Scottsdale Insurance Company v. CNC Technologies LLC et al

RESPONSE

C.D. Cal.November 14, 2018

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 39087383\1 COZEN O’CONNOR Valerie D. Rojas (SBN 180041) vrojas@cozen.com Michael V. Ruocco (SBN 297414) mruocco@cozen.com 601 South Figueroa Street, Suite 3700 Los Angeles, California 90017 Telephone: (213) 892-7965 Facsimile: (213) 784-9076 Attorneys for Plaintiff and Counter-Defendant SCOTTSDALE INSURANCE COMPANY UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SCOTTSDALE INSURANCE COMPANY, an Ohio corporation, Plaintiff, v. CNC TECHNOLOGIES, LLC, a California corporation, RONALD MAGOCSI, JAMES HYMAN, ALEX GIUFFRIDA, BABETTE SCHRANK, and KEITH HANEY, Defendants. ________________________________ AND RELATED MATTERS Case No. 2:17-cv-03190 VAP (Ex) SCOTTSDALE INSURANCE COMPANY’S RESPONSE TO DEFENDANTS’ EVIDENTIARY OBJECTIONS TO SCOTTSDALE’S EVIDENCE IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, OR ALTERNATIVELY FOR PARTIAL SUMMARY JUDGMENT Plaintiff Scottsdale Insurance Company (“Plaintiff” or Scottsdale”) respectfully requests that the Court overrule Defendants Ronald Magocsi, Alex Giuffrida, Keith Haney, Babette Schrank, James Hyman’s (“Individual Defendants”) and CNC Technologies, LLC’s (“CNC”) (collectively “Defendants”) objections to Scottsdale’s evidence submitted in support of its motion for summary judgment or alternatively for partial summary judgment (“Motion”). Scottsdale hereby opposes the objections Case 2:17-cv-03190-VAP-E Document 156 Filed 11/14/18 Page 1 of 7 Page ID #:5388 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 submitted by Defendants as follows: DECLARATION OF KATHRYN PURWIN 1. Defendants’ objection to paragraph 2 of the Declaration of Kathryn Purwin (“Purwin”) lacks merit because Defendants fail to identify how or why the declaration is “clearly incomplete” and because Purwin establishes foundation and personal knowledge of the matters discussed in her declaration. Specifically, Purwin states that she is authorized to testify on behalf of Helinet Aviation Services, LLC (“Helinet”), that she was at Helinet during the time the action styled Helinet Aviation Sevices, LLC v. Ronald Magocsi, et al., (“Underlying Action”) was being litigated, and that she is familiar with the documents, facts, and allegations in Helinet’s complaint. Purwin clearly has personal knowledge of the Underlying Action and Helinet’s allegations against the Defendants, which is why Scottsdale requests that this Court overrule Defendants’ objection. 2. Defendants’ objection to paragraph 3 of Purwin’s declaration based on hearsay is unmeritorious. Purwin’s testimony regarding the allegations in Helinet’s complaint does not recount a “statement” or prove what anyone stated and therefore cannot be considered hearsay. See F.R.E. 801(a); Aknin v. Holland, No. 15-CV- 00529-YGR (PR), 2016 WL 4524309, at *32 (N.D. Cal. Aug. 30, 2016) (finding that testimony did not recount statements and thus counsel was not deficient for failing to object on hearsay grounds); Browne v. Turner Const. Co. 127 CA4th 1334, 1348-1349 (2005) (finding that testimony that does not recount a “statement” is nonhearsay). In addition, the testimony presented by Purwin is not being offered for its truth. The hearsay rule is not implicated where the issue is whether certain things were said or done, and not whether those things were true or false. In this case, Purwin’s testimony regarding Helinet’s allegations against the Defendants is not being offered for the truth of the matter asserted because Helinet’s allegations against Defendants have independent significance (whether or not the allegations themselves are true or not). See Calmat Co. v. U.S. Dep't of Labor, 364 F.3d 1117, 1124 (9th Cir. 2004) (“If the Case 2:17-cv-03190-VAP-E Document 156 Filed 11/14/18 Page 2 of 7 Page ID #:5389 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 significance of an out-of-court statement lies in the fact that the statement was made and not in the truth of the matter asserted, then the statement is not hearsay.”); see also Kunz v. Utah Power & Light Co., 913 F.2d 599, 605 (9th Cir.1990); United States v. Kutas, 542 F.2d 527, 528 (9th Cir.1976); Martinez v. McCaughtry, 951 F.2d 130, 133 (7th Cir.1991). Helinet’s allegations (and not whether the allegations are actually true or not) impact coverage in this case because the Policy excludes “Loss on account of any Claim for a Wrongful Act actually or allegedly committed or attempted by any of the Directors and Officers.” The issue is whether Helinet made certain allegations in its complaint, not whether those allegations are true. Thus, the testimony is not being offered for the truth of the matter and does not qualify as inadmissible hearsay. Further, Defendants failed to identify how Helinet’s complaint “contradicts portions of Purwin’s statement regarding the allegations.” Accordingly, Scottsdale respectfully requests that the Court overrule Defendants’ objection because the statement does not qualify as inadmissible hearsay. 3. Defendants’ objection to paragraph 4 of Purwin’s Complaint is without merit because her testimony does not constitute inadmissible hearsay. Purwin’s testimony regarding the settlement proceeds paid by Defendants does not recount a “statement” or prove what anyone stated and therefore cannot be considered hearsay. See F.R.E. 801(a); Aknin v. Holland, No. 15-CV-00529-YGR (PR), 2016 WL 4524309, at *32 (N.D. Cal. Aug. 30, 2016) (finding that testimony did not recount statements and thus counsel was not deficient for failing to object on hearsay grounds); Browne v. Turner Const. Co. 127 CA4th 1334, 1348-1349 (2005) (finding that testimony that does not recount a “statement” is nonhearsay). Even if it is determined that the testimony qualifies as a statement, Purwin’s testimony is not being offered for the truth of the matter asserted but is instead being offered to show the existence of Helinet’s allegations that the Defendants committed wrongful acts. The testimony is not being offered to show that the Defendants actually committed wrongful acts, which is why the testimony does not qualify as inadmissible hearsay. Case 2:17-cv-03190-VAP-E Document 156 Filed 11/14/18 Page 3 of 7 Page ID #:5390 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 Moreover, even if it is determined that the testimony constitutes hearsay (it does not), the following hearsay exceptions apply: (1) F.R.E. 803(1) (present sense impression); and (2) F.R.E. 803(3) (then-existing mental condition). In addition, it is irrelevant whether Purwin’s declaration contradicts the language in the settlement agreement for the Underlying Action as Purwin’s declaration only discusses the allegations in the Underlying Action that were alleged against the Defendants. Purwin’s declaration does not discuss whether there was an ultimate determination as to whether the Defendants committed the wrongful acts. Thus, Scottsdale respectfully requests that this Court overrule Defendants’ objection. DECLARATION OF EMIL SOSKIN 4. Defendants’ lack of foundation objection to paragraph 4 of the Soskin Declaration authenticating emails sent between Lisa Damonte (“Damonte”) and Bradd Friel (“Friel”) where Friel states “the insured is very well aware that there is no coverage” is without merit. Soskin properly authenticated the email chain by describing the contents of the emails, when the emails were sent, and who they were sent to. In addition, Soskin explained that these emails were maintained as part of Scottsdale’s claims file in this case and were produced as part of Scottsdale’s November 2, 2018 production of documents to Defendants and lists the exact bates labels. Thus, Soskin’s declaration properly authenticates the emails contained in Exhibit B to his declaration. Further, Defendants’ objection should be overruled because the email is not hearsay pursuant to F.R.E. 801(d)(2)(A)(an opposing party’s statement) because the statement is being offered against Defendants and was made by the Defendants’ insurance broker who represented Defendants. In addition, the statement is not hearsay under F.R.E. 801(d)(2)(B)(an opposing party party’s statement) because the statement is being offered against the Defendants and is one the Defendants believed to be true as the statement indicates the Defendants were aware there was no coverage for the Underlying Action. Moreover, Rule 801(d)(2)(D)(an opposing party’s) of the Federal Rules of Evidence establishes that Case 2:17-cv-03190-VAP-E Document 156 Filed 11/14/18 Page 4 of 7 Page ID #:5391 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 the statement is not hearsay because it is being offered against parties in this lawsuit (Defendants) and was made by the Defendants’ insurance broker regarding coverage of the Underlying Action, which is a matter within the scope of the broker client relationship. In addition, the statement was made while the relationship existed as Defendants tendered the Underlying Action to Friel on April 8, 2016 who then tendered it to Scottsdale. Even if it is determined that the statement constitutes hearsay (it does not), the following hearsay exceptions apply: (1) F.R.E. 803(1) (present sense impression); (2) F.R.E. 803(3) (then-existing mental condition); and (3) F.R.E. 803(6) (records of a regularly conducted activity). Defendants specifically argue in their objection that the email from Friel does not satisfy F.R.E. 803(6). However there is authority for admitting emails as business records. Arthur v. Gallagher Bassett Servs., Inc., No. CV 09-4882 SVW (CWX), 2010 WL 11596468, at *6 (C.D. Cal. June 1, 2010); see also DirecTV, Inc. v. Murray, 307 F.Supp.2d 764, 770-73 (D. S.C. 2004) (admitting sales records contained in emails under business records exception when the sale orders were regularly received by email and the emails were retained as records of the orders); Cantaxx Gas Storage Ltd. v. Silverhawk Capital Partners, LLC, 2008 WL 1999234, at *13 (S.D. Tex 2008) (admitting email recounting a telephone conversation regarding plaintiff’s decision not to proceed on a deal with defendant as a business record); Nari v. Columbus State Community College, 2008 WL 3822341, at *21 (S.D. Ohio 2008) (email to employee’s supervisor informing him of an incident with a colleague likely would be admitted as a business record). Here, the email was sent by Defendants’ insurance broker on April 11, 2016 who had knowledge of the insureds’ belief that “there is no coverage” for the Underlying Action. Further, as explained in paragraph 4 of Emil Soskin’s declaration, the email was kept as part of the claim file in conjunction with Scottsdale’s adjustment of Defendants’ claim, and Defendants are unable to show that the source of the information or the method or circumstances of preparation indicate a lack of trustworthiness. Thus, the email from Case 2:17-cv-03190-VAP-E Document 156 Filed 11/14/18 Page 5 of 7 Page ID #:5392 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 Defendants’ insurance broker is not excluded by the hearsay rule pursuant to F.R.E. 803(6)(records of regularly conducted activity). DECLARATION OF MICHAEL VINCENT RUOCCO 5. Defendants’ evidentiary objection to paragraph 10 of the Declaration of Michael Ruocco (“Ruocco”) authenticating Helinet’s mediation brief is without merit. Defendants claim the mediation brief is inadmissible pursuant to California Evidence Code § 1119(b). However, the Helinet mediation brief is admissible pursuant to California Evidence Code § 1122(a)(2) because Scottsdale obtained a written waiver of the mediation privilege from Helinet. In an email from Helinet’s Counsel to Scottsdale’s Counsel dated September 17, 2018, Helinet’s Counsel stated that “Helinet has no objection to the use of the mediation brief or the settlement agreement in the context of the Scottsdale v. CNC matter.” This email is attached as Exhibit R to Scottsdale’s appendix of exhibits in support of its Motion. Accordingly, Scottsdale is entitled to rely upon Helinet’s mediation brief pursuant to California Evidence Code § 1122(a)(2), as the mediation brief was prepared by Helinet who expressly agreed in writing to its disclosure, and the brief does not disclose anything said or done in the course of the mediation. 6. Defendants’ objection to paragraph 18 of the Ruocco Declaration is without merit because the statement concerning Plaintiff Counsel’s communications with Defendants Counsel do not constitute inadmissible hearsay pursuant to F.R.E. 801(d)(2)(A)(opposing party’s statement) because Defendants Counsel’s statement is being offered against the Defendants and was made by Defendants’ Counsel who represented the Defendants. Thus, the statements were made by Defendants in a representative capacity and are being offered against the Defendants. In addition, even if it is determined that the statement constitutes hearsay, the following hearsay exceptions apply : (1) F.R.E. 803 (1) (present sense impression) (Plaintiff Counsel’s statement describes and explains the August 22, 2018 meet and confer conversation between Defendants’ Counsel and Scottsdale’s Counsel and was made after Case 2:17-cv-03190-VAP-E Document 156 Filed 11/14/18 Page 6 of 7 Page ID #:5393 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 Scottsdale’s Counsel perceived that Defendants’ Counsel was unable to identify a single wrongful act that occurred while the Defendants were acting in their insured capacity); (2) (then–existing mental condition). 7. Defendants’ objection to paragraph 18 of the Ruocco Declaration should be overruled because Defendants fail to identify which portion of the paragraph contains inadmissible hearsay. DATED: November 14, 2018 COZEN O’CONNOR By: Valerie D. Rojas Michael V. Ruocco Attorneys for Defendant SCOTTSDALE INSURANCE COMPANY Case 2:17-cv-03190-VAP-E Document 156 Filed 11/14/18 Page 7 of 7 Page ID #:5394