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In re Oil Spill by Oil Rig "Deepwater Horizon" in Gulf of Mexico

United States District Court, E.D. Louisiana

August 1, 2018

In Re Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010 This Document Relates To: Andry Law Group, LLC, et al.
v.
CNA Financial Corp., et al. No. 14-cv-600

         SECTION: J(2)

          WILKINSON MAG. JUDGE

          ORDER & REASONS

          BARBIER JUDGE

         Member case 14-cv-600 is an insurance coverage dispute between plaintiffs Andry Law Group, LLC and Jonathan Andry (sometimes referred to collectively as “Andry”) and defendants Continental Casualty Company and CNA Financial Corporation and (sometimes referred to collectively as “Continental”). The parties filed cross-motions for summary judgment on the issue of whether the insurance policy required Continental to defend Andry with respect to a Court-ordered investigation and the resulting show cause order concerning the administration of one of the class actions settlements reached in this Multidistrict Litigation No. 2179 (“MDL 2179”). (Rec. Docs. 13080, 13083) Because there was no possibility of Andry incurring a liability covered by the policy, the Court grants summary judgment in favor of Continental and against Andry.

         Background

         In 2012, this Court approved the Economic and Property Damages Settlement, a class action settlement that resolved many private claims arising from the DEEPWATER HORIZON/Macondo Well oil spill. (Rec. Docs. 8138, 8139) The settlement was administered by the Court Supervised Settlement Program (“CSSP”). Andry represented claimants in the CSSP.

         In July 2013, the Court appointed a Special Master to perform an independent external investigation into the facts and circumstances that led to the resignation of a staff attorney with the CSSP, conduct fact-finding as to any other possible ethical violations or misconduct within the CSSP, and examine, evaluate, and make recommendations regarding the internal compliance program and anti-corruption controls within the CSSP. (Rec. Docs. 10564, 11288) As part of his investigation, the Special Master interviewed Jonathan Andry, who had retained counsel, and subpoenaed documents from him. The Special Master disclosed his findings in a report issued on September 6, 2013. (Rec. Doc. 11287) The Special Master determined in pertinent part that Jonathan Andry improperly utilized a personal relationship and referral fee arrangement with the former CSSP staff attorney in an attempt to expedite the claims of clients of law firms associated with Jonathan Andry. The Special Master made multiple recommendations, including that the report be provided to the Department of Justice to determine whether Andry violated federal criminal statues regarding fraud, money laundering, conspiracy, or perjury; that the report be referred to the State Bar of Louisiana to determine whether Andry violated any disciplinary rules; and that the Court prohibit Andry from representing any claimants in the CSSP and from receiving any fees for this representation. The same day, the Court issued an order that required, inter alia, that Jonathan Andry and any associated law firms to show cause why they should not be disqualified from representing claimants in the CSSP or collecting fees from such claimants. (“Show Cause Order, ” Rec. Doc. 11288) The Court also authorized the Special Master to initiate legal action to “clawback” the payment of any fraudulent claims, including any contingent fees received by attorneys representing claimants who made fraudulent claims.

         Continental Casualty Company issued a Lawyers Professional Liability Policy (“the Policy”) to the Andry Law Group, LLC for the period January 1, 2013 to January 1, 2014.[1] On October 15, 2013, Andry tendered notice to Continental and demanded reimbursement for past and future defense costs relating to the Special Master's investigation and the Show Cause Order. Continental denied coverage in a letter dated January 7, 2014, explaining “the Policy [does] not afford coverage for this matter because there is no possibility of covered damages.” (Rec. Doc. 13080-17 at 3) (emphasis in original) In February 2014, Andry sued Continental in state court for breach of contract and sought a declaration that Continental “is obligated under the Policy to provide the attorneys with coverage for the defense of the Court's demand for services.” (No. 14-600, Rec. Doc. 1-3 ¶ XXIX(1)). The case was removed and later consolidated with MDL 2179, where it was stayed while the Court dealt with other matters in the MDL.

         On November 7, 2014, the Court conducted an evidentiary hearing regarding the Show Cause Order and made oral findings. (Rec. Doc. 13645) On February 26, 2015, the Court issued an order imposing sanctions in accordance with its oral findings. (Rec. Doc. 14221) Relevant here, the Court disqualified Jonathan Andry from representing any claimants in the CSSP and barred him from collecting attorneys' fees, except that the Court permitted him to collect fees for previous legal work actually performed on legitimate (i.e., non-fraudulent) claims that qualified for payment. The Court also instructed the Special Master to report the matter to the appropriate authorities regarding attorney discipline. Jonathan Andry appealed. The Fifth Circuit affirmed, stating, “The district court . . . did not abuse its discretion in finding that Andry [and another attorney] violated the Louisiana Rules of Professional Conduct or in fashioning an appropriate sanction.” In re: Deepwater Horizon, 824 F.3d 571, 586 (5th Cir. 2016) (per curiam).

         On June 5, 2018, the Court issued a briefing schedule on the instant cross motions for summary judgment (Rec. Docs. 13080, 13083), which Continental and Andry had filed before their case was stayed upon consolidation with MDL 2179. (Rec. Doc. 24599) Each side filed a response (Rec. Docs. 24624, 24625), and Continental also filed a reply (Rec. Doc. 24684). The Court considered these motions on the briefs and without oral argument.

         Discussion

         The parties move for summary judgment on the issue of whether the Policy required Continental to defend Andry in connection with the Special Master's investigation and the Court's Show Cause Order. A movant is entitled to summary judgment when it shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The parties agree that Louisiana law governs interpretation of the Policy.

         Under Louisiana law, “an insurer's duty to defend is much broader in scope than the insurer's duty to provide coverage.” Elliot v. Cont'l Cas. Co., 949 So.2d 1247, 1250 (La. 2007). “The insurer's duty to defend suits brought against its insured is determined by the allegations of the plaintiff's petition [against the insured], with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage.” Id. (quotations omitted). “Importantly, however, an insurer's duty to defend is not triggered where ‘the pleadings . . . do not reveal a possibility of liability [because] there is not a claim that would ...


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