United States Court of Appeals
For the First Circuit
Nos. 09-1470
09-1494
09-1589
VICOR CORPORATION,
Plaintiff, Appellee/Cross-Appellant,
v.
VIGILANT INSURANCE COMPANY; FEDERAL INSURANCE COMPANY;
CONTINENTAL CASUALTY COMPANY,
Defendants, Appellants/Cross-Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Lipez, Circuit Judge,
Souter,* Associate Justice,
and Howard, Circuit Judge.
Bruce E. Falby, with whom Bruce S. Barnett and DLA Piper LLP
were on brief, for appellants, Vigilant Insurance Company & Federal
Insurance Company.
Matthew J. Lodge, with whom Christopher R. Carroll and Carroll
McNulty & Kull LLC were on brief, for appellant, Continental
Casualty Company.
Kevin J. O'Connor, with whom Peter C. Netburn, Matthew C.
Kalin, and Hermes, Netburn, O'Connor & Spearing, P.C. were on brief
for appellee.
*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
March 16, 2012
HOWARD, Circuit Judge. This insurance coverage dispute
concerning the scope of a "loss of use" provision stems from
wireless communication network outages in 2003. The outages were
traced to the failure of a component part, known as a power
converter, manufactured by appellee/cross-appellant Vicor
Corporation and sold to Ericsson Wireless Communications, which
incorporated the power converter into radio base stations ("RBS")
critical to Ericsson's customers' wireless networks. In May 2004,
as a result of the network failures, Ericsson sued Vicor in
California state court. They settled this suit ("the Ericsson
litigation") in 2007 for $50 million. Appellant/cross-appellees
Vigilant Insurance Company and Federal Insurance Company, two of
Vicor's liability insurers, paid $13 million of the settlement.
Vicor contributed the remaining $37 million.
Vicor subsequently initiated this litigation, seeking
indemnification from its insurers for the $37 million of its own
funds that it paid to Ericsson. In addition to Federal and
Vigilant, Vicor also sued an excess carrier, appellant/cross-
appellee Continental Casualty Company (collectively "the
insurers"). After eight days of trial, a jury awarded Vicor $17.3
million. The district court granted the insurers partial post-
trial relief, reducing the verdict by $4 million and entering
judgment for Vicor in the amount of $13.3 million plus interest.
All parties filed timely appeals and cross-appeals raising multiple
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issues. For the reasons that follow, we believe that the judgment
cannot withstand appellate scrutiny, and we remand the case.
I. Background Facts1
A. Equipment and Failure
Vicor is a manufacturer of electronic equipment. The
Vicor power converters at issue in this litigation break down input
power supplies into power levels needed by various other component
parts. Ericsson's business includes the design, manufacture and
sale of electronic equipment, including radio base stations, which
are used to set up and operate cellular telephone towers and
networks. Ericsson purchased Vicor power converters for use in
Ericsson RBSs, which Ericsson sold to wireless communication
providers worldwide. These providers included Cricket
Communications, which operated in North America, and China Unicom
("CU") which operated in several Chinese provinces.
Trial testimony suggested that power converters that
Vicor had sold to Ericsson began failing in October 2002 and that
Vicor became aware in May 2003 that some of these failures were
related to a manufacturing change in a component computer chip. In
October 2003, severe outages occurred in the Cricket network.2
Later in 2003, similar problems arose in CU's network in China.
1
The facts set forth in this opinion are undisputed unless
otherwise noted.
2
Testimony placed the outages in Idaho, Oregon and Washington.
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B. Ericsson's Payments
As a result of the network outages triggered by the RBS
failures, Ericsson provided compensation to both Cricket and CU.
The record reflects that Ericsson paid approximately $9.3 million
to Cricket pursuant to a settlement agreement. Additionally,
Ericsson spent $5 to $6 million to repair the Vicor products
purchased by CU and provided CU with $3.3 million in free
equipment.
C. The Ericsson Lawsuit
In May 2004, Ericsson sued Vicor on several theories of
liability, including breach of contract, breach of warranty,
negligence, unfair competition, misrepresentation and fraud. In a
February 7, 2007 memo, Vicor's defense counsel summarized
Ericsson's damage claim, as set forth in its interrogatory answers.
The claim totaled approximately $1.1 billion, including the
following: $1 billion in lost profits; $33 million to retrofit and
replace Vicor power converters worldwide; $10 million of inventory
provided to Cricket; $9.5 million settlement paid to Cricket; $7.5
million paid to CU; $3.3 million of inventory provided to CU; $5
million in costs for engineers and technicians to address failures
and retrofit components; $2-3 million to diagnose defects and
redesign RBS components to eliminate the Vicor product.
Vicor and Ericsson successfully resolved their
differences through mediation, settling the Ericsson litigation for
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$50 million. Vigilant and Federal contributed almost $13 million
towards the settlement under two different types of policies.
Vicor supplied the remaining funds.
D. Vicor's Lawsuit
After settling with Ericsson, Vicor filed this action
against the insurers in Massachusetts federal district court,
seeking reimbursement of the $37 million it had paid to Ericsson.
Vicor sought a declaratory judgment that its payments were covered
losses under the policies, as well as seeking damages for breach of
contract.
II. The Insurance Policies
A. Vigilant and Federal
As relevant to this litigation, Vigilant issued two
primary general liability policies to Vicor, spanning the terms
October 1, 2002 to October 1, 2003, and October 1, 2003 to October
1, 2004. Each policy was subject to general liability limits of $1
million per occurrence and $2 million aggregate. In addition to
the general liability coverage, the Vigilant policies insured
against Information and Network Technology Errors or Omissions
("E&O coverage"), providing liability coverage for "financial
injury" caused by a "wrongful act," as defined by the policy. The
E&O coverage was subject to a $10 million policy limit.
Federal issued two excess and umbrella general liability
policies covering the same policy periods. The 2002-2003 policy
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contained a general liability limit of $20 million per occurrence
and in the aggregate. The 2003-2004 policy contained a $12 million
limit per occurrence and in the aggregate.
B. Continental
Continental issued an excess liability policy with an $8
million limit to Vicor covering October 1, 2003 to October 1, 2004.
The Continental policy is excess to the $13 million dollars in
coverage provided by the Vigilant and Federal policies covering the
same time period. As an excess policy, the Continental policy only
provides coverage if a covered loss during the policy period
exceeds the combined Vigilant-Federal limit.
C. Policy Provisions
The Federal and Continental policies incorporate by
reference many of the relevant policy provisions contained in the
Vigilant policy, which provides, in relevant part:
Subject to all the terms and conditions of
this insurance, we will pay damages that the
insured becomes legally obligated to pay by
reason of liability:
• imposed by law . . .
for bodily injury or property damage caused by
an occurrence to which this coverage applies.
This coverage applies only to such bodily
injury or property damage that occurs during
the policy period . . . .
. . . .
Occurrence means an accident, including
continuous or repeated exposure to
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substantially the same general harmful
conditions.
Property damage means:
• physical injury to tangible property,
including resulting loss of use of that
property . . .
• loss of use of tangible property that
is not physically injured. All such
loss of use shall be deemed to occur at
the time of the occurrence that caused
it.
III. Trial
The crux of the dispute in this case concerns the policy
language addressing coverage for "loss of use of property that is
not physically injured." Of the money contributed by Vigilant and
Federal to the Ericsson settlement, $3.14 million was considered to
be for "physical injury to tangible property."3 Vicor claimed at
trial that the insurers owed it the remaining $37 million because
Vicor had paid that sum to Ericsson as a result of such "loss of
use" damages. This total consisted of: 1)cash settlements of $7.5
million to CU; 2) free equipment to CU worth at least $6.6 million;
3) cash settlements to Cricket of $9.5 million; 4) free equipment
to Cricket worth at least $10.1 million; and 5) emergency response
costs of at least $6 million related to restoring failed customer
networks.
3
The insurers' remaining $9.8 million contribution was made
pursuant to the policies' errors and omissions coverage, which is
not part of this litigation.
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The insurers' position is that repair costs, including
emergency response costs, do not constitute loss of use damages.
The issue came to a head during arguments over jury instructions.
The insurers wanted loss of use damages to be defined to include "a
recognized measure of loss of use, such as the rental value of
substitute property, lost profits, lost sales, or a comparable,
quantifiable measure representing extra costs incurred or the value
of losing the benefit of using that property for the time
reasonably necessary to repair and replace it."
The district court did not completely accept the
insurers' argument. While a preliminary instruction noted that the
case did not involve a claim for "actual repairs" to return damaged
equipment back to its original condition, the trial judge informed
counsel at the close of evidence of his view that "emergency steps
to restore the network . . . seem to be the mirror image of loss of
use. They are the steps to get the network up and running. . . .
Beyond that, repairs are not covered."
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Over the insurers' objections,4 the district court ruled
that three of Vicor's specific damage claims could go to the jury
under the loss of use rubric:
•emergency repair costs in the amount of $5 to
$6 million;
•the $9.5 million settlement between Cricket
and Ericsson;
•$3.3 million in the delivery of emergency
equipment to China Unicom.
Consistent with this ruling, the court instructed the
jury, in relevant part, as follows on the loss of use issue:
4
Vicor argues that the insurers' objections to the district
court's instructions were not preserved because they did not raise
the objections again after the judge issued a supplementary
instruction in response to those objections. We disagree.
Objections to the loss of use instruction were lodged after the
district court announced its intention, prior to the charging
conference at which the district court ultimately rejected the
insurers' objections. We are satisfied that by bringing their
objections to the court's attention, the insurers complied with
Fed. R. Civ. P. 51. See Suprenant v. Rivas, 424 F.3d 5, 15 (1st
Cir. 2005). Vicor focuses on a subsequent colloquy that took place
after the charging conference, in which the court reiterated its
earlier ruling. In response, the insurers asked that a "reasonable
time" limitation be added to the "emergency repair" instruction.
The district court complied. Vicor argues that the insurers'
acquiescence to the supplemental "emergency repair" instruction
waives the previously raised objection. However, Vicor omitted
from its brief the question to which the insurers responded: "As
a supplementary charge, saving your rights as to earlier matters,
supplementary charge satisfactory . . .?" (emphasis added). Given
this context, we find the jury instruction issue was neither waived
nor forfeited when the insurers answered in the affirmative.
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And the only damages, the only damages that
Vicor can recover in this case are loss-of-use
damages. And it appears undisputed that there
was this settlement with Ericsson for $50
million. The insurance company -- not
Casualty, the insurance companies, the Chubb
companies, they kicked in 13, whatever it was,
but something that didn't become clear to me
until yesterday was none of that was for loss
of use.
• • •
In car insurance, if you have loss-of-use
damages and you get into an accident and your
car's towed away, the loss-of-use damages
cover renting another car so you can get on
the road and have the benefit of a car and go
to work and where you want to go with your
car. They do not cover repairing your car.
So we have to take that -- and there's lots of
cases on it, what judges look at. Lawyers all
know them. Now we have to take that language
and that concept and we have to fit it to this
case. And here's how we're going to do that.
In this case the loss of use is the loss of
use of that consumer person out there in
Seattle or the provinces of China, I won't
just confine it to Seattle, wherever Cricket
towers were up who goes to make a call and
they can't make a call. Or goes, has a call,
and it goes down because that 120-degree
sector is out because the power converter on
that sector on that tower failed. That's a
loss of use.
And, you know, the lawyers said no one -- we
haven't got any evidence here that these
people, their call was dropped so they sued.
But that's not the point. The point is that
Cricket and China Unicom, who are in the
business of running these networks and
advertise, one imagines, that their network is
up and running and is a good network, when
that loss of use occurs they have a problem.
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So when they expend money, sort of in the
nature --I won't say in the nature. Let me
get right to it. When they take emergency
response costs to bring their network back
online, Cricket, China Unicom are entitled to
come back against Ericsson, and Ericsson is
entitled to come back against Vicor once it's
understood that it's Vicor's product that has
failed and caused this. Those are the loss-
of-use damages that we're talking about; the
emergency response costs to get the system up
and running.
Now, those aren't rental costs, but we're not
talking about rental costs in this type of
situation. They are those reasonably
understood emergency response costs to get the
system up and running.
Well, given the mechanics here, one of the
things that means is repairs. You pull out a
defective power converter and you put in
another power converter, you've repaired it.
And I told you, well, repairs aren't covered.
Here's how you're going to resolve that.
You have to ask yourself what was Cricket
doing, what did Cricket think it was doing?
What was China Unicom doing, on the evidence?
What was Ericsson doing to back them up? What
was Vicor doing to back up Ericsson? These
are not the monies, the settlements, the --
I'll go through a list. These are the things
that are taken because you've got an
emergency. And people in good faith jump into
action and spend money.
If Cricket jumps into action and spends money,
if China Unicom jumps into action and spends
money, if Ericsson spends money without regard
to what their contract was, and Vicor, the
same thing, if they jump into action and spend
money to get the systems up and running, one,
that's what we want responsible companies to
do. And they're doing that, even if it
constitutes repairs, they're doing that to get
the system up and running. That's loss of
use.
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And if Cricket and China Unicom, in fact, did
that and charged it back against Ericsson, and
Ericsson, in fact, paid that, and then as part
of the settlement charged it back against
Vicor, then in this lawsuit Vicor can recover
that from the insurance companies at least for
these two years, if you find that there was
such losses in the 2002/2003 year as well as
2003/2004.
Well, now, let me go through a litany of what
is covered, and since it's all been mentioned
in this case, what's not covered. Loss-of-use
damages is covered. And that would cover
these emergency response costs even if they
include repairs, if those were the emergency
repairs and everyone's saying let's get the
system up and running. That's covered.
And if the Ericsson/Cricket settlement, if
that paid Cricket for emergency response
costs, then that's something that Ericsson
incurred and they can charge that back against
Vicor. But that does not include increased
operating and maintenance costs and it doesn't
include system upgrades, making it better than
it was before.
• • •
Ericsson claimed [fraud] against Vicor. So
much of the settlement, the Ericsson/Vicor
settlement, if it included money for fraud,
not covered. If it included money for repairs
other than emergency response costs, not
covered. Retrofit, going out to cell phone
towers where there's nothing wrong but
replacing the power converters, not covered.
Goodwill. Ericsson's loss of goodwill, if any
there was, not covered. Loss of business
opportunity, Ericsson's ability to get new
customers and the like because now the
Ericsson product in these various places has
failed, not covered. Ericsson's lost profits,
not covered. Ericsson sues Vicor and says,
Well, wait a minute, we paid this much for
your power converters, give us our money back.
Not covered. Investigation costs to figure
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out what was the problem here. Not covered.
Moving the units from the top of the pole down
to the bottom of the pole so you could get at
them easier, not covered. Cost of product
replacement, not covered. I already said
increased operating and maintenance costs, not
covered. System upgrades not covered.
Emergency response costs, covered. That's
loss of use. Whether that's -- whether that's
proved by shipping immediately replacement
parts in an emergency, whether it's paying as
part of a settlement somebody else's,
Cricket's emergency response costs, that is
covered.
The jury returned a verdict the next day awarding Vicor
$8 million in loss of use damages for the 2002-2003 policy period,
and $9.3 million for the 2003-2004 policy period. The parties
agree that this total consists of $8 million from the Ericsson-
Cricket settlement, $3.3 million in emergency equipment provided to
China Unicom, and $6 million for emergency response costs to
restore customer networks.
In addressing the insurers' post-trial motions, the court
cited certain provisions of the Ericsson-Cricket settlement
agreement as the foundation of the verdict. Those terms required
Ericsson to pay Cricket $8 million in two, $4 million dollar
installments. One of these installments was made to Cricket to
offset increased operating and maintenance expenses incurred by
Cricket.
The court then recalled its jury instruction that
increased operating and maintenance costs were specifically
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excluded as loss of use damages. As a result, the district court
granted the insurers partial relief, reducing the verdict by $4
million. The court, however, rejected the insurers' claims that
the loss of use instruction erroneously included emergency response
costs, and entered judgment in favor of Vicor for $13.3 million,
plus interest.
All four parties appealed. Vicor argues that the
district court should not have disturbed the jury's $17.3 million
verdict. The insurers argue that the district court committed
legal error when it allowed the jury to include emergency repair
costs as loss of use damages. In addition, they argue that even if
the instruction was correct, the record evidence did not, in any
event, support the award. Also, the insurers argue that they were
erroneously denied access to Vicor's counsel's underlying defense
file from the Ericsson litigation. Separately, Continental asserts
that judgment should have been entered in its favor because the
verdict did not exhaust the underlying policy limits, and thus its
excess policies were not implicated. Additionally, Vigilant and
Federal argue that all damages should have been allocated to the
2003-04 policy period, limiting their exposure and bringing
Continental's policy into play. As resolution of the loss of use
issue determines the course of this appeal, we address it first.
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IV. Discussion
A. Loss of Use Damages
The insurers argue that the district court erred by
including emergency response costs within the definition of loss of
use damages. Vigilant and Federal raise the issue in the context
of claiming that the trial court incorrectly instructed the jury.
Raising the same issue, Continental further asserts that the
district court erred in denying its motion for judgment as a matter
of law. Regardless of the procedural posture in which the issue
was raised, we review the relevant district court rulings regarding
the loss of use instruction under a de novo standard. See Latin
Am. Music Co. v. Am. Soc. of Composers, Authors & Publishers, 593
F.3d 95, 99 (1st Cir. 2010) (claim of instructional error reviewed
de novo); Butynski v. Springfield Terminal Ry. Co., 592 F.3d 272,
276 (1st Cir. 2010) (denial of motion for judgment as a matter of
law reviewed de novo).
Under Massachusetts law, the interpretation of an
insurance policy is a question of law for the court. Cody v. Conn.
Gen. Life Ins. Co., 439 N.E.2d 234, 237 (Mass. 1982).5 Where, as
here, the relevant policy provisions are plainly expressed, those
provisions must be enforced according to their terms and
interpreted in a manner consistent with what an objectively
5
The parties agree that Massachusetts law governs the dispute
insofar as interpretation of the subject insurance policies is
concerned.
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reasonable insured would expect to be covered. City Fuel Corp. v.
Nat'l Fire Ins. Co. of Hartford, 846 N.E.2d 775, 778-79 (Mass.
2006).6 Also, absent Massachusetts precedent, we may seek guidance
from other courts' interpretations of standard policy provisions.
Am. Home Assurance Co. v. AGM Marine Contractors, Inc., 467 F.3d
810, 812 (1st Cir. 2006).
As previously noted, the provision at issue here is that
which defines covered property damage to include "loss of use of
tangible property that is not physically injured." Vicor urges an
expansive interpretation based on the above language and the
policies' more general provision that the insurers are responsible
to "pay damages . . . for . . . property damage caused by an
occurrence." Focusing on a dictionary definition of the word
"for," Vicor argues that damages are covered if they "are a result
of" loss of use of uninjured tangible property. In other words,
Vicor claims that it was required only to establish a nexus between
Ericsson's customers' (Cricket and CU) loss and the claimed
damages. At oral argument, Vicor's counsel did not dispute that
this formulation essentially amounts to but-for causation.
The insurers' position is premised on the idea that loss
of use damages are subject to an implied temporal limitation that
confines coverage to damages incurred due to the inability to use
6
None of the parties argue that the definition of property
damage is ambiguous.
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the failed equipment until it is replaced or repaired. In other
words, because repair costs represent the cost of ending the loss
of use period, such costs are not themselves damages for loss of
use.
The district court attempted to strike a middle ground,
explicitly instructing the jury that "repairs aren't covered"
except those repairs that were part of an "emergency response" to
the RBS failures, in order to "get the system up and running."
While the trial court's effort is a laudable response to a thorny
question, we conclude that it misses the mark.7
As recognized by the district court, the archetypal
example of loss of use damages comes in the context of a damaged
automobile. Simply put, the cost to rent a replacement vehicle
while the damaged vehicle is being repaired would represent loss of
use damages; the actual cost of repairs would not. See Urico v.
Parnell Oil Co., 708 F.2d 852, 855 (1st Cir. 1983) (citing Antokol
v. Barber, 143 N.E. 350, 352 (Mass. 1924)); Collin v. Am. Empire
Ins. Co., 21 Cal. App. 4th 787, 818 (1994).
While the automobile analogy may be the most facile
analytic tool, it is not the exclusive one. See Atmel Corp. v. St.
Paul Fire & Marine Ins. Co., 430 F. Supp. 2d 989, 994 (N.D. Cal.
7
The parties agree that there are no reported cases using the
"emergency repair" formulation in the context presented here. At
the same time, however, we note that no cases have explicitly found
the temporal limitation suggested by the insurers.
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2006) ("The Court does not hold . . . that loss of use damages can
only consist of rental value or its equivalent."); see also
Continental Cas. Co., v. Gilbane Bldg. Co., 461 N.E.2d 209, 214
(Mass. 1984) (holding that where street was closed due to glass
falling from nearby high-rise, restaurant rendered inaccessible to
public could state claim for coverage by contractor's liability
insurer for loss of use damages).
As discussed earlier, both sides of this dispute claim
reliance on the plain language of the policy -- Vicor focusing on
the term "for," and the insurers on a literal meaning of "loss of
use." In the absence of definitive Massachusetts case law, the
parties turn their attention to various California cases for
guidance. As the facts of Atmel most closely resemble those
present here, we turn to that case first. Atmel, an electronic
chip manufacturer, sold faulty computer chips to its customer,
Seagate, for use in disk drives that Seagate later sold. 430 F.
Supp. 2d at 991. The defective chips eventually caused the Seagate
drives to fail, although the failure did not cause physical damage
to the drives. Id. Seagate customers who returned drives to
Seagate were provided with a new drives or refurbished drives
without the Atmel chip. Id. at 991-92. The Atmel chip was
replaced in a significant number of drives that had not failed.
Id. at 992.
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Seagate subsequently sued Atmel, with the matter being
settled by Atmel's $5.9 million payment to Seagate. Id. Discovery
indicated that Seagate was seeking damages for: repair and
replacement of drives with the defective chip; costs of shipping
repaired drives to customers; the screening of drives at customer
locations for Atmel chips; employee expenses related to
investigation of the chip failure; maintenance of a reserve fund to
cover potential liability to its customers due to drive problems;
and various accommodations to Seagate customers, including credit
toward future purchases and the free provision of new or
refurbished replacement drives. Id.
Atmel sought coverage from its insurer, St. Paul, under
a loss of use provision identical to the one at issue here. Atmel
argued that because the failure of the Atmel chips caused Seagate
customers to lose use of the disk drives, Seagate's damages were,
therefore, loss of use damages. Id. at 994. The court rejected
Atmel's argument, finding that the damages were not for loss of
use, but were instead the costs of repairing and replacing the
chips and drives. Id. Although the court agreed with Atmel's
assertion that the damages would not have occurred absent the chip
failure, it rejected the but-for analysis, stating, "Atmel's
expansive definition of 'loss of use' damages includes any and all
damages related to the failure of the Atmel chips in the Seagate
drives, and does not require a nexus with Seagate's (or its
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customers') inability to use the drives." Id. (emphasis in
original). While rejecting St. Paul's argument that rental cost is
the only proxy for loss of use damages, the court held that "the
damages alleged by Seagate . . . were too attenuated from a 'loss
of use,' and there must be a more direct connection between the
damages and the loss of use of the property in order to establish
coverage . . . ." Id. at 994-95.
The insurers urge the same result here. For its part,
Vicor argues that Atmel's holding is limited to disclaiming costs
to repair and replace the insured's (Atmel's or Vicor's) own
product. But Atmel is not so limited. Seagate's claimed damages
explicitly included repair and replacement of the drives
themselves, and not just Atmel's chip. Atmel, 430 F. Supp. 2d at
994. Moreover, Vicor's argument ignores Atmel's overarching
requirement of a "more direct connection" than simply but-for
causation between the damages claimed and the loss of use of the
property. Id. at 995.
Vicor advocates reliance on Anthem Electronics, Inc. v.
Pacific Employers Insurance. Co., 302 F.3d 1049 (9th Cir. 2002), a
case unsuccessfully relied upon by the insured in Atmel, which
construed certain expenses as loss of use damages but whose outcome
the Atmel court distinguished. We agree that the case is
distinguishable both from Atmel and this case in ways that do not
support Vicor's claim. In Anthem, the insured supplied defective
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circuit boards to a manufacturer, KLA, which incorporated the
circuit boards into scanners it sold. Id. at 1052. When some of
the scanners failed, the manufacturer was forced to replace them
and ultimately sued Anthem. Id. KLA identified among its damages:
depreciation of loaner scanners provided to its customers while the
defective ones were being repaired; inventory costs for scanners
made unshippable due to the defect; and lost revenue due to
customers failing to timely pay bills because of defective
scanners. Id. at 1052.
Each of Anthem's insurers refused to defend the KLA
lawsuit on the ground that the claimed losses were not covered.
Id. at 1052-53. The Ninth Circuit reversed a grant of summary
judgment to the insurers, holding that the insurers had a duty to
defend Anthem because KLA's complaint "raise[d] the possibility
that KLA suffered loss of use of the systems into which Anthem's
circuit boards had been installed." Id. at 1058. "KLA's customers
lost the use of tangible property (their scanners), and as a result
KLA suffered losses due to loaner scanners and diminished
receivables. KLA itself lost the use of unshippable scanners
sitting in inventory, and as a result incurred unexpected inventory
costs." Id. at 1057.
The Atmel court distinguished Anthem on two points.
First, Anthem was a duty-to-defend case, in which the underlying
complaint was examined only to see if a covered loss was a
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possibility. Atmel, by contrast, followed a settlement in which
the insured was seeking indemnity based on an existing factual
record. Atmel, 430 F. Supp. 2d at 995; see Anthem, 302 F.3d at
1054 ("An insurer has a very broad duty to defend under California
law."). Second, the Atmel court found that the insured in Anthem
"actually alleged damages suffered as a result of the loss of use
of the scanners . . ." Atmel, 430 F. Supp. 2d at 995.
Vicor argues that the costs for which Ericsson held Vicor
liable were similar to those sought by Anthem, and the fact that
Ericsson incurred them while making emergency repairs -- as opposed
to in connection with "loaners" -- is of no moment, as they were
incurred as a result of the unavailability of the inoperable RBSs.
We disagree. The common thread between Atmel and Anthem is that
damages ascribed to loss of use in Anthem were accrued pending
repair of the out-of-service scanners, while those excluded in
Atmel were for the repair or replacement of the disk drives. In
this case, the "emergency repairs" allowed by the district court
fall into the same category as the repairs in Atmel. They are
therefore not loss of use damages. It is not enough to
demonstrate, as Vicor attempts to do, that there was a "loss of
use" of certain property (the power converters or the wireless
networks) and that Vicor subsequently paid damages. The claimed
damages must be tied to the actual period during which the use of
the non-physically injured property was lost and to the loss of use
-23-
itself. See Urico, 708 F.2d at 855 (in context of damaged vehicle,
loss of use damages compensates plaintiff for "finite period in
which the vehicle is simply unavailable for use").
A third California case strengthens the insurers'
position. In F & H Construction v. ITT Hartford Insurance Company
of the Midwest, 118 Cal. App. 4th 364 (2004), the insured, a
subcontractor, installed steel pile caps of inadequate strength in
a building. Id. at 367. The contractor later remedied the problem
by welding additional support to the caps and sued the
subcontractor's insurer for the costs related to the modification.
Id. The court agreed with the insurer that the additional costs
did not constitute loss of use damages, noting that the contractor
was not seeking damages for "rental value (or its equivalent)" and
was not claiming damages "for the loss of use of the [facility
under construction] during the time period modifications were made
to the caps." Id. at 377. "[T]he only costs claimed by F & H are
the costs for repairing and modifying the defective caps and for
loss of the early completion bonus. Those costs are unrelated to
rental value." Id.
As particularly relevant here, the court concluded, "[a]
contrary conclusion would allow contractors and developers to
obtain liability insurance for inferior or defective workmanship,
a risk not covered by commercial liability insurance." Id.
(citations omitted). This view is consistent with that of
-24-
Massachusetts's highest court, that "the goal of [liability
insurance] is to protect the insured from claims of injury or
damage to others, but not to insure against economic loss sustained
by the insured due to repairing or replacing its own defective work
or products . . . ." Commerce Ins. Co. v. Betty Caplette Builders,
Inc., 647 N.E.2d 1211, 1213-14 (Mass. 1995) (citation omitted).8
Vicor's final assertion on this subject is that the
district court properly instructed the jury that costs to repair or
replace Vicor's power converters -- its own property -- were not
covered, and therefore the jury necessarily awarded only costs
related to the repair or replacement of Ericsson's RBSs, of which
the Vicor power converter was only a small part. Putting aside the
question of whether Atmel's holding is limited to cases of repairs
to the insured's own product -- an interpretation we do not accept
-- we conclude that the district court made no such distinction.
While the instruction used the example of replacing a defective
power converter with a new one as a non-covered "repair," it then
went on to carve out an "emergency repairs" exception to the
proscription on indemnity for general repair costs. In so doing,
court did not differentiate between the power converters and the
RBSs.
8
While the holding in Betty Caplette Builders was dependent on
certain policy exclusions that the insurers do not press here, its
comment on the general purpose of liability insurance remains
applicable.
-25-
As a result, the district court's jury instruction
referencing "emergency repairs" was erroneous. See Davignon v.
Clemmey, 322 F.3d 1, 9 (1st Cir. 2003) (stating that a jury
instruction is erroneous if it is incorrect as a matter of law).
Moreover, given that the emergency repair costs were, pursuant to
the jury instructions, a centerpiece of the putative loss of use
damages considered by the jury, the error was prejudicial, and
therefore the judgment must be vacated and a new trial held. See
Costa-Urena v. Segarra, 590 F.3d 18, 24 (1st Cir. 2009).
As the insurers concede, however, an insured might be
able to recover any extra expenses above the ordinary cost of
repairs that reduce the eventual loss of use damages. This
possibility, which we suspect the district court had in mind when
formulating its jury instructions, is a corollary of the
traditional requirement that a party must take reasonable measures
to mitigate its damages. See Urico, 708 F.2d at 855. The catch is
that an insured seeking to capitalize on this possibility must show
that the mitigation measures (1) somehow differed from ordinary
repairs and (2) resulted in a net savings, meaning that the added
expense of the mitigation measures was less than the savings
generated by the decreased loss of use damages. The first showing
could be satisfied if, for example, overtime work hastened the pace
of repairs to damaged property or the installation of a temporary
mechanical fix preserved some degree of functionality for the
-26-
property until repairs could be completed. The second showing
demands a reasonable degree of certainty as to the amount the
insured's loss of use damages would have been had the mitigation
measures not been implemented. Cf. Allens Mfg. Co. v. Napco, Inc.,
3 F.3d 502, 505 (1st Cir. 1993) (explaining that a plaintiff cannot
rely on speculation to prove damages). In no case, of course,
could an insured recover more than this amount, in keeping with the
purpose of mitigation.
This possibility may be worth exploring on remand, if the
evidence provides a justification for doing so. Therefore, on
remand, the district court should fashion jury instructions making
clear that classic loss of use damages (such as lost profits or the
rental value of substitute property) that are incurred while
repairs are pending may be recovered by an insured, but the actual
costs of repairs may not. The district court also may instruct the
jury regarding the duty to mitigate loss of use damages and may
explain that the costs of reasonable mitigation measures are
recoverable, provided that the mitigation measures are
distinguishable from ordinary repairs and result in a net savings.9
9
Given our decision on this issue, we decline to address the
insurers' other arguments premised on a finding that the jury
instruction was correct.
-27-
B. Other issues raised by the insurers
1. Other evidence of loss of use
Beyond the jury instruction issue, the insurers assert,
without much elaboration, that they are entitled to judgment in
their favor because the record lacks any evidence of loss of use
damages under the "correct" definition. The testimony and other
evidence adduced over eight trial days constitutes something of a
mixed bag, especially with respect to the precise contours of
Ericsson's payments to Cricket and CU. Thus, given the district
court's erroneous definition of loss of use damages, we believe
this is an issue best resolved by the district court upon remand,
with due consideration given to the appropriate measure of damages.
2. Insurers' Joint Motion to Compel
During the course of discovery, the insurers served
various written requests for production of documents related to the
Ericsson litigation and settlement. In addition to substantial
document production10, Vicor also produced a privilege log, in which
it justified the withholding of documents related to the defense of
the Ericsson litigation on the basis of the attorney-client and
work product privileges. The district court denied the insurers'
subsequent motion to compel without comment. Continental appeals
10
The insurers describe the production as consisting of over
6,500 documents; Vicor tallies the production at over 1 million
pages.
-28-
that denial. Because this issue was fully joined, and stands a
strong likelihood of re-emerging after remand, we address it here.
At the heart of this dispute is the allocation of
settlement monies Vicor paid to Ericsson between covered and
uncovered claims. We sketch the background of the parties'
relationship before addressing the legal issue.
As previously described, Ericsson sued Vicor in
California state court in May 2004. Vicor promptly notified
Vigilant and Federal11 of the suit. Subject to a reservation of
rights because of potential coverage issues, the insurers agreed to
provide defense and indemnity pursuant to the grant of coverage for
information and network technology liability contained in
Vigilant's errors and omission policy. They declined coverage
under their general liability policies because, in their view,
Ericsson's complaint did not allege third-party property damage.12
When Ericsson amended its complaint, however, the insurers agreed
to provide coverage under the general liability policy. While
Vicor, with the insurers' blessing, chose its own defense counsel,
the insurers required counsel to comply with their billing
11
Continental, as an excess carrier, was not involved in these
early skirmishes.
12
The errors and omissions policy had lower limits and a
narrower scope of coverage than the general liability policy.
-29-
guidelines and to provide periodic reports and evaluations as
conditions for payment.13
Although Vicor and Ericsson settled the underlying suit
for $50 million in March 2007, they created no formal allocation of
the payments between covered and uncovered claims. Based on their
own investigation, primary insurers Vigilant and Federal determined
that the failure of the Vicor power converters caused slightly more
than $3 million in third-party property damage that would be
covered under the general liability policies. They also paid the
remaining $9.7 million remaining on the technology liability
coverage, with Vicor supplying $37 million to fulfill the terms of
the settlement.
Fast-forwarding to the present litigation, exploration of
the Ericsson-Vicor settlement eventually led to the deposition of
Vicor official Richard Zengilowski, who could fairly be described
as Vicor's "point man" with respect to negotiations with Ericsson.
Zengilowski testified at his deposition that none of the $50
million paid to Ericsson was for non-covered claims. He described
a process by which Ericsson's original claimed damages of $1-$3
billion morphed into negotiations in the $135-$200 million range,
before the parties agreed on a settlement of $50 million. The
insurers were skeptical of Zengilowski's assertion, primarily
13
The insurers paid Vicor's counsel approximately $5 million.
A dispute over whether this amount fully satisfied their obligation
to pay for Vicor's defense is addressed, infra.
-30-
because Zengilowski also agreed during his deposition that various
categories of Ericsson's claimed damages that Vicor's defense
counsel had listed in a report it prepared prior to the mediation
were not covered. In light of this perceived discrepancy, the
insurers requested that Vicor produce all documents withheld on
privilege grounds that were part of the Vicor-Ericsson lawsuit. As
noted, the district court let Vicor's refusal stand.14 We review
the district court's ruling for abuse of discretion. Dennis v.
Osram Sylvania, Inc. 549 F.3d 851, 859 (1st Cir. 2008).
The party asserting the attorney-client or work product
privilege bears the burden of showing that the privilege applies.
Hanover Ins. Co. v. Rapo & Jensen Ins. Servs., Inc., 870 N.E.2d
1105, 1114 (Mass. 2007).15 If the privilege is established, the
14
After the motion to compel was denied, the insurers issued
trial subpoenas seeking a subset of the underlying defense
documents for purposes of cross examination. The district court,
while granting Vicor's motion to quash, ordered Vicor to bring the
withheld documents to court during trial, should he "rethink it as
we go along," in which case he would order production. Vicor
argues on appeal that the insurers' failure to raise the issue
later during trial constitutes waiver. We disagree. In addition
to the trial court stating that its decision on the motion to
compel might be "law of the case" on the issue, the import of the
judge's comment suggests that he would re-consider the issue, if at
all, on his own initiative. These factors lead us to conclude that
the insurers did not "intentional[ly] relinquish[] . . . a known
right." United States v. Carrasco-De-Jesus, 589 F.3d 22, 26 (1st
Cir. 2009).
15
State law undergirds our analysis of the attorney-client
privilege in this diversity case. See FDIC v. Ogden Corp., 202
F.3d 454, 460 (1st Cir. 2000); Fed. R. Evid. 501.
-31-
burden of proving any exception falls to its proponent. Ogden, 202
F.3d at 460.
The attorney client privilege "extends to all
communications made to an attorney or counsellor . . . and applied
to by the party in that capacity, with a view to obtain his advice
and opinion in matters of law, in relation to his legal rights,
duties and obligations, whether with a view to the prosecution or
defence of a suit or other lawful object." Hanover Ins. Co., 870
N.E.2d at 1111 (quoting Hatton v. Robinson, 31 Mass. 416, 421
(1834)). The privilege attaches to any communication between
attorney and client in confidentiality for the purpose of seeking,
obtaining or providing legal advice or assistance. In Re
Reorganization of Elec. Mut. Ins. Co., Ltd. (Bermuda), 681 N.E.2d
838, 840 (Mass. 1997).
"While the attorney-client privilege shields
communications between attorney and client (and in some cases third
parties), the work product doctrine protects an attorney's written
materials and 'mental impressions.'" Comm'r of Revenue v. Comcast
Corp., 901 N.E.2d 1185, 1200 (Mass. 2009) (citing Hickman v.
Taylor, 329 U.S. 495, 510 (1947)). Codified in Mass. R. Civ. P.
26(b)(3), the doctrine protects from discovery documents prepared
by a party's representative "in anticipation of litigation." Id.
-32-
at 314.16 The protection can be overcome if the party seeking
discovery demonstrates "substantial need of the materials" and
cannot obtain the "substantial equivalent" by other means without
undue hardship. Id. Finally, an attorney or other
representative's "mental impressions, conclusions, opinions, or
legal theories" are afforded greater protection than "fact" work
product, id., which includes "everything else that is eligible for
protection as work product . . . ." In Re Grand Jury Subpoena, 220
F.R.D. 130, 145 (D. Mass. 2004).
The insurers do not expressly dispute that the documents
at issue fit within the ambit of the attorney-client privilege.17
Instead, they claim that they were entitled to them under either of
two exceptions, known as the "common interest" and "at issue"
doctrines.18 Because application of the former resolves this issue,
we do not address the latter.
The insurers urge us to follow the lead of the Illinois
Supreme Court in Waste Management, Inc., v. International Surplus
16
Fed. R. Civ. P. 26(b)(3) is the analogous federal
codification of Hickman. See United States v. Textron, Inc., 577
F.3d 21, 25 (1st Cir. 2009) (en banc).
17
The parties did not address the two privileges separately.
Because they protect different interests, however, we will do so.
United States v. Nobles, 422 U.S. 225, 238 n. 11 (1975) (citing
Hickman, 329 U.S. at 508)).
18
Only documents created during the Ericsson litigation are at
issue in this appeal. No communications made during the instant
coverage litigation are being sought.
-33-
Lines Insurance Co., 579 N.E.2d 322 (Ill. 1991), which held that
under the common interest doctrine, "when an attorney acts for two
different parties who each have a common interest, communications
by either party to the attorney are not necessarily privileged in
a subsequent controversy between the two parties." Id. at 328.
The parties expend significant energy debating whether
Vicor and the insurers actually possessed a common interest during
the Ericsson litigation, with Vicor arguing that the disputes that
would later ripen into this coverage litigation undermine any
common interest that may have existed. Vicor also points out that
Waste Management has been criticized. See, e.g., Remington Arms
Co. v. Liberty Mut. Ins. Co., 142 F.R.D. 408, 417 (D. Del. 1992)
(declining to follow Waste Management's "strange theory"); see also
PETCO Animal Supplies Stores, Inc. v. Ins. Co. of N. Am., No. 10-
682 (SRN/JSM), 2011 WL 2490298 at *21 n. 12 (D. Minn. June 10,
2011) (listing cases rejecting Waste Management).
We need not, however, venture beyond application of
Massachusetts law to resolve this issue. Massachusetts has
recognized an exception to the privilege that "renders the
privilege inapplicable to disputes between clients." Ogden, 202
F.3d at 461; Beacon Oil Co. v. Parelis, 160 N.E. 892, 894 (Mass.
1928). "Thus, when a lawyer represents multiple clients having a
common interest, communications between the lawyer and any one (or
more) of the clients are privileged as to outsiders, but not inter
-34-
sese." Id.; see also Dedham-Westwood Water Dist. v. Nat'l Union
Fire Ins. Co. of Pittsburgh, No. CIV.A. 96-00044, 2000 WL 33593142
at *3 (Mass. Super. Feb. 4, 2000) ("[W]hen an attorney has been
retained to represent both insured and insurer in a third party
action, communications by either party will not be privileged . .
. even if their interests later diverge.") (quoting Hoechst
Celanese Corp. v. Nat'l Union Fire Ins. co. of Pittsburgh, 623 A.2d
1118, 1123-24 (Del. Super. Ct. 1992)); EDO Corp. v. Newark Ins.
Co., 145 F.R.D. 18, 23 (D.Conn. 1992) ("[c]ommunications between an
insured and its attorney connected with the defense of underlying
litigation are normally not privileged vis-a-vis the insured
carriers in subsequent litigation").19
Vicor argues that the defense attorneys in the Ericsson
litigation did not represent both Vicor and the insurers.
Massachusetts law, however, considers an attorney retained by an
19
Massachusetts has also used the term "common interest
doctrine" in a different way, interchangeably with the "joint
defense privilege." There, the doctrine "prevents clients from
waiving the attorney-client privilege when attorney-client
communications are shared with a third person who has a common
legal interest with respect to these communications. . . ."
Cavallaro v. United States, 284 F.3d 236, 250 (1st Cir. 2002)
(emphasis added). It is "typically understood to apply when two or
more clients consult or retain an attorney on particular matters of
common interest." Ken's Foods, Inc. v. Ken's Steak House, Inc.,
213 F.R.D. 89, 93 (D. Mass. 2002) (citation and internal quotation
marks omitted). "In such a situation, the communications between
each of them and the attorney are privileged against third
parties." Id. (citation and internal quotation omitted). This
branch of the doctrine is not at issue here. Instead, it might
have arisen in an attempt to shield communications between Vicor
and its defense counsel from Ericsson in the underlying litigation.
-35-
insurer to represent the insured as the attorney for both.
Imperiali v. Pica, 156 N.E.2d 44, 47 (Mass. 1959) ("[A]n attorney
undertaking the defense of the case covered by the policy is an
attorney for both the insurer and the insured . . . ."); Rhodes v.
AIG Domestic Claims, Inc., No. 05-1360-BLS2, 2006 WL 307911 at *9
(Mass. Super. Jan 27, 2006).
Vicor further argues that the fact that the insurers
tendered the underlying defense pursuant to a reservation of rights
defeats any claim of a common interest. We disagree. It is
undisputed that the primary insurers paid defense counsel and
partially funded the settlement with Ericsson. That suffices to
rebut Vicor's argument. Cf. Owens-Corning Fiberglass Corp. v.
Allstate Ins. Co., 660 N.E.2d 765, 769 (Ohio Com. Pl. 1993) (no
common interest where insurers neither provided representation nor
indemnified insured in underlying suits).
Here, the record reflects multiple letters, reports and
other communications between underlying defense counsel and the
insurers regarding such matters as liability assessment, strategic
litigation planning and calculations of potential damage outcomes.
All were marked as "privileged and confidential," and the parties
agree they were privileged as to third-parties, such as Ericsson.
We agree with the reasoning set forth in RPM, Inc. v. Hartford
Accident & Indemnity Co., Inc., No. 1:03CV1322, slip op. at 12-13
(N.D. Ohio, April 11, 2006) (quoted in 1 Barry R. Ostrager & Thomas
-36-
R. Newman, Handbook on Insurance Coverage Disputes § 2.08[b] (14th
ed. 2008)): "Plaintiffs cannot have it both ways. They cannot
make use of the benefit of the common interest exception to avoid
waiver of the attorney-client privilege as to third parties and
simultaneously assert the privilege against the parties with whom
they share a common interest." Accordingly, we conclude that the
district court erred, and Vicor cannot rely on the attorney-client
privilege to shield all communications between it and underlying
defense counsel.
Resolution of the work-product privilege issue requires
less discussion. In the context of coverage litigation, it is a
touchstone of such a claim that Vicor must demonstrate that its
attorneys prepared the putatively shielded documents in
anticipation of a lawsuit with the insurers. EDO Corp., 145 F.R.D.
at 24; Textron, Inc., 577 F.3d at 29. In this case, events provide
fairly clear lines of demarcation. Documents produced while the
insurers were providing a defense are unlikely to be protected;
those produced during the periods when the insurers denied coverage
-- or refused to provide indemnity -- are likely to be protected.
See EDO Corp., 145 F.R.D. at 24; Hoechst Celanese Corp., 623 A.2d
at 1126. Given the fact that the precise nature of the Ericsson-
Vicor settlement is crucial to a determination of which of
Ericsson's claims are covered, the record supports the insurers'
substantial need for at least some of documents at issue. Thus, to
-37-
the extent that the district court's denial of the insurers' motion
to compel was based on application of the work product doctrine,
the court abused its discretion.
These conclusions do not quite end the matter.
Resolution of both the attorney-client and work product claims
require a more precise examination of the course of the
relationship between the parties as it relates to the Ericsson
litigation and the juncture at which various communications were
made. We acknowledge the difficulty entailed in the three-way
relationship recognized by Massachusetts law. The fact that both
the insured and insurer are deemed to be clients does not mean that
all communications are excepted from the applicable privileges, or
that the insurers are necessarily entitled to the entire defense
file, as they claim. From the current record, however, we cannot
make the necessary judgments about which materials are subject to
disclosure. It is enough to say, however, that the district court
abused its discretion in denying the insurers' motion to compel in
its entirety, and upon remand, should tailor a discovery order
consistent with this opinion, should the parties not be able to
reach substantial agreement on their own. See Fed. R. Civ. P.
37(a)(1) (requiring parties to confer regarding discovery disputes
or attempt to do so prior to filing motion to compel).
-38-
C. Vicor's cross-appeal
Vicor argues that the district court erred when it
granted the primary insurers summary judgment on Vicor's Breach of
Duty to Defend claim, which asserted that the insurers failed to
meet their obligation to pay Vicor's reasonable attorneys' fees in
the underlying litigation. The record reflects that Vicor paid
approximately $5.2 million of the $7.4 million billed by the two
defense firms Vicor chose in the underlying suit. The district
court order granting the motion stated that the insurers had
"discharged [their] obligations to pay reasonable legal fees." Fee
awards are reviewed for abuse of discretion. French v. Corporate
Receivables, Inc. 489 F.3d 402, 403 (1st Cir. 2007). We review the
grant of summary judgment de novo. Scottsdale Ins. Co. v. Torres,
561 F.3d 74, 77 (1st Cir. 2009).
Vicor offers a number of arguments in support of its
claim that the district court erred. The first -- that the
district court failed to explain how it arrived at the fee award
sufficiently to allow evaluation on appeal -- carries the day.
Therefore we vacate the award so that the matter can be addressed
on remand. We briefly explain.
We are mindful of the Supreme Court's admonition that
fee litigation can, but should not, transform into the tail that
wags the dog. See City of Burlington v. Dague, 505 U.S. 557, 566
(1992). And while the district court's attorneys' fee findings
-39-
"need not be infinitely precise, deluged with details, or even
fully articulated," Foley v. City of Lowell, 948 F.2d 10, 20 (1st
Cir. 1991), "we must have some basis for understanding its
reasoning." Mass. Eye & Ear Infirmary v. QLT Phototherapeutics,
553 F.3d 47, 74 (1st Cir 2009). While the record suggests that the
issue was well-joined in the district court, the court's order
provides us with no such basis of understanding. The insurers
argue that we can affirm because the district court was presented
with all relevant materials, and that "no elaboration is essential
if the reviewing court can without difficulty discern the basis for
the unexplained . . . finding from the record." United States v.
One Star Class Sloop Sailboat, 546 F.3d 26, 41 (1st Cir. 2008).
While the above-cited case is correctly quoted, we noted
in One Star Class Sloop Sailboat that the district court "cit[ed]
book and verse, [and] found that [the prevailing party] had
stubbornly persisted in litigating (and then losing) a cavalcade of
issues." Id. Indeed, in a separate -- although brief -- order,
the district court in that case addressed the parties' relative
success, the appropriate hourly rate, and what he believed to be
"overlitigation," in arriving at an award less than what the
prevailing party had requested. See United States v. One Star
Class Sailboat, No. 05-10192-WGY, 2008 WL 678519 at *1 (D. Mass.
Jan. 9, 2008). Here, however, we have been provided with no
analytical guideposts from which we can undertake a proper review.
-40-
Thus, we must vacate the grant of summary judgment as to the fee
award and remand for further consideration of the claim. We take
no position on whether summary judgment is the appropriate vehicle
to resolve the issue on remand.
V. Conclusion
The judgment of the district court is vacated. The case
is remanded for proceedings not inconsistent with this opinion.20
Each party shall bear its own costs.
20
Given our vacatur of the judgment, we need not address
Vicor's appeal of the district court's reduction of the verdict, or
Continental's appeal of the judgment on the basis that its excess
policy was not brought into play by the jury's allocation of
damages over two separate policy years.
-41-