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In Tennenbaum v. Arizona City Sanitary Dist., No. CV-10-02137-PHX-GMS, 2015 WL 7731820 (D. Ariz. December 1, 2015), the plaintiff Tennenbaum sued the District and its lawyers including one Slavin. The first issue disposed of by the District Court in the current ruling was the nature of what the District Judge called "an 'Order'" signed by the Magistrate Judge. The District Judge wrote that the Magistrate did not have the authority to enter such an Order, but only a Report and Recommendation to the District Judge who would then dispose of the report with an Order. The District Judge renamed the Magistrate Judge's "'Order'" a Report and Recommendation accordingly, and went on to address other issues in the case. "The Court orders that the 'Order' entered by Magistrate Judge Mark E. Aspey (Doc. 242) shall be designated a Report and Recommendation (R & R). The Court adopts the R & R in part and rejects it in part." Tennenbaum v. Arizona City Sanitary Dist., No. CV-10-02137-PHX-GMS, 2015 WL 7731820, at *1 (D. Ariz. December 1, 2015).
The main issue presented in this case concerned the effects of a so-called Arizona "Morris agreement" on insurance coverage. In Arizona, the insured has a right to settle its underlying liability when its liability carrier reserves rights to deny all coverage on certain grounds. The resulting settlement agreement made between the policyholder and the claimant is called a "Morris agreement."
However, admissions and recitations of fact made in a Morris agreement are binding on the liability carrier when, among other things, the admissions and recitations of fact are necessary to establish the policyholder's underlying liability and not when they only affect the determination of insurance coverage. In this case, the policyholder was sued for defamation and invasion of privacy torts which, the District Court held, require evidence of actual malice.
The insured denied both actual malice and intent in the settlement agreement here. Under Arizona law applied by the District Court, this denial of intent and the agreement's recitation of facts simply established the actual malice necessary to underlying liability of the policyholder for actual malice in making the offensive statements. The issue of whether the policyholder's conduct was an excluded intentional act remains open in that case and so the District Court denied competing motions for summary judgment on that coverage issue. (Technically the District Court accepted the Magistrate Judge's recommendation to deny the parties' cross-motions for summary judgment.) Tennenbaum v. Arizona City Sanitary Dist., No. CV-10-02137-PHX-GMS, 2015 WL 7731820, at *4-*6 (D. Ariz. December 1, 2015)
In the course of its opinion in this case, the District Court provided a treatise on the treatment of judicial estoppel in the case law:
- “Judicial estoppel, sometimes also known as the doctrine of preclusion of inconsistent positions, precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position."
- “It is an equitable doctrine invoked by a court at its discretion.”
- Judicial estoppel “is intended to protect the integrity of the judicial process by preventing a litigant from playing fast and loose with the courts.”
- In determining whether to apply the doctrine, a court “typically consider[s] (1) whether a party’s later position is clearly inconsistent with its original position; (2) whether the party has successfully persuaded the court of the earlier position, and (3) whether allowing the inconsistent position would allow the party to derive an unfair advantage or impose an unfair detriment on the opposing party.”
Tennenbaum v. Arizona City Sanitary Dist., No. CV-10-02137-PHX-GMS, 2015 WL 7731820, at *7 (D. Ariz. December 1, 2015).
Although the Magistrate-Judge ultimately rejected the argument that judicial estoppel applied here, the District Judge said that the Magistrate rejected it for the wrong reasons. "The magistrate judge began with the premise that “Plaintiff vigorously argued in defending against the motions for [summary judgment] before Judge Snow that Defendant’s statements were defamatory" and made with actual malice. The District Court pointed out that when as here a party contests that there was actual malice in the course of contesting the insured's underlying liability, is not the same as contending that there was, or was not, intent to harm the plaintiff. Further, although the plaintiff did allege actual malice in the complaint at bar, he also alleged in the alternative that the policyholder acted with knowledge of falsity or with reckless disregard of whether the alleged statements were false.
That, said the District Judge, was the real reason that judicial estoppel did not apply here: The record established that the issue of actual malice was litigated, but that the separate issue important to insurance coverage -- intent to cause injury, and to the plaintiff -- was not litigated. Tennenbaum v. Arizona City Sanitary Dist., No. CV-10-02137-PHX-GMS, 2015 WL 7731820, at *7 (D. Ariz. December 1, 2015).
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