Opposition Brief — Younis Bros. & Co. v. CIGNA Worldwide Insurance

f) —_

supreme Court, U.S

No. 96-691 pokag Saat

I

'

In The DEC 4 1996

Supreme Court of the United States.

- a

October Term, 1996

YOUNIS BROS. AND CO., INC.,

Petitioner,

VS.

CIGNA WORLDWIDE INSURANCE COMPANY,

Respondent,

-and-

THE ABI JAOUDI and AZAR TRADING CORPORATION,

Petitioner,

VS.

CIGNA WORLDWIDE INSURANCE COMPANY,

Respondent.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the Third Circuit

RESPONDENT?’S BRIEF IN OPPOSITION

STEPHEN A. COZEN

Counsel of Record

DAVID R. STRAWBRIDGE

DOUGLAS R. WIDIN

ELIZABETH J. CHAMBERS

COZEN AND O’CONNOR

Attorneys for Respondent

1900 Market Street

Philadelphia, Pennsylvania 19103

(215) 665-2000

utz

E prgelat (800) 3 APPEAL « (800) 5 APPEAL « (800) BRIEF 21

ei

ee 60 NS iin peneeiee ore Te Pee ae

i

COUNTER STATEMENT OF QUESTION PRESENTED

Whether the Court should grant certiorari on a petition

containing only unreviewable state law claims, routine hearsay

evidentiary issues, and moot jury questions.

ii

DISCLOSURE OF CORPORATE AFFILIATIONS

CIGNA Worldwide Insurance Company is a subsidiary of

CIGNA Corporation, which indirectly owns 100 percent of the

shares in CIGNA Worldwide Insurance Company. A Philippine

corporation, P.C.I.B. CIGNA Life Insurance Company, is a

nonwholly owned subsidiary of CIGNA Worldwide Insurance

Company.

iii

TABLE OF CONTENTS

Page

Courter Statement of Question Presented ........... i

Disclosure of Corporate Affiliations ................ ii

EAE TOTES RO ee oa a iii

PI crate hc bob ii et iv

Statement of Jurisdiction ......................... 1

Counter Statement of the Case ..................... ]

Reasons for Denying the Writ ..................... 6

I. The Court lacks jurisdiction over the petitioners’

I a i 6

Il. Certiorari should not be granted to review trial

hearsay rulings raising no important federal

ng RN RRR SES FETA UPN Sly ee ee 8

Iil. Certiorari should not be granted to render what

would amount to advisory opinions on claims that

SACRED CA GRA GTS OURO Rew Kbc we oc ck 10

ME SCG Gun Cacao ck . oeu ee 12

iv

Contents

Page

TABLE OF CITATIONS

Cases Cited:

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986)

POP eee Te Oo Pee PT Loree ee ray 10

Brady v. Southern Railroad Co., 320 U.S. 476 (1943)

je CA VEGAAD RGN SODA GSN Weed Eh MLO RTE EL ES 10

Ellis v. Dixon, 349 U.S. 458 (1955) ...............- 7

Fay u. Nola, 372 U.S. SPL GIGS) 6 vec ketenes 6, 10, 11

Goodman v. Lukens Steel Co., 482 U.S. 656 (1987) .. 11

Graver Mfg. Co. v. Linde Co., 336 U.S. 271 (1949) .. 11

Mano Insurance Company v. Picasso Cafeteria, March

Term, A.D. 1995 (Liberia July 28, 1995) ......... &,3, 7

Mano Insurance Company v. Picasso Cafeteria, March

Term, A.D. 1996 (Liberia September 27, 1996) ....... 6, 7

McKay v. Foster, 332 U.S. 783 (1947) .............. 7

Montana v. Imlay, 506 U.S. __, 113 S. Ct. 444, 121 L.

hs Ae BE ANUP) irk ioe CdS oes bare wee UR ekas 10

Rice v. Sioux City Memorial Park Cemetery, 349 U.S. 70

CS UeD ic ob bs Bae ene baa seal rere ees 8,9

Contents

Somportex Limited v. Philadelphia Chewing Gum Corp.,

453 F.2d 435 (3d Cir. 1971), cert. denied, 405 U.S.

BT RE OFEE Se ERC RK RN Sr aa OA CURRE DC Oe eee st

Stembridge v. Georgia, 343 U.S. 541 (1952) ........

Tannenbaum v. Connecticut Fire Insurance Co., 127 Pa.

BORNE. £ras Ue ae DOP CEO SED Fo bev detec teenes

United States v. Richardson, 418 U.S. 166 (1974) ....

Statutes Cited:

ye BP a FG Se Nesey ee Ty Peery Pere

ce ee Rg 2 eee a re ene ees arp ae

Rules Cited:

ON CINE RUN SU CV bbebusseccduasteatnesinn

Federal Rule of Evidence 803(3) ...................

Page

10

1

Respondent respectfully requests that the Court deny the

Petition for Writ of Certiorari to the United States Court of

Appeals for the Third Circuit. The Third Circuit’s opinion is

reported at 91 F.3d 13 (3d Cir. 1996). The district court opinion

affirmed by the Third Circuit is reported at 899 F. Supp. 1385

(E.D. Pa. 1995).

STATEMENT OF JURISDICTION

Petitioners seek to invoke this Court’s jurisdiction pursuant

to 28 U.S.C. § 1254(1). Jurisdiction over the petitioners’ state

law claims is disputed; the remaining claims are not appropriate

for granting certiorari.

COUNTER STATEMENT OF THE CASE

This petition involves a suit by two Liberian businesses

against their insurer, respondent CIGNA Worldwide Insurance

Company (“CWW”). The petitioners filed insurance claims for

looting and/or fire damage they claimed occurred at seven

different locations in Harbel and Monrovia, Liberia, over a span

of six months from June through November, 1990, during the

height of a civil war. According to the petitioners, these losses

resulted from purely local rioting, and, for that reason, were

covered by their CWW policies.

CWW denied the claims. It proved at trial that petitioners’

losses were caused, not by local rioting, but by an insurrection

that started in December, 1989, and developed into a full scale

Civil War that raged throughout 1990, and beyond. Fierce battles

were fought in Harbel in June, 1990, and in Monrovia, from

July through November, of 1990, the time period covering the

petitioners’ losses. CWW argued that the petitioners’ losses were

2

excluded from coverage under the War Risk Exclusion Clauses

contained in each of the petitioners’ policies.’

The petitioners filed suit in the United States District Court

for the Eastern District of Pennsylvania. In addition to coverage

claims, petitioners contended that CWW acted in bad faith by

denying their insurance claims, and that it unreasonably delayed

investigating their claims. CWW answered that it was not bad

faith to deny uncovered claims, and that it sent investigators to

Liberia as early as war conditions would permit safe passage.

The parties disagreed initially on what law governed the

case. CWW argued Liberian law applied; the petitioners argued

for Pennsylvania law, including Pennsylvania’s bad faith statute,

42 Pa. C.S.A. § 8371. The district court ruled that Pennsylvania

law applied. Neither side contested the district court’s choice

of law decision on appeal.

At trial, CWW presented extensive evidence to document

the inception and progress of the Liberian Civil War. The

uncontroverted evidence showed that identifiable rebel groups,

headed by Charles Taylor, invaded Liberia’s interior border on

1. The War Risk Exclusion Clauses in the petitioner’s Fire Policies

excluded losses caused “directly or indirectly” by “(c) insurrection; (d)

rebellion; (e) revolution; (f) civil war; (g) usurped power.” The Extended

Coverage Endorsements to the petitioners’ Fire Policies covered looting losses

caused “directly” by riot, but excluded looting loss “caused directly or

indirectly” by “insurrection, rebellion, revolution, civil war, usurped power,

or action taken by governmental authority in hindering, combating or

defending against such an occurrence.” A Burglary Policy and a Money and

Securities Policy CWW issued to petitioner Abi Jaoudi and Azar Trading

Corporation (“AJA”) excluded coverage for “loss due to war, whether or not

declared, civil war, insurrection, rebellion, revolution or to any act or condition

incident to any of the foregoing.” Additionally, AJA’s Accounts Receivable

Policy excluded coverage for losses “caused by or resulting from” the same

types of occurrences.

3

December 24, 1989, and that Taylor’s group, with a later splinter

group, headed by Prince Ormie Johnson, fought their way

through Liberia to the country’s capital city of Monrovia, on

the coast. Uncontradicted evidence established that the rebel

leaders’ expressed goal was to overthrow the Liberian

government, headed by President Samuel Doe, and to assume

control of the government.”

Through the testimony of uncommonly reliable and

disinterested witnesses, CWW documented the chaotic living

conditions that attended the rebel fighting in Harbel and

Monrovia, including looting, lawlessness, fires, and a complece

breakdown of law enforcement and civil authority in Harbel and

Monrovia. These witnesses included international journalists

from the Associated Press, British Broadcasting Corporation,

the London Manchester Guardian, some of whom had direct

interviews and conversations with the rebel leaders, a Defense

Department and Army Attache to the American Embassy, a

Cabinet Minister and other officials from the Liberian

government, such as the Liberian Court Administrator, the

Deputy Coordinator for Operations at the Freeport of Monrovia,

and officials from the tax and insurance departments. CWW

also presented the testimony of residents who lived through the

crisis, including a conscripted rebel soldier and Government

soldiers who participated in looting.

Residents endured lack of food or water. Hordes of starving

refugees fled to Monrovia from battles elsewhere in the country,

and, with other starving residents, took to looting for food and

other necessities of life amidst a climate where there were no

police to control the turmoil, firefighters to put out fires, or even

protection from Government troops, which either participated

in the looting or were preoccupied with fighting the rebels. The

petitioners’ own employees, on cross-examination by CWW,

2. The evidence showed that, after reaching Monrovia, Prince Johnson

and his followers abducted and killed President Doe.

4

described fighting in the streets of Harbel and Monrovia, and

the severe deprivation, lawlessness and absence of civil authority

caused by that fighting.

The jury, surprisingly, returned a verdict for the petitioners

on the coverage and bad faith claims. Since the petitioners had

demanded a jury trial, and since Pennsylvania’s bad faith statute

provides that, upon a finding of bad faith, “the court may” award

punitive damages, interest, attorneys’ fees or costs, the district

court bifurcated trial of the bad faith damages. Under this

bifurcation plan, the jury decided the issue of punitive damages

and the district court decided whether any other bad faith

damages would be awarded. The jury assessed no punitive

damages against CWW, finding that CWW’s conduct was not

outrageous. The district court then ruled that the evidence did

not support the award of interest, attorneys fees or costs.

Thereafter, the district court granted judgment

notwithstanding the verdict on two grounds: (a) that the trial

evidence proved CWW’s War Risk Defense as a matter of law,

and (b) that “no evidence” supported the bad faith verdict.’

While post-verdict motions were pending, the Liberian

Supreme Court decided a separate case involving an insurance

claim for looting damages in Monrovia in June, 1990, Mano

Insurance Company v. Picasso Cafeteria. The Liberian high

court held in Mano that the Civil War was the efficient, proximate

cause of the looting losses, and under the provisions of the policy

there at issue, that the insurance claim was not covered by the

plaintiff’s insurance policy.

While not challenging the district court’s previous choice

3. The district cour’ slso granted alternative relief in the form of a new

trial on the grounds that: (a) the jury’s verdict was against the weight of the

evidence, and (b) the district court had committed reversible error by giving

the ambiguity jury instruction the petitioners had requested.

5

of law decision, CWW suggested that the district court review

the Mano case under comity principles, both for the Liberian

high court’s acknowledgement that a Civil War, and not local

rioting, had occurred in Monrovia, and for the use in the Liberian

decision of the same test for causation that was applicable under

Pennsylvania law.

The petitioners heatedly protested this idea, calling the

comity doctrine “inapplicable” and the Mano decision “without

legal effect.” Neither the district court nor the Third Circuit based

their decisions on Liberian law.‘

Using applicable United States law, the Third Circuit

affirmed the district court. In particular, the Third Circuit

reviewed and affirmed the district court’s ruling that the Liberian

Civil War was the efficient, proximate cause of the petitioners’

losses. The proximate cause test used by the Third Circuit was

the same test of causation approved by the Pennsylvania courts

for insurance matters. Tannenbaum v. Connecticut Fire Insurance

Co., 127 Pa. Super. 278, 284, 193 A. 305 (1937) (approving use

of proximate cause test in insurance cases).

After the Third Circuit’s opinion was filed, the Liberian

Supreme Court reversed its decision in Mano.’ In so ruling, the

Liberian high court ruled that only war risk damages caused by

the direct effect of offensive or defensive military operations

were excluded from coverage under War Risk Exclusion Clauses.

4. The district court, however, stated that it would have reached the

same decision had it decided the case on Liberian law. The court of appeals

did not even consider the Liberian Mano decision.

5. The strange way in which a reconstituted, restructured court found a

basis for a third review is troublesome and ought give one pause as to the

validity of the opinion.

6

Abandoning their prior positions and arguments, and

rejecting the lower courts’ apparent reliance on their arguments,

the petitioners now opportunistically, and overexpansively,

contend that this particular decision by the Liberian Supreme

Court “fixes the standard” for the test of causation in insurance

cases, that “courts in [the United States] should apply that

standard as well,” and that the Third Circuit should be reversed

for not following the second Mano decision, decided after the

Third Circuit ruled, under principles of comity. Petition for Writ

Certiorari, at 17.

REASONS FOR DENYING THE WRIT

The petition presents the Court with an array of

unreviewable state law claims, routine trial evidentiary rulings,

and moot Seventh Amendment questions. The petition is not

deserving of review and should be denied. This Court does not

grant certiorari to hear state law claims, for jurisdictional

reasons. Moreover, the claims that do contain federal questions

do not remotely approach the level of importance or public

interest justifying certiorari, nor are they supported by any other

of the “special” reasons discussed in Supreme Court Rule 10

that might warrant this Court’s review.

I.

THE COURT LACKS JURISDICTION OVER THE

PETITIONERS’ STATE LAW CLAIMS.

This Court has repeatedly declined to review judgments

resting on independent state grounds, for jurisdictional reasons.

As the Court stated in Fay v. Noia, 372 U.S. 391, 428 (1963), it

does not have the “power” to reverse decisions that are based

on adequate and independent state grounds and that do not

present questions of the validity or construction of the “federal

7

constitution, treaties, statutes, commissions or authorities in

dispute.” Accord Ellis v. Dixon, 349 U.S. 458 (1955); Stembridge

v. Georgia, 343 U.S. 541 (1952); McKay v. Foster, 332 U.S. 783

(1947) (all denying certiorari because the decision below rested

on nonfederal grounds). No such federal questions are raised in

Sections III and VI of the petition.

Section III of the petition claims: (a) that the Third Circuit

“used the wrong standard of causation,” and (b) that the Third

Circuit should be reversed for not according comity to the

second, though not the first, Mano decision. The definition, scope

and application of the test of causation, however, is purely a

matter of state law, unless some federal right were offended by

the test applied. Petitioners identify no constitutional provision

or other federal right allegedly violated by the lower courts’

analysis of causation, and this is fatal to their petition. The claim

raised in the petition does not rise above a state law claim.

Petitioners’ comity claim also raises no federal question.

Since this case does not involve a suit by or against foreign

governments, it does not implicate treaties with foreign

countries, federal jurisdiction over foreign governments or other,

similar federal issues. The question raised in the petition is

simply whether the Third Circuit should have accorded comity

to a judicial opinion of a foreign country. Such a claim is

manifestly a state law question. Somportex Limited v.

Philadelphia Chewing Gum Corp., 453 F.2d 435 (3d Cir. 1971),

cert. denied, 405 U.S. 1017 (1972) (a federal court in diversity

applies the comity principles of the state where the federal court

is sitting, in this case, Pennsylvania). The petitioners allege no

constitutional or federal right otherwise implicated in the comity

claim. Accordingly, review of this claim should not be granted.

Section VI of the petition also raises only a state law claim.

This section of the petition alleges the substantively incorrect

8

claim, which is contrary to numerous state and federal cases

interpreting the state statute, that the district court’s

interpretation of the term “may” in Pennsylvania’s bad faith

statute was contrary to the state legislature’s intent in enacting

the statute. While the heading to Section VI alleges that the lower

courts’ interpretation of Pennsylvania’s bad faith statute was

“unconstitutional,” the body of the argument makes it clear that,

if there is a claim of unconstitutionality being discussed, it is at

most a violation of the state constitution (which this Court does

not review) and not a violation of the federal constitution (which

this Court might choose to review). As with the causation and

comity claims, Section VI identifies no federal constitutional

provision, federal statute, or other federal standard, purportedly

at issue.

Accordingly, review of these claims should be denied

because they raise no federal question.

Il.

CERTIORARI SHOULD NOT BE GRANTED TO

REVIEW TRIAL HEARSAY RULINGS RAISING NO

IMPORTANT FEDERAL QUESTION.

Even where federal questions are raised in a petition,

Supreme Court Rule 10 makes it clear that the Court will not

grant certiorari unless there are “special and important reasons”

for review. As the Court stated in Rice v. Sioux City Memorial

Park Cemetery, 349 U.S. 70 (1955):

A federal question raised by a petitioner may

be “of substance” in the sense that, abstractly

considered, it may present an intellectually

interesting and solid problem. But this Court

does not sit to satisfy a scholarly interest in

9

such issues. Nor does it sit for the benefit of

the particular litigants. “Special and

important reasons” imply a reach to a

problem beyond the academic or episodic.

349 U.S. at 74. In dismissing the writ, the Court wrote further:

. .. itis very important that we be consistent

in not granting the writ of certiorari except

in cases involving principles the settlement

of which is of importance to the public, as

distinguished from that of the parties . . .

349 US. at 79.

It is difficult to conceive of a question more lacking in broad

public import, or one more limited in pertinence to “the benefit

of the particular litigants,” than the district court’s hearsay

rulings challenged in Sections I and II of the petition. The

petitioners’ hearsay claims refer to evidence from journalists

that the rebels’ goal was to overthrow the established Liberian

government and assume control of the government. Such

testimony was based upon direct conversations between the

journalists and the rebel leaders, as well as statements from the

rebel leaders the journalists heard at press conferences.

This testimony regarding the rebel leaders’ intent, which

clearly was not hearsay, raises nothing more than routine claims

of trial error. See, e.g., Fed. R. Evid. 803(3) (statements of a

declarant’s intent, plan, motive or design are not excluded by

the hearsay rule). There is nothing “special” or “important”

about these claims, nor does the petition itself argue that any

broader import is involved.

Moreover, the petition misrepresents the record in claiming

10

that the district court “weighed” the evidence the petitioners

erroneously characterize as hearsay. In upholding the War Risk

Defense as a matter of law, the district court did not consider

the weight of the testimony the petitioners claim is hearsay, as

the petition contends. Rather, the district court rested its decision

on the fact that the testimony was uncontradicted, which the

district court was required to consider. Brady v. Southern

Railroad Co., 320 U.S. 476, 479-80 (1943) (when, without

weighing credibility, there can be but one reasonable conclusion

as to the verdict, the court should determine the proceeding by

non-suit, directed verdict ... or by judgment notwithstanding

the verdict); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250

(1986) (quoting Brady, and stating that “the trial judge must

direct a verdict if, under the governing law, there can be but one

reasonable conclusion as to the verdict”). The hearsay claims

are thus not deserving of the Court’s review.

Il.

CERTIORARI SHOULD NOT BE GRANTED TO

RENDER WHAT WOULD AMOUNT TO ADVISORY

OPINIONS ON CLAIMS THAT ARE MOOT.

The Court does not review questions that are moot and

would result only in the issuance of advisory opinions. Montana

v. Imlay, 506 U.S. __, 113 S. Ct. 444, 121 L. Ed. 2d 310 (1992)

(certiorari petition dismissed as improvidently granted because

“no matter which party might prevail in this Court,” the judgment

would be the same); United States v. Richardson, 418 U.S. 166,

171 (1974) (the Court’s power may not be exercised over

questions that are “moot or calling for an advisory opinion”);

Fay v. Noia, 372 U.S. 391, 430 (1963) (the Court is obliged to

“refrain from rendering advisory opinions or passing upon moot

questions”).

11

Sections IV and V raise issues connected with the bifurcated

trial of the bad faith damages. Unquestionably, however, the

dispositive ruling concerning the petitioners’ bad faith claims

was the district court’s “no evidence” finding. By that ruling,

the district court determined, and the Third Circuit agreed, that

the petitioners had not made out the elements of their bad faith

claims as a matter of law. The petitioners of course may not

challenge that ruling here. Goodman v. Lukens Steel Co., 482

U.S. 656, 665 (1987) (“a court of law, such as this Court is,

rather than a court for correction of errors in factfinding, cannot

undertake to review concurrent findings of fact by two courts

below in the absence of a very obvious and exceptional showing

of error”), citing Graver Mfg. Co. v. Linde Co., 336 U.S. 271,

275 (1949).

Nevertheless, Sections IV and V of the petition allege that

the district court’s bifurcated trial of bad faith damages violated

Seventh Amendment jury guarantees. Such a claim is irrelevant,

given the present posture of the case. Since the petitioners did

not prove their bad faith claims at all, and are not entitled to

recover any damages, they would not be entitled to recover such

damages no matter how the Covrt ruled on the petition’s

purported Seventh Amendment claim. The petition’s challenge

to the way the bad faith damages were tried is, clearly, moot.

Thus, even if a potential Seventh Amendment issue were lurking

somewhere in these sections, which respondent cannot find,

since a decision on such a question would not have the slightest

impact on the judgment in this case, any decision by this Court

would be advisory, and, therefore, impermissible. Fay v. Noia,

372 U.S. at 430, n. 40 (“if the same judgment” would be rendered

after the lower court’s ruling were “corrected,” the Supreme

Court’s opinion “could amount to nothing more than an advisory

opinion”). Certiorari, thus, should not be granted for these

claims.

12

CONCLUSION

The petition for writ of certiorari should be denied.

Respectfully submitted,

STEPHEN A. COZEN

Counsel of Record

DAVID R. STRAWBRIDGE

DOUGLAS R. WIDIN

ELIZABETH J. CHAMBERS

COZEN AND O’CONNOR

Attorneys for Respondent

1900 Market Street

Philadelphia, Pennsylvania 19103

(215) 665-2000