Royalty Management Corp. v. Lloyd's of London

Full title: ROYALTY MANAGEMENT CORPORATION; Royalty Equity Fund; Royalty Mortgage…

Court: United States Court of Appeals, Ninth Circuit

Date published: Dec 22, 1998

166 F.3d 1218 (9th Cir. 1998)

Opinion

166 F.3d 1218 (9th Cir. 1998) ROYALTY MANAGEMENT CORPORATION; Royalty Equity Fund; Royalty Mortgage Income Investors; West Shaw Income Investors; Royalty Mortgage Income Fund; Royalty Mortgage Income Fund II; Royalty Mortgage Income Fund III; Royalty Mortgage Income Fund IV; Royalty Mortgage Income Fund V; Royalty Mortgage Income Fund VI, Plaintiffs-counter-claimants-Appellants, v. LLOYD'S OF LONDON; R.J. English; R.C. Barber; M.E. Warrington; A.G. Lee; R.E. Brown; N.P.B. Stimpson, dba Underwriting Syndicate on Lloyds Commercial Crime Insurance Policy No. 707-FA0010H, Defendants-counter-claimants-Appellees. No. 97-17151. D.C. No. CV-94-05669-REC. United States Court of Appeals, Ninth Circuit December 22, 1998

Editorial Note:

This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA9 Rule 36-3 regarding use of unpublished opinions)

Argued and Submitted Dec. 9, 1998.

Appeal from the United States District Court for the Eastern District of California, Robert E. Coyle, Chief District Judge, Presiding.

Before D.W. NELSON, RYMER, and T.G. NELSON, Circuit Judges.

MEMORANDUM ^*

* This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3.

We have jurisdiction under 28 U.S.C. § 1291. We affirm.

The district court did not err in granting Lloyd's motion for summary judgment. In interpreting coverage under an insurance contract, a court should first look to the plain language of the policy. Foster-Gardner, Inc. v. National Union Fire Ins. Co. of Pittsburgh, 959 P.2d 265, 272 (Cal.1998). "If contractual language is clear and explicit, it governs." Id. In this case, the plain language of the policy is clear. Coverage will not extend to any loss arising out of or in anyway involving a transaction that occurs prior to the retroactive date of December 1, 1989. The initial loan that started the Ponzi scheme, which led to the partnership's losses, occurred on July 29, 1989.

Despite Royalty Management Corp.'s ("RMC") argument that the entire Ponzi scheme does not arise out of the initial loan, the language of the loss sustained rider, "in any way involving any act, [etc.] committed ... prior to the retroactive date," simply does not support RMC's contention that the scheme can be separated into several different transactions occurring at several different times. The entire scheme started with a loan occurring prior to December 1, 1989, and the court properly concluded that Lloyd's could deny coverage on this basis.

The district court did not err by granting Lloyd's motion to file an amended answer and counterclaim. Under Federal Rule of Civil Procedure 15, leave to amend should be freely granted when justice so requires and in the absence of prejudice. Moore v. Kayport Package Express, Inc., 885 F.2d 531, 538 (9th Cir.1989). The district court determined that RMC would not be unduly prejudiced and did not abuse its discretion in granting leave to amend.

The district court also did not err in denying RMC's motions to strike Lloyd's answer or enter other sanctions for the alleged destruction of a claims file. The district court concluded that there was insufficient proof that Lloyd's intentionally destroyed the file; rather, it found that the file had been lost. It determined that striking Lloyd's answer was not the appropriate sanction for Lloyd's carelessness. Because district courts are given broad discretion to deal with discovery problems, it was not an abuse of discretion for the district court to reach this conclusion. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642 (1976).

AFFIRMED.