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Utica Mutual Insurance Co. v. Employers Insurance Co. of Wausau

United States District Court, N.D. New York

September 22, 2014

UTICA MUTUAL INSURANCE COMPANY, Plaintiff,
v.
EMPLOYERS INSURANCE COMPANY OF WAUSAU and NATIONAL CASUALTY COMPANY, Defendants.

HUNTON & WILLIAMS, L.L.P., Syed S. Ahmad, Esq., McLean, Virginia, Attorneys for Plaintiff.

Keith A. Dotseth, Esq., Melissa M. Weldon, Esq., LARSON KING, L.L.P., St. Paul, Minnesota, Attorneys for Defendants.

MEMORANDUM DECISION AND ORDER

NORMAN A. MORDUE, Senior District Judge.

This case arises out of a dispute under certain reinsurance agreements that plaintiff Utica Mutual Insurance Company ("Utica Mutual") entered into with defendants National Casualty Company ("National Casualty") and Employers Insurance Company of Wausau ("Wausau"). Citing the Court's diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(2), Utica Mutual filed this action seeking a judgment declaring that the attorneys from Hunton & Williams should not be disqualified from representing it in underlying arbitration with defendants. Utica Mutual also asks the Court, under Section 5 of the Federal Arbitration Act, 9 U.S.C. § 5, to order defendants to follow "the methodology provided in the Agreements to appoint an Umpire and to allow the arbitration to proceed."[1] Alternatively, Utica Mutual "asks the Court to appoint an Umpire selected from three candidates to be nominated by Utica Mutual." Defendants have filed a counterclaim seeking a declaratory judgment disqualifying Hunton & Williams from representing Utica Mutual in the underlying arbitrations. Dkt. No. 30.

Presently, there are three motions before the Court: (1) plaintiff's motion to dismiss defendants' counterclaim (Dkt. No. 34); (2) plaintiff's motion for summary judgment (Dkt. No. 64); and (3) defendants' request under Rule 56(d) of the Federal Rules of Civil Procedure that the Court deny or defer ruling on plaintiff's motion for summary judgment until defendants have had the opportunity to conduct discovery (Dkt. No. 73). For the reasons discussed below, plaintiff's motions are denied and defendants' request to conduct discovery is granted.

MOTION TO DISMISS

Counterclaims

In their answer (Dkt. No. 30), defendants advance the following counterclaims:

1. National Casualty is an insurance company organized and existing under the laws of the State of Wisconsin; its principal place of business is in the County of Marathon in the State of Wisconsin.
2. Wausau is an insurance company organized and existing under the laws of the State of Wisconsin; its principal place of business is in Massachusetts.
3. Utica is an insurance company organized and existing under the laws of the State of New York; its principal place of business is in the State of New York.
4. National Casualty and Utica, on the one hand, and Wausau and Utica, on the other hand, are separately parties to a number of reinsurance contracts, including the following three contracts:
• Third Casualty Excess Reinsurance Contract, effective July 1, 1975, though June 30, 1980.
• Second Casualty Excess Contract, effective July 1, 1976, through June 30, 1978.
• Fourth Casualty Excess Reinsurance Contract, effective July 1, 1978, through June 30, 1980.
5. Upon information and belief, Utica was involved in a dispute, and, ultimately, coverage litigation with its insured, Morton-Norwich Products, Inc. ("Morton-Norwich"). During that dispute and litigation, Utica shared a common interest with its reinsurers, including Wausau and National Casualty. Hunton & Williams represented those common interests during the Morton-Norwich dispute and litigation, such representation occurring primarily in the Eastern District of Pennsylvania.
6. Upon information and belief, Hunton & Williams actively engaged in negotiating the settlement of the Morton-Norwich claims.
7. Given Wausau and National Casualty's status as reinsurers of Utica, the efforts of Hunton & Williams to evaluate and settle the Morton-Norwich claims advanced the common interests of Utica, Wausau, and National Casualty in seeking to minimize the liability to Morton-Norwich.
8. Utica has submitted separate billings to National Casualty and Wausau with respect to the settlement of the underlying insurance claims made by Morton-Norwich. Upon information and belief, those billings include amounts billed by Hunton & Williams for its representation in the underlying Morton-Norwich claims.
9. Upon receiving Utica's reinsurance billings, Wausau and National Casualty separately raised various questions in connection with its purported obligation under the reinsurance contracts to reimburse Utica for a share of Utica's settlement with Morton-Norwich.
10. Before providing certain information to Wausau or National Casualty concerning Morton-Norwich's claims, Utica insisted that both Wausau and National Casualty execute confidentiality agreements. In those agreements, Utica acknowledged that some of the information might be privileged attorney-client communications (including communications with Hunton & Williams), but that such information was subject to the joint defense privilege. The joint defense privilege applied because Hunton & Williams jointly defended the interests of Utica, Wausau, and National Casualty in regards [sic] to the Morton-Norwich claims that are the subject of the reinsurance billings.
11. On or about May 24, 2012, without having answered Wausau or National Casualty's questions, Utica, through Hunton & Williams, demanded arbitration separately against Wausau and National Casualty on the Morton-Norwich claims.
12. The arbitrations that Utica has demanded are substantially related to the Morton-Norwich claims in which Hunton & Williams represented the interests of Utica, Wausau, and National Casualty.
13. Neither Wausau nor National Casualty has granted Hunton & Williams permission to represent Utica in its proceedings adverse to Wausau or National Casualty.
14. On information and belief, given the role that Hunton & Williams played in evaluating and settling the Morton-Norwich claims, Hunton & Williams' attorneys are likely to be necessary witnesses in the reinsurance arbitration demanded by Wausau. According to Hunton & Williams' own promotional materials, the attorneys involved in the Morton-Norwich claims and the attorneys involved to date in the arbitration that Utica has demanded work in the same department, a department consisting of only fifteen attorneys.
15. On or about June 23, 2012, counsel for Wausau and National Casualty separately responded to Utica's arbitration demands, denying any obligation under the reinsurance agreements to reimburse Utica with respect to the Morton-Norwich claims. Moreover, Wausau and National Casualty both pointed out that the Rules of Professional Conduct applicable to Hunton & Williams required that said firm withdraw from its representation of Utica adverse to Wausau and National Casualty. Such Rules include, but are not limited to, Rules 1.7, 1.9, 1.10, and 3.7 of ...

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