United States Court of Appeals For the First Circuit
No. 15-1351
MOUNT VERNON FIRE INSURANCE COMPANY,
Plaintiff, Appellee,
v.
VISIONAID, INC. f/k/a H.L. Boulton Co. Inc.,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Thompson, Circuit Judge, Souter, Associate Justice,* and Barron, Circuit Judge.
Kenneth R. Berman, with whom Heather B. Repicky and Nutter, McClennen & Fish LLP were on brief, for appellant. David Burgess, Wilchins Cosentino & Novins LLP, Edward J. Stein, Marshall Gilinsky, and Anderson Kill P.C. on brief for United Policy Holders, amicus curiae. James J. Duane III, with whom Scarlett M. Rajbanshi and Peabody & Arnold LLP were on brief, for appellee. Michael F. Aylward and Morrison Mahoney LLP on brief for American International Group, Inc. and Massachusetts Insurance Federation Inc., amici curiae.
* The Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation.
November 15, 2017
THOMPSON, Circuit Judge.
Prologue
This is a diversity-based declaratory-judgment action
governed (all agree) by Massachusetts substantive law. See Erie
R.R. Co. v. Tompkins, 304 U.S. 64 , 78 (1938). The case pits an
insured, VisionAid, against its employment-practices liability
insurer (say that ten times fast!), Mount Vernon (each party's
official name appears in the caption). VisionAid and Mount Vernon
are back after the busy Massachusetts Supreme Judicial Court
("SJC," for short) answered some state-law questions — arising
from this litigation — that we had certified to it (we thank the
SJC for its help). As things now stand, the only question left
for us to decide is: Does a conflict of interest exist between
the parties that permits VisionAid to choose the attorney to defend
a suit brought against it by an ex-employee, with the tab for that
defense picked up by Mount Vernon? Like the federal district judge
below, we believe the answer is no.
How We Got to This Point
Our opinion certifying the questions is found at 825
F.3d 67 (1st Cir. 2016). And the SJC's opinion responding to the
questions is found at 76 N.E.3d 204 (Mass. 2017). Rather than
fill up the pages repeating everything said before, we assume the
reader's familiarity with these decisions and mention here only
those details necessary to put today's matter into perspective.
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VisionAid is a defendant in a suit filed by Gary Sullivan
in Massachusetts state court. Sullivan essentially alleges there
that VisionAid fired him as its vice president because he was too
old. An attorney named Todd Bennett filed VisionAid's answer,
insisting that VisionAid had canned Sullivan not because of his
age, but because he had performed his job poorly, had acted
insubordinately, and had embezzled money from VisionAid on a grand
scale. Bennett got involved thanks to Mount Vernon, which —
invoking the liability policy's terms — picked him to defend
VisionAid. Mount Vernon originally acted under a "reservation of
rights" (for anyone untutored in matters of insurance law, a proper
reservation preserves an insurer's right to challenge any duty to
defend at a later stage). But after VisionAid objected, Mount
Vernon explicitly withdrew its reservation of rights and assumed
the defense unconditionally.
In the midst of all this, Sullivan offered to drop his
age-discrimination claim if VisionAid agreed not to pursue its
embezzlement claim. VisionAid said no. VisionAid also made it
clear around this time that it wanted Bennett to do more than just
raise Sullivan's embezzlement as a defense — it wanted Bennett to
raise the embezzlement allegation as a counterclaim. Mount Vernon
refused, explaining that because the policy between them was a
defense-liability policy, it had no duty to fund affirmative
actions and so would not fund VisionAid's counterclaim.
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Ultimately, VisionAid's personal counsel drafted the embezzlement
counterclaim against Sullivan.
Pulling no punches, Mount Vernon filed the underlying
federal-diversity action seeking a declaratory judgment
vindicating its understanding of the policy. Not willing to back
down, VisionAid responded with a two-count counterclaim: the first
count seeking a declaration that Mount Vernon's duty to defend
includes a duty to prosecute the embezzlement counterclaim, and
the second count seeking a declaration that a conflict of interest
between Mount Vernon and VisionAid entitles VisionAid to select
the attorney to defend it in Sullivan's suit — we will say more
later about the conflict issue; for now it is enough to note that
VisionAid thinks Mount Vernon has an interest in "diminishing" the
value of VisionAid's counterclaim, because the counterclaim is
"impeding" settlement.
Eventually the parties cross-moved for summary judgment.
Acting on the motions, the federal district judge ruled that given
the policy's plain language, Mount Vernon's duty to defend does
not oblige it to foot the bill for VisionAid's affirmative
counterclaim — a result, he added, that did not violate any state
law. And then the judge rejected what he called VisionAid's
"counter-intuitive assertion" that Mount Vernon and Bennett "have
an interest in devaluing the counterclaim." "The strength of
VisionAid's counterclaim," the judge wrote,
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both weakens the wrongful termination case against VisionAid and increases appointed counsel's bargaining power in settlement negotiations. Devaluing the counterclaim would undermine Mount Vernon's own interest in limiting Sullivan's recovery for wrongful termination.
Finally, the judge refused "to acknowledge VisionAid's parade of
horribles" it believes will occur if appointed counsel defends
against Sullivan's claims and VisionAid's personal counsel
prosecutes the counterclaim. "[T]here is," the judge noted,
"nothing inherently impractical or unwieldy about VisionAid
relying on its own separate counsel to assert the counterclaim."
For support, the judge noted that in responding to Sullivan's
complaint, appointed counsel wrote the answer and VisionAid's own
counsel wrote the counterclaim. Which, the judge stressed, goes
to show that these "separate attorneys" can "collaborate and yet
accomplish their distinct objectives."
A disappointed VisionAid appealed to us. And for the
reasons recorded in our prior opinion, we certified three questions
to the SJC — two on the duty-to-defend issue and one on the
conflict-of-interest issue:
(1) Whether, and under what circumstances, an insurer (through its appointed . . . counsel) may owe a duty to its insured . . . to prosecute the insured's counterclaim(s) for damages, where the insurance contract provides that the insurer has a "duty to defend any Claim," i.e., "any proceeding initiated against [the insured]"?
(2) Whether, and under what circumstances, an insurer (through its appointed . . . counsel) may owe a duty to
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its insured to fund the prosecution of the insured's counterclaim(s) for damages, where the insurance contract requires the insurer to cover "Defense Costs," or the "reasonable and necessary legal fees and expenses incurred by [the insurer], or by any attorney designated by [the insurer] to defend [the insured], resulting from the investigation, adjustment, defense, and appeal of a Claim"?
(3) Assuming the existence of a duty to prosecute the insured's counterclaim(s), in the event it is determined that an insurer has an interest in devaluing or otherwise impairing such counterclaim(s), does a conflict of interest arise that entitles the insured to control and/or appoint independent counsel to control the entire proceeding, including both the defense of any covered claims and the prosecution of the subject counterclaim(s)?
825 F.3d at 72 (brackets in original; ellipses added). That court
recently returned its answers, albeit by a divided vote. On
question (1), the SJC ruled that "an insurer with a contractual
duty to defend an insured is not required to prosecute an
affirmative counterclaim on the insured's behalf," either under
the "contractual language in the policy at issue or the common-
law" of Massachusetts. 76 N.E.2d at 208. On question (2), the
SJC held that "the duty to pay defense costs has the same scope as
the duty to defend, and thus does not require an insurer to pay
the costs of prosecuting a counterclaim on behalf of the
insured[.]" Id. And on question (3), the SJC concluded that given
its other two answers, it need not reach the conflict-of-interest
issue as framed by us. Id.
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After the SJC's opinion came down, VisionAid asked us to
let each side file supplemental briefs "to address how the [SJC's]
decision affects the resolution of the remaining" conflict-of-
interest question. In its telling, regardless of who pays the
fees to prosecute the embezzlement counterclaim (VisionAid or
Mount Vernon), an obvious conflict of interest exists "that affects
the right to select counsel" to "defend VisionAid against Gary
Sullivan's complaint." Mount Vernon opposed the request for more
briefing. Accepting VisionAid's view that the SJC's decision does
not necessarily dispose of the conflict issue, we allowed
additional briefing from both sides and invited any interested
amicus to chime in too. With these materials in hand, we tackle
the conflict question (which again is the only question before
us), without requiring another round of oral argument.1
The Parties' Take
The parties argue over the conflict-of-interest matter
keenly and vigorously — which is not a surprise, given how hard
1 We thank the amici for their participation in this matter (their names appear up near our caption). But we cue the reader — with the citation at the end of this sentence — that precedent tells us to ignore arguments advanced only "by amici and not by parties." In re Sony BMG Music Entm't, 564 F.3d 1 , 3 (1st Cir. 2009).
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they have fought in multiple courts. Bear with us now as we plow
through their contentions.
VisionAid's Arguments
VisionAid throws a lot of arguments at us, all based on
its understanding of Massachusetts law. For starters, VisionAid
argues that Bennett — the insurer-appointed counsel — represents
both VisionAid and Mount Vernon. This being so, the argument
continues, Bennett must act in good faith, diligently carrying out
his duties without sacrificing VisionAid's interests to Mount
Vernon's interests. But to VisionAid's way of thinking, Bennett
has not lived up to — and will not live up to — his obligations.
Elaborating on why it feels this way, VisionAid insists
Bennett has a conflict of interest caused by "the settlement
dynamics underlying" Sullivan's case — a conflict that prevents
VisionAid from being able to "trust any attorney appointed by Mount
Vernon to protect VisionAid's interests." In VisionAid's mind,
Mount Vernon's "settlement leverage comes not from proving every
dollar [Sullivan] embezzled but from developing the embezzlement
evidence only to the point that . . . [he] is incentivized" to
settle by executing a mutual release, with no money changing hands.
Actually, as VisionAid points out, Sullivan now says he will
dismiss his age-discrimination claim if VisionAid dismisses its
embezzlement counterclaim, with not a penny going to any party.
But, the argument proceeds, if Bennett's development of the
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embezzlement evidence "gives VisionAid a pathway to recover most
or all" of what Sullivan took, then VisionAid would be crazy to
settle on those terms, because such a settlement would let Sullivan
keep the stolen cash. And letting Sullivan shuffle off with the
loot would, in VisionAid's telling, mean that VisionAid "would
. . . be funding the settlement of a claim that Mount Vernon
contractually insured and would be relieving Mount Vernon of its
indemnity obligation" — a result Mount Vernon would love (because
the case would end at the lowest cost to Mount Vernon) but
VisionAid would hate (because, again, VisionAid would be kissing
the embezzled money goodbye).
Explaining further, VisionAid argues that to help make
Mount Vernon's best-case self-interest scenario a reality, Mount
Vernon will pull out all the stops — including having Bennett
"devalue" the counterclaim, something Bennett will do to curry
favor with Mount Vernon (so he can keep getting cases from Mount
Vernon). "[A] devalued counterclaim," the theory goes, "would
reduce what VisionAid could justifiably expect to recover, thus
giving [it] fewer reasons to litigate and more incentive to
settle." And to hear VisionAid tell it, any Mount Vernon-selected
defense lawyer could pursue this devaluation strategy to the hilt,
given the enormous "influence" he will have "over how the
embezzlement aspect of the case is shaped," even as VisionAid's
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own lawyer pursues the counterclaim. "That influence," VisionAid
writes,
comes from questions the [Mount Vernon-selected] defense attorney chooses to ask, information the defense attorney volunteers to [Sullivan's] counsel, gratuitous statements the defense attorney makes in court filings or open court, defense counsel's strategy decisions, defense counsel's request for jury instructions and special questions, and the like.
And even if Mount Vernon does not "subjectively" want to "devalue
the counterclaim," VisionAid believes Mount Vernon is still
conflicted "because, objectively," it is in Mount Vernon's best
interest to cheapen the counterclaim. Further, any "common
interest" Mount Vernon and VisionAid may have "in defeating
Sullivan's claim" is not enough to "cure" this conflict.
Moving on, VisionAid also notes that the policy has a
clause saying Mount Vernon cannot settle any claim without
VisionAid's "consent."2 But VisionAid contends this clause hardly
ensures against a conflict of interest, because — to quote its
appellate papers — if VisionAid does "veto a settlement," Mount
Vernon can "take away policy benefits, adding pressure on VisionAid
not to veto a settlement."3 So instead of "curing the conflict,
2The policy states (emphasis ours) that "[Mount Vernon], as it deems expedient, has the right to investigate, adjust, defend, appeal and, with the consent of [VisionAid], negotiate a settlement of any Claim." 3The part of the policy VisionAid points to says that if VisionAid "refuses to consent to a settlement recommended by [Mount Vernon]," then Mount Vernon's obligation is
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the consent-to-settle clause exacerbates it" — at least that is
what VisionAid says.
Expanding on its worst conjured-up nightmare, VisionAid
talks about how this "dual representation" — with a Mount Vernon-
chosen lawyer working to defeat Sullivan's complaint, and a
VisionAid-chosen lawyer working to prevail on the counterclaim —
will create a number of problems. For one thing, dual
representation will result in a sort of "schizophrenic
representation": instead of a "single lawyer" working to
"implement[] a cohesive case strategy" as VisionAid's "advocate,"
VisionAid will have two attorneys possibly providing separate
(a) opening and closing statements, (b) objections to questions
and answers, and (c) requests for jury instructions, to name just
a few of the "logistical problems" VisionAid fears. For another
thing, dual representation could lead "the jury to infer the
existence of insurance coverage, a fact courts scrupulously seek
limited to: (1) the amount of the covered Loss in excess of the Retention which [Mount Vernon] would have paid in settlement at the time the Insured first refused to settle; (2) plus covered Defense Costs incurred up to the date [VisionAid] first refused to settle; (3) plus seventy five percent (75%) of covered Loss and Defense Costs in excess of the first settlement amount recommended by [Mount Vernon] to which [VisionAid] did not consent.
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to keep away from juries." And finally, because Sullivan's
embezzlement "is just as much a ground for denying relief under
the complaint as it is for awarding relief under the counterclaim,"
dual representation "raises the prospect that Mount Vernon could
provide less than a robust defense (and less than the full defense
required by the insurance contract) by relying on VisionAid's
counsel to pull the laboring oar." Or so VisionAid frets.
As a final point, VisionAid argues that any insurer-
appointed counsel in Bennett's shoes would be conflicted out under
Rule 1.7 of the Massachusetts Rules of Professional Conduct.4 And
4 The current version of Rule 1.7 declares: (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer. (b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same
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VisionAid thinks the only way out of this mess is to let it choose
"its own counsel to handle its entire representation," i.e., to
let it pick the one lawyer who will defend against Sullivan's claim
(on Mount Vernon's dime) and press the counterclaim (on VisionAid's
dime). VisionAid concedes that "[n]ot all counterclaims create a
conflict of interest." Quoting comment 17 to Rule 1.7, VisionAid
argues that "[w]hether clients are aligned directly against each
other . . . requires an examination of the context of the
proceeding" — as a for-instance, VisionAid says "there might be no
conflict . . . if the tort claimant will settle the complaint
without requiring that the counterclaim be dismissed or released."
VisionAid believes context shows a conflict here. So ultimately,
VisionAid asks us to vacate the judgment below and remand for entry
of a new judgment — a judgment that would declare that VisionAid
has the right to select its own lawyer to defend it in Sullivan's
suit at Mount Vernon's expense, with the obvious exception (because
of the SJC's ruling) that VisionAid will have to pay for the
counterclaim's prosecution.
litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing.
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Mount Vernon's Arguments
Mount Vernon's views on the conflict-of-interest issue
are different from VisionAid's, to say the least. Mount Vernon,
for example, says appointed counsel has one (and only one) client
in this case — VisionAid. And, the argument goes, consistent with
his contractual and ethical obligations, Bennett will not do
anything to water down the counterclaim. Insisting it wants a
strong counterclaim, not a weak one, Mount Vernon writes that a
powerful counterclaim "could help" defeat "Sullivan's claim, a
claim that both Mount Vernon and VisionAid clearly have an interest
in defeating."
What VisionAid wants us to do, writes Mount Vernon, is
to conclude that appointed-counsel Bennett "will neglect his
obligations and duties to VisionAid and try to impair or harm the
counterclaim" — even though, according to Mount Vernon, there is
no basis (either legal or factual) to support such "a serious
allegation." But even if Bennett wanted to "devalue" the
counterclaim, he could not do so, because — to quote its
supplemental brief — "VisionAid's personal counsel is the attorney
who will be responsible for handling the counterclaim." So during
the Sullivan suit, Bennett and VisionAid's personal lawyer will
present "a unified front on behalf of their common client,
VisionAid." On top of that, Mount Vernon believes VisionAid's
devaluation theory is completely off base, because "Sullivan has
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already proposed an exchange of releases, reducing the value of
his claim to zero, and the counterclaim was not 'devalued'" in the
slightest.
Mount Vernon is equally adamant that the counterclaim is
not an "impediment" to settling Sullivan's claim, noting that the
counterclaim helped nudge "settlement negotiations in VisionAid's
and Mount Vernon's favor because the counterclaim convinced [him]
to reduce his settlement demand to zero on the condition that
VisionAid dismiss the counterclaim against him." More, Mount
Vernon believes VisionAid holds all the trump cards: given the
consent-to-settle clause, Mount Vernon cannot resolve "any
[c]laim" without VisionAid's OK; and even without that clause,
because VisionAid's own lawyer will be prosecuting the
counterclaim, any settlement would require VisionAid's blessing.
Still more, while Mount Vernon surely wants to "keep[] [defense]
costs and expenses low," it thinks that interest is completely
"outweighed" both by "its obligation to defend [VisionAid]
vigorously" and by the "[p]olicy's consent to settle clause" — a
clause Mount Vernon states it must "honor, and has honored,
throughout this litigation." And, Mount Vernon says, if VisionAid
wants to take Sullivan to trial, then Mount Vernon "will have to
pay to defend the case" to the end.
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Beyond that, Mount Vernon sees no conflict under Rule
1.7(a). And, to boot, Mount Vernon says VisionAid waived any
supposed conflict under Rule 1.7(b).5
The bottom line is Mount Vernon wants us to affirm the
district judge by holding "that the mere existence" of the
embezzlement "counterclaim, which Mount Vernon has no duty to
prosecute, does not give rise to a conflict of interest between
Mount Vernon and VisionAid that entitles VisionAid to independent
counsel at Mount Vernon's expense" — to hold otherwise would mean
that in all cases "in which an insured file[s] a counterclaim," a
conflict would result "that would entitle the insured to have its
personal counsel defend against the plaintiff's claim."
5 To save the reader the need to peek back to footnote 4, we re-quote Rule 1.7(b) here: (b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing.
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Our Take
Because the SJC saw no need to answer the certified
question on the conflict-of-interest matter — which is
understandable, given how we had framed question (3) — we must do
a bit of mind reading and predict how that court would handle the
issue. See, e.g., Candelario Del Moral v. UBS Fin. Servs. Inc.,
699 F.3d 93 , 98 (1st Cir. 2012) (calling such an exercise "an Erie
prediction"). And after reviewing the matter de novo — which is
a fancy way of saying we take a fresh look at the issue, see id.
at 99 — we think the federal district judge decided the case the
way the SJC would have decided it. We explain our reasoning below,
rejecting most of VisionAid's arguments in the text of our opinion
and others in the opinion's footnotes.
Putting first things first, we begin with the parties'
quarrel over who Bennett is counsel for — VisionAid and Mount
Vernon (as VisionAid argues), or just VisionAid (as Mount Vernon
contends). An insurer-appointed lawyer "is attorney for the
insured as well as the insurer" — those are not our words, but the
SJC's. See McCourt Co. v. FPC Props., Inc., 434 N.E.2d 1234 , 1235
(Mass. 1982). And according to another SJC case, this dual-
representation phenomenon means that an insurer-appointed lawyer
"owes to each a duty of good faith and due diligence in the
discharge of his duties," which in turn means that he cannot
"subordinate[]" "[t]he rights of one . . . to those of the other."
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Imperiali v. Pica, 156 N.E.2d 44 , 47 (Mass. 1959), abrogated in
part on other grounds by Darcy v. Hartford Ins. Co., 554 N.E.2d
28 , 32-33 (Mass. 1990). Mount Vernon tries to sidestep these
statements, essentially calling them dicta, while VisionAid treats
them as holdings — dicta, by the way, are parts of an opinion that
are not integral to the decision's analysis and so do not generally
bind later courts. See, e.g., United States v. Martinez, 762 F.3d
127 , 134-35 (1st Cir. 2014).
Unfortunately for Mount Vernon, a case of ours — Vicor
Corp. v. Vigilant Ins. Co. — read "Massachusetts law" as
recognizing that "an attorney retained by an insurer to represent
the insured" is "the attorney for both." See 674 F.3d 1 , 19 (1st
Cir. 2012) (emphasis added) (citing and relying on Imperiali).
Vicor Corp.'s conclusion is not only consistent with the Imperiali
line of cases, it is also jibes with an ethics opinion by the
Massachusetts Bar Association declaring that "an attorney . . .
retained by" an insurer "to represent an insured" represents both
the insurer and the insured "in defeating the plaintiff's
litigation . . . ." See Mass. Bar Ass'n Comm. on Prof'l Ethics,
Op. 77-16 (1977).6
6 The Bay State's law books are full of SJC decisions relying on ethics opinions from the Massachusetts Bar Association. See, e.g., Clark v. Beverly Health & Rehab. Servs., Inc., 797 N.E.2d 905 , 912 n.11 (Mass. 2003); Commonwealth v. Goldman, 480 N.E.2d 1023 , 1028 n.7 (Mass. 1985).
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Mount Vernon cites no contrary authority. Nor does it
offer any persuasive reason to doubt the applicability of the cases
just discussed. So, consistent with Vicor Corp., we agree with
VisionAid that Bennett represents both VisionAid and Mount Vernon.
See generally United States v. Wogan, 938 F.2d 1446 , 1449 (1st
Cir. 1991) (explaining "that in a multi-panel circuit, prior panel
decisions are binding upon newly constituted panels in the absence
of supervening authority sufficient to warrant disregard of
established precedent").
But winning the who-does-Bennett-represent battle does
not help VisionAid win the war.
VisionAid's appeal stands or falls on whether (as
VisionAid puts it) Mount Vernon's objective "interest in
devaluing" the embezzlement counterclaim causes a conflict that
gives VisionAid the right to choose the lawyer to defend Sullivan's
suit (with Mount Vernon paying for everything but costs associated
with prosecuting the counterclaim). We think the appeal falls
flat.
By our lights, both Mount Vernon and VisionAid want to
crush Sullivan's suit. A muscular counterclaim will go a long way
in making that happen. But a weak one certainly will not. No one
doubts that the counterclaim's strength convinced Sullivan to drop
his settlement demand to zero dollars, with the proviso that
VisionAid dismiss its claim against him. Surely if Mount Vernon
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or Bennett did something to cripple the counterclaim, Sullivan
could demand more to settle his claim. And it goes without saying
(but we say it anyway) that giving Sullivan any kind of leverage
is not in either Mount Vernon's or VisionAid's best interests,
since (at the risk of sounding like an iPod stuck on replay) they
share the same goal — parrying Sullivan's suit. Also and
critically, we see nothing in the summary-judgment record
suggesting Mount Vernon wants to torpedo the counterclaim. See,
e.g., RTR Techs., Inc. v. Helming, 707 F.3d 84 , 93 (1st Cir. 2013)
(emphasizing that to stop "the entry of summary judgment, the law
requires more than arguments woven from the gossamer strands of
speculation and surmise").
But even if we assume — counterintuitively — that Mount
Vernon wants to diminish the counterclaim, it is hard to see how
it could pull that off. Remember, per the SJC's response to our
certified questions, neither Mount Vernon nor Bennett will play
any role in prosecuting the counterclaim — VisionAid will have its
own lawyer handling that job. See 76 N.E.3d at 213. And in
fulfilling his or her ethical duty to provide zealous
representation, VisionAid's personal attorney can make sure that
no one devalues the counterclaim in any way, shape, or form. Also
protecting VisionAid is the undisputed fact that, per the insurance
policy's terms, neither Mount Vernon nor Bennett can settle
Sullivan's suit — regardless of how low the settlement figure is
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(even if it is zero!) — without VisionAid's consent.7 And VisionAid
cites no summary-judgment evidence suggesting anyone connected
with Mount Vernon has ignored VisionAid's wishes to let the
underlying litigation play out so that VisionAid can pursue its
counterclaim — that spells trouble for VisionAid, because as all
summary-judgment movants should know, arguments "that depend not
on verified facts but 'on arrant speculation, optimistic surmise,
or farfetched inference' cannot forestall summary judgment." See
Fragoso v. Lopez, 991 F.2d 878 , 887 (1st Cir. 1993) (quoting Kelly
v. United States, 924 F.2d 355 , 357 (1st Cir. 1991)).
As for VisionAid's battalion of counterarguments, though
ably presented, we believe none persuades.
Take VisionAid's claim that "even an 'overwhelming
common interest'" between it and Mount Vernon does not cure the
conflict. The case VisionAid cites for support involves an
attorney who represented both the debtor and the creditor on a
loan and a sale to satisfy a debt. See In re Wainwright, 861
N.E.2d 440 , 446 (Mass. 2007). "[A] creditor's legally enforceable
rights against his debtor presents a classic conflict of legal
interests" such that "[e]ven if the parties had an 'overwhelming
7 Because an exchange of releases requires VisionAid's signature and because VisionAid's own lawyer will be in the case prosecuting the counterclaim, neither Mount Vernon nor Bennett can push a settlement through without VisionAid's acceptance and assistance.
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common interest,' each considering the transaction mutually
advantageous, the debtor-creditor relationship necessarily created
'conflicting interests.'" Id. And while there may be some tension
between VisionAid and Mount Vernon, we see no disqualifying
conflict — let alone the kind of classic conflict at play in
Wainwright. So Wainwright holds no sway here.
Also holding no sway is VisionAid's contention — made in
its supplemental reply brief — that the consent-to-settle clause
fails to protect against a conflict of interest. As noted above,
VisionAid's big complaint is that if it "veto[es]" a settlement
offer, then under the policy it could lose "insurance benefits" —
meaning the clause has the effect of incenting VisionAid to cave
in and settle.8 But VisionAid's theory about how the consent-to-
settle clause "punishes" it for killing "a settlement" is triply
waived: first because VisionAid did not develop the theory in its
summary-judgment memos, see McCoy v. Mass. Inst. of Tech., 950
F.2d 13 , 22 (1st Cir. 1991);9 second because VisionAid did not
8 The provision VisionAid points to appears to be a standard clause. Cf. generally Quantum Park Prop. Owners' Assoc., Inc. v. U.S. Liab. Ins. Co., No. 14-80845-Civ-Dimitrouleas, 2015 WL 11422283 , at *2 (S.D. Fla. Mar. 26, 2015) (quoting a substantially similar provision). 9 VisionAid's one-sentence footnote statement in a summary- judgment memo that "[t]he policy lays out certain consequences to VisionAid if it withholds consent and a judgment is rendered against [it]" does not suffice, given how VisionAid provided no discussion of the policy's provisions or citation to relevant authority. See McCoy, 950 F.2d at 22 (declining to address an issue when a district-court party mentioned it only in passing "—
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develop the theory in its opening appellate brief, see Cornwell
Entm't, Inc. v. Anchin, Block & Anchin, LLP, 830 F.3d 18 , 32 (1st
Cir. 2016); and third because VisionAid cites no authority for the
theory in its supplemental reply brief (nor does VisionAid give a
convincing explanation of what the law should be, assuming it found
no caselaw), see Medina–Rivera v. MVM, Inc., 713 F.3d 132 , 140–41
(1st Cir. 2013); Town of Norwood v. Fed. Energy Regulatory Comm'n,
202 F.3d 392 , 405 (1st Cir. 2000).10
And despite what VisionAid thinks, there is nothing
unworkable or "schizophrenic" about having two attorneys
representing it in the Sullivan litigation. VisionAid's
imaginings about the fights between lawyers over trial strategy
overlooks a critical fact: VisionAid is the final decision-maker
on that score. One need not take our word on this. Listen to
what the person Mount Vernon designated to testify on its behalf
had to say: asked "[w]ho would resolve disagreements" between the
a mention which, in its entirety, comprised two sentences and one citation (to a tangentially relevant case)"); see also United States v. Bongiorno, 106 F.3d 1027 , 1034 (1st Cir. 1997) (admonishing that "matters not squarely presented below generally cannot be advanced on appeal"). This raise-or-waive rule is "founded upon important considerations of fairness, judicial economy, and practical wisdom," Nat'l Ass'n of Soc. Workers v. Harwood, 69 F.3d 622 , 627 (1st Cir. 1995), and there is no sound reason not to apply the rule here. 10FYI: nothing in our order granting VisionAid's request for supplemental briefing suggests we would ignore longstanding raise- or-waive principles.
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attorneys "if they could not," he declared that "[u]ltimately they
have to go with whatever VisionAid want[s] to do." The dissenters
in the SJC opinion answering our certified questions argued —
similar to the way VisionAid argues here — that "[i]n almost all
situations it is totally impracticable to have two lawyers"
representing the insured. See 76 N.E.3d at 214-15 (Gants, C.J.,
with whom Lenk, J., joined, dissenting) (alteration in original)
(quoting Richard L. Neumeier, Serving Two Masters: Problems Facing
Insurance Defense Counsel and Some Proposed Solutions, 77 Mass. L .
Rev. 66, 80 (1992)). But tellingly, the majority was unmoved —
which also catapults this argument into thin air. If more were
needed — and we do not think that it is — a just-released decision
by a Massachusetts intermediate appellate court suggests that the
fact that the insurer and the insured hold differing views about
defense "tactics . . . do[es] not give rise to a sufficient
conflict of interest under [Bay State] law to justify [the
insured's] refusal of [the insurer's] control of the defense."
See OneBeacon Am. Ins. Co. v. Celanese Corp., No. 16-P-203, 2017
WL 4583266 , at *5 (Mass. App. Ct. Oct. 16, 2017). And lest anyone
wonder whether we can look to OneBeacon in making our Erie
predication — we can, because we do not think the SJC would reject
the lower court's reasoning. See Candelario Del Moral, 699 F.3d
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at 102 n.7; see also Andrew Robinson Int'l, Inc. v. Hartford Fire
Ins. Co., 547 F.3d 48 , 51 (1st Cir. 2008).11
A major part of VisionAid's conflict theory turns on the
idea that Bennett — in defiance of his ethical obligations to
VisionAid — will do anything he can to help client Mount Vernon
and to hurt client VisionAid. And VisionAid believes Fiandaca v.
Cunningham, 827 F.2d 825 (1st Cir. 1987), makes its charge
plausible. We reject this theory.
As for evidence that Bennett will act unethically —
evidence is important, because we (like the district judge) cannot
credit "conclusory allegations, improbable inferences, and
unsupported speculation," Medina–Muñoz v. R.J. Reynolds Tobacco
Co., 896 F.2d 5 , 8 (1st Cir. 1990) — VisionAid fleetingly suggests
in its reply brief here that a note by a Mount Vernon employee
"show[s]" the Mount Vernon-appointed counsel "told Mount Vernon"
(before the SJC opinion came down) that "he might be forced to
file VisionAid's counterclaim but would not recognize its validity
11 As for VisionAid's worry that the jury might infer the existence of insurance based on the dual-representation scenario, it appears "in a single sentence" in its appellate submissions, "is not seriously supported, and is therefore waived." Bandt v. Wand Partners, 242 F.3d 6 , 22 (1st Cir. 2001). Ditto for VisionAid's suggestion — made without citation to legal authority — that an insurer-appointed counsel has an automatic conflict with an insured because counsel may get multiple case assignments from the insurer. See, e.g., Rezende v. Ocwen Loan Servicing, LLC, 869 F.3d 40 , 43 (1st Cir. 2017) (concluding that a party "waived" an "argument by failing to cite any authority whatsoever in support of his conclusory assertion").
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as a defense." Even putting aside any possible hearsay problems,
we think this argument does VisionAid no good. There is a strong
argument that the highlighted statement — reflecting Mount
Vernon's position before the SJC opinion came down — has no oomph
now that the SJC has held that Mount Vernon is not required to
prosecute the counterclaim. Regardless, we consider the argument
doubly waived — first for not being made below (and the situation
does not fit within any of the rare exceptions to the raise-or-
waive rules), and then for not being developed in its initial brief
here. See respectively McCoy, 950 F.2d at 22; Small Justice LLC
v. Xcentric Ventures LLC, 873 F.3d 313 , 323 n.11 (1st Cir. 2017).
And as far as Fiandaca goes, we see night-and-day
differences between that case and this one. The Fiandaca lawyer
(simplifying slightly) represented a class of female state inmates
housed by the state prison warden. See 827 F.2d at 826. The class
plaintiffs wanted better facilities. Id. The parties eventually
agreed to settle the suit by having the state set up a facility at
the site of a state school. Id. at 827. But class counsel also
represented residents of that school in a suit challenging the
school's conditions. Id. at 829. These residents did not want
the state to establish a facility there, it turns out. Id. And
the settlement fell apart. Id. at 827-28. The state complained
to us that the district court stumbled by not disqualifying class
counsel for a conflict of interest. Id. at 826. We agreed, saying
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that "the combination of clients and circumstances placed [class
counsel] in the untenable position of being simultaneously
obligated to represent vigorously the interests of two conflicting
clients." Id. at 829. Getting back to our case, we believe
Bennett is not in an "untenable position," because Mount Vernon is
contractually barred from making him settle the case against
VisionAid's wishes — which means Fiandaca is not a game-changer
for VisionAid.
Switching to VisionAid's Rule 1.7 arguments, we need
only say this: Given our conclusion that Bennett has no
disqualifying conflict, the crucial premise behind VisionAid's
Rule 1.7 thesis — that Bennett's representation of Mount Vernon is
(in Rule 1.7 lingo) "directly adverse" to his representation of
VisionAid, or that his representation of VisionAid is "materially
limited" by his responsibilities to Mount Vernon — is a no-go.
That, unsurprisingly, dooms VisionAid's Rule 1.7 argument.
Obviously then, VisionAid's intimation that Mount Vernon is
"aligned directly against" it also goes nowhere, because the
circumstances here cut against that theory.
Epilogue
Tasked with settling a dispute about Massachusetts law
the way the SJC would settle it, our best assessment is: Given
the particulars of the current controversy, we believe the SJC
would agree that the presence of the embezzlement counterclaim —
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which Mount Vernon neither has to prosecute nor pay for — does not
generate a conflict of interest entitling VisionAid to separate
counsel to defend against Sullivan's suit at Mount Vernon's
expense. We say this knowing that because federal courts cannot
make their state-law interpretations binding on state courts,
Massachusetts "is free to tell us" in some future case that our
analysis is "all wet" and so "wipe away what we have written."
See Candelario Del Moral, 699 F.3d at 101; see also Smith v. F.W.
Morse & Co., 76 F.3d 413 , 429 n.12 (1st Cir. 1996) (explaining
that "[w]hen the highest court of a state disposes of an issue of
state law contrary to the resolution of the issue theretofore
suggested by a federal court, the latter ruling must give way");
cf. generally Diginet, Inc. v. W. Union ATS, Inc., 958 F.2d 1388 ,
1395 (7th Cir. 1992) (Posner, C.J.) (stressing that "[s]tate courts
are not bound by federal courts' interpretations of state law" and
noting that "[a] state judge will give such interpretations no
more weight than their persuasiveness earns them").
Affirmed.
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