U.S. Supreme Court, Great Lakes Insurance SE v. Raiders Retreat Realty CO., LLC, Docket No. 22-500

Maritime Insurance Contract

 

Maritime Law

 

Choice-of-Law Provisions in Maritime Contracts

 

Federal Common Law Court

 

Circuit Split

 

 

 

“Federalism in admiralty and the scope of application of state law in maritime cases is one of the most perplexing issues in the law”.

 

 

 

 

 

This Court granted certiorari to resolve a split in the Courts of Appeals regarding the enforceability of choice-of law provisions in maritime contracts.

 

 

Maritime contracts often contain choice-of-law provisions that designate the law of a particular jurisdiction to control future disputes. The enforceability of those choice-of-law provisions is governed by federal maritime law. Applying federal maritime law in this case, we conclude that choice-of-law provisions in maritime contracts are presumptively enforceable, with certain narrow exceptions not applicable here.

 

 

Under the Constitution, federal courts possess authority to create and apply maritime law. Article III of the Constitution extends the federal judicial power to “all Cases of admiralty and maritime Jurisdiction.” U. S. Const., Art. III, § 2, cl. 1. That grant of jurisdiction contemplates a system of maritime law “‘coextensive with, and operating uniformly in, the whole country.’” Norfolk Southern R. Co. v. James N. Kirby, Pty Ltd., 543 U. S. 14, 28 (2004) (quoting American Dredging Co. v. Miller, 510 U. S. 443, 451 (1994)). The purposes of that uniform system include promoting “the great interests of navigation and commerce” and maintaining the United States’ “diplomatic relations.” 3 J. Story, Commentaries on the Constitution of the United States §1666, p. 533 (1st ed. 1833); see also Norfolk Southern, 543 U. S., at 28; Exxon Corp. v. Central Gulf Lines, Inc., 500 U. S. 603, 608 (1991). To maintain that uniform system, federal courts “make decisional law” for maritime cases. Norfolk Southern, 543 U. S., at 23. When a federal court decides a maritime case, it acts as a “federal common law court, much as state courts do in state common-law cases.” Air & Liquid Systems Corp. v. DeVries, 586 U. S. 446, 452 (2019) (internal quotation marks omitted); see Dutra Group v. Batterton, 588 U. S. 358, 360 (2019). “Subject to direction from Congress,” the federal courts fashion maritime rules based on, among other sources, “judicial opinions, legislation, treatises, and scholarly writings.” Air & Liquid Systems, 586 U. S., at 452; see also Exxon Co., U. S. A. v. Sofec, Inc., 517 U. S. 830, 839 (1996); East River S. S. Corp. v. Transamerica Delaval Inc., 476 U. S. 858, 864 (1986). Exercising that authority, federal courts follow previously “established” maritime rules. Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U. S. 310, 314 (1955).

 

 

No bright line exists for determining when a federal maritime rule is “established,” but a body of judicial decisions can suffice. See Bisso v. Inland Waterways Corp., 349 U. S. 85, 89–90 (1955). In the absence of an established rule, federal courts may create uniform maritime rules. See, e.g., Norfolk Southern, 543 U. S., at 23. When no established rule exists, and when the federal courts decline to create a new rule, federal courts apply state law. See Wilburn Boat, 348 U. S., at 320–321. For purposes of this general overview, we will stop there, as the “issue of federalism in admiralty and the scope of application of state law in maritime cases is one of the most perplexing issues in the law.” 1 T. Schoenbaum, Admiralty and Maritime Law §4:4, p. 268 (6th ed. 2018).

 

 

The initial question here is whether there is an established federal maritime rule regarding the enforceability of choice-of-law provisions. The answer is yes. Longstanding precedent establishes a federal maritime rule: Choice-of-law provisions in maritime contracts are presumptively enforceable. As a leading treatise says, it is “well established in admiralty that choice of law clauses” will “normally be enforced.” 1 Schoenbaum, Admiralty and Maritime Law §5:19, at 427; see also id., §4:4, at 275; 2 id., §19:6, at 431–432 (similar).

 

 

The Court has pronounced that forum-selection clauses in maritime contracts are “prima facie valid” under federal maritime law and “should be enforced unless” doing so would be “‘unreasonable’ under the circumstances.” The Bremen v. Zapata Off-Shore Co., 407 U. S. 1, 10 (1972); see also Carnival Cruise Lines, Inc. v. Shute, 499 U. S. 585, 593–594 (1991).

 

 

(…) Moreover, by supplying some advance assurance about the governing law, choice-of-law provisions help maritime shippers decide on the front end “what precautions to take” on their boats, American Dredging, 510 U. S., at 454, and enable marine insurers to better assess risk, see Brief for American Institute of Marine Underwriters et al. as Amici Curiae 12–13. Choice-of-law provisions therefore can lower the price and expand the availability of marine insurance. In those ways, choice-of-law provisions advance a fundamental purpose of federal maritime law: the “‘protection of maritime commerce.’” Exxon Corp., 500 U. S., at 608 (quoting Sisson v. Ruby, 497 U. S. 358, 367 (1990)).

 

 

Rather, the Wilburn Boat Court simply determined what substantive rule applied when a party breached a warranty in a marine insurance contract. See id., at 311–316. The Court concluded that no “established federal admiralty rule” governed the warranty issue. Id., at 314; see also id., at 314–316. And the Court declined to create a federal maritime rule on that question, both because States historically regulated insurance and because federal courts were poorly positioned to “unify insurance law on a nationwide basis.” Id., at 319; see also id., at 316–320. The Court therefore ordered that the warranty issue be tried “under appropriate state law.” Id., at 321.

 

 

(…) Moreover, Wilburn Boat held only that state law applied as a gap-filler in the absence of a uniform federal maritime rule on a warranty issue. 348 U. S., at 314–316. Here, however, no gap exists because a uniform federal rule governs the enforceability of choice-of-law clauses in maritime contracts.

 

 

After Wilburn Boat, maritime actors realized that a lot would depend on which State’s law governed each individual maritime dispute—a question that would be unclear in advance. See 2 Schoenbaum, Admiralty and Maritime Law §19:9. Choice-of-law provisions soon emerged as a ready answer to that problem. See W. von Bittner, The Validity and Effect of Choice of Law Clauses in Marine Insurance Contracts, 53 Ins. Counsel J. 573, 573, 578–579 (1986).

 

 

(…) The bottom line: As a matter of federal maritime law, choice-of-law provisions in maritime contracts are presumptively enforceable.

 

Of course, to say that choice-of-law clauses are presumptively enforceable as a matter of federal maritime law means that there are exceptions when the clauses are not enforceable. The parties agree that the exceptions are narrow—indeed, Raiders “freely concedes that in most every instance, a choice-of-law provision contained in a maritime insurance contract will be effective.” Tr. of Oral Arg. 54. In particular, the parties agree that courts should disregard choice-of-law clauses in otherwise valid maritime contracts when the chosen law would contravene a controlling federal statute, see Knott v. Botany Mills, 179 U. S. 69, 77 (1900), or conflict with an established federal maritime policy, see The Kensington, 183 U. S. 263, 269–271 (1902). For example, The Kensington declined to enforce a choice-of-law clause because the chosen law would have released a carrier from liability for negligence—a result that federal maritime law forbids. See ibid. The parties further agree that, as a matter of federal maritime law, courts may disregard choice-of-law clauses when parties can furnish no reasonable basis for the chosen jurisdiction. Cf. Carnival Cruise, 499 U. S., at 594–595; The Bremen, 407 U. S., at 10, 16–17. For example, it would be unreasonable to pick the law of a distant foreign country without some rational basis for doing so. That said, the “no reasonable basis” exception must be applied with substantial deference to the contracting parties, recognizing that maritime actors may sometimes choose the law of a specific jurisdiction because, for example, that jurisdiction’s law is “well developed, well known, and well regarded.” Brief for American Institute of Marine Underwriters et al. as Amici Curiae 17.

 

 

Unable to successfully invoke those exceptions, Raiders says that federal maritime law should recognize an additional exception when enforcing the law of the State designated by the contract would contravene the fundamental public policy of the State with the greatest interest in the dispute. We disagree with that argument. Indeed, Raiders’ request for that novel maritime exception is essentially a repackaged version of its initial argument that the enforceability of choice-of-law provisions in maritime contracts should be determined by state law. The argument fares no better here, for essentially the same reasons.

 

 

(…) We disagree with Raiders’ related suggestion that we adopt the choice-of-law approach set forth in §187(2)(b) of the Second Restatement of Conflict of Laws. In relevant part, that subsection says that choice-of-law provisions are enforceable unless they conflict with “a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue.” Restatement (Second) of Conflict of Laws §187(2)(b). As the commentary to the Restatement carefully explains, however, that rule arose out of interstate cases and does not deal directly with federal-state conflicts, including those that arise in federal enclaves like maritime law. See id. §2, Comment c; §3, Comment d; §10, Comment a.

 

 

 

 

Secondary sources: T. Schoenbaum, Admiralty and Maritime Law §4:4, p. 268 (6th ed. 2018); J. Coyle, The Canons of Construction for Choice-of-Law Clauses, 92 Wash. L. Rev. 631, 633, n. 6 (2017); M. Sturley, Restating the Law of Marine Insurance: A Workable Solution to the Wilburn Boat Problem, 29 J. Mar. L. & Com. 41, 45 (1998); G. Gilmore & C. Black, Law of Admiralty §§1–17, 2–8 (2d ed. 1975); W. von Bittner, The Validity and Effect of Choice of Law Clauses in Marine Insurance Contracts, 53 Ins. Counsel J. 573, 573, 578–579 (1986); Restatement (Second) of Conflict of Laws §187, Comment f, p. 567 (1969).

 

 

 

 

(U.S. Supreme Court, Great Lakes Insurance SE v. Raiders Retreat Realty CO., LLC, Feb. 21, 2024, Docket No. 22-500, J. Kavanaugh, Unanimous)

 

U.S. Court of Appeals for the Fifth Circuit, Conti 11. Container Schiffarts-GMBH & Co. KG M.S., MSC Flaminia v. MSC Mediterranean Shipping Company S.A., Docket No. 22-30808

Personal Jurisdiction

 

Of a Parent Corporation? Of its Subsidiary?

 

Nonresident Corporation

 

Purposeful Availment

 

Presumption of Institutional Independence

 

 

 

 

 

“Generally, a foreign parent corporation is not subject to the jurisdiction of a forum state merely because its subsidiary is present or doing business there.” Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1159 (5th Cir. 1983) (citing 2 J. Moore & J. Lucas, Moore’s Federal Practice ¶4.25[6], at 4–272 (2d ed. 1982)). “This presumption of institutional independence...may be rebutted, however, by clear evidence” that the two corporations are “fused...for jurisdictional purposes.” Diece-Lisa, 943 F.3d at 251 (quoting Freudensprung, 379 F.3d at 346); see also Hargrave, 710 F.2d at 116 (explaining, “so long as a parent and subsidiary maintain separate and distinct corporate entities, the presence of one in a forum state may not be attributed to the other”). In this inquiry, we consider the following factors: “(1) the amount of stock owned by the parent of the subsidiary; (2) whether the entities have separate headquarters, directors, and officers; (3) whether corporate formalities are observed; (4) whether the entities maintain separate accounting systems; and (5) whether the parent exercises complete control over the subsidiary’s general policies or daily activities.” Diece-Lisa, 943 F.3d at 251; see also Hargrave, 710 F.2d at 1160 (discussing factors).

 

 

See also, e.g., Diece-Lisa Indus., Inc. v. Disney Enters., Inc., 943 F.3d 239, 251 (5th Cir. 2019) (“Generally, ‘the proper exercise of personal jurisdiction over a nonresident corporation may not be based solely upon the contacts with the forum state of another corporate entity with which the defendant may be affiliated.’” (quoting Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 346 (5th Cir. 2004))); Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d 694, 717 (5th Cir. 1999) (“Typically, the corporate independence of companies defeats the assertion of jurisdiction over one by using contacts with the other.”); Dickson Marine, Inc. v. Panalpina, Inc., 179 F.3d 331, 338 (5th Cir. 1999) (“Courts have long presumed the institutional independence of related corporations, such as parent and subsidiary, when determining if one corporation’s contacts with a forum can be the basis of a related corporation’s contacts.” (citing Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333 (1925))); Southmark Corp. v. Life Invs., Inc., 851 F.2d 763, 773–74 (5th Cir. 1988) (“It is well-settled that where...a wholly owned subsidiary is operated as a distinct corporation, its contacts with the forum cannot be imputed to the parent.”). (Fn. 12).

 

 

(…) Furthermore, based on uncontroverted record evidence MSC has never had a registered agent for service of process in Louisiana. (Fn. 13 in fine).

 

 

 

 

 

(U.S. Court of Appeals for the Fifth Circuit, Jan. 29, 2024, Conti 11. Container Schiffarts-GMBH & Co. KG M.S., MSC Flaminia v. MSC Mediterranean Shipping Company S.A., Docket No. 22-30808)

 

U.S. Court of Appeals for the Fifth Circuit, Southwest Airlines Company v. Liberty Insurance Underwriters, Inc., Docket No. 22-10942

Insurance Law

 

Coverage Re: Subsequent Business Decisions

 

General Purpose of Business Interruption Insurance

 

Cyber Risk Insurance

 

Duty to Mitigate

 

Summary Judgment on a Bad Faith Claim

 

Interpretation of an Insurance Policy

 

Meaning of the Terms “Loss”; “Incur”; and “Sole Cause.”

 

Texas Law

 

 

 

Appeal from the United States District Court for the Northern District of Texas USDC No. 3:19-CV-2218

 

 

 

 

Defendant Liberty Insurance Underwriters denied Plaintiff Southwest Airlines’s claim for reimbursement under its cyber risk insurance policy for costs related to a computer system failure. The district court granted summary judgment for Liberty, concluding that those costs were purely discretionary and therefore either not covered under the policy’s insuring clause or barred by the policy’s exclusions. We conclude that the costs are not categorically barred from coverage as a matter of law, and accordingly we reverse and remand for proceedings consistent with our opinion.

 

 

On July 20, 2016, Southwest suffered a massive computer failure, which resulted in a three-day disruption of its flight schedule. During the disruption, approximately 475,839 Southwest customers experienced either a flight cancelation or a delay of two hours or more. Just weeks earlier, Southwest had purchased a so-called cyber risk insurance policy from non-party AIG, Inc. The policy included a provision for “System Failure Coverage” providing that the insurer “shall pay all Loss . . . that an Insured incurs . . . solely as a result of a System Failure .  .  .  .” Southwest also purchased a series of follow form excess policies, including one from Liberty. Under the Liberty policy, the company provided excess coverage under the terms of AIG’s cyber risk policy for up to $10 million in losses. The excess policy positioned Liberty above three other excess insurers and AIG. Liberty’s coverage was only implicated if Southwest’s system-failure-related losses exceeded $50 million. Southwest calculated that it ultimately incurred more than $77 million in losses as a result of the system failure and resulting flight disruptions. To recoup those losses, it began climbing the cyber risk insurance tower, and, by March 2018, it had collected $50 million from AIG and the other insurers on the first three tiers. When it reached Liberty, however, its claim was denied. Liberty challenged five categories of Southwest’s claimed losses, without which its covered losses would total less than $50 million and therefore would not trigger the Liberty policy: ·FareSaver Promo codes, constituting $16,563,656.00 in costs. FareSaver Promo codes are 50% discount codes; each code is redeemable for up to eight passengers. The codes were disbursed to customers whose flights were canceled or delayed two hours or more. ·Travel vouchers, constituting $6,644,801.00 in costs. Southwest issued such vouchers for specific dollar amounts and disbursed to customers whose flights were canceled or delayed two hours or more. ·Cover Refunds, constituting $7,366,000.00 in costs. Cover Refunds are reimbursements made by customer service agents to customers upon request to compensate for alternate travel arrangements, such as buses, rental cars, and hotels. ·Rapid Rewards Points, constituting $3,561,363.00 in costs. Rapid Rewards Points are redeemable for airline tickets and were distributed to members of its frequent flier program whose flights were canceled or delayed two hours or more. ·Advertising costs, constituting $1,217,921.00 in costs. Southwest was conducting a sale at the time of the system failure, and, as a result of it, extended the sale for a week. On September 16, 2019, Southwest sued Liberty for breach of contract, bad faith, and declaratory judgment on the issue of coverage. Liberty moved for summary judgment, arguing that Southwest’s claims failed due to the lack of coverage under the System Failure Coverage provision, or, alternatively, due to the operation of three exclusions in the policy. Southwest filed a cross-motion for partial summary judgment. On September 6, 2022, the district court issued a terse order granting Liberty’s motion. The district court’s analysis on the central issue in this appeal was contained in a footnote, in which it concluded that Southwest’s costs were not caused by the system failure but rather were the result of “various and purely discretionary customer-related rewards programs, practices and market promotions.” It also concluded that coverage was barred under the policy exclusions and that Southwest’s bad faith claims failed by operation of law and on the merits. Finally, it denied Southwest’s motion for partial summary judgment. Southwest appealed.

 

 

Texas law applies to the Liberty policy. See Tex. Ins. Code Ann. art. 21.42. “In Texas, the construction of a contract presents a question of law.” Balfour Beatty Constr., L.L.C. v. Liberty Mut. Fire Ins. Co., 968 F.3d 504, 509 (5th Cir. 2020).

 

 

As set forth above, the policy’s System Failure Coverage provision covers “all Loss . . . that an Insured incurs . . . solely as a result of a System Failure . . ..” Liberty argues that all five categories of costs that Southwest claimed were not incurred solely as a result of the system failure but rather were the result of Southwest’s subsequent business decisions. Southwest acknowledges that those costs were the result of business decisions but argues that, under the plain terms of the policy, they are covered.

 

 

In Texas, interpretation of an insurance policy begins with its actual words, “because it is ‘presumed parties intend what the words of their contract say.’” Terry Black’s Barbecue, L.L.C. v. State Auto. Mut. Ins. Co., 22 F.4th 450, 454 (5th Cir. 2022) (quoting Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 126 (Tex. 2010)). Because we must determine whether the five categories of costs were losses incurred solely as a result of the system failure, our inquiry requires us to determine the meaning of the terms “Loss”; “incur”; and “sole cause.” When a policy defines a term, we use that definition; otherwise, we endeavor to find the term’s “ordinary and generally-accepted meaning.” Terry Black’s, 22 F.4th at 455 (citing Gilbert, 327 S.W.3d at 126). Texas law requires us to begin that inquiry with the dictionary. Cooper Indus. Ltd. v. Nat’l Union Fire Ins. Co. Pittsburgh, 876 F.3d 119, 128 (5th Cir. 2017). We then look to “the term’s usage in other statutes, court decisions, and similar authorities.” Pharr-San Juan-Alamo Indep. Sch. Dist. v. Texas Pol. Subdivisions Prop./Cas. Joint Self Ins. Fund, 642 S.W.3d 466, 474 (Tex. 2022). Here, the policy defines “losses” to mean, as relevant, “costs that would not have been incurred but for a Material Interruption.” It defines Material Interruption as “the actual and measurable interruption or suspension of an Insured’s business directly caused by . . . a System Failure.”

 

 

We therefore conclude that Southwest’s five categories of costs satisfy that lenient but-for causation standard and are therefore “losses.” The policy does not define “incur” but the Texas Supreme Court has done our work for us here, relying on dictionaries to define “incur” to mean to “become liable for,” Garcia v. Gomez, 319 S.W.3d 638, 642 n.4 (Tex.  2010) (citing Webster’s Ninth New Collegiate Dictionary 611 (1984) and Incur, Black’s Law Dictionary 771 (7th ed.1999) (“to suffer or bring on oneself (a liability or expense)”)). Another dictionary similarly defines “incur” as “to become liable or subject to” or to “bring down upon oneself.” Incur, merriam-webster.com, https://www.merriam-webster.com/dictionary/incur (last visited Dec. 12, 2023). Because Southwest’s five categories of costs were ones that Southwest brought upon itself, we therefore conclude that they were “losses” that it “incurred.” The policy does not define “solely.” According to the Texas Supreme Court, also relying on a dictionary, the word means “‘to the exclusion of all else’” and “‘without another.’” Northland Indus. v. Kouba, 620 S.W.3d 411, 416 (Tex. 2020) (citing Webster’s Ninth New Collegiate Dictionary (1984); Webster’s Third New Int’l Dictionary (2002)). But that definition, standing alone, does not resolve the question. Namely, it does not tell us whether “to the exclusion of all else” means there can be no intermediate causes—such as a discretionary decision—or whether it only means there can be no other originating or precipitating causes. We look to Texas law for more clarity. See Pharr, 642 S.W.3d at 474. The parties concede that there are no cases directly on point in the context of business interruption insurance. Oral Arg. at 04:19–04:23; 34:04–34:28, https://www.ca5.uscourts.gov/OralArgRecordings/22/22-10942_10-4-2023.mp3. But the policy at issue is hardly the first time the words “sole” or “solely” have been used in a Texas insurance policy with regard to causation. In Wright v. Western Southern Life Insurance Company, for example, an injury policy covered “the loss of a foot ‘solely as a result of accidental bodily injury sustained or disease . . ..’” 443 S.W.2d 790, 790 (Tex. App.—Eastland 1969, no writ). The insured claimed that gangrene was the sole cause of the loss of his foot. See id. at 790-91. In interpreting the policy, the Court of Civil Appeals explained that a “sole” cause is one independent of any other cause, applying the Texas Supreme Court’s decision in Mutual Benefit Health & Accident Association v. Hudman, 398 S.W.2d 110 (Tex. 1965)). Accordingly, the court held that gangrene was not the sole cause of the loss because it was not the independent cause; rather, the sole cause was an earlier gunshot, which alone precipitated the gangrene infection and ultimately the amputation of the plaintiff’s foot. Wright, 443 S.W.2d at 790–92.

 

 

Much more recently, we applied that same definition of sole cause to a Texas life insurance policy that paid out only when a bodily injury was the “sole cause” of death. Wells v. Minn. Life Ins. Co., 885 F.3d 885, 888 (5th Cir. 2018); see also id. at 892–93. Like the court in Wright, we equated sole cause to independent cause. Id. at 892. Applying that definition, we concluded that an injury is still the sole cause of death even if death resulted more directly from complications like septic shock or multi-system organ failure. Id. at 893–94. We explained that those complications were not independent causes but rather were caused by the original injury. Id. In turn, the complications did not “strip the original injury of its ‘sole proximate cause’ status.” Id. at 894. Here, Liberty argues that the system failure cannot be the sole cause of Southwest’s claimed costs because the “independent” and “more direct” cause of those losses was Southwest’s decision to incur them. But those decisions can only be independent, sole causes of the costs if they were the precipitating causes of the costs. The decisions, like the infection in Wright or the medical complications in Wells, were not precipitating causes that competed with the system failure, but links in a causal chain that led back to the system failure. To be clear, this inquiry only shows that the district court erred in concluding that Southwest’s five categories of costs were all precluded as a matter of law because they were discretionary. We do not determine whether the system failure was in fact the sole cause of each of the costs that Southwest claims.

 

 

To that end, Liberty argues that if Southwest’s covered losses include discretionary costs, Southwest could “literally dictate the amount of its own ‘loss.’” But that would only be true if no causation standard applied at all. The policy still requires a causal nexus between the system failure and Southwest’s costs. Indeed, it even contains a provision to guide that causation inquiry, limiting coverage to only the costs that are deemed appropriate based on Southwest’s “probable business” if no system failure occurred. Likewise, basic insurance principles still apply. The general purpose of business interruption insurance is “to compensate an insured for losses stemming from an interruption of normal business operations.  .  . thus preserving the continuity of the insured’s business earnings by placing the insured in the position that it would have occupied if there had been no interruption.” 11A Couch on Ins. § 167:9 (3d ed. 2023). And as with any other contract, “the general duty to mitigate damages may come into play as a factor in construing policy coverage terms.” Id. at § 168:15. Under those principles, costs that Southwest incurred for mitigation may be recoverable, but recovery that would put Southwest in a better position than it would have occupied without the interruption would seem to be beyond the scope.

 

 

For any of its claimed costs, Southwest, to survive summary judgment on its bad faith claim, must make a prima facie case that Liberty “knew or should have known that it was reasonably clear that Southwest’s claim was covered” but denied the claim anyway. Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 49 (Tex. 1997). Southwest must show “the absence of a reasonable basis to deny the claim,” id. at 51, or, put differently, the absence of a bona fide dispute as to coverage, Higginbotham v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456, 460 (5th Cir.1997).

 

 

 

 

Secondary sources: Couch on Ins. § 167:9 (3d ed. 2023).

 

 

 

 

(U.S. Court of Appeals for the Fifth Circuit, Jan. 16, 2024, Southwest Airlines Company v. Liberty Insurance Underwriters, Inc., Docket No. 22-10942)

California Court of Appeal, Gary Garner v. BNSF Railway Company, Docket No. D082229

Causation Experts

 

Expert Opinion Testimony

 

Medical Expert

 

Survival and Wrongful Death Action

 

General Causation – Specific Causation

 

Exposure Necessary to Cause Specific Harm to Humans

 

Motion in Limine

 

California Law

 

 

 

Plaintiff Gary Garner appeals from a judgment entered against him after the trial court granted BNSF Railway Company’s (BNSF) motions in limine to exclude his causation experts, which resulted in the dismissal of his wrongful death lawsuit before trial. Gary alleged that during the more than four decades his father Melvin Garner spent working for BNSF, Melvin was continuously exposed to toxic levels of diesel exhaust and its chemical constituents. According to Gary, this exposure was a cause of Melvin’s non-Hodgkin’s lymphoma, which Melvin developed after retiring from BNSF and which led to his death in 2014. Gary retained several experts to perform a cancer risk assessment and opine on whether diesel exhaust and its constituents are capable of causing cancer, including non-Hodgkin’s lymphoma, and whether Melvin’s workplace exposure to diesel exhaust in this case was in fact a cause of his cancer. At the outset of trial, however, the trial court granted BNSF’s motions in limine to exclude Gary’s three causation experts from trial, finding that the science the experts relied on was inadequate and there was too great an analytical gap between the data and their opinions. The trial court then entered judgment in favor of BNSF and dismissed the case. Because the court’s in limine rulings resulted in the equivalent of a nonsuit, we conduct an independent review of the record to determine whether BNSF’s motions were properly granted. We conclude that the trial court erred in excluding Gary’s experts and therefore reverse the orders and judgment with instructions to the trial court to enter new orders denying BNSF’s motions in limine.

 

 

In October 2017, Melvin’s son, Gary Garner, filed this survival and wrongful death action against BNSF, alleging violation of the Federal Employers’ Liability Act (45 U.S.C. §51, et seq.) (FELA).

 

 

After the court’s denial of BNSF’s summary judgment motion, the parties engaged in expert discovery in February and March 2021. The parties also began filing and opposing motions in limine in March 2021 in accord with the then-scheduled trial date.

 

 

“General causation” refers to whether a substance is capable of causing a particular injury or condition in the general population. “Specific causation” refers to whether the substance caused a particular individual’s injury or condition. (Knight v. Kirby Inland Marine Inc. (5th Cir. 2007) 482 F.3d 347, 351.) (Fn. 3).

 

 

(…) In short, “section 801 governs judicial review of the type of matter” relied on by the expert, while “section 802 governs judicial review of the reasons for the opinion.” (Sargon, supra, 55 Cal.4th at p. 771; see §§ 801, subd. (b), 802.) The Supreme Court has therefore explained that, under these sections, “the trial court acts as a gatekeeper to exclude expert opinion testimony that is (1) based on matter of a type on which an expert may not reasonably rely, (2) based on reasons unsupported by the material on which the expert relies, or (3) speculative.” (Sargon, at pp. 771–772; see §§801, subd. (b), 802.) The Court has warned, however, that trial courts must “be cautious in excluding expert testimony. The trial court’s gatekeeping role does not involve choosing between competing expert opinions.” (Sargon, supra, 55 Cal.4th at p. 772.) “The gatekeeper’s focus ‘must be solely on principles and methodology, not on the conclusions that they generate.’” (Ibid.) Nor should the court determine the persuasiveness of an expert’s opinion, weigh the opinion’s probative value, substitute its own opinion for the expert’s opinion, or resolve scientific controversies. (Ibid.) Rather, the goal “is simply to exclude ‘clearly invalid and unreliable’ expert opinion.” (Ibid.)

 

 

As Gary argues, there is no requirement that a causation expert rely on a specific study or other scientific publication expressing precisely the same conclusion at which the expert has arrived. (Kennedy v. Collagen Corp. (9th Cir. 1998) 161 F.3d 1226, 1229 (Kennedy) [“it is scientifically permissible to reach a conclusion on causation without [epidemiological or animal] studies” showing a causal link]; Wendell v. GlaxoSmithKline LLC (9th Cir. 2017) 858 F.3d 1227, 1237 (Wendell) [“Perhaps in some cases there will be a plethora of peer reviewed evidence that specifically shows causation. However, such literature is not required in each and every case.”]; Turner v. Iowa Fire Equipment Co. (8th Cir. 2000) 229 F.3d 1202, 1208–1209 [“‘we do not believe that a medical expert must always cite published studies on general causation in order to reliably conclude that a particular object caused a particular illness’”].)

 

 

This makes sense for several reasons. First, “publication...is not the sine qua non of admissibility; it does not necessarily correlate with reliability [citation], and in some instances well-grounded but innovative theories will not have been published. [Citation.] Some propositions, moreover, are too particular, too new, or of too limited interest to be published.” (Daubert v. Merrell Dow Pharms., Inc. (1993) 509 U.S. 579, 593 (Daubert); see also Primiano v. Cook (9th Cir. 2010) 598 F.3d 558, 565 [“Peer reviewed scientific literature may be unavailable because the issue may be too particular, new, or of insufficiently broad interest, to be in the literature.”].) As Dr. Salmon explained, this is such a case because few studies of the potential link between diesel exhaust and non-Hodgkin’s lymphoma have been conducted. “‘The first several victims of a new toxic tort should not be barred from having their day in court simply because the medical literature, which will eventually show the connection between the victims’ condition and the toxic substance, has not yet been completed.’” (Wendell, supra, 858 F.3d at p. 1237.) Second, although “epidemiology focuses on the question of general causation,” it “cannot prove causation; rather, causation is a judgment for epidemiologists and others interpreting the epidemiologic data.” (Green et al., Reference Guide on Epidemiology, in Reference Manual on Scientific Evidence (3d ed. 2011) 549, 552, 598.) Epidemiological studies merely identify associations, which do not equate to causation. (See id. at pp.551– 553.) It is up to the expert to “bridge the gap between association and causation” and make that informed judgment. (Kaye and Freedman, Reference Guide on Statistics, in Reference Manual on Scientific Evidence (3d ed. 2011) 211, 217–218 (Statistics); accord Amador v. 3M Co. (In re Bair Hugger Forced Air Warming Devices Prods.Liab.Litig.) (8th Cir. 2021) 9F.4th 768, 778–780 [concluding it was not unreliable for an expert to rely on a study to draw an inference of causation even though the study found that the association did not establish causation, “so long as the expert does the work ‘to bridge the gap between association and causation’”].) “Whether an inference of causation based on an association is appropriate is a matter of informed judgment, not scientific methodology....” (Rest.3d Torts, § 28 (2010) (Restatement), com. (c), subd. (3), p. 406; see also id. at subd. (1), p. 403 [“An evaluation of data and scientific evidence to determine whether an inference of causation is appropriate requires judgment and interpretation.”]; Milward v. Acuity Specialty Prods. Group, Inc. (1st Cir. 2011) 639 F.3d 11, 18–19 (Milward) [same]; Statistics, supra, at p. 222 [“In the end, deciding whether associations are causal typically is not a matter of statistics alone, but also rests on scientific judgment.”].) And “scientific inference typically requires consideration of numerous findings, which, when considered alone, may not individually prove the contention.... In applying the scientific method, scientists do not review each scientific study individually for whether by itself it reliably supports the causal claim being advocated or opposed. Rather, as the Institute of Medicine and National Research Council noted, ‘summing, or synthesizing, data addressing different linkages [between kinds of data] forms a more complete causal evidence model and can provide the biological plausibility needed to establish the association’ being advocated or opposed.” (Berger, The Admissibility of Expert Testimony, in Reference Manual on Scientific Evidence (3d ed. 2011) 11, 19–20; see also Milward, at pp. 17–19 [discussing use of scientific judgment applying “weight of the evidence” approach for determining general causation].) It was therefore appropriate for Gary’s experts to use their experience and judgment to interpret the available epidemiological and other data they reviewed in reaching their causation opinions.

 

 

Dr. Salmon gave a reasonable scientific explanation for his causation opinions, including his reliance on the overall cancer risk, and he cited objective, verifiable evidence supporting his opinions. BNSF submitted no evidence that his reasoning or methodology was scientifically invalid. The trial court also found no fault with his methodology. The mere fact that a cause-effect relationship between exposure to diesel exhaust and non-Hodgkin’s lymphoma “in particular” has not been conclusively established in the scientific literature does not render Dr. Salmon’s opinions inadmissible. (Kennedy, supra, 161 F.3d at p.1230; see also Milward, supra, 639 F.3d at pp. 16, 19–20 [causation expert properly relied on scientific evidence that benzene can cause acute myeloid leukemia (AML) “as a class” as support for his opinion that workplace exposure to benzene caused plaintiff’s specific rare type of AML].)

 

 

On this record, leaving adequate space for the exercise of reasonable scientific judgment based on the available data, we conclude that the analytical gap was not “too great” for Dr. Salmon to bridge using his own scientific training and expertise. (Sargon, supra, 55 Cal.4th at p. 771.) The trial court strayed beyond its gatekeeping role by weighing the probative value of Dr. Salmon’s opinion, and the studies on which he relied, rather than merely excluding a clearly invalid and unreliable expert opinion. (See id. at p. 772; Cooper v. Takeda Pharmaceuticals America, Inc. (2015) 239 Cal.App.4th 555, 592 (Cooper).)

 

 

“While precise information concerning the exposure necessary to cause specific harm to humans and exact details pertaining to the plaintiff’s exposure are beneficial, such evidence is not always available, or necessary, to demonstrate that a substance is toxic to humans given substantial exposure and need not invariably provide the basis for an expert’s opinion on causation.” (Westberry v. Gislaved Gummi AB (4th Cir. 1999) 178 F.3d 257, 264; accord Sarkees v. E.I. Dupont De Nemours & Co. (2d Cir. 2021) 15 F.4th Cir. 584, 593; Clausen v. M/V New Carissa (9th Cir. 2003) 339 F.3d 1049, 1059–1060; Hardyman v. Norfolk & W.Ry.Co.(6th Cir. 2001) 243 F.3d 255, 265–266.)

 

 

 

 

Secondary sources: Green et al., Reference Guide on Epidemiology, in Reference Manual on Scientific Evidence (3d ed. 2011) 549, 552, 598; Kaye and Freedman, Reference Guide on Statistics, in Reference Manual on Scientific Evidence (3d ed. 2011) 211, 217–218; Berger, The Admissibility of Expert Testimony, in Reference Manual on Scientific Evidence (3d ed. 2011) 11, 19–20; Rest. 3d Torts, § 28 (2010); Proposed Guidelines for Carcinogen Risk Assessment, 61 Fed. Reg. 17960, 17993 (Apr. 23, 1996); Reference Manual on Scientific Evidence from the Federal Judicial Center.

 

 

 

 

(California Court of Appeal, Jan. 4, 2024, Gary Garner v. BNSF Railway Company, Docket No. D082229, Certified for Publication)

 

 

California Court of Appeal, Gutierrez v. Tostado, Docket No. H049983

Personal Injury Claims

 

Statute of Limitations

 

Personal Injury Action for Negligence: Two Years

 

Suits Against Health Care Providers for Professional Negligence: One Year

 

Does MICRA Applies Where the Plaintiff Is Injured During the Provision of Professional Services, as a Result of Those Services, But Was Not the Recipient of the Services?

 

(Action Against an Attorney for a Wrongful Act or Omission, Other Than for Actual Fraud: One Year)

 

Claims Time-Barred

 

 

Procedure:

 

Notice of Appeal

 

Appeal premature

 

Order to Show Cause

 

Dismissal

 

Judgment Filed

 

Notice of Submission of Judgment

 

Order to Show Cause Discharged

 

 

California Law

 

 

 

(Santa Clara County

Super. Ct. No. 20CV361400)

 

 

Francisco Gutierrez appeals from a judgment entered after the trial court granted summary judgment in favor of respondents Uriel Tostado and ProTransport-1, LLC, on the basis that Gutierrez’s personal injury claims were time-barred under the Medical Injury Compensation Reform Act (MICRA). Gutierrez contends that the trial court erred when it found MICRA’s one-year statute of limitations for professional negligence applicable. We conclude that because Tostado was a medical provider rendering professional services at the time the alleged negligence occurred, MICRA’s statute of limitations bars Gutierrez’s claims. We thus affirm the judgment.

 

 

Gutierrez was driving on Interstate 280 when he was forced to stop. Shortly after Gutierrez stopped, Tostado, who was driving an ambulance, rear-ended him.  At the time of the accident, Tostado was an emergency medical technician (EMT) employed by ProTransport-1, LLC and was transporting a patient from one medical facility to another. While Tostado drove, his partner attended to the patient in the rear of the ambulance.

 

 

Gutierrez was injured in the collision and visited a chiropractor for treatment within ten days of the incident. Almost two years later, Gutierrez filed a complaint against Tostado and ProTransport-1, alleging various personal injury claims. The respondents filed a motion for summary judgment on the sole ground that Gutierrez’s claims were time barred under MICRA’s one-year statute of limitations. The trial court agreed that MICRA applied and granted the motion. The trial court concluded that because Tostado was transporting a patient at the time of the accident, he was rendering professional services. The trial court held that Gutierrez’s claims against the defendants were time-barred under the statute. Gutierrez timely appealed from the judgment.

 

 

(Gutierrez filed his notice of appeal on April 19, 2022, after the trial court had granted summary judgment in favor of the defendants but prior to judgment being entered. We issued an order to show cause as to why Gutierrez’s appeal should not be dismissed as premature. After the trial court filed the judgment and Gutierrez submitted a notice of submission of judgment, we discharged the order to show cause and deemed Gutierrez’s notice of appeal filed on July 11, 2022, the date judgment was entered. Fn. 1).

 

 

In this case, the trial court granted summary judgment based on its statutory construction of MICRA. We review issues of statutory construction de novo. (Aldana v. Stillwagon (2016) 2 Cal.App.5th 1, 6 (Aldana).)

 

 

The trial court granted summary judgment on the sole ground that Gutierrez’s action was barred by the statute of limitations set forth in MICRA. Gutierrez contends that the trial court erred in dismissing his claims because MICRA does not apply to his personal injury claims. A personal injury action for negligence must generally be filed within two years of the date on which the injury occurred. (Code Civ. Proc., § 335.1.)

 

 

However, suits against health care providers for professional negligence must be filed within one year. (§ 340.5.) Gutierrez argues that the one-year statute of limitations does not apply to his action because his claims are for general negligence not professional negligence, and the duty that Tostado violated by crashing into his car was a duty of care generally owed to the public, not a professional duty owed by a medical provider to a patient.

 

 

MICRA defines professional negligence as “a negligent act or omission to act by a health care provider in the rendering of professional services.” (§ 340.5, subd. (2).) The parties do not dispute that an EMT transporting a patient in an ambulance is providing medical care to the patient for purposes of the statute. (Lopez, supra, 89 Cal.App.5th at p. 347; Canister v. Emergency Ambulance Service, Inc. (2008) 160 Cal.App.4th 388, 407 (Canister).) However, only actions “alleging injury suffered as a result of. . .the provision of medical care to patients” are covered. (Flores v. Presbyterian Intercommunity Hospital (2016) 63 Cal.4th 75, 88, (Flores).) In this appeal we must decide whether a driver in a separate vehicle, injured in a collision with an ambulance transporting a patient, was injured as a result of the provision of medical care, such that MICRA’s one year statute applies. Gutierrez urges us to find that any injury here was caused by ordinary negligence. He argues that where a medical provider owes no professional duty to the plaintiff and allegedly breaches only a duty owed to the general public, a claim for personal injuries should be governed by the two-year statute of limitations applicable to ordinary negligence. Conversely, respondent suggests that the critical question is not whether defendant owed plaintiff a professional duty, but simply whether plaintiff was injured as a result of the provision of medical services by defendant; in other words, was plaintiff’s injury a foreseeable consequence of defendant’s act of providing medical care?

 

 

The Supreme Court in Flores examined what it means for a health care provider to render professional services under MICRA. There, a hospital patient sued the hospital for negligence after the latch on her bedrail broke, causing her to fall and injure herself. (Flores, supra, 63 Cal.4th at p. 89.) The court considered the difference between regular negligence arising out of the duty owed to the general public, the negligence in the maintenance of equipment and premises that are merely convenient for, or incidental to, the provision of medical care to a patient, and the negligence that arises from the duty owed to patients in the rendering of professional services. (Id. at pp. 88-89.) The court found that “Even those parts of a hospital dedicated primarily to patient care typically contain numerous items of furniture and equipment—tables, televisions, toilets, and so on—that are provided primarily for the comfort and convenience of patients and visitors, but generally play no part in the patient’s medical diagnosis or treatment. Although a defect in such equipment may injure patients as well as visitors or staff, a hospital’s general duty to keep such items in good repair generally overlaps with the ‘obligations that all persons subject to California’s laws have.’ [Citation.]” (Ibid.)

 

 

(Lee v. Hanley (2015) 61 Cal.4th 1225, 1237 (Lee): In Lee, the Court considered “section 340.5’s neighboring provision imposing a one-year statute of limitations for ‘an action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services.’ [Citation.]” (Flores, supra, 63 Cal.4th at p. 87.) The court decided «that section 340.6(a) is properly read to apply to claims that ‘depend on proof that an attorney violated a professional obligation in the course of providing professional services.’ [Citation.]” (Ibid.) Explaining that the statute excludes services unrelated to the law or matters that entail violations of professional obligations that may overlap with obligations that all persons have, the court emphasized that the statute applies when an attorney violates a professional obligation as opposed to some generally applicable nonprofessional obligation. (Id. at pp. 87-88.)

 

 

(…) The court concluded that the hospital’s alleged negligence in the maintenance of plaintiff’s bedrail did not overlap with its general duty owed to the public because it was “integrally related to plaintiff’s medical diagnosis and treatment,” and was therefore professional negligence encompassed by MICRA. (Id. at p. 89.)

 

 

Flores and Lee both considered whether the injury to the patient or client was caused by negligence in the provision of professional services or whether the injury was the result of the breach of some broader overlapping duty owed to the public. Gutierrez asks us to conclude that the contrast drawn in those cases, between a professional duty and the general duty owed to the public, means that MICRA only applies where the defendant owes a professional duty to the plaintiff. However, neither Flores nor Lee considered whether MICRA applies where the plaintiff is injured during the provision of professional services, as a result of those services, but was not the recipient of the services. In both of those cases, the plaintiff was either the client or the patient. Multiple courts have considered injuries to third parties who were not patients and have concluded that MICRA applied to their claims.

 

 

(…) The Flores court concluded that by providing the bedrail the hospital was providing medical care, not just a convenience incidental to care. The question before the Flores court was what duty was owed to its patient, not to whom their professional duty of care extended.

 

 

(…) Because Gutierrez was not the recipient of the medical care, the question here is different from the one raised in Flores. It is not whether the injuries alleged were the result of general or professional negligence.  Instead, the question here is whether an injury to a third party, who is not a patient, is subject to MICRA’s statute of limitations because the injury occurred during, and as a result of, the provision of medical care by a medical provider.

 

 

(…) Because neither Flores nor Lee considered MICRA’s applicability to nonpatients, we must agree with Canister and Lopez and conclude that MICRA is not limited to suits by patients or to recipients of medical services as long as the plaintiff is injured due to negligence in the rendering of professional services and his injuries were foreseeable.

 

 

The provision of ambulance services involves driving on the road, sometimes at a very high speed. Getting a patient to the hospital quickly is often as integral to the provision of this medical service as performing CPR or administering medication intravenously. It is, therefore, entirely foreseeable that collisions may occur where third parties are injured. The fact that Tostado was not driving quickly here or that Gutierrez was in a separate vehicle rather than in the ambulance does not change the analysis or our conclusion that third parties injured in a collision with an ambulance when it is rendering medical care are subject to MICRA.

 

 

(…) Fundamental intent of MICRA to “reduce the cost of medical malpractice insurance ‘by limiting the amount and timing of recovery in cases of professional negligence.’ [Citations.]” (Flores, supra, 63 Cal.4th at p.81.)

 

 

Even though Tostado may owe a duty to the public to drive the ambulance safely when not in use for medical care, the injury to Gutierrez occurred while Tostado, a medical provider, was performing the integral function of transporting a patient by ambulance. The trial court correctly concluded that MICRA’s one-year statute of limitations applied to Gutierrez’s negligence claims.

 

 

 

 

 

(California Court of Appeal, Dec. 1^st, 2023, Gutierrez v. Tostado, Docket No. H049983, Certified for Publication)