Durham's Vanishing Comma

A few weeks back, Durham attorneys filed a motion requesting summary judgment regarding elements of the civil suits dealing with state law. They cited a recent decision, Pettiford v. City of Greensboro, to contend that they had immunity. The basic argument: the city has immunity from state-based tort claims, since Durham’s insurance policies were written in such a way not to pierce the immunity the city enjoyed.

At the time, several commenters pointed out that the city’s filing seemed unusually cogent. In sharp contrast to the run-of-the-mill argument from Durham (i.e.: state law says Mike Nifong wasn’t supposed to supervise a police investigation, and therefore Durham can’t be sued for results from the city’s decision to allow him to supervise a police investigation), the Durham filing looked as if had offered an intellectually consistent and on-point claim.

But as revealed in explosive filings from Charles Davant (representing the three falsely accused players) and Bob Ekstrand (representing Ryan McFadyen, Matt Wilson, and Breck Archer), we should have known better. Incredibly, it appears as if Durham’s high-priced attorneys—the same attorneys who have received more than $1 million in fees—misrepresented the city’s insurance policies in such a way that they essentially presented a false argument.

Davant’s opening pithily summarizes the implications of the city’s multiple errors:

The City’s brief misquotes the sentence upon which its argument depends, omitting a particularly important comma. The omission reverses the sentence’s meaning, transforming policy language that is fatal to the City’s position into the inaccurate language upon which the City’s motion is based. The omission also leads the City to represent, inaccurately, that this Court interpreted “identical policy language” in Pettiford. In fact, Pettiford involved an insurance policy that was altogether different from the City’s, and that only highlights the problems with the City’s argument.

Other issues about the Durham filing raised by Davant and Ekstrand.

1.) Inaccurate Quotations.

The city’s filing was [deliberately?] misleading. It removed a comma from a key sentence in its insurance policy—and by so doing, changed the meaning of the policy’s language in such a way to align Durham’s policy with the language of the Pettiford decision. Perhaps the Durham attorneys were simply, if inexcusably, sloppy?

2.) Misleading Ellipses.

The Durham brief also . . . creatively . . . used ellipses to mask the true meaning of its insurance policies. As Ekstrand points out,

The ellipses conceal the text that reveals that the City’s retained limit is exhausted not only by the City’s obligation to pay a claimant, but also by the City’s payment of “defense costs” along the way to judgment. Specifically, the City’s ellipses replace the phrase “by means of payments for judgments, settlements, or defense costs.” Restored to its original state, the quoted sentence reads: [The insurer’s] duty to pay any sums that you become legally obligated to pay arises only after there has been a complete expenditure of your retained limit by means of payments for judgments, settlements, or defense costs.

(While Durham has had no legal judgments against it in the case, its defense costs to date exceed its limit, and therefore require insurance payment.)

Even more dramatically, Ekstrand quotes an email between then-City Manager Patrick Baker and the city’s risk manager—the email about the very issue of insurance and the city losing its immunity, but from an already settled 2007 lawsuit. The city’s risk manager was clear: defense costs—not just settlement costs—pierced the city’s immunity:

The SIR [self-insured retention] applies to damages as well as legal defense expenses (but not to expense of our staff counsel, so we can't bill for your time.) When we expect that a claim could go into the excess (exceed the SIR), then we need to report it to the underwriter promptly. … We have an obligation to protect the underwriter's interest, and that necessarily affects our settlement posture within the SIR . . . . This does affect the potential for an immunity defense because immunity is waived to the extent of the insurance. … This is the dilemma of the low SIR.

The Durham brief operated as if this email didn’t exist.

3.) Ignoring Relevant Case Law.

In his filing, Davant cites 16 separate North Carolina cases that refuted Durham’s argument even if the city hadn’t misrepresented the language of its insurance policy. In one of these 16 cases that refute Durham’s argument, Durham itself was a defendant—making it rather difficult to explain how the city could have been unaware of the precedent.

Davant also quotes from the Kephart decision, in which the Court rejected the very argument offered by Durham in its filing as “basically circular” and contrary to “our case law,” which “has consistently considered purchase of limited insurance coverage by a governmental entity to constitute partial waiver of sovereign immunity.”

“In short,” Davant concludes, “the City’s legal argument is refuted not only by its prior admissions and the case law, but by the plain language of its policies.”

4.) Concealing Relevant Information.

The issue of defense costs triggering the insurance policy wasn’t the only information conveniently neglected from the Durham filing. Durham also made the following claim: “The City does not now participate, and has not in the past participated, in any local government risk pool pursuant to Article 23 of Chapter 58 of the North Carolina General Statutes.”

But, as both the Ekstrand and Davant filings observes, Durham actually does participate in such an arrangement—Interlocal Risk Fund. Could the Durham attorneys have been aware of this arrangement?

Moreover, as the Ekstrand filing further notes,

[Durham counselor] Mr. Laws states under oath— unequivocally and incorrectly—that “the City is not a party to any agreement which requires … any other entity to pay claims for which the City incurs liability.” Mr. Laws is wrong. One such agreement was attached to Plaintiffs’ Amended Complaint: the Duke-Durham Police Jurisdiction Allocation Agreement. Section 3.5 of the Police Jurisdiction Allocation Agreement contradicts Mr. Laws’ sworn declaration. It provides: “To the maximum extent allowed by law, the University shall defend, indemnify, and save harmless the City from and against all claims, demands and lawsuits that may arise in any manner from, in connection with, the acts or omissions of the University’s officers while performing their duties under this Agreement.”

Ekstrand continues,

Plaintiffs can only assume that Mr. Laws simply did not know of either the City’s “Immunity Waiver Fund,” the City’s three Resolutions deeming the fund to be a waiver of the City’s governmental immunity, the City Council’s appropriation of over $600,000.00 to participate in the League of Municipalities’ local government risk pool, or the City’s indemnification agreement with Duke University relating to all claims arising out of the concerted activities of the Duke and Durham police departments. If that is the case, Mr. Laws simply not a reliable affiant with respect to the facts at issue in the City’s dispositive motion.

The city’s pattern of . . . incomplete . . . disclosure of information, the players’ attorneys argue, should be particularly problematic in a motion for summary judgment. Davant summarizes the information that the plaintiffs’ attorneys could encounter if and when discovery actually begins:

• communications between City officials and/or the City’s insurers regarding coverage of Plaintiffs’ state-law claims;
• reimbursement of the City Defendants’ legal fees incurred in connection with defending Plaintiffs’ state-law claims;
• other statements by City officials concerning the City’s insurance coverage for Plaintiffs’ claims;
• whether the City and/or its insurers have engaged in other actions that would support a finding of insurance coverage and, therefore, a waiver of immunity.

The Davant filing presents five (logical, if almost comical) questions that the Durham filing essentially presented as unsettled:

1. Where an insurance policy provides that coverage is triggered upon the insured’s payment of $500,000 “for judgments, settlements, or defense costs,” is coverage triggered upon the insured’s payment of $500,000 in defense costs?

2. Can a city claim governmental immunity on the ground that it has no “legal obligation to pay” its self-insured “retained limit,” where the policy at issue requires only that the retained limit be paid, not that the city have had a “legal obligation to pay” it?

3. Does a city’s insurance policy extend coverage to state-law torts if it expressly covers “wrongful acts” that specifically include “negligent acts,” “personal injury offenses,” “malicious prosecution,” “false arrest,” and other state-law torts?

4. Does an endorsement to an insurance policy that is expressly made “subject to” the policy instead override the policy?

5. Should summary judgment be granted on the affirmative defense of governmental immunity where the moving party’s prior statements, at a minimum, create a question of fact, and the non-moving parties have been unable to take discovery?

The answers to each of these questions are self-evident, at least to everyone outside the Durham elite.

Some aspects of this case—chiefly involving the unindicted players’ suit against Duke, which could have far-reaching implications on higher education—involve complicated questions of law. But the only thing complicated about Durham’s interpretation of the Pettiford decision appears to be how the city’s attorneys could have ever made the claims they did.

[Update, here are the links to the Davant and Ekstrand motions.]