Kuehn Memo in Support MTR Order
Kuehn Memo in Support MTR Order
Kuehn Memo in Support MTR Order
this memorandum in support of its motion for reconsideration of this Court’s June 19, 2009 Order [72]
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limited to the requirement that the appraisers be disinterested, pursuant to Fed. R. Civ. P. 59(e), and for
expedited briefing, pursuant to Local Rule 7.2(H). In that Order, the Court denied State Farm’s motion
for summary judgment on Plaintiffs’ claim for declaratory and injunctive relief on the issue of appraisal.
Id. at 2.
This Court correctly held that “[t]he key issue is whether the appraisal comports with the policy
provisions and with state law.” Id. at 1. But the Court overlooked a fundamental policy provision that
effectively conceded that Mr. O’Leary was not disinterested and admitted that he “zealously represented
Plaintiffs’ interests” and undertook “passionate efforts on [Plaintiffs’] behalf during the appraisal.” [68]
at 21-22. On this basis alone, State Farm is entitled to summary judgment on Plaintiffs’ claim.
Yet the Court, without citing any discernable legal principle and without reaching the merits of
the issue, held that this essential element of Plaintiffs’ claim should be raised in state court, not here.
[72] at 2. This holding is erroneous and should be reconsidered “to correct a clear error of law” and
“prevent manifest injustice.” See, e.g., In re Benjamin Moore & Co., 318 F.3d 626, 629 (5th Cir. 2002).
The requirement that Mr. O’Leary be disinterested is a policy requirement, [63-2] at 100019, as
this Court previously and correctly recognized. Kuehn v. State Farm Fire & Cas. Co., 2007 WL 184647,
at *1 (S.D. Miss. Jan. 19, 2007) (Senter, J.) (Kuehn I) (quoting policy). This action – i.e., Kuehn II –
was originally filed by Plaintiffs in this Court, [1], and the issue of whether Mr. O’Leary was
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By limiting its motion for reconsideration to the issues concerning this Court’s holding that “the issue of whether the
appraiser appointed by the Plaintiffs was truly disinterested … is an issue properly raised in [State] Court,” [72] at 2,
State Farm is not intending to waive, and is not waiving, any other issues it may have with the Court’s June 19, 2009
Order [72].
disinterested is no less in issue before this Court than any other policy requirement for appraisal, such as
whether the appraisal improperly made causation determinations. To hold otherwise is clear error.
With Plaintiffs having invoked this Court’s diversity jurisdiction, and thus with this Court sitting
in diversity, this Court is required to apply the same substantive law as would a state court. Erie R.R. v.
Tompkins, 304 U.S. 64 (1938). Nor can the Court carve up the appraisal provision and only address and
enforce some of it. Under Mississippi law, this Court is “bound to enforce contract language as
written.” Miss. Farm Bureau Cas. Ins. Co. v. Britt, 826 So. 2d 1261, 1266 (Miss. 2002) (en banc).
By holding that “the issue of whether the appraiser appointed by the Plaintiffs was truly
disinterested … is an issue properly raised in [State] Court,” [72] at 2, and by scheduling an evidentiary
hearing to determine the validity of the appraisal, the Court has greatly magnified the effect of this error.
This Court’s ruling that the issue of disinterestedness is properly raised in state court and not here runs
counter to this Court’s mandate under Erie and it threatens to work a manifest injustice upon State Farm,
as well as violate its right to due process, by depriving it of summary judgment on what is tantamount to
a confessed point, and by depriving it of the ability to raise the essential element of disinterestedness as
Given Plaintiffs’ admissions that Mr. O’Leary was a partisan advocate for Plaintiffs during the
appraisal, the need for an evidentiary hearing – through the issuance of summary judgment – is obviated.
Yet even if the Court were to determine that there is an issue requiring resolution by a fact-finder (which
there is not), this Court’s ruling obliges State Farm to defend itself against Plaintiffs’ claim with one
hand tied behind its back. Disinterestedness is an integral and essential element of the appraisal
provision in the policy, and the admitted lack of disinterestedness is a dispositive defense to Plaintiffs’
To deprive State Farm of a bona fide legal defense is contrary to State Farm’s constitutional right
to due process. U.S. CONST. amend. V. Fundamental due process requires “‘an opportunity to present
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every available defense.’” Philip Morris USA v. Williams, 549 U.S. 346, 353 (2007) (quoting Lindsey v.
Normet, 405 U.S. 56, 66 (1972)). Unless modified, the June 19, 2009 Order [72] will deprive State
Farm of the opportunity to raise Mr. O’Leary’s admitted partisan zealotry to defeat Plaintiffs’ claim for
This Court should alter its judgment to (i) recognize that it has jurisdiction over all the policy
provisions controlling appraisal, including disinterestedness, (ii) recognize that Plaintiffs freely admitted
that Mr. O’Leary was their zealous advocate during the appraisal, contrary to the disinterestedness
requirement of the policy, and (iii) grant State Farm’s motion for summary judgment [63].
II. THE COURT HAS S UBJECT M ATTER JURISDICTION OVER ALL THE A PPRAISAL REQUIREMENTS
This Court held that the requirement that Mr. O’Leary be disinterested is “required by the order
of the state court” and, therefore, “is an issue properly raised in that Court.” [72] at 2. This holding is
erroneous and should be corrected. The requirement that Mr. O’Leary be disinterested is a policy
requirement over which this Court has jurisdiction, [63-2] at 100019, not a requirement separately
The Mississippi Chancery Court simply ordered the parties to “proceed in accordance with the
terms of the State Farm insurance policy.” [23-5] at 2. The state court’s only reference to the
disinterestedness requirement is by quoting State Farm’s policy, [23-5] at 1-2, as did this Court. Kuehn I,
2007 WL 184647, at *1. That Mr. O’Leary must be disinterested is no more “required by the order of
the state court,” [72] at 2, than it was required by this Court in Kuehn I, 2007 WL 184647, at *1.
Beyond those orders, it is the homeowners policy and the law that require Plaintiffs to show that Mr.
O’Leary was disinterested. This Court has original subject matter jurisdiction over those matters.
Indeed, this Court has subject matter jurisdiction over Plaintiffs’ claim for relief regarding the
appraisal, which necessarily includes adjudicating all the policy requirements for a valid appraisal.
Plaintiffs filed this case as an original action in this Court pursuant to the Court’s diversity jurisdiction.
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Compl. [1] ¶ 5. Thus, as this Court is well aware, it has “original jurisdiction” over Plaintiffs’ claim, 28
U.S.C. § 1332(a), and this Court’s “judicial power … extend[s]” over this case and the elements of proof
Nor has the state court retained jurisdiction over the issue of Mr. O’Leary’s partisanship. The
dispute over that issue did not “aris[e] in the course of the appraisal.” [23-5] at 2. State Farm did not
know, nor could it have known, of Mr. O’Leary’s bias and partisanship (or of Plaintiff’s counsel’s
direction to Mr. O’Leary to protect Plaintiffs’ litigation interests during the appraisal) during the course
of the appraisal to contest it in the state court proceeding. Rather, the parties were ordered to engage in
an appraisal pursuant to the policy terms, [23-5] at 2, which requires both parties to appoint an appraiser.
The parties did so and the appraisal process ensued. State Farm had no means or procedure in state
court to ascertain whether Mr. O’Leary was disinterested. The issue arose for the first time in this Court,
well after the appraisal was completed, as a result of the discovery conducted in this action. The fact of
Mr. O’Leary’s bias and partiality has now been laid bare and, indeed, freely admitted by Plaintiffs. It is
Under Erie, 304 U.S. at 64, with Plaintiffs having invoked this Court’s diversity jurisdiction, and
thus with this Court sitting in diversity, this Court is obligated to apply the same substantive law as
would a state court. “‘[U]nder Erie we cannot skirt the clear import of state decisional law solely
because the result is harsh.’” Jackson v. Johns-Manville Sales Corp., 781 F.2d 394, 397 (5th Cir. 1986)
(citation omitted). It is this Court’s task to adjudicate all of the elements of Plaintiffs’ claim and to
apply the law on the validity of appraisal. See, e.g., id. Under the law, courts “are bound to enforce
contract language as written.” Britt, 826 So. 2d at 1266; see also Tuepker v. State Farm Fire & Cas. Co.,
507 F.3d 346, 353 (5th Cir. 2007); Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So. 2d 400, 404 (Miss.
1997). And Mr. O’Leary’s admittedly zealous partisanship violates the policy provisions and the law.
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This Court has scheduled a hearing to adjudicate, among other issues, whether the appraisers
improperly determined the cause of damage to Plaintiffs’ property. [72] at 1-2. The policy requirement
that Mr. O’Leary be disinterested is no less in issue before this Court than whether the appraisal panel
improperly made causation determinations. Both elements of proof arise out of the policy provisions
and the law governing appraisal. Thus, this Court should alter its June 19, 2009 Order [72] and hold that
the issue of whether Mr. O’Leary is disinterested is within the Court’s jurisdiction and properly at issue
in this case.
III. MR. O’L EARY’S ZEALOUS ADVOCACY FOR PLAINTIFFS I S RIPE FOR S UMMARY JUDGMENT
It is not only well within this Court’s power to adjudicate Plaintiffs’ inability to show that Mr.
O’Leary was disinterested, but that issue is also ripe for decision on summary judgment. As this Court
correctly recognized in its June 19, 2009 Order, “[t]he key issue is whether the appraisal comports with
the policy provisions and with state law.” [72] at 1. For Plaintiffs to obtain declaratory and injunctive
relief, they must demonstrate that the appraisal fully complied with the policy provisions and with state
law, including the essential requirement that Mr. O’Leary was “disinterested.” [63-2] at 100019. This
case was the first opportunity for State Farm to ascertain Mr. O’Leary’s disinterestedness through
discovery. That discovery revealed that Mr. O’Leary was far from being “disinterested.” On this and
other fatal flaws in Plaintiffs’ claim, State Farm moved for summary judgment on the issue of appraisal.
[63] & [64]. Rather than repeating those issues at length, in the interests of brevity and judicial
economy, State Farm respectfully incorporates it prior briefing on the issue of disinterestedness. [63],
Suffice it say that, based on the discovery taken in this case, State Farm demonstrated that there
is no genuine issue of material fact that Mr. O’Leary was not disinterested. [64] at 1, 3-4, 8-10. Mr.
O’Leary stated in an email that during the appraisal he would “never pass a chance to create even more
of an edge wherever possible,” to “go full bore,” to attack the “credibility” of State Farm’s appraiser,
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and to “hurt him in the umpire’s eyes,” all as the premeditated “ticket we need for success” in the
appraisal. Id. at 1, 3, 9-10. Discovery further revealed that Plaintiffs’ counsel assigned Mr. O’Leary to
protect Plaintiffs’ litigation interests during the appraisal so that Plaintiffs could sue State Farm for bad
In response, Plaintiffs did not rebut or deny these facts, nor could they. Instead, they fully
embraced Mr. O’Leary’s partisanship. Plaintiffs freely admitted that Mr. O’Leary “diligently and
zealously represented Plaintiffs’ interests in the appraisal process” and undertook “passionate efforts on
[Plaintiffs’] behalf during the appraisal.” [68] at 21-22. By their admissions, Plaintiffs effectively
conceded that Mr. O’Leary was not a “disinterested” appraiser as required by the policy, [63-2] at
100019, by Fifth Circuit case law, Phoenix Assur. Co., Ltd. of London v. Davis, 67 F.2d 824, 825 (5th
Cir. 1933), and as corroborated by leading commentators. 15 Lee R. Russ & Thomas F. Segalla, Couch
on Insurance § 211:33 & n.17 (2008) (citing Davis as primary authority). Thus, after State Farm’s
motion was fully briefed, the record precluded Plaintiffs from demonstrating a genuine question on an
essential element of their claim – that Mr. O’Leary was disinterested. [71] at 1-3. Summary judgment
should have therefore been entered for State Farm. Fed. R. Civ. P. 56(c).
party’s case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322-
23 (1986). Summary judgment should “be granted so long as whatever is before the district court
demonstrates that the standard for the entry of summary judgment, as set forth in Rule 56(c), is satisfied.
One of the principal purposes of the summary judgment rule is to isolate and dispose of factually
unsupported claims or defenses, and we think it should be interpreted in a way that allows it to
accomplish this purpose.” Id. at 323-24; see also Anderson v. Liberty Lobby, 477 U.S. 242, 250 (1986).
“Summary judgment is not a discretionary remedy. If the plaintiff lacks enough evidence, summary
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judgment must be granted.” Jones v. Johnson, 26 F.3d 727, 728 (7th Cir. 1994) (citing Celotex, 477 U.S.
at 319; Anderson, 477 U.S. at 249-51), aff’d, 515 U.S 314 (1995).
Plaintiffs openly conceded that Mr. O’Leary was their zealous, partisan advocate throughout the
appraisal. This Court should, thus, alter its June 19, 2009 Order [72] to recognize that Plaintiffs freely
admitted that fact, in derogation of the policy’s requirement that the appraisers be disinterested, and to
IV. TO BAR STATE FARM FROM RAISING MR. O’LEARY ’S PARTISANSHIP VIOLATES D UE PROCESS
Though Plaintiffs’ concessions warrant summary judgment for State Farm and thereby eliminate
the need for an evidentiary hearing on the validity of the appraisal, by scheduling one, this Court has
magnified its error. While this Court scheduled an evidentiary hearing on “the validity of the appraisal,”
it relegated an essential element of Plaintiffs’ claim to state court – whether Mr. O’Leary was
disinterested. Evidence of Mr. O’Leary’s admittedly zealous partiality directly refutes and directly
negates an essential element of Plaintiffs’ claim. By effectively barring that issue from being raised in
this Court by relegating it to state court, the Court will omit an essential element of Plaintiffs’ claim
from the summary judgment process and from the evidentiary hearing, rendering those proceedings
fundamentally flawed and incomplete. It is tantamount to requiring State Farm to defend against the
claim while being deprived of the ability to assert not merely all of its available defenses, but a key
dispositive defense to an essential element of Plaintiffs’ claim as to which there is no genuine dispute.
Thus, unless corrected, the June 19, 2009 Order will work a “manifest injustice,” see, e.g., In re
Benjamin Moore & Co., 318 F.3d at 629, by depriving State Farm of its constitutional right to due
Fundamental due process requires “‘an opportunity to present every available defense.’”
Williams, 549 U.S. at 353. The dispositive defense that Mr. O’Leary is an admittedly partisan zealot has
been demonstrated by the discovery taken in this case and has been confirmed by Plaintiffs’ admissions
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in their response to State Farm’s motion for summary judgment. State Farm should be afforded every
opportunity to raise that defense, including on a motion for summary judgment, which will work a quick
end to the appraisal issues or, if a genuine issue of material fact on that remains (which it does not), at an
evidentiary hearing to adjudicate “the validity of the appraisal.” [72] at 2. Accordingly, this Court
should correct its June 19, 2009 Order [72] and permit State Farm to present every available defense in
the evidentiary hearing on the validity of the appraisal, including Plaintiffs’ inability to establish, as an
V. C ONCLUSION
For the foregoing reasons, this Court should grant State Farm’s motion for reconsideration in its
entirety. Further, pursuant to Local Rule 7.2(H), State Farm respectfully requests that this Court set an
expedited briefing schedule on the within motion, prior to July 22, 2008, the date set for a hearing on
Respectfully submitted,
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CERTIFICATE OF SERVICE
I, JOHN A. BANAHAN, one of the attorneys for the Defendant, STATE FARM FIRE &
CASUALTY COMPANY, do hereby certify that I have on this date electronically filed the foregoing
document with the Clerk of Court using the ECF system which sent notification of such filing to all
counsel of record.