Passport 420, LLC, et al. v. Starr Indemnity & Liability Company, et al

Case Number

19CV03596

Case Type

Hearing Date / Time

Mon, 12/09/2024 - 10:00

Nature of Proceedings

Plaintiff’s Motion For Prejudgment Interest On The Award Of Policy Benefits And Brandt Attorney Fees And Costs

Tentative Ruling

Passport 420, LLC, et al. v. Starr Indemnity & Liability Company, et al. 

Case No. 19CV03596           

Hearing Date: December 9, 2024                                           

HEARING:              Plaintiff’s Motion For Prejudgment Interest On The Award Of Policy Benefits And Brandt Attorney Fees And Costs

                                   

ATTORNEYS:        For Plaintiffs Passport 420, LLC; Spring Creek Research, LLC; and William Parrish: A. Barry Cappello, Lawrence J. Conlan, Richard Lloyd, Cappello & Noel LLP

                        For Defendant Starr Indemnity & Liability Co.: Michael J. Terhar, Carl J. Basile, Cunningham Swaim, LLP, Ralph S. LaMontagne, Jr., Eric A. Amador, LaMontagne & Amador LLP

TENTATIVE RULING:

The motion of plaintiff for prejudgment interest is granted, in part. The Court awards plaintiff Passport 420, LLC, prejudgment interest in the amount of $1,048,331.51. Except as otherwise herein granted, the motion is denied.

Background:

This action arises out of losses sustained as a result of a government seizure of aircraft owned by plaintiffs Passport 420, LLC (Passport), Spring Creek Research, LLC (Spring Creek) and William Parrish (Parrish) (collectively, plaintiffs.) On July 11, 2019, plaintiffs filed a complaint against defendants Starr Indemnity & Liability Company (Starr Indemnity), Avenatti & Associates, APC (Avenatti Associates), and Michael J. Avenatti (Avenatti) (collectively, defendants), alleging three causes of action: (1) breach of contract (against Starr Indemnity); (2) breach of the covenant of good faith and fair dealing (against Starr Indemnity); and (3) declaratory relief (against all defendants). Briefly, as alleged in the complaint:

On July 11, 2016, Parrish and Avenatti, who at the time was Parrish’s attorney, formed Passport for the purpose of purchasing an aircraft. Parrish owns his interest in Passport through Spring Creek. Avenatti purchased his interest in Passport through Avenatti Associates. The aircraft was purchased on January 18, 2017, for a net price of $4,383,605. Parrish held a 52.7 percent ownership interest in the aircraft. Avenatti was removed as the manager of Passport on August 29, 2018.

Starr Indemnity sold to plaintiffs an Elite Comprehensive Corporate Aircraft Policy No. 1000320046-03 (the policy), which provides coverage during the period from January 26, 2019, through January 26, 2020. The policy provided for insurance coverage of up to $10 million for covered perils which include “seizure” of the aircraft by a government authority. During the policy period, the federal government seized the aircraft as part of a criminal investigation of Avenatti. Plaintiffs submitted a sworn proof of loss to Starr Indemnity, but Starr Indemnity refused to acknowledge coverage.

On February 2, 2024, Starr Indemnity answered the complaint responding to its allegations and asserting nineteen affirmative defenses.

The matter proceeded to a thirteen day jury trial which commenced on April 24, 2024. (See Apr. 24, 2024, Minute Order.) On May 16, 2024, the jury returned a verdict in favor of Passport. On May 17, 2024, the jury awarded punitive damages in favor of Passport in the amount of $15 million. (See May 16 & 17, 2024, Minute Orders; May 17, 2024, Verdict Form [Punitive Damages].)

On June 6, 2024, plaintiffs filed a request for the dismissal of Avenatti and Avenatti Associates from the action, without prejudice.

On June 18, 2024, the Court entered a Judgment After Trial By Jury (the judgment). On June 20, 2024, in response to Starr Indemnity’s request, the Court issued a statement of decision with respect to Starr Indemnity’s defense of recission.

On July 31, 2024, Passport filed a motion for an order awarding attorney’s fees and costs (the fee motion) made pursuant to Brandt v. Superior Court (1985) 37 Cal.3d 813, a motion for an order awarding prejudgment interest on the policy amount and on any award of attorney’s fees and costs (the prejudgment interest motion), and a motion for an order to file under seal exhibits M and N to the declaration of Lawrence J. Conlan (Conlan) submitted in support of the fee motion (the motion to seal). The fee motion and prejudgment interest motion were each opposed by Starr Indemnity.

On September 30, 2024, the Court entered an order denying the motion to seal of Passport, and directing Passport to, on or before October 10, 2024, file in the public record an unredacted version of the Conlan declaration submitted in support of Passport’s fee motion. (Sept. 30, 2024, Minute Order.) Further, the Court continued the hearing on the fee motion and the prejudgment interest motion. (Ibid.)

On September 30, 2024, Passport filed a supplemental Conlan declaration, and on October 7, 2024, filed a notice of errata which included an unredacted version of exhibit L to that declaration.

On November 18, 2024, the Court entered a Minute Order (the Minute Order) granting the fee motion. As to the prejudgment interest motion, the Court found, for all reasons further discussed in the Minute Order, that Passport was entitled to an award of prejudgment interest as to the amount of $3,990,000 in policy benefits recovered by Passport in this action, at the legal rate of 10 percent per annum from November 2, 2021, through the date on which the judgment was entered in this action (or June 18, 2024). The Court further found that Passport was not entitled to compound interest, and denied Passport’s request for an award of prejudgment interest with respect to attorney’s fees and costs awarded by the Court in connection with the fee motion.

Because the calculations offered by Passport and Starr Indemnity with respect to an award of prejudgment interest did not conform to the Court’s ruling as stated in the Minute Order, the Court directed the parties to, on or before December 2, 2024, and without prejudice to their respective positions on the underlying claim of Passport, file either joint or individual reports setting forth what each party contends is a proper computation of prejudgment interest in accordance with the Court’s ruling.

On December 2, 2024, Starr Indemnity filed a supplemental brief setting forth its computations of prejudgment interest from November 2, 2021, through June 18, 2024, and from November 2, 2021, through the date the jury returned its verdict.

Also on December 2, 2024, Passport filed a supplemental brief in which Passport contends that the award of prejudgment interest should run from June 3, 2019.

Analysis:

In the Minute Order, the Court addressed the contentions of Starr Indemnity with respect to whether prejudgment interest should run from the date the jury returned its verdict or from the date the judgment was entered. The additional arguments offered by Starr Indemnity in its December 2, 2024, supplemental brief do not change the Court’s analysis or reasoning. The Court further notes that the judgment expressly provides that it “shall be the final judgment in this action on the claims between [Passport], on the one hand, and [Starr Indemnity], on the other hand. (Judgment at p. 3, ll. 16-18.)

The computation of prejudgment interest from November 2, 2021, through June 18, 2024, set forth in the supplemental brief of Starr Indemnity shows that the total amount of prejudgment interest on the award of damages for breach of contract, calculated at 10 percent, is $1,048,331.51. (Starr Indemnity Supp. Brief at p. 4.) Absent from the supplemental brief of Passport is any computation of prejudgment interest by Passport, or any other information showing or suggesting that the total calculated by Starr Indemnity is erroneous. The Court deems the absence of any objection by Passport to the computation of prejudgment interest offered by Starr Indemnity as a waiver of any such objection, and a concession as to the correctness of that computation.

For the first time, Passport argues in its supplemental brief that prejudgment interest should be calculated from June 3, 2019, and not from June 26, 2019, or the date of Starr Indemnity’s reservation of rights letter as originally argued by Passport in the prejudgment interest motion. To support this contention, Passport cites language appearing in paragraph B(2) of Section Ten of the policy, which provides that “no action will lie against the Company, nor will payment for loss be required, until thirty (30) days after the required proof of loss is filed with the Company and the amount of loss is determined as described in Section Three - Physical Damage Coverage of the Policy.” (Supp. Conlan Decl., Exh. A at p. 37.) Passport contends that this language required Starr Indemnity to pay undisputed policy benefits within 30 days of May 3, 2019, the date on which Passport submitted its claim for coverage.

Though Passport appears to contend that the Court “inquired” in its Minute Order as to whether any provision of the policy provided for payment of the loss on an earlier date, the Court did not make this inquiry. Instead, the Court observed that “wholly absent from the prejudgment interest motion is any reasoned argument showing that any provision of the policy provided for payment of the loss on an earlier date.” (Nov. 18, 2024, Minute Order.) As noted in the Minute Order, Passport did not raise in its original moving papers the factual or legal theories now raised in its supplemental brief.

Passport effectively requests that the Court reconsider its Minute Order based on the new and different factual arguments offered for the first time in its supplemental brief, to which Starr Indemnity has had an insufficient, if any, opportunity to respond. (Gilbert v. City of Sunnyvale (2005) 130 Cal.App.4th 1264, 1279 [“[t]he essence of procedural due process is notice and an opportunity to respond[]”].) In addition, Passport has offered no reasoned argument demonstrating that its request for reconsideration of the Minute Order is timely. (See Code Civ. Proc., § 1008, subd. (a) [setting forth time within which an application for reconsideration of an order based on “new or different facts, circumstances, or law” must be made].) Moreover, absent from the supplemental brief is any demonstration of diligence by Passport, or any “explanation for not presenting the new or different information earlier.” (Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 833, 839; see also Cordova v. 21st Century Ins. Co. (2005) 129 Cal.App.4th 89, 110.) For these reasons, the Court declines to reconsider its ruling.

Even if the Court were to grant Passports ostensible request to reconsider the Minute Order based on the new and different arguments offered by Passport in its supplemental brief, Passport’s arguments are not persuasive. A reasonable interpretation of the plain language of the provision cited by Passport indicates only that Starr Indemnity is not obligated to pay a loss earlier than 30 days after a proof of loss is filed. Considering the remaining language of the provision which also requires that a determination of the loss under a different section of the policy be made before payment of a loss is required, Passport has failed to show why the provision cited in the supplemental brief, expressly or by inference, requires that Starr Indemnity, under the circumstances present here, pay a loss not later than 30 days after a proof of loss is filed, or on a different specific date after the 30 day time period following the filing of a proof of loss elapses. (See Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807.) For these reasons, Passport’s strained interpretation of the policy’s plain language does not change the analysis or reasoning set forth in the Minute Order. 

For all reasons discussed above and in the Minute Order, the Court will grant the prejudgment interest motion, in part, and award Passport prejudgment interest in the amount of $1,048,331.51.