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United States District Court, S.D. New York

December 8, 2005.


The opinion of the court was delivered by: ROBERT CARTER, Senior District Judge


Park Place Entertainment, Corp. ("Park Place") originally brought this action, seeking reimbursement of defense costs and indemnification from its liability insurer, Transcontinental Insurance Company ("Transcon"). Presently before the court is Transcon's renewed motion for summary judgment on the sole remaining issue of defense costs incurred after June 9, 2005.


  Park Place and Transcon executed a general commercial liability policy on July 10, 2000. Ewing Aff. Ex. 10. Upon submission of a claim under that policy, Transcon denied liability and defense coverage to Park Place in three related lawsuits (the "lawsuits").*fn1 The lawsuits were all related to Park Place's alleged interference with business relations between various tribal governments and other casino operators.*fn2 The court, in an earlier opinion, denied Transcon's motion for summary judgment, holding that the insurer had not demonstrated that the basis of the lawsuits fit entirely within a policy exclusion. Park Place Entm't. Corp. v. Transcon. Ins. Co., 225 F.Supp.2d 406 (S.D.N.Y. 2002) (Carter, J.) (hereinafter "Park Place I").

  After further developments in the lawsuits, Transcon made a renewed motion for summary judgment. While this motion was sub judice, the parties settled many of Park Place's claims. Stipulation of the Parties, July 29, 2005. All that remains is the issue of whether Transcon is liable for the defense costs incurred after June 9, 2005, in one of the three lawsuits. The remaining lawsuit was brought by Catskill Development L.L.C. ("Catskill.") See Catskill Dev., L.L.C. v. Park Place Entm't Corp., 345 F. Supp. 2d 360 (S.D.N.Y. 2004) (McMahon, J.) (hereinafter the "Catskill lawsuit.")


  Park Place argues that in denying Transcon's earlier motion for summary judgment (Park Place I, 225 F.Supp.2d at 412), the court held that Transcon has an ongoing duty under the insurance policy to fund Park Place's legal defense. Park Place asserts that this ongoing duty is "the law of the case." Pls.' Mem. 8-10; See generally 1B J. Moore, J. Lucas & T. Currier, MOORE'S FEDERAL PRACTICE ¶ 0.404[1], at 117 (1991). However, Park Place has misconstrued the court's ruling. The court only held that Transcon had not established that they had no presently existing duty to fund Park Place's defense of the lawsuits. Transcon's new argument that developments in the Catskill lawsuit relieved them of the duty to defend or indemnify Park Place as of July 9, 2005 is consistent with the court's earlier opinion.

  At the time the court ruled on Transcon's earlier motion for summary judgment, Catskill was not yet precluded from raising a claim for defamation at trial, despite the fact that their complaint had not included one. Because there was a possibility that such a claim would be raised, the insurer was required to provide a defense to the Catskill lawsuit.

  The question of whether Transcon's duties to Park Place might end before the final disposition of the lawsuits was not decided in Park Place I. Accordingly, there has been no attempt to relitigate any issue. Park Place's invocation of law of the case doctrine is inapposite. See 18 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure § 4478, at 788 (1981).

  At the time the earlier motion was decided, Catskill would still have been able to raise a claim of defamation at trial because their complaint contained accusations that employees of Park Place had made defamatory remarks. Because these allegations could have provided the basis for a claim of defamation, Catskill could have moved to amend their complaint accordingly. F.R. Civ. P. 15(a); see Ricciuti v. N.Y.C. Transit Authority, 941 F.2d 119, 123 (2d Cir. 1991).

  At the time of the court's ruling in Park Place I, it was not yet clear that all the claims to be raised at trial would fall outside of Park Place's insurance policy. However, Catskill later waived their right to raise a defamation claim, by making concessions before trial. In their reply memorandum offered in further support of a motion in limine, Catskill disavowed the allegation that Park Place employees had made any defamatory statements. Catskill Dev., L.L.C. v. Park Place Entm't Corp., 217 F.Supp.2d 423, 436 (S.D.N.Y. 2002) (McMahon, J.). Furthermore, the trial court ruled that Catskill had not "challenge[d] Park Place's argument that there is not evidence of the other alleged derogatory statements listed above." Id. By conceding that no evidence of defamation would be offered, Catskill foreclosed the possibility of adding such a claim to the complaint.

  The claim of defamation was clearly related to the series of connected transactions that were the subject of the Catskill lawsuit. Since this transactionally related claim of defamation was abandoned and is barred after a decision was reached on the merits, Catskill is precluded from raising any such a claim of defamation in the future.*fn3 Woods v. Dunlop Tire Corp., 972 F.2d 36, 38 (2d Cir. 1992); see also RESTATEMENT (SECOND) OF JUDGMENTS § 19, 24 (1991).*fn4

  "An insurer may withdraw from an ongoing defense if it becomes clear that the claim is wholly outside the indemnification agreement." International Bus. Machs. Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 144 (internal citations omitted). As such, Transcon could withhold support for Park Place's defense to the Catskill lawsuit, by the time of the settlement if either the complaint or extrinsic evidence had established that all of the claims raised were outside of the policy coverage. Id. at 148.

  The preclusive effect of the final judgment prevents any future lawsuit on the basis of the alleged defamation that would require Transcon to provide a defense. Consequently, as of the date of the settlement agreement, extrinsic evidence had established that Catskill's claims were wholly outside of Park Place insurance coverage.*fn5 Transcon's withdrawal from the defense of the lawsuit was proper, and they are not liable for any of Park Place's defense expenses after the date of the settlement.


  Summary judgment is GRANTED to the defendant on the sole remaining issue of whether Transcon must compensate Park Place for their defense of the Catskill lawsuit after July 9, 2005.



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