Outside Inhouse Lawyer Blog : New York & Seattle Corporate Dispute Lawyer & Attorney : Grace M. Healy : Outside counsel : King County, Tacoma, Bellevue

One of the things that I enjoy about being a lawyer is dealing with and learning new things every day. This weekend I learned that using the word “tender” as opposed to “offer” and being very careful in making certain that insurance proceeds were paid to the correct party was expensive for an insurer in Kansas.

Fajardo v. Safeco Insurance Co., from the US District Court for Kansas, was an action to enforce a settlement – not a wrongful death action, although the underlying claim arose following the death of Mr. Fajardo in an auto accident. Plaintiff-heirs claimed they were entitled to interest on the policy limits as they had not been paid within thirty days after they had agreed to a settlement with the other driver’s insurance company. (Payment within thirty days after an insurance settlement is a Kansas statutory requirement.  If payment is not made, interest begins to accrue at 18%.) The insurer countered that it was not required to pay the funds within thirty days because the statute did not apply, and because the payment was not due until the court had apportioned the settlement, which is required for a wrongful death recovery in Kansas.

Decision was in favor of the plaintiffs. The 30-day payment requirement applied and, because a settlement is not a “recovery”, apportionment was not necessary. Therefore, there was a settlement at the time that the plaintiffs accepted the tender:

“The parties have stipulated that the Defendant "tendered" (a stronger term than ‘offered’) policy limits to settle all claims stemming from decedent's death, and that Plaintiffs accepted the tender on the same terms. This was an ‘unconditional and positive acceptance’ which formed a contract.”

This is Kansas law and I’m not a Kansas lawyer, and there are some puzzling facts in the decision, but, the fact that a court would see a difference between being offered policy limits and being tendered policy limits got my attention. Presumably, a claimant might find him/herself irrevocably bound after indicating acceptance of a tender.  In any event, it is something to think about when making an offer, or accepting one.

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I know I didn't do a blog post for more than three months and am now doing my second post in two days.  It isn't a New Year resolution, I simply came across two cases that seem to be of general interest to commercial lawyers.  Today's case shows the importance of the way in which a challenge to an arbitration clause is framed.  Challenge just the arbitration clause, you're in court; the entire agreement, you're in arbitration.

Everyone I know who has purchased a newly constructed home has had some issues.  The plaintiff-purchasers and children in Townsend v. The Quadrant Corporation apparently had more than some.  They sued in Superior Court for outrage, fraud, unfair business practices, negligence, negligent misrepresentation, rescission and breach of warranty.  The seller, and its parent and its parent corporation, moved to compel arbitration, based upon a clause in the purchase/sale agreement.  (The parent corporations’ motion for summary judgment was denied; the decision also discusses when compelling arbitration in waived.)

The Supreme Court ruled – in an opinion signed by four justices – that because plaintiffs challenged the validity of the entire purchase/sale agreement, not just the arbitration provision, the claim would be determined by an arbitrator.  The opinion ruled that the children’s claims, which tracked the parents’ claims would also be arbitrated on the theory of equitable estoppel.  

However, a concurrence/dissent signed by five justices stated that the children’s claims would not be subject to arbitration because they were not signatories to the purchase/sale agreement.

I have no idea or position regarding the merits of these claims, or the facts in this matter, and it is helpful for any business operating in this state to have the court speak on enforceability of arbitration clauses.   But this seems puzzling to me – why isn’t the concurrence/dissent the primary opinion, it is signed by the majority of the justices.  More disturbing is the apparent result that the non-signatory parent corporations are going to arbitration, while the non-signatory children will have a court determine these same claims.  I doubt this made anyone happy.

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An Appellate Division, First Department, decision handed down yesterday, Ostrov v. Rozbruch, should be must reading for any lawyer involved in filing a complaint, supplying a bill of particulars, or filing or responding to a summary judgment motion in New York state court. 

Defendant/doctor appealed the denial of summary judgment in regard to a medical malpractice theory that was more fully developed by the plaintiff in supplemental submissions after the initial oral argument of the defendant's summary judgment motion.  The Appellate Division unanimously ruled that supplemental submissions are only permissible in very rare circumstances that weren’t present in this case. Absent those rare circumstances, the CPLR procedure must be followed.  Summary judgment granted to the defendant.

For me, reading the decision – without the benefit of the entire record – this seemed pretty close as to whether the plaintiff had identified the issue in the complaint or the bill of particulars, and the trial court was trying to be fair to the plaintiff and defendant in allowing more briefing on the point. 

However, there seem to be policy considerations at work -- the opinion notes that summary judgment is supposed to be expeditious, and, in this case, seventeen (17) months had elapsed between filing of the motion and the trial court’s final order.  Therefore, my interpretation of this decision is: motions are to be decided, not held over; the CPLR is really the rule and second bites of the apple will be permitted only in the rarest of circumstances; and/or do not even think of sandbagging an opposing party with a new theory at the summary judgment stage, whether intentional or not.

In other (nicer) words, the lesson here is that a plaintiff must clearly plead all of his or her theories in the complaints and bill of particulars, and provide evidence to support them in opposition to summary judgment.  Maybe the message to the trial court is to exercise its discretion at risk of reversal.

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