Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 1 of 42

IN THE UNTIED STATES DISTRICT COURT

FOR TIIE EASTERN DISTRlCT OF PENNSYLVANIA

RCM TECHNOLOGIES, INC.,

2500 McClellan Avenue
Pen...1J.sauken NJ 08109,

Plaintiff, Civil Action No. 2:09-cv-04789-AB

v.

ACE AMERICAN INSURANCE

COMPANY,
436 Walnut Street
Philadelphia PA 19106,

Defendant.

ACE AMERICAN INSURANCE COMPANY'S MOTION FOR PARTIAL

SUMMARY JUDGMENT REGARDING RCM TECHNOLOGIES, INC.'S "BAD FAITH,"
PUNITIVE DAMAGES AND AITORNEYS' FEES CLAIMS (MOTION NO.3)

Pursuant to Federal Rule of Civil Procedure 56(b), defendant ACE American Insurance

Company ("ACE") seeks partial summary Judgment against plaintiffRCM Technologies, Inc.'

("RCM") on the following claims and issues of law and fact as to which no genuine issue of

fact remains:

1. Count III of the RCM Technologies, Inc. v. ACE American Insurance Company

Complaint, filed on October 17, 2009 in the instant action ("Complaint"), for breach of the

implied Cbvenant of good faith and fair dealing ("Bad Faith") is without merit as a matter of

law and should be dismissed.

2. RCM's claim for punitive damages as stated in Count III ofRCM's Complaint,

p. 13, ~ (c), is without merit as a matter oflaw and should be dismissed.

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3. RCM's claim for "attorney fees, costs and other expenses that RCM incurred in

protecting its interests in the Topa lawsuit" as stated in Count II ofRCM's Complaint, p. 12, ~

(a) and Count III, p. 13,~ (a), is without merit as a matter oflaw and should be dismissed.

4. RCM's claim for "attorneys' fees for this action" as stated in Count II of

RCM's Complaint, p. 12, ~ (c) and Count III, p. 14, ~ (c), is without merit as a matter oflaw

and should be dismissed.

This Motion for Partial Summary Judgment Regarding RCM's "Bad Faith," Punitive

Damages and Attorneys' Fees Claims (Mo~on No.3) is based on the attached supporting

memorandum and exhibits and the Court's record and files in this action.

Respectfully submitted,

BY: LE~~~== =:-a-

Lane J. Ashley, Esq., California Bar No. 73926·
Celia Moutes-Lee, Esq., California Bar No. 160950
Attorneys for Defendant ACE American Ins. Co.
221 North Figueroa Street, Suite 1200
Los Angeles, CA 90012
213-250-1800
Fax: (213) 250-7900

MARKS, O'NEILL, O'BRIEN & COURTNEY, P.C.

Patricia A. Fecile-Moreland, Esquire
ID Number 83798
Attorneys for Defendant ACE American Ins. Co.
1800 John F. Kennedy Blvd., Suite 1900
Philadelphia, P A 19103
215-564-6688

Dated: August 31, 2010

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ACE'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PARtIAL

SUMMARY JUDGMENT REGARDING RCM'S "BAD FAITH," PUNITIVE
DAMAGES AND ATTORNEYS' FEES CLAIMS (MOTION NO.3)

This Motion for Partial Summary Judgment Regarding RCM Technologies, Inc. 's "Bad

Faith," Punitive Damages and Attorneys' Fees Claims (Motion No.3) ("Motion") is directed at

the "bad faith" claim alleged by plaintiff RCM Technologies, Inc. ("RCM") in Count III of its

Complaint against defendant ACE American Insurance Company ("ACE"). The Motion also

addresses RCM's claims for punitive damages and attorneys' fees. As demonstrated below,

these claims are all without merit and should be dismissed.

I. INTRODUCTION

This insurance coverage litigation between ACE and RCM arises from an underlying

lawsuit, Topa Insurance Group v. ReM Technologies, Inc. (the "Topa suit"), which ACE both

defended and settled. More specifically, the undisputed facts establish that ACE:

1. monitored the Topa suit under a reservation 6frights pending RCM's payment

of its $250,000 retention;

2. became actively involved in the defense of the case after RCM's retention had

been exhausted, still under a reservation of rights;

3. paid $653,856.64 in defense fees and costs incurred in the Topa suit;

4. with RCM's consent, agreed to a settlement ofthe Topa suit on the tenns

requested by RCM, whereby ACE funded the initial $1 million installment of

the $2 million settlement with Topa Insurance Group (''Topa'') under a

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reservation of rights and committed to funding the remaining $1 million if a

court determined that the ACE Policy· covered the Topa claims; and

5.. executed a settlement agreement with ReM which provided the option of

coverage litigation to determine the coverage issues, the claims of

reimbursement and responsibility for the remainder of the Topa settlement.

In sUIIlITIary, ACE paid more than $1,650,000 in settlement and defense of the Topa suit

and also shares a joint obligation with RCM to fund another $1 million required by the

settlement with Topa, depending upon resolution of the coverage issues. ACE made these

substantial monetary payments and commitments even thouih coverage for the Topa claim was

always doubtful and the potential for coverage had been eliminated entirely at the time of

settlement. (See discussion in ACE's Motion for Partial Summary Judgment Regarding

·Coverage Issues (Motion No.2) ("Coverage Motion"f) In short, ACE conducted itself

"according to the book" as to how to defend and settle a California claim 3 where coverage is

doubtful.

Nevertheless, RCM, having paid no sums toward the defense or settlement of the Tapa

claim above its $250,000 retention and having demanded that ACE fund an uncovered claim on

ReM's terms, has attempted to transform the agreed upon coverage litigation into a "bad faith"

issued to RCM the DigitechsM Digital Technology & Professional Liability

1 ACE
policy no. G21643476-006, with an effective policy period from April 23, 2008 to April 23,
2009 (the "ACE ·Policy").
2 ECF Document No. 40, filed on August 27, 2010 in this action.
3Prior to filing this lawsuit, RCM acknowledged that California law applies to these
claim issues. (See discussion in ACE's Motion for Partial Summary Judgment Regarding
Choice of Law (Motion No.1), ECF Document No. 37, filed on August 24,2010 in this action.
("Choice of Law Motion").)

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suit, seeking recovery of punitive damages and attorneys' fees. However, as discussed below,

this strategy of "overreaching" by RCM does not survive legal scrutiny. The ''bad faith,"

punitive damages and attorneys' fees claims should be dismissed based on this Motion.

II. UNDISPUTED FACTS

A. RCM's Operation

1. RCM is a publicly traded corporation, incorporated in Nevada with its headquarters in

New Jersey.4 (SeeRCM UF 1; Appendix of Deposition Testimony and Documents ("Appendix"),

Exh. "1" thereto, Deposition of Stanton Remer ("Remer Depo."), 31 :11-13, Exh. "45" thereto, RCM's

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ("2009 Annual

Report"), Bates No. RCM 006167.i

2. RCM's business includes "IT solutions and consulting ~ .. engineering

consulting and project and staffing work healthcare staffing and 'light industrial staffing. '"

(See RCM UF 2; Appendix, Exh. "2" thereto, Deposition of Kevin D. Miller ("Miller Depo."),

24:9-25:3.)

3. During the relevant time periods, RCM's operational headquarters was in Pennsauken,

New Jersey with offices and employees throughout the United States and Canada. (See Appendix,

Exh. "1" thereto, Remer Depo., 35:8-20; 38:7-19; 39:12-24; 42:24-45:2; Exh. "2" thereto, Miller

Depo., 30:2-31 :13; 36:3-13; 56:15-23; Exhs. "3" and "4" there~o, ACE's Request for Admission No.

36 and RCM's Response thereto; Exh. "5" thereto, ReM's Contact List [marked as Deposition Exhibit

4
The ACE Undisputed Facts are referenced herein as "AUF _ _."
5
Where the same undisputed facts are also stated as such in RCM's Motion for
Partial Summary Judgment, ECF Document No. 35-1, filed on July 26,2010 in this action,
each is so indicated as "RCM UF "

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366]; Exh. "6" thereto, RCM's Office Listing [marked as Depo~ition Exhibit 369]; Exh. "7" thereto,

Chart ofW2 Employees by State [marked as Deposition Exhibit 365].)

4. RCM's revenues in 2007, 2008 and 2009 were $194,994,300, $185,408,693, and

$189,393,000 respectively. Its book value in 2009 was $59,011,000. (See Appendix, Exh. "I" thereto,

Remer Depo., 36:8-37:9; 38:20-39:6; Exh. "7" thereto, Chart ofW2 Employees by State [marked as

Deposition Exhibit 365], Exh. "45" thereto, 2009 Animal Report, Bates Nos. RCM 06210-06211.)

B. ACE American Insurance Company

5. ACE is a corporation incorporated under the laws of Pennsylvania with its principal

place of business in Philadelphla, Pennsylvania. (See RCM UF 3; Appendix, Exh. "8" thereto,

Affidavit oflnna Kogan in Support of Motion of ACE to Transfer Plaintiff's Action ("Kogan

Affidavit"), ~ 4.)

c. The Subject Insurance Policy

6. ACE issued to RCM the DigitechSM Digital Technology & Professional Liability policy

no. G21643476-006, with an effective policy period from April 23, 2008 to April 23, 2009. The ACE

Policy provides Technology and Internet Errors and Omissions Liability coverage, among other

coverages, with an "each claim" limit of $5 million excess of a $250,000 self-insUred retention,

including defense fees and costs. (See RCM UF No.5; Appendix, Exh. "9" thereto [marked as

Deposition Exhibit 310 and attached to RCM's Complaint].) °

7. RCM obtained the ACE Policy through its brokers Tri City Brokerage and Arthur J.

Gallagher. (See RCM UF 16; Appendix, Exh. "I" thereto, Remer Depo., 17:23-18:7; 118:15-23;

128:3-18; 149:12-14; Exh. "2"Othereto, Miller Depo., 108:5-9; Exh. "10" thereto, Smith Depo., 33:22-

34:14; 35:18-36:4; Exh. "II" thereto, June 16,2008 Letter [marked as Deposition Exhlbit 309]; Exh.

"12" thereto, July 28,2008 Letter [marked as Deposition Exhlbit 396].)

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D. The CAPRI Project

8. The CAPRI Project refers to a custom software project RCM "installed" for Topa

Insurance Group t'Topa"). (See ReM UF 29; Appendix, Exh. "2" thereto, Miller Depo., 162:21-

163:6; Exh. "13" thereto, RCM Technologies, Inc. v. ACE American Insurance Company Complaint

("Complaint") W 10-11.)

E. The Topa Claim - Pre-Suit and Suit

9. On February 8, 2008, counsel for Topa, Eric Sinrod, wrote a letter to RCM's Senior

Vice President, Jorn Pringle and Brynley Lee, the CAPRI Project Manager, making a demand for

repairs to be completed at no cost to Topa based on claims that RCM had breached its contract causing

Topa damages. (See RCM UF 30; Appendix, Exh. "2" thereto, Miller Depo., 124:13-125:5; 131:21-

133:10;" Exh. "14" thereto, February 8, 2008 Letter [marked as Deposition Exhibit 311]; Exh. "IS"

thereto, Deposition of Eric J. Sinrod ("Sinrod Depo."), 19:15-23:7; 25:18-27:16.)

1O. Kevin Miller, RCM Senior Vice President of Corporate Development, received the

February 8, 2008 letter from Topa's lawyer. (See Appendix, Exh. "2" thereto, Miller Depo., 2:7;

14:19-15:1; 124:13-125:5; 131:6-12; 131:18-20; Exh. "14" thereto, February 8, 2008 Letter [marked"

as Deposition Exhibit 311].)

11. Mr. Miller "recognized this as a threat to sue" and he quickly consulted with his

lawyers at the White & Williams firm. (See Appendix, Exh. "2" thereto, Miller Depo., 136:2-137:1;

150:10-152:17; 237:13-238:3.)

12. Attorney Udell at White & Williams responded to Mr. Sinrod with a February 19, 2008

letter which stated: " ... RCM does not agree with the claims described therein [the February 8,2008

letter] made on behalf of your client, the Topa Insurance Group ("Topa"), and, therefore, will not

agree to the demands that you have made on behalf of Topa...." (See Appendix, Exh. "2" thereto,
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Miller Depo., 237:13-238:3; Exh. "16" thereto, February 19, 2008 Letter [marked as Deposition

Exhibit 323J.)

13. Topa filed suit against RCM'entitled Topa Insurance Group v. ReM Technologies, Inc.,

et al. in state court in California. (See RCM UF 31; Exh. "13" thereto, RCM's Complaint ~ 11; Exh.

"17" thereto, Topa's Complaint.)

F. The ACE Policy

14. The relevant ACE Policy language is as follows:

DECLARATIONS PAGE

THE POLICY IS A CLAIMS MADE AND REPORTED

POLICY. EXCEPT AS OTHERWISE PROVIDED HEREIN,
THIS POLICY COVERS ONLY CLAIMS FIRST MADE
AGAINST THE INSUREDS AND REPORTED TO THE
INSURER DURING THE POLICY PERIOD AND WHICH
ARE THE RESULT OF WRONGFUL ACTS COMMITTED
ON OR AFTER THE RETROACTNE DATE BUT BEFORE
THE END OF THE POLICY PERIOD ....

The policy provides:

In consideration of the payment of the premium, in reliance upon

the Application, and subject to the Declarations and the terms
and conditions of this Policy, the Insureds and the Insurer agree
as follows:

I. INSURING AGREEMENT

A. Technology and Internet Errors and Omissions Liability

If Insuring Agreement A, Technology and Internet Errors

and Omissions Liability coverage, is purchased pursuant to
Item 3 of the Declarations, the Insurer Will pay Damages
and Claims Expenses of the Insured which the Insured
becomes legally obligated to pay by reason of a Claim
first made against the Insured during the Policy Period
and reported to the Insurer pursuant to Section VIII,
Notice, for any Wrongful Acts taking place after the

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Retroactive Date and prior to the end of the Policy

Period.

G. Miscellaneous Professional Services Liability

If Insuring Agreement G, Miscellaneous Professional

Services Liability coverage, is purchased pursuant to Item
3 of the Declarations, the Insurer will pay Damages and
Claim Expenses of the Insured which the Insured
becomes legally obligated to pay by reason of a Claim
first made against the Insured during the Policy Period
and reported to the Insurer pursuant to Section VIII,
Notice, for any Wrongful Acts taking place after the
Retroactive Date and prior to the end of the Policy
Period.

II. DEFINITIONS

E. Claims means:

1.

a. a written demand against any Insured for

monetary or non-monetary damages;

J. Daniages means compensatory damages, any award of

prejudgment or post-judgment interest, and settlements
which the Insured becomes legally obligated to pay on
account of any Claim first made against any Insured
during the Policy Period ... for Wrongful Acts to which
this Policy applies. Damages shall not include:

5. loss of fees ... by the Insured, return of fees, ...

by the Insured, or re-performance of services by
the Insured or under the Insured's supervision; ..

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III. EXCLUSIONS

The Insurer shall not be liable for Damages, Claims Expenses, .

. . on account of any Claim:

J. alleging, based upon, arising out of or attributable to a.TJ.Y

fees, expenses, or costs paid to or charged by the Insured.

By endorsement the policy substitutes for Exclusion U in the body of the policy the

following relevant language under the title "Amend Exclusion U. - Recall Loss of Use":

alleging, based upon, arising out of or attributable to any costs or

expenses incurred by any Insured or others to .... repair, ... the
Insured's products, . . .. However, this exclusion shall not
apply to Claims for loss of use that arise out of such withdrawal
or recall.

VII. RETENTION

A. The liability of the Insurer shall apply only to that part of

Damages, Claim Expenses ... which are in excess of the
applicable Retention amount shown in Item 5 of the
Declarations. Such Retention shall be borne uninsured by
the Named Insured and at the risk of all Insureds .

. IX. DEFENSE AND SETTLEMENT

A. The Insurer shall have the right and duty to defend any
covered Claim . . . brought against the Insured even if
such Claim is groundless, false or fraudulent. ....

B. The Insurer shall not settle any Claim without the written
consent of the Named Insured.

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XVIII. ALTERATION, ASSIGNMENT AND HEADINGS

C. The titles and headings to the various parts, sections,

subsections and endorsements of the Policy are included
solely for ease of reference and do not in anyway limit,
expand or otherwise affect the provisions of such parts,
sections, subsections or endorsements.

Xx. INTERPRETATION

The terms and conditions of this Policy shall be interpreted and

construed in an evenhanded fashion as between the parties. If the
language of this Policy is deemed to be ambiguous or otherwise
unclear, the issue shall be resolved in the manner most consistent
with the relevant terms and conditions, without regard to
authorship of the language, without any presumption or arbitrary
interpretation or construction in favor of either the Insureds or
the Insurer and without reference to the reasonable expectations
of either the Insureds or the Insurer.

(See Appe.pdix, Exh. "9" thereto, ACE Policy, Bates Nos. RCM 000001,000004-000006,

000010-000011, 000016-000017, 000019-000020, 000031.)

G. The Tender and Response

15. On June 16,2008, RCM's counsel, Peter Mooney at White & Williams tendered the

Tapa suit to ACE. (See RCM UP 32; Appendix, Exh. "18" thereto, Deposition of Peter J. Mooney

("Mooney Depo."), 8:17-9:12; Exh. "19" thereto, June 16,2008 Letter [marked as Deposition Exhibit

317].)

16. ACE personnel responded to Mr. Mooney. (See RCM UP 33; Appendix, Exh. "20"

. thereto, June 20, 2008 Letter [marked as Deposition Exhibit 318].)

17. Mr. Mooney was authorized by RCM to deal with ACE on behalf ofRCM. (See

Appendix, Exh. "2" thereto, Miller Depo., 172:13-16; 178:3-14.)

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18. Mr. Mooney proposed to ACE representative Matthew Lange that the finn Murchison

& Cumming would handle the defense of the Topa suit on behalf ofRCM. (See RCM UF 34;

Appendix, Exhs. "3" and "4" thereto, ACE's Request for Admission No. 38 and RCM's Response

thereto; Exh. "13" thereto, Complaint ~ 16; Exh. "18" thereto, Mooney Depo., 35:1-7.)

19. Mr. Lange wrote Mr. Mooney a letter, dated September 12,2008, reserving ACE's

rights while agreeing that the Murchison & Cwnming finn could defend the case. This letter reserved

the right to decline indemnity and to seek reimbursement for defense costs. Mr. Mooney in turn

forwarded the reservation letter to Mr. Kevin Miller, Chief Financial Officer of RCM, who read it and

discussed it with one of the White & Williams lawyers. (See RCM UFo 35; Appendix, Exh. "2"

thereto, Miller Depo., 177:18-179:12; Exh. "18" thereto, Mooney Depo., 21 :3-13; 22:9-23:1; Exh.

"21" thereto, September 12,2008 Letter [marked as Deposition Exhibit 319].)

20. Mr. Mooney understood that ACE was "reserving its right to. decline indemnity for

certain parts" of the Topa suit. (See Appendix, Exh. "18" thereto, Mooney Depo., 22:20-'-23:1.)

21. RCM did not reject ACE's involvement in the defense of the Topa suit, pursuant to a

reservation of rights. Rather, it decided not to respond. (See Appendix, Exh. "2" thereto, Miller

Depo., 182:18-183:5; 316:2-8; Exh. "18" thereto, Mooney Depo., 25:2-12.)

22. ACE was not required to pay any amount for defense or settlement until RCM paid its

$250,000 retention. (See Appendix, Exh. "2" thereto, Miller Depo., 118:23-119:3.)

23. RCM could settle a claim within its $250,000 retention without ACE's pennission and,

RCM understood that it would be paying its defense counsel in the Tapa matter until RCM met the

$250,000 retention. (See Appendix, Exh. "2" thereto, Miller Depo., 118:6-15; 120:16-21.)

24. Mr. Lange testified that "on theTopa case~ given the high retention, I deferred much of

the ... case management to both the outside general counsel for RCM and to Murchison &
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Cumming." (See Appendix, Exh. "22" thereto, Deposition of Matthew T. Lange ("Lange Depo."),

82:13-19.)

25. Mr. Lange did not discuss settlement with Murchison & Cumming or Mr. Mooney.

(See Appendix, Exh. "22" thereto, Lange Depo., 84:22-85:7.)

26. Mr. Lange did not even seek any infonnation from the Murchison & Cumming finn.

(See Appendix, Exh. "22" thereto, Lange Depo., 87:21-88:2.)

27. Murchison & Cumming never received any correspondence from Mr. Lange. ML Seitz

of the finn had perhaps one group telephone call, including Mr. Miller ofRCM and RCM's lawyer,

Mr. Mooney, and possibly Mr. Lange. (See Appendix, Exh. "23" thereto, Deposition of Friedrich W.

Seitz ("Seitz Depo."), 14:6-12; 15:4-15; 85:10-86:4.)

28. Murchison & Cumming did not ask for Mr. Lange's pennission to file pleadings or

engage in discovery or in other activities. (See Appendix, Exh. "23" thereto, Seitz Depo., 86:5-87:16;

88:13-20; 89:16-19.)

29. Mr. Lange did not give Murchison & Cumming his opinions or advice about discovery

or tell those lawyers that they could not do things on the file. (See Appendix, Exh. "23" thereto, Seitz

Depo., 88:9-12; 89:20-25.)

H. The Litigation and Claim Handling

30. The Topa claim was handled by luna Kogan and other ACE claims people in New York

and Georgia who were trained in the California regulations and certified to handle California claims.

(See Appendix, Exh. "24" thereto, Declaration ofInna Kogan in Support of ACE's (1) Opposition to

RCM's Motion for Partial Summary Judgment; (2) Motion for Partial Summary Judgment Regarding

Choice of Law (Motion No.1); and (3) Motion for Partial Summary Judgment Regarding Coverage

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Issues (Motion No.2) ("Kogan Decl."), , 2; Exh. "25" thereto, Deposition of Eric Levine ("Levine

Depo."), 23:8-24:8; 25:10-26:1.)

31. ACE was represented by coverage counsel John Lee and Scott Schaffer with the law

finn Wilson, Elser, Moskowitz, Edelman & Dicker, LLP in Los Angeles and New York. (See

Appendix, Exh. "24" thereto, Kogan Decl., , 6.)

32. RCM was represented in the insurance dispute by Mr. Miller, and then by attorney

William Hennan. When Mr. Hennanwas retained as counsel, ACE had not denied coverage but had

only reserved its rights. (See Appendix, Exh. "2" thereto, Miller Depo., 245:4-20; Exh. "26" thereto,

Deposition of William Hennan ("Hennan Depo."), 119:13-120:1; 123:3-13; Exh. "27" thereto, June

26,2009 Letter [marked as Deposition Exhibit 350].)

33. After Mr. Hennan was hired, all the communications with ACE on behalf of RCM were

through Mr. Herman. Mr. Hennan's legal services for RCM included representation ofRCM's

interests in settlement, communications with Topa's counsel, RCM's defense counsel and the

insurance broker and consideration of possible claims against BlueAlly. (See Appendix, Exh. "2"

thereto, Miller Depo., 245:4-20; 266:11-19; Exh. "15" thereto, Sinrod Depo., 47:11-18; 65:4-66:18;

67:16-69: 15; Exh. "26" thereto, Hennan Depo.,.26:9-27:5; 28:22-29:9; 41:4-13; 43:22-44:10; 54:16-

55:6; 59:13-60:8; 74:19-75:6; 78:18-79:21; 102:12-18; 110:3-13; 174:2-8; 177:9-13; Exh. "28"

thereto, Law Offices of William R. Herman, Statement of Fees & Disbursements [marked as

Deposition Exhibit 348].)

34. . Mr. Hennan wrote various letters to ACE accusing it of ''bad faith." On behalf of

RCM, Mr. Herman asserted. that California Insurance Code section 790.03 and California "bad faith"

law·applied to ACE's handling of the Topa claim. His statements were authorized by RCM. (See

Appendix, Exh. "2" thereto, Miller Depo., 316:16-317:1; Exh. "26" thereto, Hennan Depo., 172:19-
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24; 193:19-195:4; Exh. "29" thereto, July 20,2009 Letter [marked as Deposition Exhibit 355]; Exh.

"30" thereto, June 29,2009 E-mail [marked as Deposition Exhibit 351].)

I. Defense

35. Under the circumstances of this case, ACE would not control the defense of insureds by

deciding whether to use experts, to join other parties, to take depositions, etc. Indeed, in the Tapa

case, ACE did not believe it had authority to do so. (See Appendix, Exh. ''25'' thereto, Levine Depo.,

106:7-109:12; 113:19-115:11.)

36. Claims representative, Ms. Kogan of ACE, never asked for defense counsel's analysis

of coverage, and coverage issues did not affect the defense of the Topa suit. (See Appendix, Exh. "23"

thereto, Seitz Depo., 71 :9-13; 72:18-25.)

37. After RCM's retention was paid, Ms. Kogan, having heard defense counsel Friedrich

Seitz's plan for the defense, "agreed that we should go ahead with it." For example, when Mr. Seitz

said that it was important to attack Topa's fraud claim, Ms. Kogan did not limit that attack. (See

Appendix, Exh. "23" thereto, Seitz Depo., 2~:13-24; 54:18-25.)

38. ACE never limited the depositions RCM'.s defense counsel wished to take, or written

discovery RCM wished to send, or any motion RCM wished to make. (See Appendix, Exh. "23"

thereto, Seitz Depo., 58:3-16.)

39. There was no time when RCM's defense counsel was unable to retain or utilize the

services of an expert because of ACE. (See Appendix, Exh. "23" thereto, Seitz Depo., 59:24-60:2.)

40. ACE declined to pay retainers to experts before they performed their work and so RCM

advanced those retainers in the amount of approximately $15,000. However, ACE reimbursed RCM

for the advances of the expert retainers in the sum of$14,192.21 and paid the remainder of the expert

fees. (See Appendix, Exh. "2" thereto, Miller Depo., 274:16-275:4; Exh. "26" thereto, Herman Depo.,
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123:20-125:11; 125:22-126:1; 127:5-15; 237:10-238:14; Exh. "31" thereto, January 21,2010 Letter

and Check No. DN91260416 [marked as Deposition Exhibit 364].)

J. Settlement

41. In July 2009, RCM's defense counsel understood and informed ACE that Topa's

settlement demand, as stated in its settlement brief, included $2.24 million for amounts paid to RCM

for the .CAPRI project, $1 million to remediate the CAPRI system and damages for loss of business

revenues, damage to reputation and interval costs to remediate CAPRI. (See Appendix, Exh. "23"

thereto, Seitz Depo., 60:5-62:2; Exh. "32" thereto, June 8, 2009 Letter [marked as Deposition Exhibit

328]; Exh. "33" thereto, July 6, 2009 E-mail [marked as Deposition Exhibit 332].)

42. RCM also received a copy of the Tapa Settlement Conference Statement. (See

Appendix, Exh. "2" thcreto,Millcr Depo., 284:22-285:22; Exh. "33" thereto, July 6,2009 E-mail

[marked as Deposition Exhibit 332].)

43. Mr. Seitz of Murchison & Cumming advised ACE and its counsel in writing and orally

that the claim on which Topa was most likely to recover was the return of fees of $2.4 million due to a

damage limitation provision in the RCM/Topa contract so limiting the recovery. (See Appendix, Exh.

''23'' thereto, Seitz Depo., 51:18-52:3; Exh. "32" thereto, June 8, 2009 Letter [marked as Deposition

Exhibit 328].)

44. According to defense counsel, Mr. Seitz, RCM had no response to the claim for return

of fees. (See Appendix, Exh. "23" thereto, Seitz Depo., 69:5-11.)

45. Topa never demanded less than $2 million in settlement because a "rock bottom

minimum" for settlement required reimbursement of the "$2.4 million paid by Topa to RCM for a

defective software system." Topa stated that it would not accept less than $2 million in settlement.

4852-2181-9911.1
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 17 of 42

(See Appendix, Exh. "2" thereto, Miller Depo.~ 262:11-14; 295:14-22; Exh. "15" thereto, Sinrod

Depo., 43:14-45:7; 51:1-20; 55:13-56:5; 93:5-94:4.)

46. RCM acknowledges that ifRCM prevailed on the contractual limitation provision, the

damages would be limited to the $2,242,000 (approximately) which Topa paid to RCM for fees. (See

Appendix, Exh. "2" thereto, Miller Depo., 249:21-250:8.)

47. In July 2009, defense counsel told ACE's representatives that Topa had a 90%

likelihood of recovery on the breach of contract claim, a 60-70% chance of prevailing on the negligent

misrepresentation claim and a 30-40% chance of prevailing on the fraud claim and that RCM had a

good chance of prevailing on the liability limitations provisions, limiting Topa's recovery to $2.4

million or less and those opinions did not change prior to settlement. (See Appendix, Exh. "23"

thereto, Seitz Depo., 63:1-65:3, 21-25; Exh. "34" thereto, July 7,2009 E-mail [marked as Deposition

Exhibit 333].)

48. Defense counsel reported on testimony of Topa's damages expert in August 2009

which related to the fee claim and repair costs, but not a claim for lost revenue. (See Appendix, Exh.

"23" thereto, Seitz Depo., 62:12-25; Exh. "35" thereto, August 18,2009 Letter [marked as Deposition

Exhibit 44].)

49. . RCM's defense counsel received Topa's trial briefon the eve of trial and settlement,

which reflected its refined damage claims b~sed upon the deposition testimony of its expert. That brief

showed $2,240,000 as the amounts paid to RCM in fees for CAPRI and $1.4 million for remediation

costs, including $1.1 million to third-party vendors. ~t reflected withdrawal of the claim for lost

revenues which Topa never resurrected prior to settlement. (See Appendix, Exh. "23" thereto, Seitz

Depo., 66:21-69:4; Exh. "36 thereto, Topa's Trial Brief [marked as Deposition Exhibit 400].)

4852-2181-9911.1
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 18 of 42

50. Throughout the case, including at the time immediately preceding trial and settlement,

Topa was demanding the.amount of fees it paid RCM for the CAPRI project and the cost incurred by

Topa to repair the CAPRI system. However, as of the time of settlement and trial, Topa was no longer

seeking to recover lost revenues, business and profits. Having decided to forego such claims, Topa's

expert did not testify about such losses. (See Appendix, Exh. ''2'' thereto, Miller Depo., 263:23-

265:14; Exh. "15" thereto, Sinrod Depo., 39:9-17; 59:2-4, 10-63:5; Exh. "23" thereto, Seitz Depo.,

62:3-11; Exh. "36" thereto, Topa's Trial Brief [marked as Deposition Exhibit 400]; Exh. "37" thereto,.

Topa's Settlement Conference Statement [marked as Deposition Exhibit 409].)

51. No other items of damages other than repair costs and fees were being claimed by Topa

at the time of settlement. (See Appendix, Exh. "23" thereto, Seitz Depo., 70:5-9.)
. .
52. RCM acknowledges that Topa's claim that it suffered a loss of revenue because of

defects in the CAPRI software system "was proven to be untrue in the litigation itself with Topa."

(See Appendix, Exh. "2" thereto, Miller Depo., 128:2-10.)

K. Coverage Dispute

53. ACE never denied coverage for the Topa case. (See Appendix, Exh. "25" thereto,

Levine Depo., 130: 17-19.)

54. Prior to the July 2009 settlement conference, aIld thereafter, ACE continued to advise

RCM that it had uncovered exposure and should consider contributing to settlement. (See Appendix,

Exh. "25" thereto, Levine Depo., 151 :17-152:7; 157:5-22.)

55. RCM's lawyers attended the Topa settlement conference and communicated directly

with Topa's counsel. (See Appendix, Exh. "15" thereto, Sinrod Depo., 47:11-18; 65:4-66:18; 67:16-

69:15.)

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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 19 of 42

56. On June 18, 2009, Ms. Kogan told counsel for RCM that there was no coverage for the

breach of contract claim. On the other hand, she said there was coverage for the loss of revenue claim.

(See Appendix, Exh. "26" thereto, Herman Depo., 92:18-93:6; 96:19-97:l3.)

57. The ACE claims representatives believed that the only Topa claim which was covered

was a ''potential business loss that would have arose [sic] from the negligence claim against the

insured." (See Appendix, Exh. "25" thereto, Levine Depo., 96:4-8.)

58. On Ju1y 20, 2009, RCM, through Mr. Herman, demanded that ACE "immediately enter

into settlement discussions" with Topa. It was RCM's position that ACE "needed to settle the case" at

$2 million "[i]fnecessary." (See Appendix, Exh. "26" thereto, Herman Depo., 172:19-24; Exh. "29"

thereto, July 20,2009 Letter Bates No. ACE 02407 [marked as Deposition Exhibit 355].)

59. On August 5, 2009, RCM, through Mr. Herman, demanded that ACE fund the

settlement with Topa and then seek reimbursement from RCM. (See Appendix, Exh. "26" thereto,

Herman Depo., 195:22-196:9, 197:3-24; Exh. "38" thereto, August 5,2009 Letter [marked as

Deposition Exhibit 357].)

60. On August 6, 2009, ACE's coverage counsel, Mr. Lee, wrote Mr. Herman, raising

various coverage issues and reserving rights. (See Appendix, Exh. "26" thereto, Herman Depo.,

201: 18-202:5; 209:5-6; Exh. "39" thereto, August 6, 2009 Letter [marked as DeposWon Exhibit 358].)

61. Although the ACE Policy requires the insured's consent to settle (i.e., ACE could not

settle without RCM's permission), RCM's lawyers told ACE not to seek RCM's approval before

making a settlement offer, however, if there was a settlement, RCM would exercise its rights under the

ACE Polley to decide whether to consent to the settlement. (See Appendix, Exh. "26" thereto, Herman

Depo., 217:2-7; Exh. "40" thereto, August 10,2009 Letter [marked as Deposition Exhibit 361].)

4852·2181·9911.1
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 20 of 42

62. Topa unilaterally reduced its demand from $4.5 million in July 2009 to $2.5 million 'in

August 2009. (See Appendix, Exh. "2" thereto, Miller Depo., 292:5-20; Exh. "41" thereto, July 29,

2009 Letter [marked as Deposition Exhibit334].)

63. ACE offered $1 million to Topa in settlement which, according to defense counsel, was

a reasonable offer and to which RCM did not object. (See Appendix, Exh. ~'2" thereto, Miller Depo.,

294:8-12; Exh. "23" thereto, Seitz Depo., 78:18':'79:7.)

64. Ultimately, the Topa suit was settled with RCM's consent in September 2009 for $2

million with payments pf "$1 million up front and $1 million [to be paid] at some point in the future,

plus interest." (See Appendix, Exh. "2" thereto, Miller Depo., 261: 15-22; Exh. "42" thereto, August

23, 2009 E-mail.)

65. Subsequently, ACE did fund the initial $1 million of the Topa settlement while

reserving the right to ~ssert non-coverage and obtain reimbursement. RCM never offered to contribute

more than $100,000 to the settlement and eventually paid nothing. However, RCM told ACE that if

ACE would fund a settlement without contribution from RCM, then RCM would be agreeable to

coverage litigation whereby ACE could seek reinibursement from RCM. (See Appendix, Exh. "2"

thereto, Miller Depo., 302:6-9,306:2-9; Exh. "26" thereto~ Herman Depo., 198:13-199:20.)

66. RCM co~sented to the settlement even though it understood that there would be

coverage litigation to resolve the coverage issues. (See Appendix, Exh. "2" thereto, Miller Depo.,

299:9-300:15; Exh. "43" thereto, Confidential Supplemental Agreement [marked as Deposition

Exhibit 338].)

67. Mr. Miller approved and executed a Confidential Supplemental Settlement Agreement

with ACE which reserved the respective rights of the parties. Mr. Miller knew, when he signed it, that

it provided for coverage litigation. (See Appendix, Exh. "2" thereto, Miller Depo., 299:9-300:15.)
4852-2181-99.11.1
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68. ACE paid $653,856.64 for the defense of the Tapa suit and RCM paid nothing for the

defense beyond its retention. (See Appendix, Exh. "2" thereto, Miller Depo., 274:24-275:4; Exh. "44"

thereto, Stipulation and Order Thereon.)

III. THE SUMMARY JUDGMENT STANDARD IS

SATISIFIED BY THIS MOTION

Federal Rule of Civil Procedure 56(b) states, in relevant part, "[a] party against whom

relief is sought may move with or without supporting affidavits, for summary judgment on all

or part of the claim." In addition, Federal Rule of Civil Procedure 56(c)(2) states, "[t]he

judgment sought should be rendered if the pleadings, the discovery and disclosure materials on

file, and any affidayits sho,:" that there is no genuine issue as to any material fact and that the

movant is entitled to judgment as a matter oflaw." Further, Federal Rille of Civil Procedure

56(d) (1 ) provides that where summary judgment is not rendered on the whole action, the court

"should, to the extent practicable, determine what material facts are not genuinely at issue....

It should then issue an order specifying what facts - - including items of damages or other relief

- - are not genuinely at issue. The facts so specified must be treated as established in the

action."

A moving party is entitled to summary judgment when the evidence indicates no

genuine issue of material facts exists and the moving party is entitled to judgment as a matter of

law. See Fed. R. Civ. Proc. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The

moving party is not required to produce evidence showing the absence of any genuine issues of

material facts and need not support its motion with evidence negating the nonmoving party's

claim. See Lujan v. National Wildlife Federation, 497 U.S. 871, 885 (1990). Rather, the

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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 22 of 42

motion "may, and should, be granted so long as whatever is before the district court

demonstrates that the standard for the entry of judgment ... is satisfied." Id.

Once a party moving for summaryjudgment shows either (1) no genuine issue of

material fact remains or (2) evidence to support the nonmoving party's claim is absent, the

burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine

issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). The moving party

is entitled to judgment as a matter oflaw if the nonmoving party fails to make a sufficient

showing of ari element of its case with respect to which it has the burden of proof. See Celotex,

supra; at 322-323.

In this case, based on established law and the undisputed facts, ACE is entitled to partial

summary judgment on RCM's ''bad faith," punitive damages and attorneys' fees claims which

no longer present genuine issues for trial.

IV. THIS MOTION FOR PARTIAL SUMMARY JUDGMENT

SHOULD BE GRANTED, DISMISSING COUNT III FOR BREACH OF
THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

As RCM earlier acknowledged that California law applies to the "claim" issues and for

the reasons discussed in ACE's Choice of Law ·Motion, ACE confines its discussion herein to

California law. Under that law, RCM's "bad faith" claim is clearly without merit.

A. As There is No Coverage Under the ACE Policy and No Breach of Contract by

ACE, RCM's "Bad Faith" Claim is Without Merit

A cause of action for breach of the implied covenant of good faith and fair dealing is .

entirely derivative and is completely dependent upon a breach ofthe underlying contract. See

Waller v. Trucklns. Exch., Inc., 11 Cal. 4th 1,35 (1995); Kopczynski v. Prudentiallns. Co. of

America, 164 Cal. App. 3d 846, 849 (1985); Healy Tibbitts Construction Co. v. Ins. Co. ofNorth

4852-2181-9911.1
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 23 of 42

America, 679 F .2d 803, 804-805 (9th Cir. 1982). Consequently, absent a breach of contract by

the insurer, a cause of action for breach ofthe implied covenant fails as a matter oflaw. See

Love v. Fire Ins. Exch., 221 Cal. App. 3d 1136, 1153 (1990); Gruenberg v. Aetna Ins. Co., 9 Cal.

3d 566, 576 (1973).

As established by ACE's Coverage Motion, RCM cannot prove ACE's breach of the ACE

Policy. Consequently, ACE is entitled to summary adjudication against ReM on Count III of the

RCM Complaint for breach ofthe implied covenant of good faith and fair dealing.

B. Even if ACE's Coverage Positions Are Determined to Be Incorrect, ACE Cannot Be

Held Liable for "Bad Faith" Because Its Positions Were Reasonable and It Properly
Handled the Topa Claim in Light of Those Issues

California courts hold that an insured may recover extra-contractual damages if the

insurer's breach of contract is tortious (i.e., a breach of the implied covenant of good faith and

fair dealing.) See, e.g., Silberg v. Cal. Life Ins. Co., 11 Cal. 3d 452, 460461 (1974). However,

an erroneous refusal to pay a claim, by itself, does not necessarily constitute a breach of the

implied covenant of good faith and fair dealing - some additional showing of tortious conduct by

the insurer is required. See Opsal v. United Services Automobile Ass 'n, 2 Cal. App. 4th 1197,
"

1205 (1991); San Jose Production Credit Ass 'n v. Old Republic Life Ins. Co., 723 F.2d 700, 703-

704 (9th Cir. 1984).

With that standard in mind and based on the course of discovery in. this case, ACE

anticipates that RCM will attempt to raise a genuine issue supporting its ''bad faith" claim

based on the following events, to which ACE responds below.

4852-2181-991 I.l
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 24 of 42

1. ACE Did Not Become Actively Involved in the Topa Case Prior to the Time
that RCM Paid Its Retention

As detailed in ACE's Coverage Motion, ACE owed no obligation to defend the Topa

claim prior to the time that the $250,000 retention was paid by RCM. (AUF 14,23) See, e.g.,

General Star Indem. Co. v. Sup. Ct., 47 Cal. App. 4th 1586, 1593-1594 (1996); Nabisco, Inc. v.

Transport Indem. Co., 143 Cal. App. 3d 831,835-836 (1983); Moore v. Nayer, 321 N.J. Super.

419,439 (1999). Consequently, ACE properly monitored the case during that time. (AUF 23-

29) In any event, even ifRCM could show that ACE's approach of monitoring rather than

directing the defense was incorrect, such a showing falls far short of proof of tortious conduct.

In fact, there is no evidence that RCM objected to ACE's approach or that ACE's limited

involvement caused any damage to RCM whatsoever. (AUF 20-21, 24-29, 35-39) Thus, these

circumstances do not support the "bad faith" claim.

2. ACE Took the Position that Defense Counsel, Murchison & Cumming Was
California Civil Code Section 2860 Counsel

With this argument, RCM has raised a "red herring" because the legal status of defense

counsel Murchison & Cumming is irrelevant to the ''bad faith" claim. The undisputed facts are

that RCM chose that finn and ACE agreed to that choice. (AUF 18-19) ACE did not interfere

with the defense and ACE paid over $650,000 in defense fees and costs above the RCM

retention. (AUF 24-29, 35-40, 68) Therefore, while California Civil Code section 2860 may

have some bearing on the "estoppel" issue,6 it provides no proof of tortious conduct supporting

the bad faith claim.

6 There is no estoppel in any event under either New Jersey or California law for the
reasons set forth in ACE's Opposition to RCM's Motion for Partial Swnmary Judgment, ECF
(footnote continued)
4852-2181-991 LJ
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 25 of 42

·3. ACE Took the Position that Some of Topa's Claims Were Not Covered

In California:

[B]efore an [insurer] can be found to have acted tortiously, i.e., in

bad faith, in refusing to bestow policy benefits, it must have done
so "without proper cause." .

Cal. Shoppers, Inc. v. Royal Globe Ins. Co., 175 Cal. App. 3d 1~ 54-55 (1985). Further, an

insurer's good faith beliefthat there is no coverage is ''proper cause" for denying a claim by the

insured for policy benefits, provided that its interpretation of its policy is not unreasonable.

Hanson v. The Prudential Ins. Co. ofAmerica, 783 F.2d 762, 766 (9th Cir. 1985); Congleton v.

National Union Fire Ins. Co. of Pittsburgh, Penn., 189 Cal. App. 3d 51, 58-59 (1987).

In this case, for the reasons stated in ACE's Opposition to RCM's Motion for Partial

Summary Judgment and ACE's Coverage Motion, ACE had proper cause to contest coverage.

In any event, ACE did not withhold policy benefits but rather paid benefits that were not owed.

Consequently, the coverage dispute does not support RCM's bad faith claim. (AUF 6,8-14,

19,40-68)

4. ACE Requested that ReM Contribute Toward Settlement Based on Its

Uninsured Exposure

Under California law, the insured must prove its entitl~ent to indemnity and the

insurer is not obligated to settle uncovered claims. See Blue Ridge Ins. Co., supra, at 502-503;

Camelot by the Bay Condominium Owners' Ass 'n., Inc. v. Scottsdale Ins. Co., 27 Cal. App. 4th

33,38-39 (1994); J.B. Aguerre, Inc. v. American Guarantee & Liability Ins. Co., 59 Cal. App.

4th 6, 16 (1997). Therefore, while a carrier may not make its se~lement contribution

Document No. 36, filed on August 18, 2010 in this action ("ACE's Opposition to RCM's
Motion for Partial Summary Judgment") and ACE's Choice of Law Motion.

4852-2181-991 LI
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 26 of 42

contingent upon an insured's contribution or coerce a contribution, it is obligated to infonn the

insured of uncovered exposure and to allow the insured an opportunity to participate. See

Palmer v. Financial Indem. Co., 215 Cal. App. 2d 419,436 (1963); Miller v. Elite Ins. Co., 100

Cal. App. 3d 739, 758 (1980); JB. Aguerre, Inc., supra, at 15; Bodenhamer v. Sup. Ct., 192

Cal. App. 3d 1472, 1476 (1987).

Thus, ACE did nothing improper in this case by inviting RCM's contribution based on

the absence of coverage for the claim. (AUF 54, 56-57, 60) In fact, as demonstrated by ACE's

Coverage Motion, ACE exceeded its contractual obligations by funding the settlement rather

than denying coverage. (AUF 53-67) In any event, the reality is that RCM achieved its goal

and avoided paying any money toward settlement, agreeing to have ACE fund the initial $1

million settlement payment and to litigate whether there is coverage for the entire settlement in

this action. (AUF 65) Consequently, again, there is no evidence of tortious conduct, much less

resulting damage.

5. ACE Failed to Conduct Settlement Negotiations in the Manner that RCM

Demanded

Although RCM has suggested that ACE controlled settlement of the Tapa suit, the truth

is that RCM was closely involved in the settlement process, except contribution. (AUF 41-67)

While involving itself in the process, RCM complained about ACE's settlement strategy,

including not offering more money earlier. (AUF 58) However, ReM is unable to present any

evidence that ACE's settlement strategy adversely affected settlement. To the contrary, ACE's

strategy resulted in Topa's unilateral reduction in its demand from $4.5 million to $2.5 million,

and ultimately achieved a $2 million, two installment settlement. (AUF 62-64) Indeed,

although RCM has; at various times, speculated that ACE's delay in settlement resulted in a

4852-2181 -991 I.I

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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 27 of 42

higher settlement than could have been achieved earlier, the evidence is again to the contrary.

In fact, counsel for Topa has testified that Topa never told anyone that the case could settle for

less than $2 million and that was a "rock bottom" figure, given the $2.4 million in fees that

Topa had paid to RCM. (AUF 45, 64)

In summary, the fact that RCM disagrees with how ACE conducted settlement

negotiations hardly constitutes evidence of tortious conduct by ACE particularly where, as

here, there is no evidence of resulting damage.

6. ACE Failed to. Pay Expert Retainers

RCM may also complain that ACE refused to pay expert retainers before the experts

performed actual work. The result was that RCM advanced the retainers. However, ACE

reimbursed those sums in the amount of$14,192.21 (AUF 40) and, in addition, ACE paid in

excess of $1 ,650,000 in defense fees and costs and settlement payments. (AUF 65, 68)

7. ACE Allegedly Failed to. Respo.nd Timely or Adequately to. RCM's

Co.mmunicatio.ns

Finally, ACE anticipates that RCM will claim that ACE failed to comply with

California regulations requiring timely and complete responses to communicatio.ns from

insurers to their insureds. However, while any such violations may result in administrative

remedies, they are not actionable in a civil suit in California. Set; Moradi-Shalal v. Fireman IS

Fund Ins. Co., 46 Cal. 3d 287, 304-305 (1988).

c. RCM Cannot Pro.ve Damages Caused by "Bad Faith"

Extra-contractual damages available for insurance "bad faith" consist of damages

recoverable under a tort measure of damages, over and above the damages recoverable under

4852-2181-9911.1
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 28 of 42

the policy. See e.g., Waters v. United Services Automobile Ass'n, 41 Cal. App. 4th 1063, 1071-

1073 (1996); Fletcher v. Western Nat 'I Life Ins. Co., 10 Cal. App. 3d 376, 401-402 (1970).

Given the distinction between contract and tort damages, the California courts have held

that the damages for tortious breach of contract ("bad faith") must be treated separately from

contract damages. See Cal. Shoppers, Inc., 175 Cal. App. 3d at 64-65; Slottow v. American

Cas. Co. o/Redding, Penn., 10 F.3d 1355, 1362 (9th Cir. 1993); Diamond Woodworks, Inc. v.

Argonaut Ins. Co., 109 Cal. App. 4th 1020, 1049, n.26 (2003). The point is illustrated by the

decision in Waters v. United Services Automobile Ass 'n, supra. There, the plaintiff sued its

insurer for bad faith based on its handling of a fire loss. The carrier settled the property damage

claim for policy benefits, but the insured pursued a bad faith claim for emotional distress. Id. at

1068-1069. There was a bad faith verdict at the trial court level, but the Court of Appeal

reversed because the plaintiffhad not proved its tort damages (emotional distress due to

financial loss beyond the policy benefits.) /d. at 1081-1082.

In short, in order to recover on a claim for breach of the implied covenant of good faith

and fair dealing, a plaintiff must satisfy the burden of proving that it has sustained tort damages

in addition to any contract damages. See Emerald Bay Community Assn. v. Golden Eagle Ins.

Corp., 130 Cal. App. 4th 1078, 1096 (2005); Gourley v. State Farm Mutual Automobile Ins.

Co., 53 Cal. 3d 121, 129 (1991); Maxwell v. Fire Ins. Exch., 60 Cal. App. 4th 1446, 1451

(1998).

In this case, even assuming that there is coverage for the Topa settlement, ReM cannot

establish damages beyond the ACE Policy benefits. (In fact, pursuant to ACE's demonstration

of the lack of coverage in its Coverage Motion, it is RCM which owes ACE reimbursement for

4852-2181-9911.1
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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 29 of 42

the ACE Policy benefits which ACE advanced.) C.onsequently, the "bad faith" claim fails, and

Count TIl of the RCM Complaint should be dismissed.

V. THIS MOTION FOR PARTIAL SUMMARY JUDGMENT SHOULD

BE GRANTED DISMISSING THE PUNITIVE DAMAGES CLAIM

As a general matt~r, courts in California look with disfavor upon punitive damages, as

"they create the 'anomaly of excessive compensation' .... " Piscitelli v. Friedenberg, 87 Cal.

App. 4th 953,980 (2001). ill the insurance context, an insured cannot recover punitive

damages unless the insurer's conduct goes beyond that ordinarily characterized as "bad faith."

"Bad faith" itself "implies unfair dealing rather than mistaken judgment ...." Congleton, 189

Cal. App. 3d at 59. However, as reiterated by the Court of Appeal in Shade Foods, Inc. v.

Innovative Products Sales & Marketing, Inc . , 78 CaL App. 4th 847, 890-891 (2000), an

insurance carrier may be liable for punitive damages in a bad faith case only if the insured

shows that the carrier not only acted in bad faith but also was guilty of "oppression, fraud or

malice" as defined in California Civil Code section 3294. In this case, RCM cannot establish

tortious conduct supporting a "bad faith" claim much less prove entitlement to punitive.

damages, which requires clear and convincing evidence of oppression, fraud or malice.

A~ Under California Law, an Award of Punitive Damages Requires Proof of

Intentional Injury or Despicable Conduct

1. The Statutory Standard for Punitive Damages on Summary Judgment

In 1987, the Legislature amended California Civil Code section 3294 subsection (c) so

as to tighten the standard for punitive damages by defining the terms as follows:

(l) "Malice" means conduct which is intended by the

defendant to cause injury to the plaintiff or despicable
conduct which is carried on by the defendant with a willful
and conscious disregard of the rights or safety of others.

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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 30 of 42

(2) "Oppression" means despicable conduct that subjects a

person to cruel and unjust hardship in conscious disregard
of that person's rights.

(3) "Fraud" means an intentional misrepresentation, deceit, or

concealment of a material fact known to the defendant with
the intention on the part of the defendant of thereby
depriving a person or property or legal rights or otherwise
causing injury.
With this amendment, "the Legislature clearly intended ... to impose a new statutory

limitation on the award of punitive damages." Mockv. Mich. Mutual Ins. Co., 4 Cal. App. 4th

306, 331 (1992). Under these definitions, the terms "malice" and "oppression" require that the

conduct in question be intended to injure or be "despicable." This substantive limitation

requires ''base,'' ''vile,'' or "contemptible" ~nduct that rises to the level of "outrage frequently'

associated with crime." See Tomaselli v. Transamerica Ins. Co., 25 Cal. App. 4th 1269, 1287

(1994); College Hosp., Inc. v. Sup. Ct., 8 Cal. 4th 704~ 725 (1994).

2. The Standard as Applied by the California Courts

The punitive damages standard which must be applied in the context of insurance ''bad

faith" cases has been clearly stated by the California courts as follows:

(1) Unless the plaintiff, in asserting malice or oppression, can prove that the insurer

actually intended injury, then plaintiff must establish that the insurer's conduct was despicable.

"'Despicable conduct' is conduct which is so vile, base, contemptible, miserable, wretched or

loathsome that it would be looked down upon and despised by ordinary, decent people." Mock,

supra, at 331; Stewart v. Truck Ins. Exch., 17 Cal. App. 4th 468, 483, n.29 (1993).

(2) A finding that an insurer has violated its duty of good faith and fair dealing does

not mean that it acted with oppression, fraud or malice, justifying an award of punitive

damages. See Mock, supra, at 328 (criticizing plaintiff's attempt to draw inferences of malice

from mere evidence of ''bad faith"); Stewart, supra, at 483; Patrick v. Maryland Cas. Co., 217

Cal. App. 3d 1566, 1575 (1990); Lunsford v. Am. Guar. & Liab. Ins. Co., 18 F.3d 653, 656 (9th
Cir.1994).

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(3) Evidence of inept, inefficient, negligent or unreasonable handling of a claim is

not sufficient proof of malice, oppression or fraud to justify an award of punitive damages. See

Mock, supra, at 328, 330; Jackson v. Johnson, 5 Cal. App. 4th 1350, 1354 (1992); Patrick,

supra, at 1576; Lunsford, supra, at 656.

(4) In order to establish the oppression, fraud, or ma~ice necessary to justify an

award of punitive damages, there must be evidence of established policies or practices in claim

handling by the insurer which are harmful to its insureds. Stated another way, the plaintiff

must show "a consistent and unrernedied pattern of egregious insurer practices." Mock, supra,

at 329; Patrick, supra, at 1576.

B. The Standard of Proof in California Is Now "Clear And Convincing" Evidence

Which Standard Also Applies to Summary Judgment Motions
In setting a more stringent standard for a punitive damages award, the Legislature also

substantially raised the proof requirement. Specifically, the plaintiff now bears the burden of

proving fraud, oppression or malice by "clear and convincing evidence." Cal. Civ. Code §

3294(a). This requires evidence that is "so clear as to leave no substantial doubt .... " Mock,

supra, at 332.

When determining the viability of a punitive damages claim on a motion for summary

adjudication, the Court must view the evidence through the "prism" of the statutory clear-and-

convincing evidentiary burden. See Stewart, supra, at 482. In Basich v. Allstate Ins. Co., the

appellate court held that the "clear and cOnvincing" standard must be applied in motions for

summary adjudication proceedings regarding punitive damages claims:

As in Reader's Digest Assn. v. Superior Court . .. 37 Ca1.3d 244,
on a motion for sum.ri:lary adjudication with respect to a punitive
damages claim, the higher evidentiary standard applies. If the
plaintiff is going to prevail on a punitive damage claim, he or she .
can only do so by establishing malice, oppression or fraud by clear
and convincing evidence. Thus, any evidence submitted in
response to a motion for summary adjudication must be necessarily
meet that standard.

Basich v. Allstate Ins. Co., 87 Cal. App. 4th 1112, H21 (2001).
4852-2181-991 U
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This point is illustrated by the decision in Food Pro International, Inc. v. Fanners Ins.

Exch., 169 Cal. App. 4th 976 (2008). There, the Court of Appeal affirmed the trial coUrt's

granting of summary adjudication against a punitive damages claim despite evidence of the

insurer's "incomplete investigation and reliance on erroneous facts" and "an incorrect

assumption regarding breadth of exclusion and failure to give proper weight to relevant facts ..

. .") Id. at 995.

C. In This Case, There is No Clear and Convincing Evidence that the ACE Claims
Representatives Acted with Malice or Fraud toward ReM in Handling the Topa
Claim

Examination of California court decisions illustrates the standard against which ACE's

conduct should be judged. In Shade Foods, Inc. v. Innovative Products Sales & Marketing.

Inc., the court, while concluding that the record could support a finding of "bad faith," refused

to uphold the verdict with respect to punitive damages:

Underlying Northbrook's conduct, the jury could reasonably

perceive a careless disregard for the rights of its insured and an
obstinate persistence in an ill-advised initial position. We think
that this conduct might conceivably support a finding that the
insurer acted ''with a willful and conscious disregard of the rights .
. . of others" within the definition of 'malice" or that the insurer
"subject[ed] a person [IPS] to cruel and unjust hardship in
conscious disregard of that person's rights" within the definition of
"oppression." (Civ. Code, § 3294, subd. (c).) But we still must
take into account the extreme complexity of the coverage issues
and the purely economic character of the losses in assessing the
level of opprobrium that it merits. In our opinion, the record falls
well short of establishing by clear and convincing evidence the sort
of contemptible conduct that could be described by the term
"despicable." Unreasonable and negligent as it may have been,
Northbrook's conduct falls within the common experience of
human affairs, both with respect to its careless initial evaluation
and its stubborn persistence in error.
Shade Foods, supra, at 892.

Similarly, in Beck v. State Farm Mut. Ins. Co., the appellate court affirmed the bad faith

judgment but struck the punitive damages award, reasoning:

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[I]t does not follow that, because State Fann took an unreasonable
position on the validity of a defense to coverage under Beck's
policy, State Farm acted with intent to harm Beck. Respondent
cites, and we have found, no evidence of actual malice or
oppression by State Farm. Initial State Farm internal memoranda
recommended that even though Beck had a valid uninsured
motorist claim the issue of failure to make a police report should
be used in settlement negotiations. . .. A State Farm claims
representative testified that he knew the withholding of benefits
from Beck might vex and oppress her; but that would be true of
any insured. The circumstances here do not pennit an inference of
actual malice or oppression.

Beck v. State Farm Mutual Automobile Co., 54 Cal. App. 3d 347,356 (1976). (Emphasis

supplied.)

In Stewart v. Trucklns. Exch., the seventy-four year-old plaintiff was rendered a partial

. quadriplegic as a result of alleged negligence and ''bad faith" by Good Samaritan Hospital and

its liability insurer, Truck Insurance Exchange (''Truck''). The evidence adduced at trial

included Truck instructing its adjuster to delay claims made by elderly or infinn people (such

as Mr. Stewart) in the hop~ the claimant would die or become incompetent before trial. The

court affinned a non-suit on plaintiff's claim for punitive damages:

While the record in this case demonstrates substantial evidence of

Truck's bad faith conduct, [footnote] it does not support Stewart's
claim for punitive damages, given the "clear and convincing"
burden of proof which such a claim must satisfy.

Stewart, supra, at 471. The court continued:

Did Truck's conduct, viewed in the light most favorable to

Stewart, rise to the level of malice? Was there any evidence that
Truck intended to cause Stewart injury? Did Truck's actions
constitute despicable conduct [footnote] carried out in a conscious
disregard of Stewart's rights? We think, as the trial judge
obviously did, that the answer to each of these questions is no.
While Truck's investigation could possibly have been pursued with
more vigor, it was nonetheless pursued, not ignored.... There
simply was no evidence of either an intent to injure Stewart or any
despicable conduct carried out in conscious disregard of his rights.

Id. at 483. (Emphasis in original.)

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Finally, in Patrick v. Maryland Cas. Co., a ''bad faith" suit arising from a first party

property claim for roof repair, the Court of Appeal analyzed and reversed a jury's punitive

damages award, reasoning:

There was substantial evidence in this case, as we have discussed

above, that appellant's claims handling practices were shoddy, and
that its handling ofthe claim sought by the respondent was attimes
witless and infected with symptoms of bureaucratic inertia and .
inefficiency. However, after a review ofthe full reCord, we find no
.substantial evidence thatits actions were malicious, fraudulent, or
oppressive.... we cannot find liability here for punitive damages
based merely upon the insurer's inept and negligent handling of a
claim.

Patrick, supra, at 1576.

As evidenced by the briefing of the various dispositive motions filed by the parties in

this action, this case involves the same type of complex coverage issues and resulting economic

disputes which the court in Shade Foods, Inc. noted in rejecting a punitive damages claim.

Moreover, while RCM may not have agreed with ACE's coverage and settlement positions,

such disagreement is neither unusual nor unexpected in situations where, as here, substantial

damage claims raise significant coverage issues. However, such a dispute in itself does not

justify a punitive damages award, as the court noted in Beck. While ReM may point to

instances where the claim handling in the Topa case was not always consistent with ACE's

standards, as noted by the courts in Stewart and Patrick, such conduct does not constitute fraud,

oppression or malice.

What is entirely missing in this case is clear and convincing evidence of an intent to

injure or despicable conduct by ACE and any pattern or practice of such conduct. To the

contrary, it is evident that ACE essentially accommodated ReM's demands for defense and

settlement while protecting ACE's legitimate interests in adhering to its contractual rights and

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obligations. There is no evidence, much less clear and convincing evidence, of fraud

oppression or malice.

D. This Case Involves a Legitimate Business Dispute Between Substantial

Corporations Which Does Not Support a Punitive Damages Award Based on
"Oppression"

ReM's overreaching is illustrated by its claim of "oppression." One may ask how a

mega-corporation such as RCM can be "oppressed" (i.e., suffer ''unjust hardship"). The answer

is, it cannot. This case is very similar to the case of Slottow v. American Cas. Co. ofReading,

Penn., supra, wherein the Ninth Circuit overturned a punitive damages award in a "bad faith"

action. InSlottow, a bank and bank officer brought suit against an insurer under a directors arid

officers policy after the insurer refused to reimburse the 'bank: for a settlement. Slottow, 1 F.3d

at 914. The trial court held that there was coverage under the policy for the settlement. A

judgment for $5 million in punitive damages followed. ld. at 914-915. On appeal, the Ninth

Circuit, applying California law, affinned coverage under the policy for the "claim but reversed

the award of punitive damages, stating:

Punitive damages aren't available in California for simple

breaches of contract, no matter how willful. [Citation omitted.]
Rather, the breach must have been tortious, and the breaching
party must have "been guilty of oppression, fraud, or malice."
[Citations omitted'.] Put another way, punitive damages are
recoverable only where the defendant "acted with the intent to
vex, injure, or annoy." [Citation omitted.]

We apply this standard in light of the relative economic power,

sophistication and legal expertise of the parties. What might be
acceptable behavior between two large corporations butting heads
in the marketplace looks quite different when there is a
substantial difference in economic power or sophistication
between the parties. Indeed, California cases upholding punitive
damages typically do so in cases involving small plaintiffs,
usually ones that are in distress of one fonn or another....

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What we have here is a much different situation. Fidelity Federal

Bank is a federally chartered savings bank and owns several
I financial institutions, including FNT. It has ready access to legal
advice and controls substantial assets, placing it on relatively
equal footing with American. Neither the bank nor American
faced a threat to its existence or fmandal stability because of this
dispute; each simply went about its business while the
controversy percolated. Such rough equality of economic power
and sophistication precludes a finding of oppression; American's
refusal to pay the claim simply could not have oppressed the
bank.

Id. at 918-919.

Similarly, here ReM is a publicly-traded multinational corporation with thousands of

employees, many millions in yearly revenue and a book value of $59,011 ,000 for 2009. (AUF

1-4) ReM utilizes the services of large, nationally recognized insurance brokers and able

outside counsel. (AUF 7, 12, 15-20,27,32-34,58.-60) In short, ReM isa sophisticated

consumer of insurance products and a capable, well-financed litigator. Its handling of this

matter reflects that sophistication and those capabilities. Those facts clearly eliminate

"oppression" as a basis for its punitive damages cla,im.

VI. THIS MOTION FOR PARTIAL SUMMARY JUDGMENT SHOULD

BE GRANTED DISMISSING THE ATTORNEYS' FEES CLAIM

Predominant in the United States is the "American rule" where each party to the

litigation bears its own attorneys' fees. See Fleischmann Distilling Corp. v. Maier Brewing

Co., 386 U.S. 714, 717-718 (1967). Still, ReM seeks to avoid this rule by claiming that this

. case falls within an exception to the rule. It does not.

A. State Law Will Apply to the Determination of the Award of Attorneys' Fees

In this federal court diversity action, the determination as to whether a party is entitled

to an award of attorneys' fees is a substantive issue that is to be determined by applicable state

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law. See Montgomery Ward & Co., Inc. v. Pacific Indem. Co., 557 F.2d 51,56 (3d Cir. 1977);

see also, Nikimiha Securities Ltd. v. The Trend Group Ltd., 646 F. Supp. 1211, 1229 (E.D. Pa.

1986). As liability for attorneys' fees is considered a substantive issue, the Court should apply

California (or, as RCM may claim, New Jersey) law. Regardless of which law applies, no

attorneys' fees may be recovered here.

B. California Law

California has adopted the -"American rule" in California Code of Civil Procedure

section 1021:

Except as attorney's fees are specifically provided for by statute,

_the measure and mode of compensation of attorneys ... is left to
the agreement, express or implied, of the parties ... .

One of the few exceptions to this iule was enunciated by the California Supreme Court in

Brandt v. Sup. Ct., 37 Cal. 3d 813,819 (1985). The Court there held that, under limited

circumstances, an insured is entitled to recovery of attorneys' fees against an insurer upon a

finding that the insurer breached the implied covenant of good faith and fair dealing or

committed "bad faith." Under Brandt, in order to recover attorneys' fees, the insured must prove

that: 1) it was entitled to policy benefits from the insurer; 2) the insurer withheld such benefits

unreasonably and without proper cause; 3) the insured incurred legal fees and expenses in pursuit

ofthe contract benefits owed; and 4) the fees and costs were reasonably necessary. Case law

interpreting Brandt has affirmed that the insured may recover only those legal fees and costs

"reasonably necessary to collect benefits due under the policy .... " Cal. State Automobile

- Ass 'n, Inter-Ins. Bureau v. Sup. Ct., 184 Cal. App. 3d 1428, 1434 (1986). Plaintiff cannot

recover any portion of the fees incurred in pursuing other parties, extra-contractual or punitive

damages. Cassim v. Allstate Ins. Co., 33 Cal. 4th 780,811-812 (2004).

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In the case at bar, RCM cannot satisfy any of the foill' criteria for collection of its legal

fees. First, RCM catinot prove that it was entitled to policy benefits given the absence of

coverage. (See ACE's Coverage Motion.)

Second, RCM cannot establish that ACE withheld benefits unreasonably and without

proper cause. In fact, ACE acted reasonably in asserting legitimate coverage defenses but still

funded the defense and settlement. No benefits were withheld.

Third, even ifRCM could establish that ACE owed coverage and acted unreasonably in

withholding benefits, RCM may recover only those legal fees and costs it necessarily and

reasonably incurred in pursuing recovery ofpoli~y benefits. Here, ReM's counsel Mr. Herman

incUrred fees and costs assisting RCM in settling and in dealing with the defense 'ofthe Topa

suit. (AUF 33) Those fees and costs are not recoverable in this case. Further, the fees and costs

in this case were incurred voluntarily by RCM, which agreed to and then instituted this lawsuit.

Moreover, it is RCM's burden to establish an apportionment between recoverable and

nonrecoverable fees and costs. See Cassim, supra, at 813, citing Slottow,~O F.3d at 1362

(applying California law, indicating it is the plaintiffs burden to demonstrate how fees should be

apportioned); see also, Cal. State Automobile Ass 'n Inter-Ins. Bureau, supra, at 1434. In this

case, RCM cannot sustain its burden of proving allocation because, to the extent Mr. Herman's

services were incurred to pursue policy b~efits, they are irrevocably intertwined with his other

settlement and defense activities which benefited RCM by reducing the value of an uncovered

claim which it eventually must pay.

Finally, RCM cannot prove that it was reasonably necessary to even hire Mr. Herman

because ACE had not denied defense or indemnity. (AUF 19,32,53) Indeed, the result of Mr.

Hennan's involvement is the same as the resu.lt would have been without his involvement - ACE
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funding a settlement under a reservation of rights pursuant to California law. See Blue Ridge Ins.

Co. v. Jacobsen, 25 Cal. 4th 489 (2001). Consequently, RCM is not entitled to an award of

attorneys' fees under the California Brandt doctrine.

c. New Jersey Law

Contrary to its position on other "claim issues," ReM has asserted that New Jersey law

applies to the fees claim. RCM is incorrect for the reasons stated in ACE's Choice of Law

Motion. However, in any event, the result would be the same under New Jersey law as under

California law.

New Jersey law is similar to California law in that "[t]he general rule is that parties to

litigation should bear their own legal costs." Eagle Fire Protection Corp. v. First Indem. of

America Ins. Co., 145 N.J.'345, 363 (1996) (where Supreme Court held that insured prevailing in

suit on surety bond was not entitled to an attorneys' fees award).

A limited exception to this rule is stated in New Jersey Court Rule 4:42-9(a):

No fee for legal services shall be allowed in the taxed costs or

otherwise except ... (6) In an action upon a liability or indemnity
policy of insurance, in favor of a successful claimant.

N.J. Ct. Rule 4:42-9(a)(6); see also, Eagle Fire Protection Corp., supra, at 363.

As the Supreme Court in Eagle Fire Protection, in interpreting the notes to the Rule,

stated:

The express terms of Rule 4:42-9(a)(6) state that it "only applies

when 'an insurer refuses to indemnify or defend its insured's
third party liability to another. '"

Eagle Fire Protection Corp., supra, at 363. (Emphasis supplied.)

The Supreme Court in Eagle Fire Protection noted further that:

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"[T]he Supreme Court has twice rejected recommendations by

the Civil Practice Committee to amend R. 4:42-9(a)(6) to allow
awards of counsel fees in a broader range of suits brought by
insureds against insurers." Ibid. The court concluded that the
committee's rejection of any attempts to expand or broaden the
rule "suggests that the rule should not be construed expansively
to apply to disputes between insurers and insured which fall
beyond its literal terms."

Id. at 364; see also, Auto Lenders Acceptance Corp. v. Gentilini Ford, Inc., 181 N.J. 245,281

(2004) (where the court applied the "American Rule" in denying an attorneys' fees claim).

With the ,above rules in mind, it is dear that RCM is not entitled under New Jersey law to

recover'attomeys' fees against ACE for Mr; Herman's pre-suit activities. Moreover, it is not

entitled to fees in this case even if it prevails on coverage, because ACE did not deny coverage

and refuse to defend the Topa case. ,Rather, ACE defended the case and funded the settlement

and then agreed with RCM to resolve the coverage dispute with this litigation. RCM's quest to

recover fees in the very lawsuit it agreed to, in fact encouraged, clearly falls outside the scope of

New Jersey's narrow exception to the "American Rule." Thus, ReM is not entitled to fees.

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VII. CONCLUSION

For the above-stated reasons, this Court should grant partial summary judgment to ACE

by dismissing RCM's bad faith, punitive damages and attorneys' fees. claims in Counts II and

III ofRCM's Complaint.

Respectfully Submitted,

BY: ~~~-= :=;z

LEWis BRISBOIS BISGAARD & SMITH LLP
Lane J. Ashley, Esq., California Bar No. 73926
Celia Moutes-Lee, Esq., California Bar No. 160950
Attorneys' for Defendant ACE American Ins. Co.
221 North Figueroa Street, Suite 1200
Los Angeles, CA 90012
213-250-1800
Fax: (213) 250-7900

MARKS, O'NEILL, O'BRIEN & COURTNEY, P.C.

Patricia A. Fecile-Moreland, Esquire
ID Number 83798
Attorneys for 'Defendant ACE American Ins. Co.
1800 John F. Kennedy Blvd., Suite 1900
Philadelphia, PA 19103
215-564-6688

Dated: August 31, 2010

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 Case 2:09-cv-04789-AB Document 44 Filed 09/01/10 Page 42 of 42

CERTIFICATE OF SERVICE

I hereby certify that on September 1, 2010 a true and correct copy of ACE AMERICAN
INSURANCE COMPANY'S MOTION FOR PARTIAL SUMMARY JUDGMENT
REGARDING RCM TECHNOLOGIES, INC. 'S "BAD FAITH," PUNITIVE DAMAGES AND
ATTORNEYS' FEES CLAIMS (MOTION NO.3) and ACE AMERICAN INSURANCE
COMPANY'S APPENDIX OF DEPOSmON TESTIMONY AND DOCUMENTS was served on
the following counsel of record and interested parties by electronic filing and U.S. Mail.

William R. Herman, Esquire

Pennsylvania attorney ID 36361
Law Offices of William R. Hennan
59 Betts Drive· Suite 100
Washington Crossing, PA 19877-1356
215-751-0262

Ralph A. Jacobs, Esquire

Pennsylvania attorney ID 21387
Jacobs & Singer LLC
1515 Market Street· Suite 705
Philadelphia PA 91102
215-789-3110

Attorneys for plaintiffReM Technologies, Inc.

BY:
. ecile ~
N er 83798
Attorneys for Defendant ACE American Ins. Co.
1800 John F. Kennedy Blvd., Suite 1900
Philadelphia, PA 19103
215·564·6688

LEWIS BRISBOIS BISGAARD & SMITH LLP

Lane J. Ashley, Esq., California BarNo. 73926
Celia Moutes·Lee, Esq., California Bar No. 160950
Attorneys for Defendant ACE American Ins. Co.
221 North Figueroa Street, Suite 1200
Los Angeles, CA 90012
213-250·1800
Fax: (213) 250-7900

Dated: September 1, 2010

4852-2181-9911.1
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