Xl Specialty Insurance Company v. Federal Deposit Insurance Company et al

MOTION to Dismiss for Failure to State a Claim re Mendez Counterclaim D.E. 44

D.P.R.January 16, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO XL SPECIALTY INSURANCE COMPANY, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, et al. Defendants. Case No. 3:16-cv-02594-PAD XL SPECIALTY INSURANCE COMPANY’S MOTION TO DISMISS THE COUNTERCLAIM FILED BY IVAN MÉNDEZ, HIS SPOUSE RAQUEL MIRO CORDERO AND THE CONJUGAL PARTNERSHIP BETWEEN THEM Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 1 of 27 - i - TABLE OF CONTENTS Page I. THE COUNTERCLAIM .....................................................................................................2 II. ARGUMENT .......................................................................................................................4 A. Standards for Motion to Dismiss .............................................................................4 B. XL Specialty properly filed this interpleader action when it was faced with competing, conflicting settlement demands that far exceeded the remaining limits of the MLP Policy. ...................................................................................................5 1. XL Specialty has not committed bad faith by filing an interpleader action.5 2. XL Specialty was not obligated to file an interpleader action at an earlier date. ............................................................................................................10 3. Counterclaimants have not alleged, and cannot allege any injury arising from XL Specialty’s filing of the interpleader action rather than funding individual settlements on behalf of some, but not all, insureds. ................12 C. There is no legal authority to support Counterclaimants’ claim that XL Specialty had a duty to limit the individual insureds’ Defense Expenses, and the counterclaim would result in Counterclaimants being obligated to repay their share of the amounts advanced. .............................................................................14 D. Counterclaimants’ request for punitive damages must be dismissed as a matter of law because there is no right to recovery for punitive damages under Puerto Rico law. .........................................................................................................................18 E. If the counterclaim is not dismissed with prejudice for the reasons set forth above, it must be dismissed for failure to assert sufficient facts to support a claim upon which relief may be granted. ..................................................................................19 CONCLUSION ..............................................................................................................................21 Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 2 of 27 - ii - TABLE OF AUTHORITIES Page(s) Cases Alternative Energy, Inc. v. St. Paul Fire & Marine Insurance Co., 267 F.3d 30 (1st Cir. 2001) ........................................................................................................6 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .............................................................................................................4, 19 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .............................................................................................................4, 19 Bowers v. State Farm Mutural Automobile Insurance Co., 460 So. 2d 1288 (Ala. 1984) ......................................................................................................8 Brown v. American International Group, Inc., 339 F. Supp. 2d 336 (D. Mass. 2004) ......................................................................................16 Brown v. Guarantee Insurance Co., 319 P.2d 69 (Cal. Dist. Ct. App. 1957) ....................................................................................13 Carrero-Ojeda v. Autoridad de Energia Electrica, 755 F.3d 711 (1st Cir. 2014) ......................................................................................................6 Clarendon American Insurance Co. v. Rodriguez, No. CIV. 99-1623 (JP), 1999 WL 33218159 (D.P.R. Oct. 4, 1999)..................................18, 19 Claudio-De Leon v. Sistema Universitario Ana G. Méndez, 775 F.3d 41 (1st Cir. 2014) ........................................................................................................5 Critz v. Farmers Insurance Group, 41 Cal. Rptr. 401 (Cal. Ct. App. 1964) ....................................................................................13 Federal Insurance Co. v. Parnell, No. CIV 6:09CV00033, 2009 WL 2848667 (W.D. Va. Sept. 3, 2009) ...................................11 Gilbert v. Congres Life Insurance Co., 646 So. 2d 592 (Ala. 1994) ........................................................................................................8 Gonzalez v. Otero, 172 F. Supp. 3d 477 (D.P.R. 2016) ......................................................................................4, 19 Hartford Fire Insurance Co. v. Annapolis Bay Charters, Inc., 69 F. Supp. 2d 756 (D. Md. 1999) ...........................................................................................13 Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 3 of 27 - iii - Hurley v. Columbia Casualty Co., 976 F. Supp. 268 (D. Del. 1997) ..............................................................................................16 John Beaudette, Inc. v. Sentry Insurance A Mutual Co., 94 F. Supp. 2d 77 (D. Mass. 1999) ..........................................................................................13 Kmart Corp. v. TJAC (Vega Baja), S.E., No. CIV. 00-2115(HL), 2001 WL 34394665 (D.P.R. Oct. 12, 2001) .............................4, 5, 19 Lehto v. Allstate Insurance Co., 36 Cal. Rptr. 2d 814 (Cal. Ct. App. 1994) .....................................................................9, 10, 11 Mahan v. American Standard Insurance Co., 862 N.E.2d 669 (Ind. Ct. App. 2007).........................................................................................9 Maldonado v. Fontanes, 568 F.3d 263 (1st Cir. 2009) ................................................................................................4, 19 McReynolds v. American Commerce Insurance Co., 235 P.3d 278 (Ariz. Ct. App. 2010) ...........................................................................................9 Metlife Capital Corp. v. Water Quality Insurance Syndicate, 100 F. Supp. 2d 90 (D.P.R. 2000) ............................................................................................15 Monumental Life Insurance Co. v. Lyons-Neder, 140 F. Supp. 2d 1265 (M.D. Ala. 2001) ....................................................................................8 Morales v. Automatic Vending Service, Inc., 3 P.R. Offic. Trans. 390, 1975 WL 38864 (P.R. 1975) ...................................................6, 7, 13 National Casualty Co. v. Insurance Co. of North America, 230 F. Supp. 617 (N.D. Ohio 1964) ...................................................................................11, 12 National Life & Accident Insurance Co. v. Edwards, 174 Cal. Rptr. 31 (Cal. Ct. App. 1981) ......................................................................................9 Noble Corp. Insular De Seguros, 738 F.2d 51 (1st Cir. 1984) ......................................................................................................18 NPR, Inc. v. American International Insurance Co. of Puerto Rico, 242 F. Supp. 2d 121 (D.P.R. 2003) ....................................................................................17, 18 Oriental Financial Group, Inc. v. Federal Insurance Co., 483 F. Supp. 2d 161 (D.P.R. 2007) ....................................................................................12, 13 Oriental Financial Group, Inc. v. Federal Insurance Co., 598 F. Supp. 2d 199 (D.P.R. 2008) ........................................................................................7, 8 Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 4 of 27 - iv - Pan-American Fire & Casualty v. Revere, 188 F. Supp. 474 (E.D. La. 1960) ............................................................................................12 Principal Mutual Life Insurance Co. v. Racal-Datacom, Inc., 233 F.3d 1 (1st Cir. 2000) ....................................................................................................5, 19 Rivera-Freytes v. Puerto Rico, 894 F. Supp. 2d 159 (D.P.R. 2012) ............................................................................................6 Rivera-Torres v. Castillo, 109 F. Supp. 3d 477 (D.P.R. 2015) ............................................................................................6 Romstadt v. Allstate Insurance Co., 59 F.3d 608 (6th Cir. 1995) .....................................................................................................13 Schwartz v. State Farm Fire & Casualty Co., 106 Cal. Rptr. 2d 523 (Cal. Ct. App. 2001) ...............................................................................9 Smit Americas, Inc. v. M/V MANTINIA, 259 F. Supp. 2d 118 (D.P.R. 2003) ..........................................................................................18 Statutes P.R. Laws Ann. tit. 31, § 3024 .......................................................................................................12 Rules Fed. R. Civ. P. 8(a)(2) ......................................................................................................................4 Other Authorities 14 Steve Pitt et al. Couch on Insurance § 206:4 (3d. ed. 2016) ....................................................13 Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 5 of 27 XL Specialty Insurance Company (“XL Specialty”) respectfully requests that this Court dismiss the Counterclaim filed by Iván Méndez, his spouse Raquel Miró Cordero and the conjugal partnership between them (“Méndez” or “Counterclaimants”) under Rule 12(b)(6). The Méndez counterclaim is notable both for its failure to state a cognizable claim and its success in demonstrating that XL Specialty had no choice but to file this interpleader action. Counterclaimants allege that XL Specialty acted wrongfully by filing this interpleader action when it indisputably was faced with competing, conflicting demands in excess of the applicable policy limits, but complain in passing that XL Specialty did not file the interpleader action sooner. Having previously asserted that XL Specialty would be in bad faith if it funded individual settlements on behalf of some, but not all, insureds, they now allege that XL Specialty acted in bad faith by refusing to do so. And having demanded that XL Specialty advance Defense Expenses on their behalf to the counsel of their choosing, and expressly agreed never to argue that such amounts did not reduce the applicable limit of liability, they now allege that XL Specialty acted wrongfully by paying the very defense invoices that they caused to be submitted for payment on their own behalf. It is difficult to imagine more appropriate circumstances for an insurer to file an interpleader action. To make matters worse, Counterclaimants make all of these strikingly inconsistent allegations based solely upon unfounded, conclusory assertions, such as that XL Specialty had some “duty” not to pay the invoices they submitted for payment or that it paid “unreasonable” amounts on Counterclaimants’ behalf. But Counterclaimants offer no support for the existence of the supposed “duty” of XL Specialty not to pay the invoices they caused to be submitted by the lawyers they chose for their defense. Such a duty does not exist. In any event, they do not identify a single fact from which this Court could conclude that XL Specialty did, indeed, pay Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 6 of 27 - 2 - unreasonable Defense Expenses. They allege that XL Specialty acted in bad faith by failing to fund a settlement, but they provide no facts to show when or how any settlement demand was made, whether it was within remaining policy limits, or how or when XL Specialty was allegedly notified of the demand or purportedly refused to fund it. Counterclaimants’ conclusory allegations fall woefully short of the specificity required of a counterclaim in federal court. Moreover, their allegations make clear that, whatever the propriety of XL Specialty’s actions, Counterclaimants have suffered no injury because XL Specialty has funded their defense and they have not suffered an adverse judgment. Finally, Counterclaimants’ demand for punitive damages must be dismissed because Puerto Rico law does not recognize recovery of punitive damages. Accordingly, XL Specialty respectfully requests that this Court dismiss the Méndez counterclaim with prejudice. I. THE COUNTERCLAIM The counterclaim alleges, in relevant part, that in 2012, XL Specialty was made aware of two lawsuits, FDIC v. Victor Galán Alvarez (the “Galán-Alvarez matter”) and Zucker v. Rolando Rodríguez (the “Zucker Litigation”) against Counterclaimants and others. Counterclaim ¶ 11. The lawsuits sought aggregate damages in excess of the $25 million policy limit under the Management Liability and Company Reimbursement Policy (“MLP Policy”) and the $10 million policy limit under the Side-A Management Liability Policy (“Side-A Policy”).1 Id. XL Specialty agreed to advance Defense Expenses on behalf of its insureds for both lawsuits under the MLP Policy. Id. ¶ 12. 1 Counterclaimants use these or similar defined terms interchangeably with the undefined terms “policy” or “policies.” XL Specialty uses the following defined terms in this motion: “MLP Policy” for Management Liability and Company Reimbursement Policy No. ELU108674-08, and “Side-A Policy” for Classic A-Side Management Liability Policy No. ELU108668-08. XL Specialty also uses the term “Defense Expenses” as defined in the MLP Policy. The MLP Policy is the only insurance policy at issue in this litigation. The question whether coverage exists under the Side-A Policy is already teed up for summary judgment in the Galán-Alvarez matter. Nonetheless, the arguments in this brief apply equally whether Counterclaimants are referring to the MLP Policy, the Side-A Policy, or both. Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 7 of 27 - 3 - Counterclaimants allege that “[e]ven though XL Specialty was aware since 2012” that the plaintiffs in the Galán-Alvarez matter and the Zucker Litigation sought damages in excess of the policy limits, “XL Specialty waited until September 2016 to seek interpleader relief.” Id. ¶ 14. The counterclaim alleges in conclusory fashion that between 2012 and 2016, XL Specialty “failed to adequately monitor and control the defense bills in these cases, and allowed the payment of excessive and unnecessary fees and expenses, as a result of which XL Specialty has paid Defense Expenses that are not ‘reasonable’ as required under the Policy.” Id. ¶ 15. The counterclaim alleges that XL Specialty has a duty under the applicable policies to ensure that Defense Expenses are “reasonable” and concludes that XL Specialty “has breached its duty toward its insureds” resulting in unspecified damages to Counterclaimants. Id. ¶ 18. The counterclaim alleges further that Counterclaimants “have repeatedly sought XL Specialty’s consent and cooperation in order to negotiate with the FDIC” and that “XL Specialty has refused to consent to any individual settlement negotiations, has refused to fund any individual settlements, and has instead filed an Interpleader action . . .” Id. ¶ 16. Counterclaimants allege that they have reached a confidential settlement with the FDIC, but are “prevented from finalizing the agreement because XL Specialty is unwilling to make payment under the [MLP Policy] to settle any claims by the FDIC against individual insureds.” Id. ¶ 17. The counterclaim alleges that XL Specialty breached a purported duty “not to unreasonably withhold its consent to a settlement within the policy limits” and by filing an interpleader action at this time, resulting in unspecified damages to Counterclaimants. Id. ¶ 19. Counterclaimants further allege that by “failing to consent to settlement negotiations and/or agreements between the counterclaimants and the FDIC, XL Specialty has breached such duty and is acting in bad faith.” Id. ¶ 20. Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 8 of 27 - 4 - The counterclaim concludes that “XL Specialty’s breach of its duties and bad faith” has caused “substantial damages” to Counterclaimants. For relief, the counterclaim seeks 1) a judgment compelling XL Specialty to pay a purported settlement amount agreed to between Counterclaimants and the FDIC-R; 2) a judgment for compensatory damages for alleged breach of XL Specialty’s duties towards Counterclaimants; 3) a judgment for punitive damages against XL Specialty for “its unreasonable and bad faith withholding of consent to engage in individual settlement negotiations with the FDIC, and its refusal to settle the individual claims against counterclaimants within the policy limits;” and 4) award of costs, prejudgment interest and attorneys fees. II. ARGUMENT A. Standards for Motion to Dismiss Federal Rule of Civil Procedure 8(a) requires plaintiffs to provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To survive a motion to dismiss, a plaintiff is required to ‘“provide the grounds of his entitlement [with] more than labels and conclusions.”’ Gonzalez v. Otero, 172 F. Supp. 3d 477, 499 (D.P.R. 2016) (alteration in original) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007)). While a court must “‘accept as true all of the allegations contained in a complaint[,]’” it must “discard[] legal conclusions, conclusory statements and factually threadbare recitals of the elements of a cause of action.” Gonzalez, 172 F. Supp. 3d at 499 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A court “need not accept as true legal conclusions from the complaint or naked assertions devoid of further factual enhancement.” Maldonado v. Fontanes, 568 F.3d 263, 266 (1st Cir. 2009) (quoting Iqbal, 556 U.S. at 678) (internal quotations omitted). Additionally, courts do not accept contract interpretations as true because “contract interpretation is construed as a ‘question of law’ for the judge.” Kmart Corp. v. TJAC (Vega Baja), S.E., No. CIV. 00- Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 9 of 27 - 5 - 2115(HL), 2001 WL 34394665, at *2 (D.P.R. Oct. 12, 2001) (quoting Principal Mut. Life Ins. Co. v. Racal-Datacom, Inc., 233 F.3d 1, 3 (1st Cir. 2000)). Where it is clear that a plaintiff cannot amend the complaint to assert facts that would properly state a cause of action, dismissal with prejudice is appropriate. See Claudio-De León v. Sistema Universitario Ana G. Méndez, 775 F.3d 41, 49 (1st Cir. 2014) (absent clear statement by district court to the contrary, dismissal under 12(b)(6) is presumed to be with prejudice). B. XL Specialty properly filed this interpleader action when it was faced with competing, conflicting settlement demands that far exceeded the remaining limits of the MLP Policy. 1. XL Specialty has not committed bad faith by filing an interpleader action. Counterclaimants allege that XL Specialty acted in bad faith by filing this interpleader action rather than consenting to settlements with the FDIC-R for some, but not all, of its insureds. Tellingly, this position is directly contrary to a position counterclaimants took before they allegedly received an individual settlement demand from the FDIC-R. As alleged in paragraph 5 of the Complaint in this action, and effectively conceded by Counterclaimants, XL Specialty filed this interpleader action because, in connection with a settlement conference in the Galán-Alvarez matter, the FDIC-R made settlement demands to all insureds. Some of the individual demands were within the remaining limit of the MLP Policy, but cumulatively the demands far exceeded the remaining available insurance proceeds.2 Certain insureds that received individual demands within the remaining limit demanded that XL Specialty fund their individual settlements, while others demanded that XL Specialty decline to settle on behalf of some, but not all, insureds in order to preserve the remaining insurance proceeds for Defense 2 Although only the MLP Policy is at issue here, the settlement demands cumulatively exceeded the remaining limits of the MLP Policy and Side-A Policy combined. Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 10 of 27 - 6 - Expenses or to fund a future global settlement. Complaint, ¶¶ 5, 56-58.3 Counterclaimants were among the individuals who first demanded that XL Specialty not fund any individual settlements: their counsel wrote XL Specialty on May 5, 2016, immediately after the settlement conference, to “provide formal notice that [Counterclaimants] will consider the approval and funding of the settlements to be in bad faith and reserve all rights.” Exhibit 1 (letter from counsel for Counterclaimants and other individual insureds to counsel for XL Specialty (names of other insureds redacted)).4 At that time, Counterclaimants stated that “under the Policies and Puerto Rico law, XL is permitted, and in this case, required, to withhold its consent to settlement offers made to only a portion of the insured defendants.” Id. at 1 (citing, among others, Morales v. Automatic Vending Serv., Inc., 3 P.R. Offic. Trans. 390, 1975 WL 38864 (P.R. 1975)). Now, having apparently received an individual settlement demand within the remaining limit of liability,5 Counterclaimants reverse course and allege in conclusory 3 These allegations are borne out by the two answers filed to date by individual insureds. The Answer and Affirmative Defenses filed by Defendants Rafael Nin-Torregrosa and Doris Price, Doc. No. 27, asserts that XL Specialty would violate its fiduciary duty to its insureds if it funded any individual settlements. Having previously agreed with these Defendants, Counterclaimants reverse course and take the opposite position here. 4 This Court properly may consider as part of this motion any documents that are “central to” Counterclaimant’s claim. See Rivera-Torres v. Castillo, 109 F. Supp. 3d 477, 482 (D.P.R. 2015) (citing Carrero-Ojeda v. Autoridad de Energia Electrica, 755 F.3d 711, 717 (1st Cir. 2014)) (“There is, however, a narrow exception by which a document effectively merges into the pleadings, when the authenticity of that document is unchallenged and the document is central to the plaintiff's claim or sufficiently referred to in the complaint, even if it is not physically attached to the pleading.”) (internal quotation marks and citation omitted). Like the Fee Agreement discussed below, this document is central to Counterclaimants’ allegations because the two documents directly undermine those allegations. Counterclaimants have put these documents at issue by making unfounded allegations here that directly contradict their own prior statements and agreements. See Rivera-Freytes v. Puerto Rico, 894 F. Supp. 2d 159, 167–68 n.5 (D.P.R. 2012) (court will consider letter providing facts to refute allegation in complaint “and still decide the defendant’s motion to dismiss under Rule 12(b)(6) because the complaint’s factual allegations are expressly linked to—and admittedly dependent upon—[this] document.”) (internal quotation marks and citations omitted); Alternative Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 34 (1st Cir. 2001) (consideration of settlement agreement not attached to complaint proper because plaintiff’s “alleged liability under the complaint depends directly upon [interpretation of the settlement agreement],” noting that under First Circuit precedent, “when a complaint’s factual allegations are expressly linked to—and admittedly dependent upon—a document (the authenticity of which is not challenged), then the court can review it upon a motion to dismiss.”) (internal quotation marks and citations omitted). 5 We say “apparently” because Counterclaimants allege only that, at some point in time, they received a settlement demand for a “reasonable amount” in excess of $75,000. Counterclaim ¶ 17. They do not specifically allege that the amount is within the remaining limit of liability. As explained above, the Counterclaim must be dismissed for Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 11 of 27 - 7 - fashion that XL Specialty acted in bad faith by filing this interpleader action rather than funding settlements on behalf of some, but not all, insureds. Counterclaim ¶ 20. Regardless of Counterclaimants’ contradictions, the law is clear that XL Specialty cannot be subject to a claim of bad faith for filing the interpleader action. The very purpose of interpleader is to allow a stakeholder facing multiple, competing claims for money or property, such as an insurance policy, to seek judicial resolution of entitlement to the funds. As courts around the country have held, an insurer who uses the interpleader procedure cannot be liable for bad faith for doing so. To the contrary, by tendering the policy limit to the Court—particularly here, where XL Specialty seeks to protect the interests of multiple insureds—the insurer is acting prudently and in a manner to protect the interests of all of its insureds. Although no Puerto Rico court has considered whether a bad faith action may lie against an insurer for filing an interpleader action, such a holding would be inconsistent with the nature of bad faith law in Puerto Rico. In that regard, Puerto Rico recognizes a cause of action based on the implied covenant of good faith in an insurance contract where an insurer rejects a reasonable settlement offer without taking into account the insured’s interests. See, e.g., Morales, 3 P.R. Offic. Trans. 390.6 The standard imposed by the Morales court was that of the “prudent insurer” that gives “the interests of the insured at least as much consideration as it gives to its own interests.” Id. at 397-98. Other courts have explained that an insurer “acts with bad faith (‘dolo’) when it knowingly and intentionally, through deceitful means, avoids complying with its lack of specificity even if this Court rejects all other bases for dismissal. 6 Morales involved a single demand to a single insured, which the insurer declined to fund based on what the court deemed an implausible view of the merits, and so it did not raise the issue of competing and conflicting demands in excess of the available policy limit. Morales, 3 P.R. Offic. Trans. at 401-02. Morales also relied on the fact that the insurer had a duty to defend and “exclusive control over the decision concerning settlement within policy coverage.” Id. at 395, 400. Neither is true here. MLP Policy, Management Liability Part, Section V.(A) and (B) (providing that insured has duty to defend and may settle with XL Specialty’s consent, “such consent not to be unreasonably withheld”). Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 12 of 27 - 8 - contractual obligation.” Oriental Fin. Grp., Inc. v. Fed. Ins. Co., 598 F. Supp. 2d 199, 219 (D.P.R. 2008). Thus, bad faith requires the insurer to intentionally avoid its contractual obligations and to disregard the interests of its insureds. By filing an interpleader action, XL Specialty has done just the opposite. Consistent with Puerto Rico law, courts that have addressed the issue have found that an insurer cannot be held liable for filing an interpleader action. As one court explained in Monumental Life Insurance Co. v. Lyons-Neder, 140 F. Supp. 2d 1265, 1270 (M.D. Ala. 2001), breach of contract and bad faith counterclaims against an insurer in an interpleader action should be rejected, as a matter of law, “because by virtue of the stakeholder’s interpleader of the proceeds or stake the plaintiff could not prove the breach of contract or ‘refusal to pay’ element necessary for each claim.” Quoting Gilbert v. Congress Life Insurance Co., 646 So. 2d 592, 594 (Ala. 1994), the court stated: Because filing an interpleader action is equivalent to the plaintiff’s admitting that it is willing to pay the legitimate claimant, an interpleading stakeholder cannot logically be subjected to a claim alleging bad faith refusal to pay, under the circumstances of this case. Id. at 1270. Courts around the country have similarly held that an insurer does not act in bad faith by filing an interpleader when insurance policy proceeds are subject to multiple claims, the total of which will exceed the available policy limits. See, e.g., Bowers v. State Farm Mut. Auto. Ins. Co., 460 So. 2d 1288, 1290 (Ala. 1984) (insurer’s “filing of an interpleader action, rather than establishing its bad faith … shows just the contrary. It was faced with conflicting claims to the funds interpleaded, and nothing in the record suggests that the interpleader action was filed other than in a good faith effort to establish the extent of each claim against that fund and to limit its liability to the amount interpleaded. This it had a legal right to do and, absent some evidence to Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 13 of 27 - 9 - the contrary, the mere filing of an action of interpleader does not amount to evidence of bad faith dealing on its part.”); McReynolds v. Am. Commerce Ins. Co., 235 P.3d 278, 284 (Ariz. Ct. App. 2010) (filing of interpleader “acts as a safe harbor for an insurer against a bad faith claim for failure to properly manage the policy limits (or give equal consideration to settlement offers) when multiple claimants are involved and the expected claims are in excess of the applicable policy limits”); Mahan v. Am. Standard Ins. Co., 862 N.E.2d 669, 677 (Ind. Ct. App. 2007) (insurer did not act “with a dishonest purpose, moral obliquity, furtive design, or ill will when it filed its interpleader” and “[t]o the contrary … had a rational basis for filing the interpleader” after investigating and determining that it “most likely would be subject to multiple claims, the total of which would meet, if not exceed, the limits of the policy”); Schwartz v. State Farm Fire & Cas. Co., 106 Cal. Rptr. 2d 523, 532 (Cal. Ct. App. 2001) (“An insurer facing multiple claims on a limited pool of funds has at least two means of protecting itself without breaching its duty to either insured. The first is to seek a negotiated agreement among the insureds as to a fair apportionment of the pool of funds. If that approach fails, an insurer may file an interpleader action as other insurers do when faced with multiple claimants to a single fund.”); Nat’l Life & Accident Ins. Co. v. Edwards, 174 Cal. Rptr. 31, 38 (Cal. Ct. App. 1981) (“A bad faith action cannot be predicated upon [an insurer] filing an interpleader unless there was a showing that the claims of the interpleading parties were not asserted in good faith.”). As an appellate court in California has explained, where “multiple claims were asserted against the proceeds of the insureds’ policy[, t]he interpleader was thus properly filed to apportion the policy proceeds among the competing claimants. While the filing of the interpleader action would not absolve [the insurer] of liability had it refused in bad faith to offer the policy limits to the [insureds’] claimants, the filing of the interpleader, standing alone, cannot Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 14 of 27 - 10 - itself constitute an act of bad faith.” Lehto v. Allstate Ins. Co., 36 Cal. Rptr. 2d 814, 818 (Cal. Ct. App. 1994), as modified (Jan. 13, 1995). The court further discussed an insurer’s obligation where it faces a settlement demand with respect to a single insured that would deplete the remaining policy limits and leave the remaining insureds without any coverage: “Bad faith refusal to accept a settlement offer cannot occur where ‘acceptance’ would itself be bad faith. As [the insurer] would have acted in bad faith by accepting the offer, it could not be held in bad faith for refusing it.” Id. at 822 (internal citations and quotations omitted). As discussed above, Counterclaimants previously asserted, and other insureds continue to assert,7 that XL Specialty would be acting in bad faith if it paid any individual settlements, raising precisely the concerns addressed in Lehto. Counterclaimants allege that XL Specialty acted in bad faith by refusing to consent to their unspecified settlement demand. Yet XL Specialty faces multiple, competing settlement demands with respect to numerous insureds ― as evidenced most pointedly by the contrary position Counterclaimants took when it suited their purposes to do so. By filing this interpleader action, XL Specialty is acting prudently to protect the interests of all of the insureds facing exposure in the Galán-Alvarez matter and Zucker Litigation as best as possible. In doing so, XL Specialty has made available the full remaining limit of the MLP Policy, and a bad faith claim against it must fail as a matter of law. 2. XL Specialty was not obligated to file an interpleader action at an earlier date. Although they do not appear to seek any relief on this basis, Counterclaimants complain that XL Specialty did not file this interpleader action in 2012, when the underlying lawsuits were 7 See, e.g., Exhibit 1 (letter from counsel for multiple insureds asserting that XL Specialty would be in bad faith if it funded individual settlements); Answer and Affirmative Defenses filed by Defendants Rafael Nin-Torregrosa and Doris Price, Doc. No. 27 (asserting that XL Specialty would violate its fiduciary duty to its insureds if it funded any individual settlements). Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 15 of 27 - 11 - first filed. This allegation is unfounded. XL Specialty arguably could not have interpled the policy proceeds at an earlier date because there were no liquidated competing demands on the MLP Policy exceeding the policy limits as required to sustain an interpleader action. And even if XL Specialty might have been able to file an interpleader action sooner than it did, there is no legal authority whatever for the proposition that it was required to do so. Counterclaimants seemingly suggest that because the Galán-Alvarez matter and Zucker Litigation sought damages in excess of the MLP Policy limits, XL Specialty should have interplead the policy proceeds at the onset of the litigations in 2012. However, the existence of lawsuits alleging damages against insureds in excess of policy limits generally does not create a right for an insurer to file an interpleader action. Rather, the interpleader remedy is generally available only where there are competing liquidated demands (such as specific settlement demands) on the policy exceeding the policy limit. “[T]he primary test for determining the propriety of interpleading the adverse claimants and discharging the stakeholder is whether the stakeholder legitimately fears multiple litigation over a single fund.” Fed. Ins. Co. v. Parnell, No. CIV 6:09CV00033, 2009 WL 2848667, at *4 (W.D. Va. Sept. 3, 2009) (internal quotations and citations omitted) (interpleader appropriate where directors and officers asserted demands on the policy exceeding the policy limits); see also Lehto, 36 Cal. Rptr. 2d at 818 (because “multiple claims were asserted against the proceeds of the insureds’ policy, [t]he interpleader was thus properly filed to apportion the policy proceeds among the competing claimants”). Accordingly, the majority of courts that have addressed the issue have held that the mere existence of lawsuits seeking amounts in excess of policy limits is not sufficient grounds for an insurer to file an interpleader action. See, e.g., Nat’l Cas. Co. v. Ins. Co. of N. Am., 230 F. Supp. 617 (N.D. Ohio 1964) (holding that insurer could not file interpleader action where lawsuits had Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 16 of 27 - 12 - not been reduced to judgment and no specific settlement demands were pending). While at least one court has found that unliquidated demands in lawsuits may be sufficient to permit an insurer to file an interpleader action in a jurisdiction permitting direct actions against insurers, see Pan- American Fire & Cas. v. Revere, 188 F. Supp. 474 (E.D. La. 1960), XL Specialty is aware of no legal authority in any jurisdiction finding that an insurer is required to file an interpleader action upon the filing of lawsuits that might ultimately trigger its ability to do so. Indeed, if an insurer were not only permitted, but required to file an interpleader action as soon as multiple plaintiffs assert lawsuits against the insured demanding damages in excess of the applicable policy limit, the result would be absurd: an insurer would be required to avoid defending any such lawsuits, and simultaneously deprive state courts of authority over the underlying suits, by filing an interpleader action as soon as its insureds are faced with lawsuits by multiple claimants seeking amounts in excess of available insurance. See Nat’l Cas. Co., 230 F. Supp. at 622 (“Otherwise, where the damages exceed the policy coverage, the insurer could walk into court, toss the amount of the policy on the table, and blithely inform the insured that the rest was up to him.”). Federal courts would be buried in unnecessary interpleader actions. This is not the law in Puerto Rico, nor should it be. 3. Counterclaimants have not alleged, and cannot allege any injury arising from XL Specialty’s filing of the interpleader action rather than funding individual settlements on behalf of some, but not all, insureds. Finally, regardless of the merits of Counterclaimants’ bad faith claim, the counterclaim is not ripe because Counterclaimants have not suffered an adverse judgement in excess of the MLP Policy’s limit of liability. Under Puerto Rico law, “when a party acts with bad faith (“dolo”) in breaching a contract, the aggrieved party may recover all damages that originate from the nonfulfillment of the obligation.” Oriental Fin. Grp., Inc. v. Fed. Ins. Co., 483 F. Supp. 2d 161, Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 17 of 27 - 13 - 165 (D.P.R. 2007) (citing P.R. Laws Ann. tit. 31, § 3024). However, an insured cannot suffer damages by an insurer’s purported bad faith absent an adverse judgment against the insured. While jurisdictions may differ whether an insured must first pay an excess judgment to sustain a cause of action for bad faith failure to settle,8 there is no dispute that the insured must first have suffered an excess judgment before it can sue its insurer. At a minimum, an “insured’s [bad faith failure to settle] action [arises] when the excess judgment against the insurer is imposed.” See 14 Steve Pitt et al., Couch on Insurance § 206:4 (3d ed. 2016) (collecting cases). “Logically, an insured does not experience appreciable harm until there is a judgment in excess of the policy limits.” John Beaudette, Inc. v. Sentry Ins. A Mut. Co., 94 F. Supp. 2d 77, 108 (D. Mass. 1999) (statute of limitations did not begin to run on insured’s bad faith failure to settle claim until entry of excess judgment against insured); see also, e.g., Brown v. Guarantee Ins. Co., 319 P.2d 69, 75 (Cal. Dist. Ct. App. 1957) (“the insured’s cause of action arises when he incurs a binding judgment in excess of the policy limit”); Critz v. Farmers Ins. Grp., 41 Cal. Rptr. 401, 407 (Cal. Ct. App. 1964) (“A finding of completed breach, however, would not endow the policyholder with an immediately enforceable chose in action against the insurer. . . . The fact of damage would become fixed and the policyholder’s cause of action arise when he incurred a binding judgment in excess of the policy limit.”); Hartford Fire Ins. Co. v. Annapolis Bay Charters, Inc., 69 F. Supp. 2d 756, 762–63 (D. Md. 1999) (“The tort of bad faith by the insurer in settlement negotiations accrues only when the eventual judgment obtained is in excess of the limits of the policy.”); Romstadt v. Allstate Ins. Co., 59 F.3d 608, 611 (6th Cir. 1995) (“Thus, under Ohio law, implicit in bringing an action against an insurer for bad faith with 8 This appears to be the approach adopted in Morales. Morales, 3 P.R. Offic. Trans. at 394 (when an offer of settlement has been rejected, the filing of a separate action is required to claim from the insurer what the insured has paid in excess of the policy limit. . . . The judge acted incorrectly in taking cognizance of the question raised within the present suit, and retarded the execution of the judgment to the prejudice of [the insurer]. . . .” (Emphasis added). Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 18 of 27 - 14 - respect to settling a claim within policy limits, is a requirement that there be an excess judgment against the insured.”). Because Counterclaimants have not alleged that they suffered an adverse judgment in the underlying litigations – and indeed, it is undisputed that they have not – they can assert no recoverable damages, and therefore their bad faith claim is not yet ripe. C. There is no legal authority to support Counterclaimants’ claim that XL Specialty had a duty to limit the individual insureds’ Defense Expenses, and the counterclaim would result in Counterclaimants being obligated to repay their share of the amounts advanced. Counterclaimants’ position that XL Specialty’s advancement of defense expenses on their behalf was not “reasonable” and it therefore breached its duties under the MLP Policy, is unsupported by the policy language, applicable legal authority, and common sense. Moreover, like its allegations regarding XL Specialty’s purported duty to fund individual settlements, these allegations run directly contrary to Counterclaimants’ prior assertions. XL Specialty agreed to advance Defense Expenses on behalf of Counterclaimants and others pursuant to an Interim Non-Waiver and Defense Funding Agreement (the “Fee Agreement”) dated August 24, 2011. Exhibit 2.9 As consideration for XL Specialty’s agreement to advance Defense Expenses, Counterclaimants agreed that “any Defense Expenses paid hereunder will be included within, and charged against, the Insurer’s limits of liability under the Policies, and that at no time will the Insureds assert or contend that such payments shall not be properly chargeable against such limits of liability.” Id. ¶ 1. The allegations set forth in the counterclaim directly violate Counterclaimants’ agreement. Like the FDIC-R (which has now fully briefed the issue in its opposition to XL Specialty’s motion to dismiss its counterclaim), Counterclaimants offer no legal authority for 9 As noted above, this Court may properly consider the Fee Agreement on a motion to dismiss because it completely undermines their allegations and therefore is “central” to them. Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 19 of 27 - 15 - their position that XL Specialty somehow breached a duty by fulfilling its obligation to advance the cost of the individual insureds’ defense. The MLP Policy gave the insureds the right and duty to control their own defense, which included the ability to select their own counsel and litigation strategy. While the MLP Policy may have given XL Specialty some right to limit defense expenses to reasonable and necessary ones, it cannot possibly be read to impose any sort of obligation on XL Specialty. Although unstated in the counterclaim, Counterclaimants presumably follow the reasoning of the FDIC-R and derive their argument from the definition of “Defense Expenses,” which means “reasonable legal fees and expenses incurred in the defense of any Claim.” MLP Policy, § II.F. Nothing in the MLP Policy or case law suggests that this definition creates a duty owed to an insured. Rather, the definition of “Defense Expenses” as “reasonable legal fees and expenses” serves to protect an insurer from paying excessive legal fees, especially when it does not choose defense counsel. See Metlife Capital Corp. v. Water Quality Ins. Syndicate, 100 F. Supp. 2d 90, 95–96 (D.P.R. 2000) (noting that limitation of coverage to only reasonable fees is “protection for the insurer from runaway legal fees”). There are sound public policy reasons why the purported “duty” to pay only “reasonable” Defense Expenses does not and should not exist. If XL Specialty were found to owe a purported duty to pay only “reasonable” Defense Expenses, and that duty could be enforced in this Court by any party, then this (and every other federal court) would be required to review and second- guess the insurer’s analysis and payment of defense costs in any lawsuit in which an insurer is funding the defense. This Court is aware that defense expenses in litigation funded by directors and officers insurance policies – including the many credit-crisis claims still pending throughout the country and myriad securities class actions – frequently run into the tens or even hundreds of Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 20 of 27 - 16 - millions of dollars. Those defense costs are supported by hundreds or thousands of pages of detailed defense invoices and insurer analyses of the invoices. Courts would face a colossal burden if they were required to review and opine on those defense costs and insurer analyses at the request of any insured or claimant. It is therefore not surprising that neither Mendez nor the FDIC-R has identified a single court from any jurisdiction that has adopted their view. Counterclaimants chose to retain Cleary Gottlieb and then Rivero Mestre as counsel, and under the MLP Policy, XL Specialty was required to reimburse fees incurred in connection with Counterclaimants’ defense. The MLP Policy states that “[i]t shall be the duty of the Insured and not the duty of the Insurer to defend any Claim under this Policy.” MLP Policy, § V.A. Further, “[n]o Insured may incur any Defense Expenses or admit liability for, make any settlement offer with respect to, or settle any Claim without the Insurer’s consent, such consent not to be unreasonably withheld.” Id. § V.B (emphasis added). Because the MLP Policy provides that the duty to defend belongs to the insureds, not XL Specialty, it gives the insureds extensive control over their defense. See Brown v. Am. Int’l Grp., Inc., 339 F. Supp. 2d 336, 344 (D. Mass. 2004) (internal citations omitted) (stating that duty to advance policies, “were intended to cover the very ‘brain trust’ of the corporation and these individuals did not wish to have such delicate matters as their personal defense left to the control of an insurance company.”); Hurley v. Columbia Cas. Co., 976 F. Supp. 268, 275 (D. Del. 1997) (explaining that the difference between a duty to advance and a duty to defend is “the difference between who will direct the defense”). If Counterclaimants thought their counsel was overbilling, they should have told XL Specialty not to pay the amounts incurred. Instead, they continued to cause the invoices to be submitted for payment on their behalf. Counterclaimants cannot now complain that XL Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 21 of 27 - 17 - Specialty acted wrongly in paying Defense Expenses on their behalf based on invoices they caused to be submitted for payment. Moreover, if XL Specialty did advance Defense Expenses on behalf of its insureds that were not “reasonable” and to which the insureds therefore were not entitled, Counterclaimants would be required to repay those amounts under the MLP Policy and the Fee Agreement. Section V(C) of the MLP Policy acknowledges that the insureds are obligated to return any Defense Expenses advanced to them or on their behalf that are ultimately determined not to be covered, and gives XL Specialty the option of demanding that they sign an undertaking guaranteeing that they will fulfill that obligation. The provision acknowledges that, if XL Specialty advances Defense Expenses that are found to be not covered for any reason, the remedy is for the insureds to return the amounts paid to XL Specialty. The Fee Agreement provides that Counterclaimants and the other insureds guarantee to repay any amounts advanced on their behalf that are ultimately determined not to have been covered, provided that each insured must repay only those amounts reasonably related to his or her defense. Fee Agreement ¶ 10. This provision is not limited to “reasonable” Defense Expenses, but to any Defense Expenses that are reasonably related to the defense of Counterclaimants (as opposed to the other insureds). In other words, if the Court determines that amounts paid were not covered ― because they were unreasonable or otherwise ― then Counterclaimants are contractually obligated to repay to XL Specialty their share of any amounts that are deemed not covered.10 Even absent the express agreement to repay non-covered amounts to XL Specialty, Counterclaimants would be legally obligated to do so. The Fee Agreement makes clear that “[a]s a condition precedent to receiving any payments,” Counterclaimants and the other insureds were 10 Any ruling on the counterclaim will impact other insureds, including those who have not asserted counterclaims. If Counterclaimants (or Zucker or the FDIC-R) could establish that any Defense Expenses XL Specialty advanced were not covered, each insured would be required to repay his or her share of those Defense Expenses. Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 22 of 27 - 18 - responsible for providing, or causing to be provided, invoices and other information sufficient to allow XL Specialty to evaluate the Defense Expenses they sought. Fee Agreement ¶ 5. By causing those invoices to be submitted to XL Specialty for payment, Counterclaimants implicitly represented that the amounts sought were, in fact, reasonable and covered under the MLP Policy. XL Specialty reasonably relied on the information Counterclaimants provided in paying the Defense Expenses they sought, and Counterclaimants are now estopped from denying the validity or reasonableness of those invoices. See, e.g., Smit Americas, Inc. v. M/V MANTINIA, 259 F. Supp. 2d 118, 132 (D.P.R. 2003). If Counterclaimants caused false or unreasonable invoices to be submitted to XL Specialty, and thereby sought payment of amounts to which they were not entitled, then Counterclaimants are legally liable to return non-covered amounts to XL Specialty regardless of the express contractual obligation to do so. D. Counterclaimants’ request for punitive damages must be dismissed as a matter of law because there is no right to recovery for punitive damages under Puerto Rico law. As part of their claim for relief, Counterclaimants seek a judgment for punitive damages against XL Specialty for its purported bad faith in failing to consent to individual settlement negotiations and a settlement agreement with the FDIC-R. In addition to the arguments discussed above, this claim must be dismissed as a matter of law because “[t]he law of Puerto Rico does not, as a general rule, recognize or permit the recovery of punitive damages.” NPR, Inc. v. Am. Int'l Ins. Co. of Puerto Rico, 242 F. Supp. 2d 121, 126-27 (D.P.R. 2003) (holding that “since the law of Puerto Rico does not permit recovery of punitive damages, [the insurer] is entitled to judgment on this issue as a matter of law.”) (citing Noble Corp. Insular De Seguros, 738 F.2d 51, 54 (1st Cir. 1984). “Specifically . . . this Court held that an insurer cannot be held liable for punitive damages under the law of Puerto Rico.” NPR, Inc., 242 F. Supp. 2d at 127. The Court in NPR, Inc. cited numerous cases for this proposition, including Clarendon American Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 23 of 27 - 19 - Insurance Co. v. Rodriguez, No. CIV. 99-1623 (JP), 1999 WL 33218159, at *2 (D.P.R. Oct. 4, 1999), in which this Court struck an insureds’ demand for punitive damages because “punitive damages do not exist in Puerto Rico.” Accordingly, this Court should dismiss Counterclaimants’ demand for punitive damages with prejudice. E. If the counterclaim is not dismissed with prejudice for the reasons set forth above, it must be dismissed for failure to assert sufficient facts to support a claim upon which relief may be granted. For the reasons set forth above, the counterclaim should be dismissed with prejudice. If this Court determines not to dismiss it with prejudice, it should at least dismiss the counterclaim without prejudice because its factual allegations are woefully insufficient to state a claim upon which relief may be granted. As discussed above, a plaintiff is required to ‘“provide the grounds of his entitlement [with] more than labels and conclusions.”’ Gonzalez, 172 F. Supp. 3d at 499 (alteration in original) (quoting Twombly, 550 U.S. at 545). While a court must “‘accept as true all of the allegations contained in a complaint[,]’” it must “discard[] legal conclusions, conclusory statements and factually threadbare recitals of the elements of a cause of action.” Gonzalez, 172 F. Supp. 3d at 499 (quoting Iqbal, 556 U.S. at 678). A court “need not accept as true legal conclusions from the complaint or naked assertions devoid of further factual enhancement.” Maldonado, 568 F.3d at 266 (quoting Iqbal, 556 U.S. at 678) (internal quotations omitted). And courts do not accept contract interpretations as true because “contract interpretation is construed as a ‘question of law’ for the judge.” Kmart Corp., 2001 WL 34394665, at *2 (quoting Principal Mut. Life Ins. Co., 233 F.3d at 3). Counterclaimants’ allegations are insufficient to withstand scrutiny. With respect to their allegations that XL Specialty acted wrongly in declining to fund an individual settlement within policy limits, they allege only that XL Specialty had a duty under the applicable policy not to unreasonably withhold its consent to a settlement within the policy limits, and that XL Specialty Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 24 of 27 - 20 - breached that duty by filing the interpleader action rather than consenting to such individual settlements. Setting aside that their position is flatly inconsistent with their prior threats to sue XL Specialty if it did fund individual settlements, Counterclaimants offer no facts regarding any purported settlement demand that was within the limits of liability and that XL Specialty purportedly declined to fund. Indeed, the only “facts” alleged regarding a purported settlement demand is that, at some time, in some way, a “reasonable” demand in excess of $75,000 was made. Similarly, in support of their claim that XL Specialty paid “unreasonable” Defense Expenses on their behalf, Counterclaimants allege only that XL Specialty had a “duty” under the MLP Policy to “monitor and control Defense Expenses, in order to ensure that they were ‘reasonable’ as required by the policy.” Counterclaim ¶ 18. Setting aside the hypocrisy of these allegations ― since the Defense Expenses were paid in part on behalf of Counterclaimants and at their request, they are essentially alleging that XL Specialty had a duty to prevent them from committing insurance fraud ― they are entirely conclusory and unsupported by any facts. They do not allege a single instance in which one of their counsel was paid an unreasonable amount, why any tasks their lawyers performed were unreasonable, what amount of the fees paid were unreasonable, or anything other than the bald assertion that “XL Specialty has paid Defense Expenses that are not ‘reasonable’ as required under the Policies.” Counterclaim ¶ 18. While this Court need not, and generally cannot, consider facts outside the record in ruling on a motion to dismiss, there is a reason for Counterclaimants’ lack of factual support. The fact is that XL Specialty did review each invoice submitted for payment and made deductions where appropriate. In doing so, XL Specialty gave due consideration to Counterclaimants’ rights under the MLP Policy, their choice of counsel, and the context in which Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 25 of 27 - 21 - the Defense Expenses were incurred – high-stakes litigation against its insureds with over $500 million potentially at stake. If the facts regarding XL Specialty’s assessment of Defense Expenses were considered – and there is no reason they should be given the utter lack of a legal basis for Counterclaimants’ claims – they would reveal that XL Specialty acted appropriately at all times in light of the MLP Policy provisions and the threat facing its insureds. The Counterclaim therefore falls far short of the specificity required to sustain a claim in federal court. At the very least, it should be dismissed on that basis. CONCLUSION For the foregoing reasons, the Méndez counterclaim should be dismissed with prejudice. Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 26 of 27 - 22 - I HEREBY CERTIFY: That on this same date we electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to all attorneys of record. Dated: January 16, 2017 Respectfully submitted, /s/ Harold D. Vicente-Colon Harold D. Vicente-Colon Vincente & Cuebas PO Box 11609 San Juan, Puerto Rico 00910 (787) 751-8000 hdvc@vc-law.net Charles C. Lemley, Esq. Pro hac vice WILEY REIN LLP 1776 K St NW Washington, D.C. 20006 (202) 719-7000 clemley@wileyrein.com Counsel for Interpleader Plaintiff, Counter- Defendant XL Specialty Insurance Company Case 3:16-cv-02594-PAD Document 112 Filed 01/16/17 Page 27 of 27