Opinion
No. C02-2569P
May 25, 2004
ORDER DENYING PLAINTIFF'S MOTION TO ALTER OR AMEND AND VACATE JUDGMENT
This matter comes before the Court on Plaintiff Cutter Buck, Inc.'s ("CB") Motion to Alter or Amend and Vacate the Judgment. (Dkt. No. 293). On February 11, the Court issued an order granting summary judgment in favor of Defendant on Plaintiff's breach of contract and breach of duty of good faith and fair dealing claims. (Dkt. No. 265). On February 13, the Court entered final judgment. (Dkt. No. 271). CB now moves to alter or amend and vacate that judgment under Fed.R.Civ.P. 59(e). CB's motion relates to two aspects of the Court's order: 1) the interpretation of the severability of application provision in the insurance contract, and 2) waiver and ratification by Defendant Genesis Insurance Company ("Genesis"). Having reviewed the pleadings and supporting documents, the Court DENIES CB's motion. The core of CB's argument is that the Court erroneously relied on inadmissible deposition testimony in interpreting the severability of application provision in the insurance contract, or at a minimum that this testimony presented genuine issues of fact precluding summary judgment. However, the Court did not rely on the deposition testimony at issue in the way that CB contends. The Court identified the testimony and concluded based on it and other evidence that CB had not presented sufficient evidence of its intent in adding this provision to the insurance contract to support its desired interpretation of this provision. The Court did not rely on the testimony per se in interpreting the contract. As to CB's second argument, CB fails to identify any disputed issues of fact that would have precluded summary judgment on waiver and ratification.
ANALYSIS
I. Jurisdiction to Rule on CB's Motion
CB filed its Rule 59(e) motion to amend or alter the judgment on March 1, 2004. On March 11, CB filed a notice of appeal to the Ninth Circuit. Because CB filed its Rule 59(e) motion before filing its notice of appeal, this Court still has jurisdiction to rule on CB's motion. Osterneck v. Ernst Whinney, 489 U.S. 169, 177 (1989), Innovative Home Health Care, Inc. v. P.T.-O.T. Ass'n of the Black Hills, 141 F.3d 1284, 1286 (8th Cir. 1998).
II. CB's Motion to Alter and Amend and Vacate the Judgment
Under Fed.R.Civ.P. 59(e), amendment or alteration of a final judgment is appropriate when either the moving party presents newly discovered evidence, there has been an intervening change in the law, or the court committed clear error. Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir. 2001). However, this is an "extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources."Kona Enterprises, Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000). Here, CB does not argue that it has newly discovered evidence or that there has been an intervening change in the law necessitating an amendment of final judgment. The basis for CB's motion is that the Court made clear error in 1) interpreting the severability of application provision in the insurance contract to allow imputation of a signor's knowledge of misrepresentations of material facts to otherwise innocent directors and officers, and 2) concluding that Genesis had neither waived its right to rescind, nor ratified the policy after it learned certain facts.
A. Severability of Application
The Court interpreted the severability of application provision within the insurance contract to mean that the signor's knowledge of a misrepresentation in the application materials is imputed to otherwise innocent directors and officers. The Court reached this conclusion based primarily on the language in the contract provision at issue. CB does not appear to dispute this part of the analysis.
Washington's context rule for contract interpretation, established in Berg v. Hudesman, necessitated a further analysis in interpreting this provision. 115 Wn.2d 657, 801 P.2d 222 (1990). CB asserts that the Court committed clear error in this part of the analysis. Two principles of Washington contract law guided the Court's analysis. First, extrinsic evidence of the parties' intent is admissible to aid in the interpretation of what is already in the contract. It cannot be used to modify or contradict the terms of an otherwise unambiguous contract. Second, only evidence that shows an objective manifestation of the parties' intent is relevant. Evidence that merely indicates a party's subjective or unilateral intent has no place in contract interpretation under the context rule. In its order, the Court reviewed the evidence that both CB and Genesis put forth as to their intent, and concluded that CB had not presented evidence of an objective manifestation of its intent in requesting a "severability of application" provision.
CB now argues that the Court incorrectly relied on a portion of Genesis' underwriting agent Winnie Van's testimony in granting summary judgment in favor of Genesis. To understand this argument, it is necessary to summarize some of the facts and to outline what occurred during Van's deposition.
In renewing CB's Directors and Officers policy with Genesis, CB's insurance broker Paul Nowak emailed Van with twenty-three requests for changes in the policy, one of which was to "provide severability to the application." Van responded by proposing a provision, which was the same provision that was later incorporated into the final contract. (Gagnes Decl., Ex. J, Sub-Ex. 14). In her deposition, Van was asked what she understood Nowak to be requesting. (Id., Ex. E at 88). She answered that it was her understanding that he was seeking to modify the severability language in the base policy, to make the policy "broader" for CB and "narrower" for Genesis. (Id. at 89-96). She was then asked to interpret the base policy versus the policy that was used in the contract at issue here. Specifically, she was asked when knowledge of a misrepresentation in the application could be imputed to otherwise innocent directors and officers. At one point she said that she did not tell Nowak that her proposed provision would not protect an otherwise innocent director or officer if the signor knew of a misstatement in the application because she felt that Nowak was familiar with Genesis' policies and did not need further education. (Van dep at 97-98). A few questions later, she stated that her proposed provision provided broader coverage than the base policy because it limited Genesis' ability to void the policy because it only goes to the signor. (Id. at 98-99). Almost immediately after this question, Genesis' counsel suggested a lunch break. After lunch, and after CB finished questioning Van, Genesis' counsel stated that he had a couple of questions based on an issue that Van wanted to clarify. (Id. at 195). Van then testified that, based on her understanding of the provision, the policy would be void for innocent directors and officers if the signor knew of misrepresentations in the application. (Id. at 196-97). CB's counsel then questioned Van why she did not state this before. Van responded that she was erroneously not looking at the entire provision when she made the earlier statement. (Id. at 197-98). She also stated that she had reviewed the provision over lunch and that she had spent her lunch hour with Genesis' counsel. (Id. at 200).
CB contends that Van's post-lunch testimony is inadmissible because it is subjective opinion testimony, whereas her pre-lunch testimony is admissible as an objective manifestation of the parties' intent, and because it is an admission against a party under Rule 801(d)(2). According to CB, Van was coached during lunch, and her post-lunch testimony reflects nothing more than a restatement of Genesis' counsel's argument. At a minimum, CB maintains that her contradictory testimony creates an issue of fact precluding summary judgment.
Regardless of CB's characterization of Van's deposition testimony, amending or altering the judgment is not warranted because the Court did not rely on Van's testimony per se. Rather, the Court identified the various sources of evidence that the parties presented as extrinsic evidence of their intent. This evidence consisted of: the email from Nowak to Van requesting that Genesis "Provide Severability to the Application"; Van's response to Nowak's email in which she proposed the language that was eventually included in the application; the standard base policy provision on imputing knowledge to directors and officers; and Van's deposition testimony in this case. (Order on Summ. J. at 35-36). The Court then concluded that none of this evidence was an objective manifestation of CB's intent to seek a severability of application provision in which knowledge by the signor would not be imputed to otherwise innocent directors and officers.
Van's deposition testimony is not evidence of an objective manifestation of either parties' intent at the time of entering this contract. Her testimony is her after-the-fact thoughts or perception about what Nowak requested, what she proposed, and her interpretation of what she proposed. As such, her testimony represents her unilateral and subjective understanding. This conclusion accords with Washington case law. Admissible extrinsic evidence for interpretation under the Berg context rule does not include evidence of a party's unilateral or subjective intent as to the meaning of a contract word or term.Hollis v. Garwall, Inc., 137 Wa.2d 683, 695, 974 P.2d 836 (1999), Go2Net, Inc. v. C I Host, Inc., 115 Wa.App. 73, 84-85, 60 P.3d 1245 (2003). A party's "unexpressed impressions are meaningless when attempting to ascertain the mutual intentions of the parties." Lynott v. Nat'l Union Fire Ins. Co., 123 Wa.2d 678, 684, 871 P.2d 146 (1994) (citing Dwelley v. Chesterfield, 88 Wa.2d 331, 335, 560 P.2d 353 (1977)). See Hollis, 137 Wa.2d at 696 (holding that an affidavit stating what a party to a contract intended at the time of entering the contract was inadmissible under Berg because it was the unilateral and subjective intent of one of the contracting parties), Lynott, 123 Wa.2d at 685 (analyzing a meeting and telephone calls between an insurance broker and an underwriting agent as admissible extrinsic evidence, and observing they never discussed their intent to exclude certain coverage from the policy during those meeting and phone calls). Following this case law, the Court held that CB had not put forth evidence of an objective manifestation of its intent in adding this provision. CB's current arguments do not undermine that holding.
CB's argument that the pre-lunch testimony is admissible under Fed.R.Evid. 801(d)(2) is unpersuasive. Her testimony is not hearsay because it is not relating an out of court statement.
B. Waiver and Ratification
In a single paragraph at the end of its twelve page motion, CB contends that the Court erred in concluding that Genesis did not knowingly and intentionally waive its right to rescind, nor ratify coverage after it learned of certain facts. According to CB, these issues are questions of fact that should be decided by a jury. In its summary judgment order, the Court went thorough a review of the facts surrounding these issues and concluded that the facts were not in dispute; the legal significance of those facts were the heart of the dispute. As such, the Court concluded that the dispute was a question of law, not fact, and summary judgment was appropriate. In this motion to amend or alter the judgment, CB fails to identify specific material issues of fact that are in dispute on these claims. Therefore, the Court will not amend or alter its judgment on either of these issues.
CONCLUSION
The Court DENIES CB's Motion to Alter or Amend and Vacate the Judgment. The Court did not rely on inadmissible deposition testimony in interpreting the severability of application provision in the insurance contract. Rather the Court reviewed all of the evidence presented as to the formation of this provision in the contract and concluded that CB had not presented sufficient evidence of its intent in adding this provision to the insurance contract to support its desired interpretation of this provision. Additionally, CB fails to identify any disputed issues of fact that would have precluded summary judgment on waiver and ratification.
The clerk is directed to provide copies of this order to all counsel of record.