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1 SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: CIVIL TERM : PART 59
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ZURICH AMERICAN INSURANCE COMPANY,
3
Plaintiff,
4 Index No.
-against- 652336/2018
5
FIRST SPECIALTY INSURANCE CORPORATION,
6 WESTERN BEEF RETAIL, INC., AND WESTERN
BEEF PROPERTIES, INC.,
7
Defendants.
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Transcript of Motion Proceedings
9 New York Supreme Court
60 Centre Street
10 New York, New York 10007
October 29, 2019
11
12 B E F O R E:
13 HON. DEBRA A. JAMES, Justice of the Supreme Court
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A P P E A R A N C E S:
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COUGHLIN DUFFY LLP
16 Attorneys for the Plaintiff
88 Pine Street, 28th Floor
17 New York, New York 10005
BY: LINDSEY LAFOND, ESQ.
18
19 BATES CAREY LLP
Attorneys for Defendant
20 First Specialty Insurance Corporation
191 North Wacker Drive, Suite 2400
21 Chicago, Illinois 60606
BY: MICHAEL PASSMAN, ESQ.
22 (Continued on the next page.)
23 * * * * * * * * * * * *
LAURA L. LUDOVICO
24 Senior Court Reporter
60 Centre Street - Room 420
25 New York, New York 10007
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1 A P P E A R A N C E S: (continued)
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ABRAMS, GORELICK, FRIEDMAN & JACOBSON, P.C.
3 Attorneys for Defendant
Western Beef Properties, Inc.
4 1 Metrotech Center - Suite 1701
Brooklyn, New York 11201
5 BY: JULIE LEVINE, ESQ.
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1 THE COURT: Please, in the order of the caption
2 state your appearances.
3 MS. LAFOND: Lindsey LaFond, Coughlin Duffy LLP
4 on behalf of Zurich American Insurance Company.
5 MR. PASSMAN: Michael Passman, Bates Carey LLP on
6 behalf of First Specialty Insurance Corporation.
7 MS. LEVINE: Julie Levine from Abrams Fensterman
8 for Western Beef Retail and Western Beef Properties.
9 THE COURT: Counsel LaFond, your argument. Start
10 with your reply. Frankly, you've cited case law that
11 states what about joint representation?
12 MS. LAFOND: Yes, Your Honor. We have obtained a
13 waiver, as requested by the Court, in the September 3, 2019
14 order. Counsel opposed the motion to compel based on --
15 THE COURT: No, I know that. I just want you to
16 get right to it. I'm a hot bench.
17 MS. LAFOND: Yes, Your Honor.
18 THE COURT: Get right to the crux of the
19 argument, which is -- I mean, your opponents say joint
20 representation, there's no waiver by the co-client of the
21 privilege and you, I think, say the law is quite the
22 contrary.
23 MS. LAFOND: Yes, Your Honor. In a joint
24 representation, all of the information disclosed by the
25 codefendants are not privileged as between those
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1 codefendants unless there is some specific agreement made
2 at the start of the representation, which there was not in
3 this case.
4 THE COURT: Neither opponent comes forward with
5 any agreement to the contrary, correct?
6 MS. LAFOND: No, Your Honor.
7 THE COURT: All right. I really don't have any
8 further questions.
9 MS. LAFOND: There's one other --
10 THE COURT: Okay, go ahead.
11 MS. LAFOND: One other point that I think might
12 be helpful is that at the time Western Beef determined
13 there was a conflict of interest on the eve of trial in the
14 underlying action, in the joint representation, Western
15 Beef, Serota and Zurich entered into a conflict waiver with
16 the Brown Firm, allowing the Brown Firm to continue to
17 represent Serota in the underlying action trial, which the
18 Brown Firm did. And so all of the parties were aware --
19 THE COURT: You argued that in your papers?
20 MS. LAFOND: In the original motion to compel,
21 yes.
22 THE COURT: All right. Thank you.
23 MS. LAFOND: Thank you, Your Honor.
24 THE COURT: Let's hear the opposing argument.
25 MR. PASSMAN: Thank you. Would you prefer I
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1 stand here or --
2 THE COURT: At the podium. It is easier for the
3 court reporter to record what you are saying. Please talk
4 at a slow pace and loudly.
5 MR. PASSMAN: Thank you, Your Honor. Michael
6 Passman for First Specialty.
7 The cases cited by Zurich say that when there are
8 two clients jointly represented by the same attorney, the
9 communications that are privileged as against the rest of
10 the world can be shared within those two clients, are not
11 privileged against those two clients, but the problem here
12 with Zurich's motion is that Zurich was never a client to
13 Mr. Brown, Serota was a client and Western Beef was a
14 client and Western Beef opposes this motion.
15 THE COURT: And Serota has waived its rights.
16 MR. PASSMAN: Serota has waived its rights as to
17 its privilege, but Zurich has not cited any authority, and
18 I don't think there is any authority, that in a joint
19 representation the waiver of one client's privilege waives
20 or effectuates a waiver of the other client's privilege or
21 that one client can authorize the waiver or the production
22 of documents that the other client jointly holds that
23 privilege to. And I think that there's a lot of
24 situations --
25 THE COURT: Well, I thought the law says --
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1 there's no -- there's no -- so I think you're saying this
2 is not a controversy between Serota and Western Beef.
3 MR. PASSMAN: That's exactly right, Your Honor.
4 THE COURT: But isn't Zurich the real party in
5 interest, wasn't it?
6 MR. PASSMAN: No, Your Honor.
7 THE COURT: In other words, it was a carrier for
8 Serota, no?
9 MR. PASSMAN: Your Honor, Zurich is a carrier for
10 Serota.
11 THE COURT: So they were the real party in
12 interest, right? In other words, it was on the hook and
13 that's why this is even here, for recovering whatever
14 damages were recovered against Serota.
15 MR. PASSMAN: That's true, Your Honor, except the
16 context of this case and the history of this case is that
17 when this underlying case first arose, Mr. Brown
18 represented Western Beef and Serota and that defense was
19 paid by for Western Beef. It was not paid for by Zurich.
20 THE COURT: But the real party in interest,
21 always in terms of recovery, right, indemnification, was
22 going to be Zurich?
23 MR. PASSMAN: At that time, Your Honor, the
24 parties -- Zurich -- at that time, Your Honor, Zurich was
25 not defending the case, Zurich was not saying that it was
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1 going to indemnify the case. Western Beef --
2 THE COURT: Yes, but ultimately, First Specialty
3 determined that it had a conflict, right?
4 MR. PASSMAN: First Specialty did not determine
5 that it had a conflict either, Your Honor.
6 THE COURT: Remind me again what happened.
7 MR. PASSMAN: So in the underlying case
8 Mr. Garrett sued Western Beef and Serota. Western Beef has
9 a policy with First Specialty, Serota has a policy with
10 Zurich. First Specialty's policy says that it does not
11 have any duty to defend or indemnify until certain
12 self-insured retention is exhausted for reasons that go to
13 the merits of the case and that are not really in this
14 motion.
15 THE COURT: What is this case, by the way?
16 MR. PASSMAN: This case is Zurich paid ultimately
17 for Mr. Garrett's damages and they would like --
18 THE COURT: Right, because of the adjudication
19 finding Serota liable.
20 MR. PASSMAN: Serota was held liable. Zurich
21 paid it and Zurich wants to recover from First Specialty
22 and Western Beef, but the problem with this motion is that
23 during, probably, I'd say 90 percent of the time that
24 Mr. Brown was representing Western Beef and Serota jointly,
25 that defense was not being provided by Zurich. Zurich was,
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1 in effect, a stranger to that defense. That defense was
2 being provided by Western Beef.
3 THE COURT: I'm still trying to figure out, when
4 did defense counsel, provided by First Specialty -- wasn't
5 there some type of determination that --
6 MR. PASSMAN: Yes, Your Honor.
7 THE COURT: -- where they basically threw Serota
8 under the bus?
9 MR. PASSMAN: That is Zurich's argument, Your
10 Honor. And respectfully, First Specialty was not providing
11 that defense. I think that goes to the merits, but that's
12 an important point I just want to make. There was a
13 determination that there was a conflict and Mr. Brown can
14 no longer represent both parties, but that determination
15 was not made by First Specialty and I believe actually, it
16 was made --
17 THE COURT: No, counsel for First Specialty,
18 right, on behalf of First Specialty and --
19 MR. PASSMAN: No, Your Honor, Mr. Brown did not
20 represent First Specialty. He was not counsel on behalf of
21 First Specialty.
22 THE COURT: Well, who provided him?
23 MR. PASSMAN: Mr. Brown's defense was being paid
24 for by Western Beef is my understanding.
25 THE COURT: I mean, I know this is in the record,
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1 so I'm not sure why I'm even asking. I guess I'm asking
2 because I'm trying to figure out whether Zurich is
3 really -- you know, was the party in interest, right? In
4 other words, you're saying there's this whole retention
5 business -- I'm a little confused -- so that the amount of
6 retention that Western Beef had to pay out of its pocket
7 for "X" amount of defense, correct?
8 MR. PASSMAN: That's correct, Your Honor.
9 THE COURT: All right. And under a policy issued
10 by First Specialty?
11 MR. PASSMAN: That's correct, Your Honor.
12 THE COURT: And then at some point, that counsel
13 would be entitled to be paid under the policy, correct?
14 MR. PASSMAN: In theory, if the self-insured
15 retention was exhausted and --
16 THE COURT: Right, but it was never exhausted and
17 then at some point the Brown Firm determined that, well, I
18 can't represent both at the eve of trial.
19 MR. PASSMAN: Someone made that representation --
20 I mean made that determination.
21 THE COURT: It had to be Brown.
22 MR. PASSMAN: It wasn't my client.
23 THE COURT: No, I said it had to be Brown, who
24 Western Beef paid under the policy up to a certain point.
25 So I do believe that Western Beef, up until that point, was
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1 certainly required to indemnify, right, to reimburse or to
2 cover any award against Western Beef and you're saying
3 well, against Serota as well, at that point.
4 MR. PASSMAN: Your Honor --
5 THE COURT: -- Zurich is not a real party in
6 interest.
7 MR. PASSMAN: There was and there is a dispute as
8 to whether or not Western Beef or First specialty have to
9 pay for Serota's liability. That's what this case is
10 about, but the important point of what I think you just
11 said is that up until that point that someone determined
12 that Mr. Brown wasn't going to be representing both
13 parties --
14 THE COURT: No, it had to be Brown. Give me a
15 break. Who else would it have been? It had to be
16 Mr. Brown, who, under the insurance policy issued by First
17 Specialty in the first instance was paid by the insured
18 himself and then ultimately, it was exhausted and it would
19 be paid by First Specialty. I don't think that's --
20 maybe -- you know, maybe that's not all in here, but I
21 mean, it's sort of not controverted, right?
22 MR. PASSMAN: Your Honor, I think the important
23 point, though, is up to that point, Zurich was not
24 providing the defense, Zurich was not part of that defense,
25 Zurich was not offering to pay, was not saying they --
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1 THE COURT: Maybe not offering to pay, but they
2 were certainly the carrier for Serota, correct?
3 MR. PASSMAN: They were the carrier for Serota
4 and they were on notice of the case, but they were not
5 defending.
6 THE COURT: They were on notice of what?
7 MR. PASSMAN: They were on notice of the case.
8 THE COURT: Of the claim?
9 MR. PASSMAN: They were --
10 THE COURT: And why would they be on notice of
11 the claim if they may not ultimately, under their insurance
12 carrier they issued to Serota, be the real party in
13 interest?
14 MR. PASSMAN: Well, Your Honor, I do contend that
15 they do ultimately owe that liability, but --
16 THE COURT: They may, but my whole question is
17 how come you're saying one thing; well, yeah, they
18 ultimately owe the money, but they're not the real party in
19 interest, Judge, no?
20 MR. PASSMAN: But during the time that most of
21 these privileged documents were created, they had not
22 acknowledged that responsibility.
23 THE COURT: I don't know that I'm convinced of
24 what you're saying, but you make a good argument, but I'm
25 not sure I'm convinced of what you're saying. In other
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1 words, there's some kind of disconnect. They don't become
2 a party in interest until we're ready for them to pay the
3 judgment adjudicated against Serota. I've got a problem
4 with that argument. So we'll wait and once Serota is
5 adjudicated, you know, to be responsible, an award is made,
6 Judge, only then do they become the real party in interest.
7 MR. PASSMAN: But, Your Honor --
8 THE COURT: I have a problem with that, I do.
9 MR. PASSMAN: -- if I may respond to that.
10 THE COURT: I think I have to deliberate over
11 this. I thought I was going to be able to decide this
12 right here. I may have to deliberate. I think you made
13 your argument.
14 MR. PASSMAN: May I respond to that?
15 THE COURT: There's no case that's helpful,
16 right?
17 MR. PASSMAN: I do not believe that there's a
18 case that's helpful.
19 THE COURT: No, in terms of your position.
20 MR. PASSMAN: No, Your Honor, except this.
21 There's -- there is --
22 THE COURT: In other words, are there any cases
23 that say the representation of the insured is not the
24 representation of the insurance carrier who often is the
25 real party in interest? There are no cases, so that's why
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1 I say I have to deliberate. I don't think you arguing back
2 and forth is going to help me at this point. I understand
3 the argument, but there is no cases that actually say this.
4 MR. PASSMAN: May I just --
5 THE COURT: Wait.
6 The client, the insured, may be entitled --
7 MR. PASSMAN: Yes.
8 THE COURT: -- to his file, but the carrier is
9 not. Do you have a case? That's all I'm asking you and
10 then really, I want to hear from your cocounsel.
11 MR. PASSMAN: I do not have a case because, Your
12 Honor, there are situations where the carrier is entitled
13 to that information when they are defending, when they are
14 involved in the case. Zurich chose not to.
15 THE COURT: So you're saying, Counselor Passman,
16 Judge, as far as I know, this is a case of first
17 impression?
18 MR. PASSMAN: I think it is.
19 THE COURT: As far as you know?
20 MR. PASSMAN: Yes, yes.
21 THE COURT: I'm sure you did research.
22 MR. PASSMAN: Yes, Your Honor.
23 THE COURT: And you didn't find a case where the
24 Court ruled insured entitled to the file, insurance carrier
25 not entitled to the file? That's the question.
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1 MR. PASSMAN: Not one quite like this, Your
2 Honor.
3 THE COURT: Or even slightly like it.
4 MR. PASSMAN: There are --
5 THE COURT: You would have told me. What case?
6 I can look it up now. Your time is up. I'll look up the
7 case.
8 MR. PASSMAN: I don't have a case, Your Honor.
9 THE COURT: Mr. Passman, good argument.
10 MR. PASSMAN: Thank you, Your Honor.
11 THE COURT: Take a seat, please.
12 All right. Counselor, who's left?
13 MS. LEVINE: That would be me, Your Honor.
14 THE COURT: Do you agree with him?
15 MS. LEVINE: Yes, I do, but I just wanted to add
16 some additional things.
17 THE COURT: Do you have a case where the Court
18 said insured certainly is entitled to the counsel file,
19 carrier not entitled to the counsel file?
20 MS. LEVINE: No, I do not have case before me,
21 Your Honor.
22 THE COURT: All right. So let's just get that
23 clear. I'm going to have to do some research myself.
24 There may not be a case, but I'm not convinced that this
25 has never come up.
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1 MS. LAFOND: Your Honor, may I respond?
2 THE COURT: Excuse me. No, you may not. It's
3 her turn. After she's finished, you can say, Judge, may I
4 have a brief reply?
5 Off the record.
6 (WHEREUPON, a discussion was held off the
7 record.)
8 THE COURT: Counsel Levine, would you head over
9 to the podium and tell me what you want?
10 MS. LEVINE: Good afternoon, Your Honor. There
11 is no need for me to rehash the arguments of the
12 codefendants because --
13 THE COURT: You get points for that.
14 MS. LEVINE: -- because we are in agreement on
15 the issues at hand. All I did want to add is that in the
16 event that plaintiff is seeking these documents, the
17 defendants do not believe that they're even relevant to the
18 case at bar.
19 THE COURT: Wait, wait, wait, wait, wait. No,
20 no, no. Wait a minute. In the event?
21 MS. LEVINE: I'm saying that the threshold issue
22 in this matter is that we do not believe that these
23 documents that plaintiff are seeking to be produced is --
24 THE COURT: No, no, Judge, in the event plaintiff
25 is seeking these documents, that's the motion.
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1 MS. LEVINE: Yes. Thank you, Your Honor. Please
2 let me strike that line from the record if that is okay
3 with you.
4 THE COURT: No, I don't have to strike it. Go
5 ahead.
6 MS. LEVINE: Okay. Let me restart my argument,
7 if I may.
8 THE COURT: You're saying the documents aren't
9 even material?
10 MS. LEVINE: Yes, the documents they're seeking
11 aren't even material. At trial the judge, as a matter of
12 law, held that Serota is liable for the injury because they
13 owned and operated the area of where the plaintiff in the
14 underlying action fell, and that was just based on a matter
15 of law. That decision was not appealed and that stands.
16 And now the plaintiff in this case, Zurich, is coming in
17 and saying that because Mr. Brown no longer represented
18 Western Beef because of this conflict, that they were
19 damaged, but the damage was not because of that, the damage
20 was because they were the landlords of the building and
21 therefore, because of that, they were liable.
22 So we do not believe that the documents that
23 Zurich is seeking to be produced that are subject to
24 attorney-client privilege should be produced in this
25 matter.
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1 THE COURT: So essentially you're asking for a
2 protective order.
3 MS. LEVINE: Yes, we just do not believe that
4 they're relevant.
5 THE COURT: You probably should have cross-moved
6 for that, but, okay, you're saying, Judge, we want a
7 protective order because it's not material.
8 All right. Very good, Counselor.
9 MS. LEVINE: Thank you.
10 THE COURT: Let's hear a brief reply from
11 Counselor LaFond.
12 MS. LAFOND: Thank you, Your Honor.
13 THE COURT: Let's start with the last one.
14 MS. LAFOND: I will, Your Honor.
15 THE COURT: How is it material?
16 MS. LAFOND: So this case is an equitable
17 estoppel action by Zurich against Western Beef and First
18 Specialty. Essentially the case is that up until the eve
19 of trial, the actual literal issue --
20 THE COURT: I'm not really sure that's what
21 equitable estoppel is. I'll be honest, I thought that was
22 sort of an evidentiary principle. It's a cause of action.
23 MS. LAFOND: Yes, Your Honor, estoppel -- one
24 moment.
25 THE COURT: It's a cause of action.
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1 MS. LAFOND: Under the principles of estoppel, an
2 insured --
3 THE COURT: I want to know what the complaint
4 says.
5 MS. LAFOND: The complaint says that --
6 THE COURT: A cause of action for equitable
7 estoppel?
8 MS. LAFOND: Yes. "An insurer, though, not, in
9 fact, obligated to provide coverage --" which we do say
10 that there is coverage under the First Specialty policy for
11 Serota -- "may be precluded from denying coverage upon
12 proof of the insurer by its conduct, otherwise lulled the
13 insured into sleeping on its rights under the insurance
14 contract."
15 THE COURT: Is that a cause of action or really a
16 basis for declaratory judgment?
17 MS. LAFOND: This is an action for declaratory
18 judgment, yes, Your Honor.
19 THE COURT: So that's what I thought. So that's
20 the cause of action. So you're saying it's based on a
21 declaratory judgment action, which answers my question, and
22 you're saying it's for a declaration that First Specialty
23 must pay the judgment and you're saying the rationale is
24 the doctrine of equitable estoppel. So you're saying these
25 records are certainly pertinent with respect to that
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1 question?
2 MS. LAFOND: Yes, Your Honor, and I have case
3 law.
4 THE COURT: Repeat again, what is the
5 principle -- now that I know it's not an action for
6 equitable estoppel, Judge, it's an action for declaratory
7 judgment based on the principles of equitable estoppel?
8 MS. LAFOND: Yes, Your Honor.
9 THE COURT: Now that I know that, you can explain
10 to me what it is, what is equitable estoppel?
11 MS. LAFOND: So under the principles of equitable
12 estoppel, "An insurer, though, in fact, not obligated to
13 provide coverage, may be precluded from denying coverage
14 upon proof that the insurer, by its conduct, otherwise
15 lulled the insured into sleeping on its rights under the
16 contract."
17 THE COURT: And how do you address Counselor
18 Levine's argument that the Court ruled as a matter of law
19 that because Serota owned the property, it was liable or
20 controlled the property, the portion of the premises where
21 the plaintiff fell? There is no reason to apply the
22 equitable estoppel because nothing that the Brown Firm did
23 would have changed that.
24 MS. LAFOND: It's not only what the Brown Firm
25 did during that entire time of representation, it's also
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1 the actions of Western Beef and First Specialty. Western
2 Beef is using the Brown Firm file as a sword and a shield.
3 Both defendants are asserting that neither one of them
4 retained the Brown Firm to represent Serota in the
5 underlying action, but then who did? We need the Brown
6 Firm file to understand who retained the Brown Firm to
7 represent Serota jointly and also, in order to --
8 THE COURT: I don't know that you need the entire
9 file to do that. It seems to me there is a retainer
10 agreement between the client and the Brown Firm, so why do
11 you need the entire file?
12 MS. LAFOND: So in order to prove estoppel Zurich
13 must prove prejudice, that it was prejudiced in the -- by
14 virtue of First Specialty and Western Beef's conduct and,
15 you know, it's our understanding that the parties went to
16 mediation throughout the underlying case, that a deposition
17 of Serota was not even conducted during that case and so at
18 the time of trial there was no deposition testimony from
19 the Serota witness that --
20 THE COURT: So you're saying the Court's finding
21 may have been based on an incomplete evidentiary record?
22 MS. LAFOND: Yes, Your Honor, and we just don't
23 know --
24 THE COURT: But for the Brown Firm's
25 representation, there would not have been this injury.
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1 All right. So as to the argument that the
2 insurance carrier does not have a right to the client's
3 file, only Serota has a right to the client's file.
4 MS. LAFOND: Your Honor, while Western Beef,
5 under the self-insured retention on First Specialty's
6 policy issued to Western Beef was, to our knowledge, paying
7 for the defense of both Serota and Western Beef.
8 THE COURT: No, he says there was a retention and
9 it had to be exhausted before First Specialty would assume
10 the payment of the legal fees.
11 MS. LAFOND: Yes, that's our understanding up
12 until the time of trial when the conflict was asserted by
13 Western Beef, but Zurich, during that time, was on notice
14 of the claim and was acting essentially as an excess
15 carrier for Serota should the underlying First Specialty
16 policy be exhausted by the Garrett Action.
17 THE COURT: Admittedly, none of this is in these
18 papers, right?
19 MS. LAFOND: They are in the underlying papers,
20 so this motion is --
21 THE COURT: What do you mean "the underlying
22 papers?"
23 MS. LAFOND: They are incorporated by reference
24 into the motion to renew.
25 THE COURT: You should physically attach them and
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1 serve them, right, so everybody knows what you're arguing?
2 In any event, you're saying, Judge, look at the
3 old motion and you'll see it. All right. I understand.
4 I'm going to have to deliberate, so let's go off the
5 record.
6 (WHEREUPON, a discussion was held off the
7 record.)
8 THE COURT: Counselor, continue your argument.
9 MS. LAFOND: Your Honor, there is a case
10 regarding the tripartite relationship and the common
11 interest privilege that extends to an insurer from the
12 insured, which is Shaya B. Pacific LLC v. Wilson Elser
13 Moskowitz Edelman & Dicker LLP. The cite is 38 AD3d 34 --
14 THE COURT: Wait just a minute. And you mention
15 that --
16 MS. LAFOND: That Your Honor --
17 THE COURT: -- this Court cited it in her
18 opinion, denying the prior motion with leave to -- did I --
19 well, I don't know if I said leave. I made an observation.
20 I cited the case, right? What case is it again?
21 MS. LAFOND: And the cite is 38 AD3d 34, and the
22 pin cite is 42 to 43.
23 THE COURT: All right, continue.
24 MS. LAFOND: And, Your Honor, that case discusses
25 the common interest privilege and that the privilege
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1 between an attorney and its client, an insured, extends to
2 the insurer, allowing the insurer to obtain the file of --
3 THE COURT: Pin cite, which one?
4 MS. LAFOND: Forty-two to 43, Your Honor.
5 THE COURT: That's why I asked the question.
6 That looked so familiar and I said I thought that I already
7 did this. I was surprised when your opponent said, Judge,
8 there are no cases. They should have at least pushed back.
9 The opponent should have pushed back.
10 It says: "Assuming, without deciding, that in
11 New York a law firm retained by a carrier to represent its
12 insured may have an attorney-client relationship with both,
13 in assuming further, as such was the case here, we see no
14 conflict of interest in the circumstances at bar."
15 So your opponents would have done a better job
16 had they cited this and said, Judge, because I think their
17 argument would be, had they thought to look at this and
18 they should have cited it, well, the attorney was not
19 retained by this particular carrier, he was retained by
20 another carrier. So that's what they should have argued.
21 So that's the argument, right? So how do you address that?
22 MS. LAFOND: I address that argument by at the
23 time the conflict was asserted by Western Beef, Western
24 Beef allowed the Brown Firm, who had jointly represented
25 both of those parties throughout the entire underlying
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1 litigation, to continue to represent Serota, Zurich's
2 insured, at the time of trial. Western Beef, Zurich and
3 Serota entered into a conflict waiver agreement with
4 Mr. Brown, allowing Serota to move forward. Their argument
5 would be --
6 THE COURT: Okay. You put that in your papers,
Preview
FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 1 1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: CIVIL TERM : PART 59 2 ----------------------------------------X ZURICH AMERICAN INSURANCE COMPANY, 3 Plaintiff, 4 Index No. -against- 652336/2018 5 FIRST SPECIALTY INSURANCE CORPORATION, 6 WESTERN BEEF RETAIL, INC., AND WESTERN BEEF PROPERTIES, INC., 7 Defendants. 8 ----------------------------------------X Transcript of Motion Proceedings 9 New York Supreme Court 60 Centre Street 10 New York, New York 10007 October 29, 2019 11 12 B E F O R E: 13 HON. DEBRA A. JAMES, Justice of the Supreme Court 14 A P P E A R A N C E S: 15 COUGHLIN DUFFY LLP 16 Attorneys for the Plaintiff 88 Pine Street, 28th Floor 17 New York, New York 10005 BY: LINDSEY LAFOND, ESQ. 18 19 BATES CAREY LLP Attorneys for Defendant 20 First Specialty Insurance Corporation 191 North Wacker Drive, Suite 2400 21 Chicago, Illinois 60606 BY: MICHAEL PASSMAN, ESQ. 22 (Continued on the next page.) 23 * * * * * * * * * * * * LAURA L. LUDOVICO 24 Senior Court Reporter 60 Centre Street - Room 420 25 New York, New York 10007 FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 2 1 A P P E A R A N C E S: (continued) 2 ABRAMS, GORELICK, FRIEDMAN & JACOBSON, P.C. 3 Attorneys for Defendant Western Beef Properties, Inc. 4 1 Metrotech Center - Suite 1701 Brooklyn, New York 11201 5 BY: JULIE LEVINE, ESQ. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 3 Proceedings 1 THE COURT: Please, in the order of the caption 2 state your appearances. 3 MS. LAFOND: Lindsey LaFond, Coughlin Duffy LLP 4 on behalf of Zurich American Insurance Company. 5 MR. PASSMAN: Michael Passman, Bates Carey LLP on 6 behalf of First Specialty Insurance Corporation. 7 MS. LEVINE: Julie Levine from Abrams Fensterman 8 for Western Beef Retail and Western Beef Properties. 9 THE COURT: Counsel LaFond, your argument. Start 10 with your reply. Frankly, you've cited case law that 11 states what about joint representation? 12 MS. LAFOND: Yes, Your Honor. We have obtained a 13 waiver, as requested by the Court, in the September 3, 2019 14 order. Counsel opposed the motion to compel based on -- 15 THE COURT: No, I know that. I just want you to 16 get right to it. I'm a hot bench. 17 MS. LAFOND: Yes, Your Honor. 18 THE COURT: Get right to the crux of the 19 argument, which is -- I mean, your opponents say joint 20 representation, there's no waiver by the co-client of the 21 privilege and you, I think, say the law is quite the 22 contrary. 23 MS. LAFOND: Yes, Your Honor. In a joint 24 representation, all of the information disclosed by the 25 codefendants are not privileged as between those Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 4 Proceedings 1 codefendants unless there is some specific agreement made 2 at the start of the representation, which there was not in 3 this case. 4 THE COURT: Neither opponent comes forward with 5 any agreement to the contrary, correct? 6 MS. LAFOND: No, Your Honor. 7 THE COURT: All right. I really don't have any 8 further questions. 9 MS. LAFOND: There's one other -- 10 THE COURT: Okay, go ahead. 11 MS. LAFOND: One other point that I think might 12 be helpful is that at the time Western Beef determined 13 there was a conflict of interest on the eve of trial in the 14 underlying action, in the joint representation, Western 15 Beef, Serota and Zurich entered into a conflict waiver with 16 the Brown Firm, allowing the Brown Firm to continue to 17 represent Serota in the underlying action trial, which the 18 Brown Firm did. And so all of the parties were aware -- 19 THE COURT: You argued that in your papers? 20 MS. LAFOND: In the original motion to compel, 21 yes. 22 THE COURT: All right. Thank you. 23 MS. LAFOND: Thank you, Your Honor. 24 THE COURT: Let's hear the opposing argument. 25 MR. PASSMAN: Thank you. Would you prefer I Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 5 Proceedings 1 stand here or -- 2 THE COURT: At the podium. It is easier for the 3 court reporter to record what you are saying. Please talk 4 at a slow pace and loudly. 5 MR. PASSMAN: Thank you, Your Honor. Michael 6 Passman for First Specialty. 7 The cases cited by Zurich say that when there are 8 two clients jointly represented by the same attorney, the 9 communications that are privileged as against the rest of 10 the world can be shared within those two clients, are not 11 privileged against those two clients, but the problem here 12 with Zurich's motion is that Zurich was never a client to 13 Mr. Brown, Serota was a client and Western Beef was a 14 client and Western Beef opposes this motion. 15 THE COURT: And Serota has waived its rights. 16 MR. PASSMAN: Serota has waived its rights as to 17 its privilege, but Zurich has not cited any authority, and 18 I don't think there is any authority, that in a joint 19 representation the waiver of one client's privilege waives 20 or effectuates a waiver of the other client's privilege or 21 that one client can authorize the waiver or the production 22 of documents that the other client jointly holds that 23 privilege to. And I think that there's a lot of 24 situations -- 25 THE COURT: Well, I thought the law says -- Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 6 Proceedings 1 there's no -- there's no -- so I think you're saying this 2 is not a controversy between Serota and Western Beef. 3 MR. PASSMAN: That's exactly right, Your Honor. 4 THE COURT: But isn't Zurich the real party in 5 interest, wasn't it? 6 MR. PASSMAN: No, Your Honor. 7 THE COURT: In other words, it was a carrier for 8 Serota, no? 9 MR. PASSMAN: Your Honor, Zurich is a carrier for 10 Serota. 11 THE COURT: So they were the real party in 12 interest, right? In other words, it was on the hook and 13 that's why this is even here, for recovering whatever 14 damages were recovered against Serota. 15 MR. PASSMAN: That's true, Your Honor, except the 16 context of this case and the history of this case is that 17 when this underlying case first arose, Mr. Brown 18 represented Western Beef and Serota and that defense was 19 paid by for Western Beef. It was not paid for by Zurich. 20 THE COURT: But the real party in interest, 21 always in terms of recovery, right, indemnification, was 22 going to be Zurich? 23 MR. PASSMAN: At that time, Your Honor, the 24 parties -- Zurich -- at that time, Your Honor, Zurich was 25 not defending the case, Zurich was not saying that it was Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 7 Proceedings 1 going to indemnify the case. Western Beef -- 2 THE COURT: Yes, but ultimately, First Specialty 3 determined that it had a conflict, right? 4 MR. PASSMAN: First Specialty did not determine 5 that it had a conflict either, Your Honor. 6 THE COURT: Remind me again what happened. 7 MR. PASSMAN: So in the underlying case 8 Mr. Garrett sued Western Beef and Serota. Western Beef has 9 a policy with First Specialty, Serota has a policy with 10 Zurich. First Specialty's policy says that it does not 11 have any duty to defend or indemnify until certain 12 self-insured retention is exhausted for reasons that go to 13 the merits of the case and that are not really in this 14 motion. 15 THE COURT: What is this case, by the way? 16 MR. PASSMAN: This case is Zurich paid ultimately 17 for Mr. Garrett's damages and they would like -- 18 THE COURT: Right, because of the adjudication 19 finding Serota liable. 20 MR. PASSMAN: Serota was held liable. Zurich 21 paid it and Zurich wants to recover from First Specialty 22 and Western Beef, but the problem with this motion is that 23 during, probably, I'd say 90 percent of the time that 24 Mr. Brown was representing Western Beef and Serota jointly, 25 that defense was not being provided by Zurich. Zurich was, Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 8 Proceedings 1 in effect, a stranger to that defense. That defense was 2 being provided by Western Beef. 3 THE COURT: I'm still trying to figure out, when 4 did defense counsel, provided by First Specialty -- wasn't 5 there some type of determination that -- 6 MR. PASSMAN: Yes, Your Honor. 7 THE COURT: -- where they basically threw Serota 8 under the bus? 9 MR. PASSMAN: That is Zurich's argument, Your 10 Honor. And respectfully, First Specialty was not providing 11 that defense. I think that goes to the merits, but that's 12 an important point I just want to make. There was a 13 determination that there was a conflict and Mr. Brown can 14 no longer represent both parties, but that determination 15 was not made by First Specialty and I believe actually, it 16 was made -- 17 THE COURT: No, counsel for First Specialty, 18 right, on behalf of First Specialty and -- 19 MR. PASSMAN: No, Your Honor, Mr. Brown did not 20 represent First Specialty. He was not counsel on behalf of 21 First Specialty. 22 THE COURT: Well, who provided him? 23 MR. PASSMAN: Mr. Brown's defense was being paid 24 for by Western Beef is my understanding. 25 THE COURT: I mean, I know this is in the record, Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 9 Proceedings 1 so I'm not sure why I'm even asking. I guess I'm asking 2 because I'm trying to figure out whether Zurich is 3 really -- you know, was the party in interest, right? In 4 other words, you're saying there's this whole retention 5 business -- I'm a little confused -- so that the amount of 6 retention that Western Beef had to pay out of its pocket 7 for "X" amount of defense, correct? 8 MR. PASSMAN: That's correct, Your Honor. 9 THE COURT: All right. And under a policy issued 10 by First Specialty? 11 MR. PASSMAN: That's correct, Your Honor. 12 THE COURT: And then at some point, that counsel 13 would be entitled to be paid under the policy, correct? 14 MR. PASSMAN: In theory, if the self-insured 15 retention was exhausted and -- 16 THE COURT: Right, but it was never exhausted and 17 then at some point the Brown Firm determined that, well, I 18 can't represent both at the eve of trial. 19 MR. PASSMAN: Someone made that representation -- 20 I mean made that determination. 21 THE COURT: It had to be Brown. 22 MR. PASSMAN: It wasn't my client. 23 THE COURT: No, I said it had to be Brown, who 24 Western Beef paid under the policy up to a certain point. 25 So I do believe that Western Beef, up until that point, was Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 10 Proceedings 1 certainly required to indemnify, right, to reimburse or to 2 cover any award against Western Beef and you're saying 3 well, against Serota as well, at that point. 4 MR. PASSMAN: Your Honor -- 5 THE COURT: -- Zurich is not a real party in 6 interest. 7 MR. PASSMAN: There was and there is a dispute as 8 to whether or not Western Beef or First specialty have to 9 pay for Serota's liability. That's what this case is 10 about, but the important point of what I think you just 11 said is that up until that point that someone determined 12 that Mr. Brown wasn't going to be representing both 13 parties -- 14 THE COURT: No, it had to be Brown. Give me a 15 break. Who else would it have been? It had to be 16 Mr. Brown, who, under the insurance policy issued by First 17 Specialty in the first instance was paid by the insured 18 himself and then ultimately, it was exhausted and it would 19 be paid by First Specialty. I don't think that's -- 20 maybe -- you know, maybe that's not all in here, but I 21 mean, it's sort of not controverted, right? 22 MR. PASSMAN: Your Honor, I think the important 23 point, though, is up to that point, Zurich was not 24 providing the defense, Zurich was not part of that defense, 25 Zurich was not offering to pay, was not saying they -- Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 11 Proceedings 1 THE COURT: Maybe not offering to pay, but they 2 were certainly the carrier for Serota, correct? 3 MR. PASSMAN: They were the carrier for Serota 4 and they were on notice of the case, but they were not 5 defending. 6 THE COURT: They were on notice of what? 7 MR. PASSMAN: They were on notice of the case. 8 THE COURT: Of the claim? 9 MR. PASSMAN: They were -- 10 THE COURT: And why would they be on notice of 11 the claim if they may not ultimately, under their insurance 12 carrier they issued to Serota, be the real party in 13 interest? 14 MR. PASSMAN: Well, Your Honor, I do contend that 15 they do ultimately owe that liability, but -- 16 THE COURT: They may, but my whole question is 17 how come you're saying one thing; well, yeah, they 18 ultimately owe the money, but they're not the real party in 19 interest, Judge, no? 20 MR. PASSMAN: But during the time that most of 21 these privileged documents were created, they had not 22 acknowledged that responsibility. 23 THE COURT: I don't know that I'm convinced of 24 what you're saying, but you make a good argument, but I'm 25 not sure I'm convinced of what you're saying. In other Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 12 Proceedings 1 words, there's some kind of disconnect. They don't become 2 a party in interest until we're ready for them to pay the 3 judgment adjudicated against Serota. I've got a problem 4 with that argument. So we'll wait and once Serota is 5 adjudicated, you know, to be responsible, an award is made, 6 Judge, only then do they become the real party in interest. 7 MR. PASSMAN: But, Your Honor -- 8 THE COURT: I have a problem with that, I do. 9 MR. PASSMAN: -- if I may respond to that. 10 THE COURT: I think I have to deliberate over 11 this. I thought I was going to be able to decide this 12 right here. I may have to deliberate. I think you made 13 your argument. 14 MR. PASSMAN: May I respond to that? 15 THE COURT: There's no case that's helpful, 16 right? 17 MR. PASSMAN: I do not believe that there's a 18 case that's helpful. 19 THE COURT: No, in terms of your position. 20 MR. PASSMAN: No, Your Honor, except this. 21 There's -- there is -- 22 THE COURT: In other words, are there any cases 23 that say the representation of the insured is not the 24 representation of the insurance carrier who often is the 25 real party in interest? There are no cases, so that's why Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 13 Proceedings 1 I say I have to deliberate. I don't think you arguing back 2 and forth is going to help me at this point. I understand 3 the argument, but there is no cases that actually say this. 4 MR. PASSMAN: May I just -- 5 THE COURT: Wait. 6 The client, the insured, may be entitled -- 7 MR. PASSMAN: Yes. 8 THE COURT: -- to his file, but the carrier is 9 not. Do you have a case? That's all I'm asking you and 10 then really, I want to hear from your cocounsel. 11 MR. PASSMAN: I do not have a case because, Your 12 Honor, there are situations where the carrier is entitled 13 to that information when they are defending, when they are 14 involved in the case. Zurich chose not to. 15 THE COURT: So you're saying, Counselor Passman, 16 Judge, as far as I know, this is a case of first 17 impression? 18 MR. PASSMAN: I think it is. 19 THE COURT: As far as you know? 20 MR. PASSMAN: Yes, yes. 21 THE COURT: I'm sure you did research. 22 MR. PASSMAN: Yes, Your Honor. 23 THE COURT: And you didn't find a case where the 24 Court ruled insured entitled to the file, insurance carrier 25 not entitled to the file? That's the question. Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 14 Proceedings 1 MR. PASSMAN: Not one quite like this, Your 2 Honor. 3 THE COURT: Or even slightly like it. 4 MR. PASSMAN: There are -- 5 THE COURT: You would have told me. What case? 6 I can look it up now. Your time is up. I'll look up the 7 case. 8 MR. PASSMAN: I don't have a case, Your Honor. 9 THE COURT: Mr. Passman, good argument. 10 MR. PASSMAN: Thank you, Your Honor. 11 THE COURT: Take a seat, please. 12 All right. Counselor, who's left? 13 MS. LEVINE: That would be me, Your Honor. 14 THE COURT: Do you agree with him? 15 MS. LEVINE: Yes, I do, but I just wanted to add 16 some additional things. 17 THE COURT: Do you have a case where the Court 18 said insured certainly is entitled to the counsel file, 19 carrier not entitled to the counsel file? 20 MS. LEVINE: No, I do not have case before me, 21 Your Honor. 22 THE COURT: All right. So let's just get that 23 clear. I'm going to have to do some research myself. 24 There may not be a case, but I'm not convinced that this 25 has never come up. Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 15 Proceedings 1 MS. LAFOND: Your Honor, may I respond? 2 THE COURT: Excuse me. No, you may not. It's 3 her turn. After she's finished, you can say, Judge, may I 4 have a brief reply? 5 Off the record. 6 (WHEREUPON, a discussion was held off the 7 record.) 8 THE COURT: Counsel Levine, would you head over 9 to the podium and tell me what you want? 10 MS. LEVINE: Good afternoon, Your Honor. There 11 is no need for me to rehash the arguments of the 12 codefendants because -- 13 THE COURT: You get points for that. 14 MS. LEVINE: -- because we are in agreement on 15 the issues at hand. All I did want to add is that in the 16 event that plaintiff is seeking these documents, the 17 defendants do not believe that they're even relevant to the 18 case at bar. 19 THE COURT: Wait, wait, wait, wait, wait. No, 20 no, no. Wait a minute. In the event? 21 MS. LEVINE: I'm saying that the threshold issue 22 in this matter is that we do not believe that these 23 documents that plaintiff are seeking to be produced is -- 24 THE COURT: No, no, Judge, in the event plaintiff 25 is seeking these documents, that's the motion. Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 16 Proceedings 1 MS. LEVINE: Yes. Thank you, Your Honor. Please 2 let me strike that line from the record if that is okay 3 with you. 4 THE COURT: No, I don't have to strike it. Go 5 ahead. 6 MS. LEVINE: Okay. Let me restart my argument, 7 if I may. 8 THE COURT: You're saying the documents aren't 9 even material? 10 MS. LEVINE: Yes, the documents they're seeking 11 aren't even material. At trial the judge, as a matter of 12 law, held that Serota is liable for the injury because they 13 owned and operated the area of where the plaintiff in the 14 underlying action fell, and that was just based on a matter 15 of law. That decision was not appealed and that stands. 16 And now the plaintiff in this case, Zurich, is coming in 17 and saying that because Mr. Brown no longer represented 18 Western Beef because of this conflict, that they were 19 damaged, but the damage was not because of that, the damage 20 was because they were the landlords of the building and 21 therefore, because of that, they were liable. 22 So we do not believe that the documents that 23 Zurich is seeking to be produced that are subject to 24 attorney-client privilege should be produced in this 25 matter. Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 17 Proceedings 1 THE COURT: So essentially you're asking for a 2 protective order. 3 MS. LEVINE: Yes, we just do not believe that 4 they're relevant. 5 THE COURT: You probably should have cross-moved 6 for that, but, okay, you're saying, Judge, we want a 7 protective order because it's not material. 8 All right. Very good, Counselor. 9 MS. LEVINE: Thank you. 10 THE COURT: Let's hear a brief reply from 11 Counselor LaFond. 12 MS. LAFOND: Thank you, Your Honor. 13 THE COURT: Let's start with the last one. 14 MS. LAFOND: I will, Your Honor. 15 THE COURT: How is it material? 16 MS. LAFOND: So this case is an equitable 17 estoppel action by Zurich against Western Beef and First 18 Specialty. Essentially the case is that up until the eve 19 of trial, the actual literal issue -- 20 THE COURT: I'm not really sure that's what 21 equitable estoppel is. I'll be honest, I thought that was 22 sort of an evidentiary principle. It's a cause of action. 23 MS. LAFOND: Yes, Your Honor, estoppel -- one 24 moment. 25 THE COURT: It's a cause of action. Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 18 Proceedings 1 MS. LAFOND: Under the principles of estoppel, an 2 insured -- 3 THE COURT: I want to know what the complaint 4 says. 5 MS. LAFOND: The complaint says that -- 6 THE COURT: A cause of action for equitable 7 estoppel? 8 MS. LAFOND: Yes. "An insurer, though, not, in 9 fact, obligated to provide coverage --" which we do say 10 that there is coverage under the First Specialty policy for 11 Serota -- "may be precluded from denying coverage upon 12 proof of the insurer by its conduct, otherwise lulled the 13 insured into sleeping on its rights under the insurance 14 contract." 15 THE COURT: Is that a cause of action or really a 16 basis for declaratory judgment? 17 MS. LAFOND: This is an action for declaratory 18 judgment, yes, Your Honor. 19 THE COURT: So that's what I thought. So that's 20 the cause of action. So you're saying it's based on a 21 declaratory judgment action, which answers my question, and 22 you're saying it's for a declaration that First Specialty 23 must pay the judgment and you're saying the rationale is 24 the doctrine of equitable estoppel. So you're saying these 25 records are certainly pertinent with respect to that Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 19 Proceedings 1 question? 2 MS. LAFOND: Yes, Your Honor, and I have case 3 law. 4 THE COURT: Repeat again, what is the 5 principle -- now that I know it's not an action for 6 equitable estoppel, Judge, it's an action for declaratory 7 judgment based on the principles of equitable estoppel? 8 MS. LAFOND: Yes, Your Honor. 9 THE COURT: Now that I know that, you can explain 10 to me what it is, what is equitable estoppel? 11 MS. LAFOND: So under the principles of equitable 12 estoppel, "An insurer, though, in fact, not obligated to 13 provide coverage, may be precluded from denying coverage 14 upon proof that the insurer, by its conduct, otherwise 15 lulled the insured into sleeping on its rights under the 16 contract." 17 THE COURT: And how do you address Counselor 18 Levine's argument that the Court ruled as a matter of law 19 that because Serota owned the property, it was liable or 20 controlled the property, the portion of the premises where 21 the plaintiff fell? There is no reason to apply the 22 equitable estoppel because nothing that the Brown Firm did 23 would have changed that. 24 MS. LAFOND: It's not only what the Brown Firm 25 did during that entire time of representation, it's also Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 20 Proceedings 1 the actions of Western Beef and First Specialty. Western 2 Beef is using the Brown Firm file as a sword and a shield. 3 Both defendants are asserting that neither one of them 4 retained the Brown Firm to represent Serota in the 5 underlying action, but then who did? We need the Brown 6 Firm file to understand who retained the Brown Firm to 7 represent Serota jointly and also, in order to -- 8 THE COURT: I don't know that you need the entire 9 file to do that. It seems to me there is a retainer 10 agreement between the client and the Brown Firm, so why do 11 you need the entire file? 12 MS. LAFOND: So in order to prove estoppel Zurich 13 must prove prejudice, that it was prejudiced in the -- by 14 virtue of First Specialty and Western Beef's conduct and, 15 you know, it's our understanding that the parties went to 16 mediation throughout the underlying case, that a deposition 17 of Serota was not even conducted during that case and so at 18 the time of trial there was no deposition testimony from 19 the Serota witness that -- 20 THE COURT: So you're saying the Court's finding 21 may have been based on an incomplete evidentiary record? 22 MS. LAFOND: Yes, Your Honor, and we just don't 23 know -- 24 THE COURT: But for the Brown Firm's 25 representation, there would not have been this injury. Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 21 Proceedings 1 All right. So as to the argument that the 2 insurance carrier does not have a right to the client's 3 file, only Serota has a right to the client's file. 4 MS. LAFOND: Your Honor, while Western Beef, 5 under the self-insured retention on First Specialty's 6 policy issued to Western Beef was, to our knowledge, paying 7 for the defense of both Serota and Western Beef. 8 THE COURT: No, he says there was a retention and 9 it had to be exhausted before First Specialty would assume 10 the payment of the legal fees. 11 MS. LAFOND: Yes, that's our understanding up 12 until the time of trial when the conflict was asserted by 13 Western Beef, but Zurich, during that time, was on notice 14 of the claim and was acting essentially as an excess 15 carrier for Serota should the underlying First Specialty 16 policy be exhausted by the Garrett Action. 17 THE COURT: Admittedly, none of this is in these 18 papers, right? 19 MS. LAFOND: They are in the underlying papers, 20 so this motion is -- 21 THE COURT: What do you mean "the underlying 22 papers?" 23 MS. LAFOND: They are incorporated by reference 24 into the motion to renew. 25 THE COURT: You should physically attach them and Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 22 Proceedings 1 serve them, right, so everybody knows what you're arguing? 2 In any event, you're saying, Judge, look at the 3 old motion and you'll see it. All right. I understand. 4 I'm going to have to deliberate, so let's go off the 5 record. 6 (WHEREUPON, a discussion was held off the 7 record.) 8 THE COURT: Counselor, continue your argument. 9 MS. LAFOND: Your Honor, there is a case 10 regarding the tripartite relationship and the common 11 interest privilege that extends to an insurer from the 12 insured, which is Shaya B. Pacific LLC v. Wilson Elser 13 Moskowitz Edelman & Dicker LLP. The cite is 38 AD3d 34 -- 14 THE COURT: Wait just a minute. And you mention 15 that -- 16 MS. LAFOND: That Your Honor -- 17 THE COURT: -- this Court cited it in her 18 opinion, denying the prior motion with leave to -- did I -- 19 well, I don't know if I said leave. I made an observation. 20 I cited the case, right? What case is it again? 21 MS. LAFOND: And the cite is 38 AD3d 34, and the 22 pin cite is 42 to 43. 23 THE COURT: All right, continue. 24 MS. LAFOND: And, Your Honor, that case discusses 25 the common interest privilege and that the privilege Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 23 Proceedings 1 between an attorney and its client, an insured, extends to 2 the insurer, allowing the insurer to obtain the file of -- 3 THE COURT: Pin cite, which one? 4 MS. LAFOND: Forty-two to 43, Your Honor. 5 THE COURT: That's why I asked the question. 6 That looked so familiar and I said I thought that I already 7 did this. I was surprised when your opponent said, Judge, 8 there are no cases. They should have at least pushed back. 9 The opponent should have pushed back. 10 It says: "Assuming, without deciding, that in 11 New York a law firm retained by a carrier to represent its 12 insured may have an attorney-client relationship with both, 13 in assuming further, as such was the case here, we see no 14 conflict of interest in the circumstances at bar." 15 So your opponents would have done a better job 16 had they cited this and said, Judge, because I think their 17 argument would be, had they thought to look at this and 18 they should have cited it, well, the attorney was not 19 retained by this particular carrier, he was retained by 20 another carrier. So that's what they should have argued. 21 So that's the argument, right? So how do you address that? 22 MS. LAFOND: I address that argument by at the 23 time the conflict was asserted by Western Beef, Western 24 Beef allowed the Brown Firm, who had jointly represented 25 both of those parties throughout the entire underlying Laura L. Ludovico, SCR FILED: NEW YORK COUNTY CLERK 03/10/2020 12:28 PM INDEX NO. 652336/2018 NYSCEF DOC. NO. 81 RECEIVED NYSCEF: 03/10/2020 24 Proceedings 1 litigation, to continue to represent Serota, Zurich's 2 insured, at the time of trial. Western Beef, Zurich and 3 Serota entered into a conflict waiver agreement with 4 Mr. Brown, allowing Serota to move forward. Their argument 5 would be -- 6 THE COURT: Okay. You put that in your papers,