, 11/18/13.

Todd Shea (Shea Law Firm), Bozeman, and Ryan Jackson (Jackson Law), Bozeman, for Segal; Michael Lilly (Berg, Lilly & Tollefsen), Bozeman, for the City; Michele Braukmann (Moulton Bellingham), Billings, for the chiefs; Brendon Rohan (Poore, Roth & Robinson), Butte, for Megargel and Ziegler.

SKI AREA OPERATOR LIABILITY: Failure to warn/negligence claims by skier injured in crash into boulder field obscured by unmarked cat track survive summary judgment notwithstanding statutory definition of “inherent dangers and risks of skiing”… Christensen.

The facts are derived from Brian Kopeikin’s complaint allegations.

On 2/5/12 Kopeikin, MD, of California, was skiing at Moonlight Basin in Madison Co. Conditions were excellent and he is a very experienced skier. After lunch he and a friend boarded the Six Shooter lift and began skiing the intermediate “Fast Lane” which accessed the slightly more difficult“Upper Elkhorn.” While skiing Upper Elkhorn he encountered an unmarked “cat track” cut into the mountain or groomed so as to “slope downward in the uphill direction.” It was lined with boulders to delineate its path. It prevented him from seeing a boulder field of “large, craggy, and sharp rocks” which stretched downhill for 50 and had been created by the construction and/or grading of the cat track. There was no warning of any kind. Kopeikin was skiing well under control and at medium speed. As he crossed the cat track he saw, with no time to take evasive action, the boulder field immediately below the cat track. He tucked his shoulder and rolled to avoid head injury. He landed on his back in the rocks, sustaining serious injuries. Moonlight requests Rule 12(b)(6) dismissal because the complaint alleges an injury resulting from “the inherent dangers and risks of skiing” as defined in MCA 23-2-702:

(2) “Inherent dangers and risks of skiing” means those dangers or conditions that are part of the sport of skiing, including:

…

(d) collisions with natural surface or subsurface conditions, such as bare spots, forest growth, rocks, stumps, streambeds, cliffs, trees, and other natural objects;

(e) collisions with lift towers, signs, posts, fences, enclosures, hydrants, water pipes, or other artificial structures and their components;

(f) variations in steepness or terrain, whether natural or the result of slope design, snowmaking, or snow grooming operations, including but not limited to roads, freestyle terrain, ski jumps, catwalks, and other terrain modifications;

…

(i) the failure of a skier to ski within that skier’s ability;

Moonlight contends that one or all of these are applicable. The Court finds that, at this stage at least, (d), (e), and (i) are inapplicable. Moonlight argues in its reply brief that Kopeikin’s claims are barred by §§ 23-2-736(1) & 736(2)(a). The Court will not address these arguments because they were not raised in its initial motion. Further, they raise obvious questions of fact about causation and comparative negligence.

Kopeikin’s complaint consistently alleges that the hazards were unnatural. Thus, even if the rocks he collided with are natural objects, the complaint alleges that the boulder field was not a “natural surface or subsurface condition” pursuant to (d). Even though the complaint alleges that it was not a natural condition, it also cannot be regarded as an “artificial structure” pursuant to (e). The vague term “other artificial structures” is to be interpreted by reference to the specific listed items, ejusdem generis, and thus “other artificial structures” should not encompass a boulder field resulting from construction of a cat track. (i) is inapplicable because the complaint alleges that Kopeikin was a very experienced skier who was skiing “well under control at a medium speed.” Pursuant to (f), a skier must “accept all legal responsibility for injury or damage of any kind” resulting from variations in steepness or terrain.

Moonlight contends that the Court should simply determine whether the complaint alleges injury from one of the listed items and dismiss because the case involves a catwalk, which is listed in (f). (The complaint refers to a “cat track” while the statute refers to a “catwalk;” the Court regards these terms as synonymous.) This has simplistic appeal, but the Court is not persuaded that such analysis is appropriate in light of Montana case law and federal decisions applying similar statutes in other states. Further, this issue is presented pursuant to a motion to dismiss as opposed to summary judgment following a fully developed record.

Mead (Mont. 1994) held that under the 1989 version of 23-2-733 a ski area operator’s duties were not limited to those listed in the statute but included any duties “consistent with the duty of reasonable care.” The Legislature amended skier responsibility statutes twice since Mead, but the operative provisions remain largely unchanged. §733 still provides a non-exclusive list of duties for operators which, as underscored in Mead, are to be performed “consistent with the duty of reasonable care owed by a ski area operator to a skier.” While the definition of “risks inherent in the sport of skiing” has been modified, the changes are generally minimal and do not affect the analysis here. For instance, what was earlier referred to as “risks inherent in the sport of skiing” has been amended slightly more broadly to “inherent dangers and risks of skiing.” Also, under the current version “inherent dangers and risks” need not be “integral” to the sport of skiing, but only “part of the sport of skiing,” and “ski” no longer modifies “terrain in “variations in steepness or terrain.” These changes make no difference here because the Court concludes, particularly as to the last modification, that the cat track and boulder field are clearly part of the “ski terrain.” Regardless, some of Kopeikin’s contentions can be resolved by applying the plain language of the statute. For instance, his insistence that inherent risks include only “a list of natural conditions over which a ski-area operator has no control” is clearly mistaken. The current definition of inherent dangers and risks of skiing includes a variety of “unnatural” and potentially hazardous conditions on ski mountains, including roads, cat walks, ski jumps, and “other terrain modifications.” The current definition also includes collisions with lift towers, signs, posts, fences, water pipes, and “other artificial structures.” Thus it does not follow that because the cat track and boulder field were “man-made” the conditions are per se beyond the scope of “inherent dangers and risks of skiing.” Also, the principles in Mead and Brewer (Mont. 1988) remain binding to the extent that the cases are applicable. However, they involved different factual situations and legal contentions are therefore do not fully resolve the issues here. Finally, the Court rejects Kopeikin’s contention that Mead stands for the proposition that all hazards on a ski mountain present questions of fact not suitable for summary disposition. Kumar (10th Cir. 2011) (applying similar Colorado skier responsibility statutes and granting summary judgment to the resort for a claim by a plaintiff who fell off an unmarked natural cornice).

The Court has looked for guidance to decisions from other States with similar skier responsibility statutes. For example, White (Utah 1994) held that “the unmarked cat track on the blind side of a ridge” was the type of risk that a skier would not wish to confront, and that fact questions existed as to whether the resort exercised reasonable care in eliminating or alleviating the hazard. It noted:

It is undisputed that cat tracks are a common and necessary feature at ski resorts. They allow novice skiers an easier route down the mountain and provide access to upper portions of the mountain for grooming machines and other maintenance equipment. Because cat tracks are so pervasive and important to the sport, it is unlikely that ski resorts could alleviate all of the possible harms that may result from them. Thus, in most cases they would constitute an inherent risk of skiing.

In light of the case law and Montana’s statutory scheme, the Court adopts the following framework in resolving Moonlight’s motion to dismiss. 1st, Montana’s skier responsibility statutes do not immunize operators from their own negligence. The statute provides a non-exclusive list of duties which an operator must perform “consistent with the duty of reasonable care owed by a ski area operator to a skier.” §23-2-733(1). Mead underscores this. 2nd, Montana’s statutory definition of “inherent dangers and risks of skiing” must be read in conjunction with the operator’s statutory duty of reasonable care. A mechanical application of the statute focused solely on the object with which the plaintiff collided would produce results that are “entirely arbitrary,” Clover (Utah 1991), and undermine Brewer‘s holding that an operator is not immune from liability for its own negligence. The statutes should be read in a manner that avoids constitutional violations and gives meaning to all provisions. Mead. 3rd, the duty of reasonable care required of an operator must be viewed in the unique context of skiing as made clear by §§ 23-2-702(2) & 736(1)-(2). Notwithstanding an operator’s efforts to tame it, skiing takes place on essentially wild terrain, on “a mighty mountain, with fluctuation in weather and snow conditions that constantly change.” Wright (D.Vt. 1951). It is engaged in by thrill-seeking experts and novices alike. It is impossible and undesirable to eliminate all hazards. In many cases an operator eliminates natural hazards at the risk of compromising appeal to skiers who embrace the thrill and challenge of more challenging conditions. Skiing demands that a skier exercise appropriate caution and good judgment or be responsible for the consequences. Some inherent hazards like cat tracks exist as a necessary result of accommodating and managing the infrastructure and moving skiers from one part of the mountain to another. Thus not all inherent risks result from “natural” conditions. To remain economically viable, courts cannot hold operators to the same safety standards generally demanded of owners of simpler business premises. The Legislature requires restraint when assessing that which, as a matter of law, constitutes reasonable care by an operator, mindful of the economic impact on ski areas of lengthy and expensive litigation. Indeed, it is the stated purpose of the Montana skier responsibility statutes to maintain economic viability of the industry “by discouraging claims based on damages resulting from the inherent dangers and risks of skiing.” §23-2-731.

Moonlight’s motion to dismiss is denied. At this very early stage all alleged facts must be treated as true and construed in the light most favorable to the plaintiff. According to the complaint allegations, the hazard which Kopeikin encountered was of a type that no skier wishes to confront: an unmarked and arguably ill-designed and boulder-lined cat track that hid a 50 boulder field in the middle of a groomed run. He alleges that the hazards were unnecessary and could have been eliminated or alleviated through ordinary care. Moonlight presents no facts to contradict Kopeikin’s allegations that its failure to warn and negligence in constructing and maintaining the cat track and boulder field caused his injuries.

Kopeikin v. Moonlight Basin, 41 MFR 146, 11/7/13.

Edward Moriarity (Moriarity, Badaruddin & Booke), Missoula, for Kopeikin; Ian McIntosh (Crowley Fleck), Bozeman, for Moonlight Basin.

TORTIOUS INTERFERENCE/ARBITRATION/ DISCOVERY: No authority to vacate emergency arbitration order or stay arbitration proceedings at bidding of non-party to contract, injunction allowing Defendant to dismantle equipment to prevent use by Plaintiff granted under arbitration rules, not NY civil procedure… tortious interference claim rejected on LR 56.1(d) deemed admission of undisputed facts that letters based on good faith belief of breach of agreement… 56(d) not satisfied but additional discovery would not add essential facts, pursuit of settlement not valid excuse for not diligently pursuing discovery… amendment to add factual allegations and conversion claim denied… summary judgment for Defendant granted… Christensen.

Irvine Scientific Sales of California, Microbix Biosystems of Canada, and Rocky Mountain Biologicals of Montana manufacture water products for pharmaceutical and medical industries. Irvine and Microbix entered into a binding letter of intent in 10/12 to begin exclusive negotiations as to Irvine’s purchase of Microbix’s water assets. It provided that “during the period from the date hereof and December 31, 2012, [Microbix] shall not discuss, negotiate, or accept any agreement with any third party for the sale of all or any part of the commercial assets to be acquired.” Nevertheless, on 10/12/12 Microbix entered into a binding letter of intent which provided that Rocky Mountain would be allowed to evaluate certain equipment for manufacture of water products at the facility leased by Microbix in Toronto. Rocky Mountain was allowed 60 days to evaluate the equipment, after which it had the option to sign an agreement to operate the equipment at the facility and pay Microbix rent, negotiate with the landlord to remove the equipment and pay restoration costs, or negotiate a new lease with the landlord relieving Microbix of its lease obligations. On 12/31/12, Irvine and Microbix entered into a Commercial Asset Purchase Agreement whereby Irvine purchased substantially all of Microbix’s water assets including contracts, customer information, and good will. Microbix agreed to maintain confidentiality of all proprietary information and not compete with Irvine directly or indirectly. The agreement did not include sale of the equipment. On 2/1/13 Microbix entered into a Purchase & Sale & Service Agreement with Rocky Mountain under which Rocky Mountain assigned to Skyway Purified Solutions its option to carry on operations at the facility using Microbix’s equipment. Rocky Mountain agreed to pay Microbix rent for the equipment until expiration of Microbix’s lease 7/31/13. Rocky Mountain planned to then negotiate a new lease with the landlord and so agreed to relieve Microbix of its obligation to restore the facility to its original state. While Rocky Mountain has maintained that it had sole rights to the equipment before entering into the equipment agreement, the agreement provides that “Microbix will grant title to SPS for the Water Equipment with completion of the purchase.” Ownership of the equipment is made more ambiguous by other provisions such as the paragraph purporting to clarify ownership which apparently contains a critical typo: “Microbix has previously sold the Water Equipment (listed in SCHEDULE ) to for an amount of $1. RMB has subsequently transferred the rights and use of the equipment to SPS and Microbix has approved the assignment.” The entity to whom Microbix “previously sold the Equipment” is omitted. Assuming that Rocky Mountain purchased it, it appears that perhaps it purchased (for only $1) only the right to use the equipment rather than title to it and sole right of possession, ownership, and control. Irvine soon learned of the equipment agreement and on 3/4/13 wrote Microbix alleging that it constituted a breach of the non-compete provisions of the Irvine-Microbix agreement and demanding remedial measures. On 3/18 Irvine notified Rocky Mountain of the letter to Microbix and demanded that it cease using the equipment. On 3/21 Microbix wrote Rocky Mountain purporting to terminate the equipment agreement, alleging material breaches and asserting that it was signed by one lacking authority. Microbix has steadfastly maintained that the agreement is terminated and has refused to allow Rocky Mountain access to the facility. Rocky Mountain sued Microbix and Irvine 4/4/13. Microbix was dismissed for lack of personal jurisdiction. Irvine moved for summary judgment 5/31/13. Rocky Mountain filed a Rule 56(d) motion to defer summary judgment pending further discovery on the basis that it has not had a reasonable opportunity to conduct discovery because it pursued settlement in lieu of discovery. Irvine opposed the motion. Irvine moved to supplement the record with an Emergency Arbitration Order awarding injunctive relief giving it access to the facility to partially dismantle the equipment to prevent its use by Rocky Mountain. Rocky Mountain sought an order from this Court that would stay the arbitration and vacate the arbitration order, contending that new facts — failing to give Rocky Mountain notice of the emergency arbitration and dismantling of the equipment — constituted a new basis for claims against Irvine of tortious interference with contract or prospective business advantage and for a declaration of rights and legal relations of Rocky Mountain, Skyway, and Irvine vis-à-vis the Irvine-Microbix agreement. At the hearing on all motions 10/11/13 Rocky Mountain’s counsel indicated that its tortious interference claim might be better stated as a claim for conversion.

Rocky Mountain contends that the Court has authority to stay further Irvine-Microbix arbitration and that New York law mandates that the arbitration order be vacated. The Court agrees with Irvine that it cannot stay arbitration or vacate an arbitration order at the bidding of a stranger to the arbitration. A court may vacate an arbitration award “upon the application of any party to the arbitration.” 9 USC 10(a). Only a party to the arbitration may seek a court order vacating an arbitration award. ILWU (9th Cir. 1971). Rocky Mountain’s contention that the order must be vacated because it is void is based on its contention that, because the Irvine-Microbix agreement contains a provision for New York law to resolve contract disputes, New York civil procedure applied to the emergency arbitration and required Rocky Mountain to be joined as a necessary party. However, the agreement provided that arbitration would be conducted under arbitration rules. Pursuant to ICDR Art. 7, the emergency arbitrator rejected Microbix’s contention that Rocky Mountain should be joined, and proceeded to apply the arbitration rules agreed to by the parties in their contract. Rocky Mountain’s motion to vacate the arbitration order is denied.

9 USC 3 allows courts to stay litigation pending arbitration and §4 allows a court to compel arbitration, but absent from the Arbitration Act is any mechanism for a Court to stay arbitration pending resolution of related litigation. Wolsey (9th Cir. 1988). An order staying arbitration entered into pursuant to a valid arbitration clause would violate mandates of the USSC. More to the point, “under the Arbitration Act, an arbitration agreement must be enforced notwithstanding the presence of other persons who are parties to the underlying dispute but not to the arbitration agreement.” MHCMH (US 1983). Rocky Mountain’s motion to stay Irvine-Microbix arbitration proceedings is denied.

Likely sensing the hurdles in requesting a stay of arbitration and vacation of an arbitration award, Rocky Mountain reformulates its motion in its reply brief as a motion for injunctive relief requiring Irvine to return the control panel to the facility, which it asserts will restore the status quo. The Court need not address arguments raised the first time in a reply brief, but returning the control panel will not restore the status quo, but would amount to a mandatory injunction, the burden for which Rocky Mountain cannot meet, and would constitute direct interference with the arbitration order.

Irvine’s properly supported Statement of Undisputed Facts establishes that the letters were sent in a good faith effort to protect its legitimate business interests based on the Irvine-Microbix agreement. Rocky Mountain did not file a statement of undisputed facts, which is deemed an admission that no material facts are in dispute. LR 56.1(d). Rocky Mountain contends that application of the LR in the context of its 56(d) motion “is absurd,” but can point to no exception to the LR. Regardless, it has still not offered any statement of undisputed facts or any properly supported evidence to dispute Irvine’s, and thus the Court will treat the facts offered by Irvine as true and undisputed. It is undisputed that Irvine sent the letters to Microbix and Rocky Mountain based on a good faith belief that Microbix was in breach of the Irvine-Microbix agreement. Even if its actions resulted in severance of the equipment agreement, Irvine cannot be held liable for tortious interference when it acted in “honest furtherance of [its] own business enterprise.” Quinlivan (Mont. 1934). Even if Irvine was mistaken in its belief that Microbix was in breach of the agreement, it cannot be held liable when it acted in good faith. Grenfell (Mont. 2002). Irvine is entitled to summary judgment on tortious interference.

Rocky Mountain has failed to satisfy 56(d). The evidence provided by Irvine affirmatively negates the factual issues which Rocky Mountain contends remain controverted, and many of the sought-after-facts are not essential to opposing Irvine’s motion. Regardless, the Court will address each issue. For example, Rocky Mountain seeks discovery into “the timing of Irvine’s negotiations with Microbix.” The evidence establishes that the negotiations formally began 10/1/12 when the parties entered into a binding letter of intent and concluded 12/31/12 when they executed the Irvine-Microbix agreement. Further discovery will not establish anything different, nor does Rocky Mountain provide any information to suggest that any other facts exist relative to the timing of the negotiations. While timing may be relevant to Irvine’s intent, the evidence of record affirmatively establishes the timing. Irvine entered negotiations with Microbix before Rocky Mountain began negotiating with Microbix. Irvine closed its deal with Microbix before Rocky Mountain executed the equipment agreement. The timing thus evidences Irvine’s good faith and justification in sending the letters.

While the Court does not find that Rocky Mountain has been dilatory in seeking discovery, it cannot be said to have diligently pursued it as required for a 56(d) motion. Mackey (9th Cir. 1989). It filed its complaint 4/11/13. Irvine’s summary judgment motion has been pending nearly 5 months, yet Rocky Mountain has not conducted any discovery. Its decision to pursue settlement does not excuse it from diligently pursuing discovery. Cervantes (7th Cir. 1999).

Rocky Mountain’s motion to add factual allegations as to the arbitration and Irvine’s actions pursuant to the arbitration order must be denied because the proposed amendment is futile and Foman (US 1962) factors weigh against it. Its motion is brought while summary judgment is pending, all of its claims as amended are subject to immediate summary judgment, and amendment would unduly prejudice Irvine by forcing it to continue litigating meritless claims and needlessly delay resolution of the case.

Rocky Mountain’s motion to add a claim for conversion is also denied. A ruling that would deem this action tortious would subvert the arbitration process and impose contradictory rulings and thus be futile. The motion also presents a new theory without alleging new facts at a stage where summary judgment is pending, without adequate explanation except that the new theory occurred to it during the hearing and it believes it is more appropriate.

Judgment for Irvine; the case is closed.

Rocky Mountain Biologicals and Skyway Purified Solutions v. Irvine Scientific Sales, 41 MFR 110, 10/31/13.

William VanCanaghan & Nathan Wagner (Datsopoulos, MacDonald & Lind), Missoula, for Plaintiffs; Stephen Bell, Denver, and Ben Kappelman, Minneapolis (Dorsey & Whitney), for Irvine.

 

INSURANCE/MAIL FRAUD: Materiality lacking in claim under “white glove” mansion policy for living expenses based on ambiguous standard of living clause (not actual cost) even though payment was based on misrepresented condition/ownership of temporary housing during repair of wind/fire damaged mansion… case should not have gone to jury, motions for acquittal of insured and broker granted, convictions reversed… Molloy.

Christin Didier and Surayya Nasir were convicted of mail fraud and conspiracy to commit mail fraud 3/12/13 after a week long trial. The Court vacated the convictions in 7/13, and this rationale follows.

This criminal case was tried to a jury but it should have not been given to them for decision. It was submitted on a theory of mail fraud, but, upon reflection, that theory cannot be sustained when the proof of materiality is at odds with a contractual obligation to pay what was supposedly gained by fraud. Chubb, the alleged victim of mail fraud, was obligated to pay Didier a substantial sun, undefined except in ambiguous language in its policy, because she could not live in her lake mansion due to covered losses. It argued to state and federal regulatory and investigative agencies that it had been victimized when she misrepresented the nature of her temporary residence. But, because it was obligated to pay an amount sufficient to maintain her standard of living in a mansion with multiple bedrooms, multiple baths, and even a ballroom, whatever she said could not have been material to Chubb. Materiality cannot be proven when the entity supposedly victimized by mail fraud is obligated to pay what the US claims was a loss caused by fraudulent representations of the insured. Every day there are thousands if not hundreds of thousands of insurance claims, in many of which the carrier pays the policy value of the roof destroyed by wind, the collision damage from a wreck, or the estimated value of windshield damage. Every day adjusters engage in thousands of transactions and adjustments concerning liability payments, home owner claims, or replacement value disputes. If the US’ theory is correct about materiality being a separate issue from the contractual obligation to pay, each of these events could give rise to indictment for mail fraud. Is it mail fraud when the owner of a damaged car gets the 3 estimates, obtains payment by mail from the carrier, but then has someone else do the work, pocketing the difference or savings? Is it fraud if the owner never has the damage repaired? Is it mail fraud when the water heater leaks and destroys the beautiful wood floor in the kitchen and the adjuster issues a check in the mail for the replacement cost and the homeowner elects to install linoleum or not fix the floor but pockets the difference? Is it mail fraud when the adjuster compromises the PI claim with a 3rd party by erroneously telling them comparative fault applies when the injured person is an innocent passenger, using the underpayment to bolster corporate and personal profits? Is it mail fraud when an auto carrier tells an insured in Montana that policy limits cannot be stacked, contrary to established law? Is it mail fraud when Chubb issues a “white glove” policy that requires it to maintain a standard of living and its adjuster unilaterally uses the wires to declare the “cost is too much” even though the policy requires it to pay according to a subjective standard? Materiality cannot legally exist if the purported victim is contractually obligated to pay what it was allegedly deprived of by misrepresentation or lies. That is why a judgment of acquittal must be entered here.

Didier bought a large mansion in Somers in 7/05. It was built in 1903 and had 14 bedrooms, multiple fireplaces, 3 bathrooms, and a ballroom. It was on 5 acres and has extraordinary views of Flathead Lake. She also purchased a white glove policy on the home written by Pacific Indemnity, a division of Chubb Ins. The Masterpiece Policy premium was nearly $1,000/mo. The mansion was damaged by a tornado in 7/07. She filed a claim with Chubb, which begin adjusting so repairs could be made. Either due to damage to the boiler from the wind or lack of fuel, Didier began using diesel heaters and the fireplaces that winter. A fire in 1/08 caused extensive damage to the residence, rendering it uninhabitable. Chubb agreed that losses from the wind and fire were covered and that it was necessary for her to vacate for at least 6 months until repairs were completed. A major clause anticipated this event and provided assurance that her standard of living would not be altered. Chubb was obligated to pay whatever it took to make sure Didier maintained her standard of living, regardless of where she lived, even if her normal expenses went up.

If your house cannot be lived in because of a covered loss to your house or, if applicable, to your contents, we cover the reasonable increase in your normal living expenses that is necessary to maintain your household’s usual standard of living. We cover this increase for the reasonable amount of time required to repair, replace or rebuild your house or your contents, or if you permanently relocate, the shortest amount of time required for your household to settle elsewhere. This period of time is not limited by the expiration of this policy.

The policy required undefined payment, constrained only by her usual standard of living at the mansion.

Resolving an ambiguous clause to favor Chubb is inconsistent with the general rules of interpretation and turns payment of a contractual obligation into a sword of conviction simply because the carrier paid what it owed, but did so based on mistaken reasons imparted by its insured. The focus of the obligation to pay is not on where the insured chooses to live when expelled from her mansion by a loss, but what is the cost of keeping her standard of living the same, even if it costs more than her actual expenses, based on the mansion she could no longer inhabit. The nature of the mansion and Didier’s use & enjoyment of it presented a challenge to Chubb in meeting its guarantee to provide replacement housing that would maintain her standard of living. The mansion and estate were exceptional properties in the Flathead Valley. The size of the mansion, its historic character, the surrounding estate, and panoramic views of Flathead Lake are rare, especially in a replacement rental. The loss was complicated by Didier’s living situation. She used the property in a way that was specialized and somewhat incompatible with many rentals. She had been living with her elderly mother who had Alzheimer’s. She also had several dogs with some estimates of 20-30 Pugs. When Chubb was handed this unique high-end loss it retained a temporary housing vendor, ALE Solutions, and authorized it to offer Didier and her household hotel accommodations as a stopgap to provide shelter during the winter. It was unworkable because she had concerns about her mother and dogs. While ALE was searching for housing that would match the standard of living in the mansion, Didier stayed at the mansion despite the fire damage. She offered to live in a mobile home, but that was not acted on by ALE and Chubb due to cost. ALE located a bed & breakfast in Whitefish willing to cancel its reservations to accommodate Didier. Chubb’s adjuster Peterson said “no” because the owner was not willing to sign a 6-month lease with option to renew. ALE found a fully furnished home with 8 bedrooms. Peterson rejected the corporate property due to the $40,000/mo cost. He told ALE to look for a place costing $10,000-$15,000/mo. In other words, Chubb acknowledged that it had to pay based on replacement cost, not the value of where Didier, her mother, and her dogs actually lived. ALE eventually reached an agreement with the bed & breakfast owner to rent the 6-bedroom, 3½ bath property for just over $10,000/mo for 6 months with an option to renew. Didier rejected it because it was too far from Somers. She informed ALE 1/28/08 that she had a lead on a property in Rollins. She put ALE in contact with Nasir, who represented herself as broker for Didier Family Trust and began communicating with ALE by fax and mail. ALE sent the “preap” to Didier. She completed it and faxed it back. Notably, these communications were not with Chubb. The preap represented that the Rollins property was 6,900 sq ft with 5 bedrooms and 2 baths. This was false. It proposed a base of $15,250/mo, a $7,000 security deposit, a $5,000 pet deposit, a $200 application fee, a $1,500 cleaning fee, and a 10% broker fee. Chubb did not question coverage for any of the claims. ALE transferred the preap to an electronic format and processed it for Chubb’s approval. ALE confirmed Nasir’s role as broker for the Didier Family Trust and that the broker fee was a 1-time fee. It needed confirmation that the property was not Didier’s own property and was actually held in trust by her extended family. Didier confirmed. Didier, her mother, and the dogs stayed in the Somers mansion surrounded by smoke and fire damage and without adequate heat until 1/27/08, then moved to the Rollins property before Peterson had given final approval to ALE to lease it. There was an email exchange 1/31 between Peterson and ALE. Didier had been very demanding about acceptable accommodation. Peterson expressed frustration and approved the Rollins proposal to just “shut this lady up.” Chubb eventually approved it as temporary housing on terms Didier proposed. On 2/4 ALE received a lease, payment letter of commitment, temporary housing agreement, and move-in form for Rollins. The payment letter was executed between ALE and the landlord detailing the nature of the transaction. The temporary housing agreement was also executed between ALE and Didier detailing the transaction as temporary replacement housing. The move-in form was completed by Didier detailing the condition of the property. All of these documents were based on information in the preap and flow from Peterson’s approval of it. ALE sent a $10,875 check for the broker and application fees, by mail or common carrier from an office in Illinois to Nasir in California, which she deposited. It also sent checks to the Didier Family Trust to Didier’s sister in Lewistown, who sent the check to Didier’s Somers address. Didier deposited the checks at Glacier Bank in the name of C.D. Didier Family Trust, Christin Didier. 7 checks totaling $122,791.50 were sent by DHL, FedEx, and USPS for 6 months rent, security deposit, pet deposit, and cleaning fee.

Didier had filed Ch. 11 in 7/07, prior to the wind and fire events. She represented that Rollins was owned in trust and was not an asset available for liquidation. (She is not charged with bankruptcy fraud). In 7/09 her case was converted by Ch. 7 by Judge Kirscher and her schedule of assets was amended and the trust designation removed. She objected to sale of the property because she claimed it was owned in trust. Kirscher ruled that she was the trustor, trustee, and sole beneficiary. Rollins was eventually sold by the bankruptcy trustee.

In 2/08 Chubb’s Special Investigation Unit began work to validate her claim and evaluate her replacement housing, including hiring PI Markey to visit it. The SIU discovered her control over and benefit from the Didier Family Trust and revealed Rollins to be a cabin of 860 sq ft, 2 bedrooms, no bathrooms, no indoor plumbing. Representations as to other amenities & furnishings on the move-in form were also at odds with the actual condition. Instead of an in-ground pool, there was only an above-ground pool. Didier had fudged and lied about Rollins. In examinations by Markey, she explained the description of Rollins on the preap as consistent with her definition of bedrooms, bathrooms, and methods of calculating square fee, and admitted that she was in control of the Didier Family Trust and thus was the real owner of Rollins. In a surprise examination under oath with Nasir at a San Diego restaurant, Nasir confirmed her role as broker for the Didier Family Trust and offered to send her file to Markey but never did. Chubb complained to the Montana CSI in 1/09. (Had it denied Didier’s claim it surely would have been subjected to a bad faith claim; going to CSI insulated it from potential civil liability.) In an interview while represented by counsel, she justified her temporary housing claim by stating that the rent was based on a conversation with an ALE rep, who stated that she was due whatever it cost for hotel fees regardless of where she ended up and likened her decision to live at Rollins to a decision to replace kitchen linoleum with dollar store linoleum at her option regardless of the cost associated with maintaining her standard of living. She claimed she was completely transparent about ownership of Rollins and that ALE expressed no issue with the ownership. Nasir was interviewed by phone. She refused to answer many questions without reviewing her file, and agreed to retrieve it and contact CSI but did not.

Didier was charged with 7 counts of mail fraud and 1 count of conspiracy to commit mail fraud. Nasir was charged with 1 count of mail fraud and 1 count of conspiracy to commit mail fraud. At the close of the US’ case, Didier moved for judgment of acquittal due to insufficient evidence that she had the capacity to form specific intent to defraud or conspire with Nasir and failure to prove that her statements and representations were material to any act by Chubb. Nasir also asked for judgment of acquittal for lack of evidence of unlawful agreement to which she was a party and that Didier’s mental disease or defect made such an agreement impossible. The motions were taken under advisement pending the verdict, and then renewed following the verdict, along with a motion by Nasir for a new trial.

Didier’s and Nasir’s statements and representations were not material to Chubb’s acts under the policy. While Neder (US 1999) expressly incorporates materiality as an element of mail fraud, it did not define it. One meaning, as articulated in Gaudin (US 1995) and embraced by the Peterson (9th Cir. 2008), is that a statement is material if it “has a natural tendency to influence, or is capable of influencing, the addressee’s decision.” Materiality is distinct from other elements of common law fraud. “The common-law requirements of `justifiable reliance’ and `damages,’ for example, plainly have no place in the federal fraud statutes.” Neder.This is because 18 USC 1341 prohibits a “scheme to defraud,” not the completed fraud. While the language of the mail fraud statute is consistent with a requirement to prove materiality, it, by its own terms, does not impose a requirement of proof of actual reliance and damages. Id. The jury was instructed to determine whether “the statements made or facts omitted as part of the scheme were material; that is, they had a natural tendency to influence, or were capable of influencing, a person to part with money.” It was also given a detailed instruction (Inst. 15) on materiality, above & beyond the general elements instruction. The relevant question was whether Didier and Nasir concocted a scheme to defraud that had a natural tendency to influence or was capable of influencing Chubb’s determination of what to pay Didier for her losses when that amount was contractually constrained to maintaining her standard of living in the Somers mansion. Were their misrepresentations material, “constituting an inducement or motive to the act or omission of the other party?” Id.; (Story, Commentaries on Equity Jurisprudence §195 (10th ed. 1870)). Inst. 15 was given because the additional living expenses clause of the policy is ambiguous as a matter of law. The heading of the paragraph reading “extra living expenses” could give rise to an interpretation that the insured is only due payment for additional expenses incurred as a consequence of the covered loss, as argued by the US. However, the text guarantees payment for “the reasonable increase in your normal living expenses that is necessary to maintain your household’s usual standard of living.” This obligated the carrier to pay based on the standard of living enjoyed at the Somers mansion, with all its accoutrements. The ambiguity raises reasonable doubt about the materiality element as a matter of law. The preambulatory statement “actual living expenses” suggests that the amount paid by Chubb was to be based on the actual cost of temporary housing. Under this interpretation, Defendants’ actions could have been material to Chubb’s determination of the amount. The text of the policy means the amount to be paid was driven by Didier’s normal, usual standard of living at the mansion. Chubb knew this was a high-end policy, generous in its obligation to the insured, and cannot now claim mail fraud because the insured was paid more than Rollins should have cost.

The indictment charged Didier and Nasir with defrauding Chubb — not ALE and not Bankruptcy Court. Thus Chubb and its agents are the only possible source of evidence of materiality of Defendants’ acts. The trial record is threadbare on this question. Markey’s testimony confirmed the incongruities between the Rollins property as described and as it existed; he did not testify about decisions related to what Didier was due. Peterson testified to the high-end, liberal nature of the policy; his testimony did not establish that Chubb would have paid less under the policy had Defendants accurately described Rollins. The only thing it establishes is that Chubb’s decision as to what to pay tracked with the ambiguous policy terms. He cited the need to compensate the insured to maintain the standard of living enjoyed at the covered property, and also claimed the payment was for extra expenses. Neither alternative proved that Chubb was not obligated to pay under policy terms or that it would have paid less but for Defendants’ misrepresentations. Without this evidence, materiality of their acts cannot be proven. Indeed, Chubb may have paid just to get “that woman” out of its hair.

The US’ argument that Defendants’ representations & statements about the condition of Rollins to ALE were ultimately material to Chubb because Chubb contracted with ALE holds no water because Chubb was ultimately obligated to pay what was due under the policy. There was no testimony by Chubb that the representations were material to its calculation of what was due to maintain Didier’s usual standard of living, and testimony of ALE employees indicated that ALE did not calculate the amount owed under the policy. Chubb simply approved or denied the housing found by ALE. It set a range for what it owed at $10,000-$15,000/mo, no different in essence from what it paid. The proof as to Chubb’s determination of Didier’s normal standard of living is related to its denial of the $40,000/mo corporate property and its charge to ALE to find something more comparable to the mansion. Both Peterson and ALE’s rep testified that after the corporate property was rejected, Chubb limited ALE’s search criteria to properties renting $10,000-$15,000/mo. Thus the condition, ownership, or actual value of Rollins was not and could not have been material to Chubb’s obligation to compensate Didier that amount for her usual standard of living.

Another way to look at the problem is to invert it. Substituting Chubb as the defendant charged with wire fraud illustrates the untenable nature of the US’ case. ALE found the corporate property and presented it to Chubb. Peterson balked at the $40,000/mo price even though the policy could be read to require it. Chubb took a position that ALE should only consider replacement properties with similar “useable space” to the Somers mansion, although nothing in the policy allowed Chubb to redefine the standard of living clause. Was this mail fraud? Chubb devised a plan to deprive its insured of a benefit which it was due under one interpretation of the policy, leading Didier to believe she was entitled to replacement property based only on usable space of the covered property, and used the mails by sending checks to her for a property with a smaller size and price than the $40,000 corporate property originally proposed.

The US insists that the linchpin of its wire fraud charge was Defendants’ representations & statements to ALE about ownership of Rollins and that these lies were material to Chubb’s payment. However, for the representations about ownership of Rollins to be material to Chubb, there would have to be proof that it would have acted differently had it known that the Didier Family Trust was solely controlled by Didier. The US could have called witnesses to establish this but did not. The notes and history compiled by ALE indicate that Peterson’s supervisor authorized Didier to move to Rollins. Peterson did not and could not testify that ownership of Rollins was material to his supervisor.

In Bryant (8th Cir. 2010), with analogous facts, the policy stated: “We will pay the actual charges incurred for a provider of Home Health Care up to the Home Health Care Daily benefits as shown in the Policy Schedule.” The Chubb policy is at best ambiguous, stating that it is obligated to pay “Extra living expenses” and simultaneously pay what “is necessary to maintain your household’s usual standard of living.” The ambiguity of this crucial term raises doubts at to materiality of Defendants’ representations and actions. Chubb wrote the policy, charged significant premiums for the coverage, and deemed it a liberally construed white glove policy. The US seeks to rewrite the “standard of living” language to mean “actual charges incurred” to satisfy proof of materiality. It cannot do so based on the policy language. Given ambiguity of the policy and absence of proof as to Chubb’s decision to authorize Rollins, no reasonable finder of fact could find Defendants guilty beyond a reasonable doubt. Chubb could have written its policy with more precise language reflecting its obligation to pay only actual cost of replacement housing. It instead based its obligation on an ambiguous term generously providing coverage for living expenses based on a standard of living in a 14-bedroom mansion. The US cannot invoke this ambiguity by attempting to establish mail fraud, effectively making the grand jury and this criminal Court an enforcement mechanism for a policy dispute between a carrier and its insured.

Defendants’ arguments as to mens rea, Didier’s interpretation of the policy, questions sent out by the jury, Nasir’s analysis of documentary evidence, and spoliation are insufficient to set aside the verdict.

Judgment of acquittal is granted and the case is closed. (The US has appealed.)

US v. Didier and Nasir, 41 MFR 72, 10/4/13.

Colin Stephens (Smith & Stephens), Missoula, for Didier; Federal Defender Michael Donahoe for Nasir; AUSA Timothy Racicot.