Las Vegas Sands, Inc. et al v. National Union Fire Insurance Company of Pittsburgh, PA, No. 2:2022cv00461 - Document 128 (D. Nev. 2023)

Court Description: ORDER granting 127 Stipulation to Withdraw Plaintiff's Motion to Seal ECF 93 as to Exhibits 18 and 19. Signed by Magistrate Judge Brenda Weksler on 11/8/2023. (Copies have been distributed pursuant to the NEF - CT)

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Las Vegas Sands, Inc. et al v. National Union Fire Insurance Company of Pittsburgh, PA 1 2 3 4 5 6 7 9 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 8 10 11 12 13 14 15 16 17 J. Randall Jones, Esq. (#1927) r.jones@kempjones.com Michael J. Gayan, Esq. (#11135) m.gayan@kempjones.com KEMP JONES, LLP 3800 Howard Hughes Parkway Seventeenth Floor Las Vegas, Nevada 89169 Telephone: (702) 385-6000 Facsimile: (702) 385-6001 Robin L. Cohen, Esq. (Admitted pro hac vice) Marc T. Ladd, Esq. (Admitted pro hac vice) Alexander M. Sugzda, Esq. (Admitted pro hac vice) Jason D. Meyers, Esq. (Admitted pro hac vice) COHEN ZIFFER FRENCHMAN & MCKENNA LLP 1325 Avenue of the Americas New York, NY 10019 Telephone: (212) 584-1890 Facsimile: (212) 584-1891 rcohen@cohenziffer.com mladd@cohenziffer.com asugzda@cohenziffer.com jmeyers@cohenziffer.com Attorneys for Plaintiffs Las Vegas Sands, Inc. n/k/a Las Vegas Sands, LLC & Las Vegas Sands Corp. 18 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 19 20 21 22 LAS VEGAS SANDS, INC. n/k/a LAS VEGAS SANDS, LLC; and LAS VEGAS SANDS CORP. Plaintiffs, 23 24 25 26 27 Doc. 128 v. Case No.: 2:22-cv-00461-JCM-BNW STIPULATION AND [PROPOSED] ORDER TO WITHDRAW PLAINTIFFS’ MOTION TO SEAL [ECF NO. 93] AS TO EXHIBITS 18 & 19 NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant. 28 1 STIPULATION AND [PROPOSED] ORDER TO WITHDRAW MOTION TO SEAL [ECF No. 93] AS TO EXHIBITS 18 & 19 Dockets.Justia.com kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 Plaintiffs Las Vegas Sands, Inc. n/k/a Las Vegas Sands, LLC and Las Vegas Sands Corp. 2 (together, “Plaintiffs”) and Defendant National Union Fire Insurance Company of Pittsburgh, 3 Pa. (“National Union”) (collectively, the “Parties”), through their respective counsel of record, 4 hereby stipulate and agree to withdraw Plaintiffs’ Motion to Seal, ECF No. 93, as to Exhibits 18 5 and 19, as follows: 6 1. 7 Protective Order (the “Protective Order”). See ECF No. 35; ECF No. 38. 8 2. 9 ECF No. 95, with an accompanying Motion to Seal certain exhibits, including Exhibits 18 and 10 19. ECF No. 93. Exhibits 18 and 19 are documents that National Union produced and marked 11 as Confidential pursuant to the Protective Order. 12 3. 13 94, with redactions relevant to the proposed sealed exhibits, including Exhibits 18 and 19. 14 Attached as Exhibit A is an updated unredacted version of Plaintiffs’ Motion for Summary 15 Judgment (ECF No. 94) reflecting the change in status of Exhibits 18 and 19 to unsealed. 16 4. 17 Seal as to Exhibits 18 and 19, and directing Plaintiffs to file a renewed motion to seal Exhibits 18 18 and 19 by November 20, 2023, that explains what compelling reasons exist for their sealing 19 (the “Order”). ECF No. 111. 20 5. 21 whether Exhibits 18 and 19 need to be sealed. National Union did not object to unsealing 22 Exhibits 18 and 19. Thus, the parties agree that Plaintiffs may withdraw their Motion to Seal 23 (ECF No. 93) as to Exhibits 18 and 19 such that those documents will be publicly filed. On September 26, 2022, the Court granted the Parties’ Stipulated Confidentiality and On September 29, 2023, Plaintiffs filed their Motion for Partial Summary Judgment, Plaintiffs also filed a redacted version of their Motion for Summary Judgment, ECF No. On October 19, 2023, the Court issued an Order denying in part Plaintiffs’ Motion to On October 20, 2023, the Parties met and conferred regarding the Court’s Order and 24 IT IS SO STIPULATED. 25 DATED this 1st day of November, 2023. 26 KEMP JONES, LLP 27 _/s/ Michael J. Gayan___________________ J. Randall Jones, Esq. (#1927) Michael J. Gayan, Esq. (#11135) 3800 Howard Hughes Parkway, 17th Floor 2 28 1 2 3 4 5 6 7 9 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 8 10 Las Vegas, Nevada 89169 Robin L. Cohen, Esq. (Admitted pro hac vice) Marc T. Ladd, Esq. (Admitted pro hac vice) Alexander M. Sugzda, Esq. (Admitted pro hac vice) Jason D. Meyers, Esq. (Admitted pro hac vice) COHEN ZIFFER FRENCHMAN & MCKENNA LLP 1325 Avenue of the Americas New York, New York 10019 Attorneys for Plaintiffs Las Vegas Sands, Inc. n/k/a Las Vegas Sands, LLC & Las Vegas Sands Corp. DATED this 1st day of November, 2023. PRHLAW LLC 11 12 13 14 15 16 17 18 /s/ Courtney A. Palko Paul R. Hejmanowski, Esq. (#94) Charles H. McCrea, Esq. (#104) 520 South Fourth Street, Suite 360 Las Vegas, Nevada 89101 Michael J. Hartley (Admitted pro hac vice) Courtney A. Palko (Admitted pro hac vice) BAUTE CROCHETIERE HARTLEY & McCOY LLP 777 South Figueroa Street, Suite 3800 Los Angeles, California 90017 Attorneys for Defendant National Union Fire Insurance Company of Pittsburgh, PA. 19 20 ORDER 21 Based on the foregoing stipulation by the Parties, and for other good cause appearing, 22 IT IS HEREBY ORDERED, ADJUDICATED, and DECREED that Plaintiffs’ Motion 23 24 25 to Seal, ECF No. 93, is withdrawn as to Exhibits 18 and 19. IT IS SO ORDERED IT IS SO ORDERED. DATED: 1:31 pm, November 08, 2023 26 __________________________________ 27 BRENDA WEKSLER UNITED STATES MAGISTRATE JUDGE 28 3 EXHIBIT A 1 2 3 4 5 6 7 9 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 8 10 11 12 13 14 J. Randall Jones, Esq. (#1927) r.jones@kempjones.com Michael J. Gayan, Esq. (#11135) m.gayan@kempjones.com KEMP JONES, LLP 3800 Howard Hughes Parkway Seventeenth Floor Las Vegas, Nevada 89169 Telephone: (702) 385-6000 Facsimile: (702) 385-6001 Robin L. Cohen, Esq. (Admitted pro hac vice) Marc T. Ladd, Esq. (Admitted pro hac vice) Alexander M. Sugzda, Esq. (Admitted pro hac vice) Jason D. Meyers, Esq. (Admitted pro hac vice) COHEN ZIFFER FRENCHMAN & MCKENNA LLP 1325 Avenue of the Americas New York, NY 10019 Telephone: (212) 584-1890 Facsimile: (212) 584-1891 rcohen@cohenziffer.com mladd@cohenziffer.com asugzda@cohenziffer.com jmeyers@cohenziffer.com 15 16 17 Attorneys for Plaintiffs Las Vegas Sands, Inc. n/k/a Las Vegas Sands, LLC & Las Vegas Sands Corp. 18 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 19 20 21 LAS VEGAS SANDS, INC. n/k/a LAS VEGAS SANDS, LLC; and LAS VEGAS SANDS CORP. 22 Plaintiffs, Case No.: 2:22-cv-00461-JCM-BNW PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT 23 24 25 ORAL ARGUMENT REQUESTED v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., 26 Defendant. 27 28 1 PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 Pursuant to Federal Rule of Civil Procedure 56, Plaintiffs Las Vegas Sands, Inc. n/k/a 2 Las Vegas Sands, LLC (“LVSI”) and Las Vegas Sands Corp. (“LVSC”; together with LVSI, 3 “LVS”) move for partial summary judgment against Defendant National Union Fire Insurance 4 Company of Pittsburgh, Pa. (“National Union”) on LVS’s Second and Third Causes of Action 5 (Breach of Contract for Duty to Defend/Defense Costs Coverage and Breach of Contract for 6 Settlement Coverage) in the Complaint (the “Motion”). See ECF No. 1. Specifically, LVS 7 requests summary judgment in its favor that National Union is obligated under its Directors, 8 Officers and Private Company Liability Insurance Policy, Policy No. 360-88-71, for the policy 9 period of October 6, 2003 to December 6, 2004 (the “Policy”) to pay LVS’s defense costs 10 incurred in defending against the underlying lawsuit Richard Suen & Round Square Co. v. Las 11 Vegas Sands Inc. n/k/a Las Vegas Sands LLC, No. A493744 (Nev. Dist. Ct., Clark Cnty.) (the 12 “Suen Action” or “Suen”) up to the full Policy limit, and is obligated to pay LVS’s settlement 13 payment in Suen only in the case and to the extent that the Court finds the Policy limit is not 14 already exhausted by payment of defense costs. 15 This Motion is based upon: (1) this Notice; (2) the following Memorandum of Points 16 and Authorities; (3) the accompanying Declaration of Marc T. Ladd (the “Ladd Declaration”) 17 filed concurrently herewith; (4) the exhibits1 attached to the Ladd Declaration; (5) all pleadings 18 and papers on file in this action; and (6) such other matters as may be presented to the Court at 19 the Court’s request and/or at the time of a hearing on this Motion if set. 20 DATED this 29th day of September, 2023. 21 KEMP JONES, LLP 22 _/s/ Michael J. Gayan____________________ J. Randall Jones, Esq. (#1927) Michael J. Gayan, Esq. (#11135) 3800 Howard Hughes Parkway Seventeenth Floor Las Vegas, Nevada 89169 23 24 25 26 Robin L. Cohen, Esq. (Admitted pro hac vice) Marc T. Ladd, Esq. (Admitted pro hac vice) 27 28 1 All “Ex.” references herein are to the Ladd Declaration. 2 PROOF OF SERVICE 1 2 3 Alexander M. Sugzda, Esq. (Admitted pro hac vice) Jason D. Meyers, Esq. (Admitted pro hac vice) COHEN ZIFFER FRENCHMAN & MCKENNA LLP 1325 Avenue of the Americas New York, New York 10019 4 5 6 Attorneys for Plaintiffs Las Vegas Sands, Inc. n/k/a Las Vegas Sands, LLC & Las Vegas Sands Corp. 7 9 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 PROOF OF SERVICE MEMORANDUM OF POINTS AND AUTHORITIES 1 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 2 I. INTRODUCTION 3 The underlying Suen Action was litigated for over a decade in the Nevada state courts, 4 through years of discovery, motion practice, two full jury trials and the start of a third trial, and 5 it reached Nevada’s highest court twice before ultimately settling in 2019. However, the issue 6 of whether National Union improperly evaluated coverage and denied its obligation to pay 7 LVS’s defense costs in Suen that entire time is straightforward. Under Nevada law, determining 8 whether an insurer owes a defense obligation is achieved by comparing the allegations of the 9 complaint with the terms of the policy, and the insured is entitled to defense coverage if there is 10 even a “potential for coverage” based on those allegations.”2 Here, National Union never even 11 did this analysis. Rather, within 24 hours of receiving notice of Suen, National Union made the 12 decision to deny defense coverage, based entirely on a single Policy exclusion intended for loss 13 arising from a claim for “contractual liability” under an “express contract or agreement.” In the 14 process, however, National Union completely missed the Suen complaint’s other allegations and 15 causes of action beyond breach of contract, including a claim for quantum meruit that, by 16 definition, could not arise out of an “express contract.” Since then, National Union has spent the 17 last decade attempting to backfill that initial incomplete and hasty denial by claiming that the 18 quantum meruit claim was “impliedly” denied (it was not), by arguing that LVS never contested 19 the denial (it did), and by alleging all-new coverage defenses. However, none of this changes 20 the simple fact that National Union had an obligation to contemporaneously pay LVS’s defense 21 costs for Suen until its Policy limit was exhausted. 22 Suen arose from a business relationship between Hong Kong citizen Richard Suen (and 23 his company Round Square Company Limited (“Round Square”)) and LVS, LVS’s then- 24 Chairman and CEO Sheldon Adelson, and LVS’s then-president William Weidner. Suen alleged 25 that Mr. Suen and his associates had provided services to LVS in and around 2000-01 to assist 26 LVS in getting approved to conduct gambling-related activities in the Macau Special 27 28 United Nat’l Ins. Co. v. Frontier Ins. Co., 99 P.3d 1153, 1155 (Nev. 2004); see also Andrew v. Century Sur. Co., 2014 WL 1764740, at *6 (D. Nev. Apr. 29, 2014). 4 PROOF OF SERVICE 2 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 Administrative Region (“Macau SAR”) in the People’s Republic of China, such as by 2 introducing Messrs. Adelson and Weidner to government officials and advising on potential 3 investors. When, after that, LVS continued with the formal concession process, plaintiffs alleged 4 LVS and Mr. Suen exchanged three short faxes in July and September 2001 stating that Mr. 5 Suen would get a 2% ownership interest and a “success fee” of $5 million if LVS obtained the 6 concession and opened a casino property. However, when LVS opened the Macau SAR property 7 later in 2004, LVS refused Suen’s request for payment because in the years after those faxes 8 Suen had done nothing to help LVS obtain the concession. The parties’ subsequent negotiations 9 for an alternative fee fell through, and Mr. Suen and Round Square sued in October 2004 (the 10 “Suen Complaint”) asserting claims for (1) breach of contract (based on the three 2001 faxes 11 allegedly making a “contract”), (2) fraud, and (3) quantum meruit for the reasonable value of 12 the services the plaintiffs alleged they provided. National Union received LVS’s notice of the 13 Suen Complaint on November 2, 2004. On November 3, National Union decided to deny 14 coverage. 15 While National Union acknowledged in 2004 that LVSI and its executives were insureds 16 under the Policy, and that the Suen Action would trigger the Policy’s coverage grant, National 17 Union claimed it had reviewed the Suen Complaint and the Policy and found defense coverage 18 was precluded under the Policy’s exclusion 4(h) (the “Contract Exclusion”). The Contract 19 Exclusion, as written, excludes coverage for loss in connection with a claim alleging, arising out 20 of, or based on the “actual or alleged contractual liability of the Company under any express 21 contract or agreement[.]” However, it was apparent from National Union’s denial letter and it 22 has since been confirmed by National Union’s internal documents produced in this action that 23 National Union did not evaluate the entire Suen Complaint for defense coverage. Specifically, 24 National Union missed that the Complaint sought non-contractual relief under a claim for 25 quantum meruit that was irrespective of any contract,3 and it failed to evaluate the allegations of 26 the fraud cause of action. When LVS’s broker wrote to National Union on LVS’s behalf to point 27 28 ECF No. 1-4 at 2 (denial letter stating incorrectly “[t]he Complaint states two claims for relief, breach of contract and fraud”). 5 PROOF OF SERVICE 3 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 out the many inaccuracies in the denial letter, National Union’s claims handler ignored it, never 2 logged that it happened in the claim log, and falsely reported internally to her superiors that 3 National Union “did not receive a response” to the letter.4 With no support from its insurer, LVS 4 turned its attention fully toward defeating Suen on the merits. 5 Through two separate jury trials, the court and then a jury in Suen determined that there 6 was no contract between the parties. Rather, each time, the only basis for plaintiffs’ recovery 7 was quantum meruit, which, under Nevada law, is not “contractual liability” and only exists “in 8 the absence of an express contract” or agreement,5 elements that are required for the Contract 9 Exclusion to apply. Thus, while National Union breached its duty to pay defense costs for the 10 Suen Action at the outset because the Suen Complaint allowed for the possibility of coverage 11 outside the Contract Exclusion that the Exclusion never applied was borne out in the Suen 12 Action verdicts in 2008 and 2013. As such, in 2017, after the Supreme Court’s second decision 13 that affirmed the liability on quantum meruit, LVS’s broker reached out again to National Union 14 to conduct an actual coverage analysis this time. On the surface, National Union agreed to take 15 another look; however, National Union had no intention of “re-visiting” its prior denial, a 16 decision made even “eas[ier]” by the fact that LVS no longer purchased insurance with National 17 Union.6 Tellingly, National Union’s re-review of the file confirmed that it never analyzed 18 coverage for the quantum meruit claim in the first denial. Nevertheless, based solely on the 19 Policy and first amended complaint, National Union now insisted that quantum meruit the 20 claim LVS was just found liable on also fell under the Contract Exclusion. 21 There is no dispute that the Contract Exclusion would apply to the Suen plaintiffs’ claims 22 for breach of contract and breach of the covenant of good faith and fair dealing (the latter added 23 by amendment in Suen in 2005). Those claims sought damages for alleged contractual liability 24 based on an alleged contract (the 2001 faxes). But National Union’s interpretation in 2017 that 25 expanded the scope of the Contract Exclusion to the quantum meruit claim to avoid all coverage 26 27 4 Ex. 1 at APP00003-04. Atwell v. Westgate Resorts, Inc., 2019 WL 4738010, at *4 (D. Nev. Sept. 28, 2009) (emphasis added). 6 Ex. 2 at APP00021. 6 PROOF OF SERVICE 5 28 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 not only ran contrary to Nevada law, it required that National Union rewrite the terms of the 2 Exclusion. Under Nevada law, an insurer has a defense obligation for the entire lawsuit as long 3 as a single allegation in the complaint is arguably covered, and exclusions are interpreted 4 narrowly and only apply when the insurer’s reading is the “only reasonable” interpretation.7 The 5 quantum meruit claim never arose from, or was based on, alleged contractual liability under an 6 express contract pursuant to the Contract Exclusion: there was no express contract, and, if Suen 7 never sent the three 2001 faxes that he alleged had formed a “contract,” the Suen plaintiffs still 8 had the same allegations and claim for quantum meruit that they ultimately prevailed on. And 9 the fraud count was always potentially covered which National Union tacitly admitted in 10 2017 meaning National Union should have been, at a minimum, paying LVS’s defense costs 11 from 2004 until the fraud count was dismissed in 2010. But National Union has paid nothing, 12 and it now maintains that the Contract Exclusion always applied to the fraud count as well. 13 In addition to the Contract Exclusion, National Union has also asserted that the Policy’s 14 Exclusion 4(a) bars coverage. Exclusion 4(a), referred to as the “Illegal Profit Exclusion,” 15 precludes coverage where the insured made a profit or gained an advantage to which it was “not 16 legally entitled” and a “final adjudication” establishes that such conduct took place. Courts have 17 held that this Exclusion is intended for corporate malfeasance, such as insider trading, where an 18 insured must return illegal profits or gains. The Suen Action never accused the LVS insureds of 19 obtaining a profit or advantage that was illicit in nature or that the LVS insureds were not legally 20 entitled to (nor was there any final adjudication establishing this took place). Rather, the Suen 21 plaintiffs sought their fair compensation for the alleged services they rendered to LVS. Same as 22 with the Contract Exclusion, National Union’s interpretation of the Illegal Profit Exclusion to 23 the facts here exceeds all reasonable bounds. 24 The Suen Action has always satisfied the Policy’s insuring agreement, and no exclusion 25 applies. Thus, National Union owed LVS a defense obligation from the outset of the Suen Action 26 until the Policy limit was exhausted. LVS’s defense costs alone for the Suen Action are 27 approximately $34 million, far in excess of the Policy’s $250,000 retention and $20 million 28 7 Century Sur. Co. v. Casino W., 329 P.3d 614, 616 (Nev. 2014). 7 PROOF OF SERVICE limit. Even if National Union had the right to challenge the reasonableness of these costs despite 2 having denied coverage (it does not), LVS’s costs were reviewed for reasonableness in real time 3 by in-house attorneys, and were reasonable and necessary under the Brunzell8 factors, given the 4 size and nature of the Suen litigation. Accordingly, LVS respectfully requests judgment on its 5 Second Cause of Action for the Duty to Pay Defense Costs for the full Policy limit. LVS also 6 requests judgment on its Third Cause of Action for the Duty to Indemnify the Suen settlement 7 only if the Court finds that the Policy limit was not already exhausted by defense costs. 8 II. 9 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 STATEMENT OF UNDISPUTED FACTS A. 10 The Policy Provides Broad Defense Costs And Indemnity Coverage For The Company And Its Executives 11 The Policy was issued to Interface Group Holding Company, Inc., an LVS-related 12 company, for the policy period of October 6, 2003 to October 6, 2004, which was extended twice 13 by endorsement to December 6, 2004. ECF No. 49-1, Declarations Item 3, and Endts. 23 and 14 24. Las Vegas Sands, Inc. (LVSI), LVS’s primary operating company at the time of issuance, 15 was added as a named insured by endorsement. Id., Endt. 12. The Policy provides $20 million 16 in coverage, excess of a $250,000 self-insured retention, for “Loss” arising from a “Claim” first 17 made during the Policy period for allegations of “Wrongful Acts.” Id., Declarations Items 4 and 18 5 and § 1. The Policy defines “Loss” to include “damages . . . settlements, pre- and post- 19 judgment interest, and Defense Costs,” the latter of which is defined as the “reasonable and 20 necessary fees, costs and expenses consented to by [National Union] resulting solely from the 21 investigation, adjustment, defense and appeal of a Claim against the Insureds . . . .” Id. §§ 2(k) 22 and 2(e). 23 The Insuring Agreement further provides that National Union “shall, in accordance with 24 and subject to Clause 8, advance Defense Costs of such Claim prior to its final disposition” 25 based on “a Claim . . . for any actual or alleged Wrongful Act.” Id. § 1.B (emphasis added). 26 Similarly, the Defense Provisions subsection provides that, “[r]egardless of whether [a] defense 27 is . . . tendered, [National Union] shall advance Defense Costs (excess of the applicable retention 28 8 Brunzell v. Golden Gate Nat’l Bank, 455 P.2d 31 (Nev. 1969). 8 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 amount) of such Claim prior to its final disposition.” Id. § 1.9 Under Clause 8 of the Policy, LVS 2 has the option to (1) tender to National Union an obligation to carry out the defense, “even if 3 such Claim is groundless, false or fraudulent,” or (2) retain its own attorneys, and in that event, 4 National Union “shall advance nevertheless, at the written request of [LVS], Defense Costs prior 5 to the final disposition of a Claim.” Id. § 8. Accordingly, the Policy requires that National Union 6 contemporaneously advance Defense Costs based on allegations. Furthermore, there is no 7 provision in the Policy for the allocation or limitation of coverage for Defense Costs based on 8 covered and non-covered claims or causes of action included in a single lawsuit. 9 National Union’s almost 20-year refusal to cover any costs associated with Suen is based 10 on the Contract Exclusion. That Exclusion provides that National Union “shall not be liable to 11 make any payment for Loss in connection with a Claim made against an Insured . . . alleging, 12 arising out of, based upon or attributable to any actual or alleged contractual liability of the 13 Company under any express contract or agreement.” Id., Endt. 6. In its legal briefing, National 14 Union also has cited Exclusion 4(a), the Illegal Profit Exclusion, which provides, in relevant 15 part, that National Union shall not be liable to make payment for Loss in connection with a 16 Claim “arising out of, based upon or attributable to the gaining of any profit or advantage to 17 which a final adjudication adverse to the Insured(s) or an alternative dispute resolution 18 proceeding establishes the Insured(s) were not legally entitled.” Id., Endt. 4. 19 B. The Suen Action 20 On or about October 15, 2004, Richard Suen, a citizen of Hong Kong, and his company, 21 Round Square, filed the Suen Action in the District Court of Clark County, Nevada, against 22 LVSI, LVSC, and Messrs. Adelson and Weidner, both officers of LVS.10 ECF No. 1-2. The 23 24 25 26 27 28 Additionally, a “Notice” clause on the first page of the Policy states: “IN ALL EVENTS, THE INSURER MUST ADVANCE DEFENSE COSTS PAYMENTS PURSUANT TO THE TERMS HEREIN PRIOR TO THE FINAL DISPOSITION OF A CLAIM.” Id., Declarations. 10 LVSI was incorporated in Nevada in April 1988 (Ex. 3) and acted as the primary operating company until August 2004, when LVSC was formed and incorporated in Nevada to act as the new parent company over all LVS entities (Ex. 4 at APP00031-32). Accordingly, on December 17, 2004, LVSI became a wholly-owned subsidiary of LVSC after LVSC acquired 100% of LVSI’s capital stock in “a reorganization of entities under common control, in a manner similar to pooling-of-interests.” Id.; Ex. 5. On July 28, 2005, LVSI converted into a limited liability 9 9 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 Amended Suen Complaint was filed in the Suen Action on or about May 17, 2005. ECF No. 1- 2 3. The Amended Suen Complaint contained essentially the same allegations as the original Suen 3 Complaint, the primary differences being that it (1) dismissed LVSC as a defendant since LVSI 4 was the operating company at the time of the acts alleged in the Complaints, not LVSC11 (see 5 Ex. 9, dismissing LVSC), and (2) added a cause of action for Breach of the Implied Covenant 6 of Good Faith and Fair Dealing. ECF No. 1-3 ¶¶ 32-37. 7 The original and Amended Suen Complaints alleged that Suen and Round Square had 8 performed certain activities to assist LVS in obtaining a concession to conduct casino and resort 9 activities in the Macau SAR, such as meeting with defendants on strategy, advising on 10 presentations for meetings with government officials, and introducing defendants to such 11 officials and other influential individuals in 2000 and 2001. See ECF No. 1-2 ¶¶ 14, 18, 40-41; 12 ECF No. 1-3 ¶¶ 13, 17, 46-47. These services allegedly provided by Suen and his group were 13 described in paragraphs 14 and 18, and 13 and 17, of the original and Amended Suen 14 Complaints, respectively. As LVS moved forward with the formal process for the gaming 15 concession, Messrs. Suen and Weidner exchanged three faxes in 2001 negotiating a payment to 16 plaintiffs if a casino was opened in the Macau SAR, including that Suen would get a $5 million 17 “success fee” and a 2% ownership interest in the property being opened. ECF No. 1-2 ¶¶ 15-17; 18 ECF No. 1-3 ¶¶ 14-16; ECF Nos. 71-1, 71-2, and 71-3. 19 A few years later in 2004, after LVS was granted a gaming concession in the Macau 20 SAR and opened its first property, Mr. Suen reached out to LVS for compensation. However, 21 LVS denied that the plaintiffs had done anything to help procure the concession: defendants 22 claimed the meetings Mr. Suen played a part in arranging did not impact (and under applicable 23 law, could not have impacted) the decision by the Macau SAR authorities to grant the concession 24 25 26 27 28 company called Las Vegas Sands, LLC, of which LVSC remains the sole member and parent corporation to this day. Exs. 6 and 7. 11 In 2013, the Suen case caption was mistakenly changed to “Las Vegas Sands Corp.” based on LVS’s counsel’s erroneous statement in a hearing that LVSC was the correct party. On March 26, 2019, the court entered an order on stipulation of the parties rectifying that error and amending the case caption to reflect that Las Vegas Sands, Inc. (n/k/a Las Vegas Sands, LLC, supra n.10) was (and always was) the proper defendant. Ex. 8. 10 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 to LVS. See, e.g., Ex. 10 at APP00205-08; Ex. 11 at APP00267-68. Rather, it was LVS’s 2 substantial experience in the gaming industry and diligent efforts during the application process 3 in the Macau SAR well after the meetings that got LVS the concession. See id. The parties 4 discussed an alternative fee for Mr. Suen, including a “procurement deal” under which Mr. Suen 5 would work for LVS as a purchasing agent. See, e.g., Ex. 10 at APP00191 and APP00224-26; 6 Ex. 11 at APP00246. However, Mr. Suen declined the offer, and following subsequent requests 7 for compensation which LVS rejected, Mr. Suen brought suit in October 2004. See id.; ECF No. 8 1-2. According to the Suen Complaint, plaintiffs asserted that the three, cursory faxes in 2001 9 made up a “contract” that LVS breached, and the Amended Suen Complaint alleged that LVS 10 had additional liability for breaching the contract in bad faith. ECF No. 1-2 ¶¶ 15-17, 24-31; 11 ECF No. 1-3 ¶¶ 14-16, 24-37. However, the plaintiffs’ Complaints also contended that LVS and 12 Messrs. Adelson and Weidner had committed fraud, and that, regardless of any supposed 13 contract, they should be compensated for the reasonable value of the services they performed 14 (i.e., introductions to influential government officials and advising on the presentations for those 15 officials) under a claim for quantum meruit. ECF No. 1-2 ¶¶ 32-42; id. ¶ 40 (quantum meruit 16 claim referencing allegations of services in ¶ 18 as supporting that claim); ECF No. 1-3 ¶¶ 38- 17 48. 18 After four years of litigation, in April 2008, the Suen trial court granted summary 19 judgment to LVS on the two contract claims (breach and covenant of good faith and fair dealing), 20 holding that “[t]here was no contract between” the plaintiffs and LVS, and it also dismissed the 21 cause of action for fraud, leaving only quantum meruit. Suen v. Las Vegas Sands, Inc., No. 22 A493744, 2008 WL 2692509, at *1 (Nev. Dist. Ct., Clark Cnty., Apr. 4, 2008); Suen v. Adelson, 23 No. A493744, 2006 WL 5894934, at *1 (Nev. Dist. Ct., Clark Cnty., Mar. 15, 2006). At trial, 24 LVS was found liable on quantum meruit. Suen v. Las Vegas Sands, Inc., 2008 WL 2660819, at 25 *1 (Nev. Dist. Ct., Clark Cnty., May 24, 2008) (Pls.’ Special Verdict Form); see also Suen v. 26 Las Vegas Sands, Inc., No. A493744, 2008 WL 6831952, at *1 (Nev. Dist. Ct., Clark Cnty., 27 June 30, 2008). Both sides appealed, and on November 17, 2010, the Supreme Court of Nevada 28 affirmed the dismissal of the plaintiffs’ fraud count, but reversed the earlier decision dismissing 11 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 the breach of contract counts and ordered a new trial. Las Vegas Sands, Inc. v. Suen, 367 P.3d 2 792 (Table), 2010 WL 4673567, at *1 (Nev. 2010). The Supreme Court also rejected LVS’s 3 argument that Suen could not recover in quantum meruit for the “efforts” of his business 4 associates, stating that a valid claim for quantum meruit can be asserted “[w]hen there is no 5 express agreement but the plaintiff asserts a right to reasonable compensation.” Id. at *2. 6 In 2013, a second trial was conducted, and the court instructed the jury that plaintiffs 7 sought to establish liability on one of two alternative legal theories: contract and quantum meruit. 8 ECF No. 49-2, at APP114. The court instructed the jury on the quantum meruit claim as follows: 9 Plaintiffs’ second claim is for quantum meruit. If you find there was not an enforceable contract, Plaintiffs seek in the alternative to establish a claim of quantum meruit against Las Vegas Sands. 10 11 12 13 14 15 Id. at APP136. The trial court continued: To establish a claim for quantum meruit, a Plaintiff must prove . . . [t]he Plaintiff performed [a] service at the request of or with the knowledge and acquiescence of the Defendant; and . . . Plaintiff performed under such circumstances as reasonably notified Defendant that the Plaintiff expected to be compensated. Id. at APP137. 16 The jury again rejected that there existed a contract or agreement with the plaintiffs that 17 LVS breached, and instead found LVS liable solely on the theory of quantum meruit. ECF No. 18 49-3; Suen v. Las Vegas Sands Corp., No. 04A493744, 2013 WL 3142652, at *1 (Nev. Dist. Ct., 19 Clark Cnty., May 28, 2013). LVS appealed, and in 2016, the Supreme Court of Nevada ordered 20 a new trial, agreeing with LVS that the jury’s award for the reasonable value of the plaintiffs’ 21 efforts on the quantum meruit claim was not supported by the evidence. Las Vegas Sands Corp. 22 v. Suen, 132 Nev. 998 (Table), 2016 WL 4076421, at *5 (2016). LVS continued defending itself 23 against the Suen Action, including preparing for the third trial, until 2019, when the parties 24 entered into a confidential settlement resolving the case. Ex. 12. 25 26 Over the course of its fifteen-year defense of the Suen Action, LVS incurred and paid approximately $34,176,225.49 in defense costs and related expenses. See Ex. 13. 27 28 12 PROOF OF SERVICE C. 2 On October 29, 2004, LVS, through its broker representatives at Aon, gave notice to 3 National Union and attached the Suen Complaint. ECF No. 49-4; see also ECF No. 1-4 at 1. The 4 notice stated that LVS had not yet retained defense counsel and made the following request of 5 National Union: 8 Please acknowledge receipt of this claim and provide AIG’s consent to the retention of defense counsel, and authorization to incur defense costs. If there are any litigation management guidelines, which you would request the Insureds to comply with, please provide a copy of those guidelines. 9 ECF No. 49-4 at NU00012156. The notice specifically called out to National Union that the 10 Suen Complaint alleged three causes of action: “Breach of Contract, Fraud, and Quantum 11 Meruit,” and it requested that Joe McManus, LVS’s representative at Aon, be copied on any 12 response. Id.; see also Ex. 14 (Conboy Tr.) 167:9-14; Ex. 15 (National Union sending Policy 13 information and documents to Mr. McManus as LVS’s representative). Unbeknownst to Aon or 14 LVS (until this litigation), fewer than 24 hours after receiving the notice on November 2, 2004 15 (Ex. 1 at APP00018), National Union decided to deny coverage. On November 3rd, Assistant 16 Vice President Anthony Tatulli, who would later become head of AIG’s financial lines for North 17 America, wrote on the assignment sheet for complex claims: “breach of contract suit” and under 18 “Coverage” he concluded: “Denial – Breach of contract exclusion; 4(q) exclusions . . . 4(a) + 19 4(c) [exclusions].” Id. at APP00017. A day later, on November 4th, Mr. Tatulli wrote to LVS, 20 copying Mr. McManus, stating that AIG Complex Claims Director Maureen Conboy was 21 assigned to the Suen claim and would be providing a coverage letter. Id. at APP00018. 6 kjc@kempjones.com KEMP JONES LLP 7 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 National Union’s Coverage Denial 1 22 On November 30, 2004, Ms. Conboy sent a letter copying Mr. McManus denying 23 coverage. ECF No. 1-4. The letter stated that LVSI and Messrs. Adelson and Weidner were 24 Insureds under the Policy, and acknowledged that the Complaint triggered the coverage grant. 25 Id. at 1-2; Ex. 14 (Conboy Tr.) 243:15-244:6 (no dispute that Suen alleged “Claims” for 26 “Wrongful Acts”). Nevertheless, based on National Union’s “review of the Complaint and the 27 provisions of the Policy,” the letter stated that there was no coverage for Suen under the Contract 28 Exclusion because the allegations in Suen were “totally based upon and attributable to the 13 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 alleged agreement,” i.e., the 2001 faxes. ECF No. 1-4 at 1 and 3; see also Ex. 14 (Conboy Tr.) 2 247:20-248:4. Ms. Conboy’s letter missed, however, that the Suen Complaint had alleged a 3 separate claim for quantum meruit, stating that “[t]he [Suen] Complaint states two claims for 4 relief, breach of contract and fraud.” ECF No. 1-4 at 2; Ex. 14 (Conboy Tr.) 261:7-11. As such, 5 there was no evaluation of the quantum meruit claim. Ex. 14 (Conboy Tr.) 245:10-246:11; see 6 also id. 250:22-25. (“[T]here is no analysis in this letter of the allegations supporting the 7 quantum meruit claim for relief.”). Moreover, there also was no attention given to the allegations 8 of fraud either, even though the common practice, including at National Union, was to determine 9 defense coverage separately for each cause of action asserted in a suit. Id. 250:6-21; Ex. 16 10 (Trager Tr.) 215:5-10. Instead, the November 30th letter exactly followed Mr. Tatulli’s 11 November 3rd directive it denied coverage based on the Contract Exclusion; it cited exclusions 12 4(a) and 4(c), even though those exclusions required a “final adjudication” establishing the 13 excluded conduct; and it said Exclusions 4(q)(2) and (q)(3) precluded coverage, even though 14 these exclusions relating to anti-trust claims and the failure of LVS to render professional 15 services to a client never remotely applied to the allegations in Suen. Compare ECF No. 1-4 16 at 3 with Ex. 1 at APP00017.12 National Union’s failure to evaluate the allegations in Suen was 17 carried over into its internal claim logging system. Ex. 17 (claim note repeating that Suen alleged 18 two causes of action). Mr. McManus at Aon was copied on the denial letter. ECF No. 1-4 at 4. 19 A week later, on December 7, Mr. McManus sent an email on LVS’s behalf to a contact 20 of his at National Union (Mr. David Guild) that attached the denial letter and provided a separate, 21 numbered rebuttal to each ground asserted in National Union’s letter. Ex. 18; Ex. 16 (Trager 22 Tr.) 174:16-20. Mr. McManus, among other things, disputed that the Contract Exclusion applied 23 to the entire suit (“it is far from clear that any ‘express’ agreement existed at any time”), 24 commented that there was no analysis of the fraud count (“the complaint sounds in fraud as 25 well”), remarked that exclusions 4(a) and (c) required final adjudication and Suen had just been 26 filed, and asked “how in the world does [exclusion 4(q)(3)] apply???” Ex. 18. Mr. McManus 27 28 12 During discovery in this lawsuit, National Union finally conceded these exclusions did not apply on their face. Ex. 16 (Trager Tr.) 73:20-74:13. 14 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 understood it was “appropriate to issue a reservation [of National Union’s rights]” but 2 questioned “[h]ow [wa]s this an outright denial?” based on the presence of the two other non- 3 contract claims. Id. Mr. McManus said a more formal response would be forthcoming, but in 4 the meantime he asked National Union to consider all of these points, and requested that 5 National Union respond “as soon as you can.” Id. 6 Mr. Guild forwarded Mr. McManus’s December 7th email to Ms. Conboy that same day 7 (he also sent it to AIG’s head of financial lines (Ex. 19, Ex. 20 (Hughes Tr.) 177:19-20)), saying 8 “see broker comments/questions.” Ex. 18. However, there is nothing in National Union’s files 9 indicating that National Union did anything in response to Mr. McManus’s email, and no 10 documentation that coverage for Suen was further evaluated. To the contrary: Ms. Conboy 11 represented to her superiors in emails and in the internal claim log that National Union never 12 “receive[d] a response” to the denial letter (Ex. 1 at APP00003-04 and Ex. 17), which she 13 conceded at deposition may not have been accurate. Ex. 14 (Conboy Tr.) 280:3-17 (“Maybe it’s 14 right. Maybe it’s wrong [that no response was received]. I don’t – I don’t really know why it 15 matters but it says what it says.”). Ultimately, there is no evidence that National Union again 16 considered coverage for Suen. Without support from its insurer, LVS turned its focus toward 17 defending itself against the Suen Action and defeating the case. Ex. 21 (Little Tr.) 42:11-17. 18 However, following years of litigation, after the Nevada Supreme Court’s second 19 decision in the Suen Action in 2016 that affirmed liability solely on quantum meruit, it was clear 20 LVS would be liable for Suen. Accordingly, Ron Goldstein at Aon, on LVS’s behalf, reached 21 out to Kieran Hughes, AIG Vice President of Financial Lines, in the hopes of getting a serious 22 coverage evaluation for Suen. Ex. 2 at APP00022. However, it was clear no such consideration 23 would be given. Mr. Hughes responded (after removing LVS’s in-house counsel from the email) 24 to Aon’s request for a coverage evaluation that LVS should “be prepared” that National Union 25 would “not [be] re-visiting” coverage for this claim in part because the claim log said no 26 response to National Union’s denial was received (which was incorrect), and, in any event, LVS 27 was not presently purchasing coverage from AIG. Id. at APP00021 (“I’m also informed that 28 Patrick [Dumont, LVS’s CFO,] has no intention of doing any business w[ith] AIG. This 15 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 [decision to deny] is easy.”). Tellingly, when Mr. Hughes did review the Suen file, Mr. Hughes 2 not only incorrectly believed that no response to the denial was received, but he also mistakenly 3 thought (based on Ms. Conboy’s denial letter) that the original Suen Complaint had only two 4 causes of action for breach of contract and fraud, and assumed that the claim for quantum meruit 5 that was not addressed in the 2004 denial letter must have been added in by the Amended Suen 6 Complaint filed in 2005. Ex. 22 at APP00397-400. 7 Mr. Hughes assigned Suen to Complex Claims Director Andrew Trager, and on June 29, 8 2017, Mr. Trager sent a letter reiterating that Suen satisfied the elements for triggering coverage. 9 ECF No. 1-5 at 3. Contrary to the November 2004 letter, the June 2017 letter addressed coverage 10 for each claim in the Amended Suen Complaint, and this time, National Union said the Contract 11 Exclusion excluded coverage for the two contract claims (breach of contract and breach of the 12 covenant of good faith and fair dealing) and the quantum meruit claim. Id. at 4. The final letter 13 contained Mr. Hughes’ comments intended to be directed to Mr. Trager (evidencing Mr. Trager 14 did not review Mr. Hughes’ edits before sending it to LVS13) and demanded that LVS provide 15 National Union with a dozen categories of Suen documents, even though its denial was based 16 on the Amended Suen Complaint alone. Id. at 5. Nevertheless, National Union acknowledged 17 that the fraud count which was fully dismissed by 2010 did not unambiguously fall within 18 the Contract Exclusion, and asked for billings by LVS’s defense counsel that could be possibly 19 allocated just to that fraud count, which was impossible now thirteen years into Suen. Id. at 4 20 (after denying coverage for breach and quantum meruit counts, stating, “[a]s to the fraud count, 21 we reserve rights . . . .”); see also ECF No. 1-6 at 3 (“We are continuing to investigate and 22 consider coverage as to plaintiffs’ fraud claim.”); Ex. 23 at APP00402 (National Union 2017 23 claim notes stating that National Union is considering “potential coverage pursuant to the fraud 24 count”); Ex. 20 (Hughes Tr.) 150:17-151:2; id. 153:18-155:2; id. 157:5-12 (Mr. Hughes 25 agreeing that National Union acknowledged potential coverage for the fraud count in August 26 2017). 27 28 Id. at 2 (Mr. Hughes writing to Mr. Trager “? (I don’t understand this phrase)” which was included in the final letter sent to LVS). 16 PROOF OF SERVICE 13 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 A week later, LVS challenged National Union’s position that the Contract Exclusion 2 applied to the quantum meruit claim, which was separate from any alleged contract. See ECF 3 No. 49-5 at NU00011654-55. National Union responded on August 8, 2017 that LVS’s reading 4 of the Contract Exclusion was “too narrow,” and it applied to the quantum meruit claim too, 5 even though the quantum meruit claim exists only in the absence of an express agreement. ECF 6 No. 1-6 at 1.14 National Union again admitted at the very least that the fraud count would not 7 automatically fall under the Contract Exclusion. ECF No. 1-6 at 3. Nevertheless, it became clear 8 to LVS that National Union was not going to pay any amounts for the Suen Action. Ex. 24 9 (Batarseh Tr.) 64:2-17. 10 III. APPLICABLE LEGAL STANDARDS 11 A. Summary Judgment Standard 12 “The purpose of summary judgment is to avoid unnecessary trials when there is no 13 dispute as to the facts before the court.” Nw. Motorcycle Ass’n v. U.S. Dep’t of Agric., 18 F. 3d 14 1468, 1471 (9th Cir. 1994). The court shall grant summary judgment “if the movant shows that 15 there is no genuine dispute as to any material fact and the movant is entitled to judgment as a 16 matter of law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 17 (1986). The “mere existence of some alleged factual dispute between the parties will not defeat 18 [summary judgment]”; rather, “the requirement is that there be no genuine issue of material 19 fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). An issue of fact is genuine 20 only if there is “sufficient evidence favoring the nonmoving party for a jury to return a verdict 21 for that party.” Id. at 249. Once the moving party shows the absence of material fact, the 22 nonmoving party “may not rely on denials in the pleadings but must produce specific evidence, 23 through affidavits or admissible discovery material, to show that the dispute exists.” Bhan v. 24 NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991). “In essence . . . the inquiry [is] whether 25 the evidence presents a sufficient disagreement to require submission to a jury[.]” Id. at 251-52. 26 27 28 14 Moreover, National Union continued to ignore that the Contract Exclusion, by its plain terms, applied only to the liability of the “Company,” and would not under any circumstance apply to coverage for the fraud count alleged against Messrs. Adelson and Weidner in the Suen Action. Id.; see also ECF No. 49-1, Endt. 6. 17 PROOF OF SERVICE 1 Issues of insurance policy interpretation, including the triggering of an insurer’s defense 2 obligation, involve objective analysis of questions of law and are appropriate on summary 3 judgment. See Century Sur. Co. v. Casino W., Inc., 2010 WL 762188, at *2 (D. Nev. Mar. 4, 4 2010), aff’d, 578 F. App’x 720 (9th Cir. 2014). 5 B. kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 6 Rules Of Insurance Policy Interpretation And The Insurer’s Duty To Defend And Pay Defense Costs 7 “In the insurance context,” Nevada courts “broadly interpret clauses providing coverage, 8 to afford the insured the greatest possible coverage.” Fed. Ins. Co. v. Am. Hardware Mut. Ins. 9 Co., 184 P.3d 390, 392 (Nev. 2008) (citation omitted). “When construing an insurance policy 10 under Nevada law, the Court must read the policy ‘as a whole,’ and ‘its language should be 11 analyzed from the perspective of one untrained in law or in the insurance business. Policy terms 12 should be viewed in their plain, ordinary and popular connotations.’” Danganan v. Am. Family 13 Mut. Ins. Co., 2019 WL 4855140, at *3 (D. Nev. Sept. 30, 2019) (citation omitted). “If a term 14 in an insurance policy is ambiguous, it will be construed against the insurer, because the insurer 15 drafted the policy.” Id. (citation omitted). Lastly, “clauses excluding coverage are interpreted 16 narrowly against the insurer.” Nat’l Union Fire Ins. Co. of State of Pa., Inc. v. Reno’s Exec. Air, 17 Inc., 682 P.2d 1380, 1383 (Nev. 1984). 18 A liability policy “creates two contractual duties between the insurer and the insured: the 19 duty to indemnify and the duty to defend,” and “[t]he duty to defend is broader than the duty to 20 indemnify.” Century Sur. Co. v. Andrew, 432 P.3d 180, 183 (Nev. 2018) (citation omitted); 21 United Nat’l, 99 P.3d at 1158 (citation omitted). Whereas the duty to indemnify arises when 22 there is “actual coverage” under the policy’s coverage grant for settlements or judgments, the 23 duty to defend arises when there is simply “arguable or possible coverage” or the “potential” for 24 coverage under the policy, and “[i]f there is any doubt about whether the duty to defend arises, 25 this doubt must be resolved in favor of the insured.” United Nat’l, 99 P.3d at 1158 (citation 26 omitted). Furthermore, as both parties now agree,15 Nevada follows the “four corners” or 27 28 15 Previously, National Union refused to admit in its filings to the Court that its obligation to pay defense costs was determined by the potential for coverage based on a complaint’s allegations 18 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 “complaint” rule for an insurer’s defense obligation, i.e., “[d]etermining whether an insurer owes 2 a duty to defend is achieved by comparing the allegations of the complaint with the terms of the 3 policy,” id. (citation omitted), and this determination is made at the outset of the litigation. 4 Zurich Am. Ins. Co. v. Ironshore Specialty Ins. Co., 497 P.3d 625, 631 & n.9 (Nev. 2021); Centex 5 Homes v. Zurich Specialties London Ltd., 2017 WL 2232134, at *3 (D. Nev. May 19, 2017) 6 (Mahan, J.); Andrew, 2014 WL 1764740, at *6 (rejecting insurer’s attempt to look beyond facts 7 alleged in complaint to find grounds to deny defense coverage; “the Nevada Supreme Court 8 would adopt the four corners rule”). Importantly, each cause of action in a suit is analyzed for 9 defense coverage, and “it is well established that where an insurer has a duty to defend, the 10 obligation generally applies to the entire action, even though the suit involves both covered and 11 uncovered claims, or a single claim only partially covered by the policy.” Jaynes Corp. v. Am. 12 Safety Indem. Co., 2013 WL 5428095, at *2 (D. Nev. Sept. 26, 2013); Hanover Ins. Co. v. Paul 13 M. Zargis, Inc., 714 F. App’x 735, 737 (9th Cir. 2018) (same). 14 Moreover, National Union’s obligation to advance defense costs is governed by the same 15 standard as if it had carried out the defense. See, e.g., Acacia Research Corp. v. Nat’l Union Fire 16 Ins. Co. of Pittsburgh, Pa., 2008 WL 4179206, at *11 (C.D. Cal. Feb. 8, 2008) (holding that 17 National Union’s “duty to advance defense costs is [as] broad as the duty to defend . . . [t]he 18 agreement to advance defense costs must be similarly interpreted; it would be an anomaly to 19 require [National Union] to advance defense costs only for meritorious claims.” (citation 20 omitted)). Accordingly, the “duty to advance defense costs extends to costs incurred defending 21 against claims that are potentially covered under the policy.” Braden Partners, LP v. Twin City 22 Fire Ins. Co., 2017 WL 63019, at *10-11 (N.D. Cal. Jan. 5, 2017); see also Lexington Ins. Co. 23 v. Devaney, 50 F.3d 15 (Table), 1995 WL 105985, at *2 (9th Cir. 1995) (“[The insurer] correctly 24 points out that it had no duty to defend, but only to reimburse defense costs as part of the loss 25 26 27 28 under the four corners rule. See ECF No. 61 at 15-16. However, now National Union submitted an expert rebuttal report on its bad faith that repeatedly states that Nevada “is a four corners jurisdiction,” and National Union’s witnesses in discovery testified they excluded defense coverage based on the Suen Complaints alone. Ex. 25 at APP00444 & n.49, APP00445, APP00450. See also Ex. 14 (Conboy Tr.) 65:15-21; 240:12-19 (coverage is determined by comparing complaint to policy); Ex. 20 (Hughes Tr.) 124:18-125:12 (same). 19 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 under the policy. However, under California law a breach of the duty to pay the costs of defense 2 under a D&O policy will be treated much the same as a breach of the duty to defend.”). 3 IV. ARGUMENT The Suen Action Satisfies The Policy’s Coverage Grant 4 A. 5 The allegations contained in the Suen Action are precisely the type of liability for which 6 the Policy provides coverage. The Insuring Agreement provides that National Union will pay 7 LVS’s Loss for Claims first made against LVS or an Individual Insured “during the Policy 8 Period . . . and reported to [National Union] pursuant to the terms of this policy for any actual 9 or alleged Wrongful Act . . . .” ECF No. 49-1 § 1. National Union admitted that the allegations 10 in Suen constituted a covered “Claim” for “Wrongful Acts” under the Policy, and that the Action 11 was filed against both LVSI and Messrs. Adelson and Weidner, all of whom were insureds under 12 the Policy. Supra at Section II.C. Finally, the Suen Action was filed during the Policy period 13 and was timely reported to National Union on October 29, 2004. ECF No. 49-1, Endt. 24; ECF 14 No. 49-4 at NU00012156; see also ECF No. 1-4 at 1. Accordingly, the allegations in the Suen 15 Action triggered National Union’s duty to pay defense costs unless an exclusion to coverage 16 applied. 17 18 B. No Policy Exclusion Applies To Preclude Coverage For Defense Costs Incurred In The Suen Action 19 Because the Suen Action falls within the coverage grant provided by the Policy, National 20 Union has argued that a Policy exclusion, specifically the Contract Exclusion, applies to bar 21 coverage. Under Nevada law, in order for an exclusion to apply, the insurer must: (1) draft the 22 exclusion in “obvious and unambiguous language,” (2) “demonstrate that the interpretation 23 excluding coverage is the only reasonable interpretation of the exclusionary provision,” and (3) 24 establish that the exclusion “plainly applies to the particular case before the court.” Casino W., 25 329 P.3d at 616. Neither the Contract Exclusion nor the Illegal Profit Exclusion unambiguously 26 establishes that coverage is excluded for the allegations in the Suen Complaints, and therefore, 27 National Union had a duty to advance LVS’s Defense Costs for the Suen Action until the $20 28 million Policy limit was exhausted. 20 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 1. The Contract Exclusion Does Not Apply To Preclude Coverage For The Suen Action 2 From the time that National Union first denied coverage the day after it received notice 3 in November 2004 until the time that it denied coverage again in August 2017, the only real 4 basis National Union has put forward for avoiding coverage has been the Contract Exclusion. 5 However, National Union’s unduly broad reading of the Contract Exclusion is not supported by 6 the plain language of the Policy, it ignores the allegations of the Suen Action, and it is contrary 7 to longstanding tenets of Nevada law, including those regarding insurance policy interpretation. 8 The Contract Exclusion applies to Loss from a Claim that alleges, arises out of, is based 9 upon or is attributable to actual or alleged “contractual liability” under an “express contract or 10 agreement.” Supra at Section II.A. While the Suen plaintiffs’ breach of contract claim was the 11 only cause of action that National Union actually considered when it quickly denied coverage 12 in 2004, the original and Amended Suen Complaints contained two other causes of 13 action quantum meruit and fraud that always were potentially covered for the purposes of 14 defense coverage, and never unambiguously fell within the Contract Exclusion. 15 Regarding the quantum meruit claim, both Nevada courts and the Ninth Circuit hold that 16 a claim for quantum meruit arises only in the absence of an express contract. Atwell v. Westgate 17 Resorts, Inc., 2019 WL 4738010, at *4 (D. Nev. Sept. 28, 2009) (“In the absence of an express 18 contract, a party may be able to recover under the theory of quantum meruit.”); Mobius 19 Connections Grp. v. TechSkills, LLC, 2012 WL 194434, at *8 (D. Nev. Jan. 23, 2012) (stating 20 that, only where “there is no express agreement as to compensation, then one can recover the 21 reasonable value of their services under a quantum meruit claim”); Gov’t Comp. Sales Inc. v. 22 Dell Mktg., 199 F. App’x 636, 639 (9th Cir. 2006) (“A plaintiff cannot recover in quantum 23 meruit if there is an express contract . . . .”). Indeed, the Nevada Supreme Court in Suen 24 underscored what was evident from the Suen Complaints when it stated that the plaintiffs could 25 obtain compensation under quantum meruit only “[w]hen there is no express agreement[.]” Las 26 Vegas Sands, Inc., 2010 WL 4673567, at *2 (emphasis added); Mielke v. Standard Metals 27 Processing Inc., 2015 WL 18886709, at *5 (D. Nev. Apr. 24, 2015). Nevada courts are not 28 alone; it is well-established elsewhere that “a party may recover under quantum meruit only 21 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 when there is no express contract covering the services or materials furnished.” See, e.g., Vortt 2 Exploration Co., Inc. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990); Zawada v. Pa. 3 Sys. Bd. Of Adjustment, Bhd. of Ry. & S.S. Clerks, Freight Handlers, Express & Station Emps., 4 140 A.2d 335, 338 (Pa. 1958) (“That the two actions—quantum meruit and express contract— 5 are utterly distinct in nature is clear beyond question.” (citations omitted)). 6 The original Suen Complaint’s claim for quantum meruit always presented the 7 possibility of coverage for the purposes of defense coverage because that claim was by necessity 8 pled if there were no contract damages under an “express contract or agreement” as required by 9 the Exclusion. Indeed, the elements for a claim for quantum meruit do not require any contract 10 or agreement, let alone an “express” one, for LVS to have been held liable. Suen, 2010 WL 11 4673567, at *2.16 Quantum meruit simply requires a service provided with the knowledge of the 12 defendant, in circumstances where the plaintiff would expect to be compensated. Id.17 See also 13 Cass, Inc. v. Prod. Pattern & Foundry Co., 2017 WL 1128597, at *19 (D. Nev. Mar. 23, 2017) 14 (plaintiff was allowed to assert claim for quantum meruit in the alternative in the event there 15 was no express contract). Nor was LVS’s potential liability for the quantum meruit claim arising 16 out of “contractual liability” under an express contract as required by the Contract Exclusion. 17 Indeed, the Suen Action plaintiffs stated their quantum meruit claim as one for providing some 18 service to the insureds services detailed in paragraphs 14 and 18 of the original Suen 19 Complaint, and included meeting with defendants on strategy, advising on presentations for 20 meeting with government officials, and introducing defendants to such officials and other 21 influential individuals. ECF No. 1-2 ¶¶ 14 and 18. These services were performed irrespective 22 23 16 24 25 26 27 28 Since Ms. Conboy missed the quantum meruit claim in the Suen Action, she did not consider or analyze the elements of quantum meruit under Nevada law when she wrongly denied LVS’s coverage claim. Ex. 14 (Conboy Tr.) 251:1-252:4. 17 See also, e.g., Indian Harbor Ins. Co. v. Satterfield & Pontikes Construction, Inc., 2011 WL 3502483, at *3 (S.D. Tex. Aug. 10, 2011) (because the liability for quantum meruit arose only in the absence of an express contract or agreement, the policy’s breach of contract exclusion did not apply to coverage for defense costs). National Union contended that Indian Harbor was distinguishable from Suen on the ground that the quantum meruit claim in Indian Harbor was asserted in the alternative to the breach of contract claim (see ECF No. 1-6 at 2); however, that was exactly the case here as well. See supra at Section II.B.; ECF No. 49-2 at APP114. 22 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 of the three faxes subsequently sent in 2001 that the plaintiffs claimed made up a “contract” in 2 paragraphs 15-17. ECF No. 1-2 ¶¶ 15-17 and 40; see also ECF No. 1-3 ¶¶ 14-16 and 46.18 And, 3 in the Complaints, plaintiffs sought “compensation for the reasonable value of their services” 4 rendered for their quantum meruit claim (ECF No. 1-2 ¶ 41, ECF No. 1-3 ¶ 47), not contractual 5 liability. And while, under the law, National Union had a duty to pay LVS’s Defense Costs at 6 the outset of the case triggered by the Suen Complaints’ allegations alone (supra at Section 7 III.B.), nothing transpired in the fifteen-year Suen case that would have negated that initial 8 defense obligation: plaintiffs ultimately prevailed on the alternative ground of quantum meruit 9 because there was no “express contract or agreement” between plaintiffs and LVS, as recognized 10 by the trial court in the jury instructions in both Suen Action trials and by the Nevada Supreme 11 Court. See supra at Section II.B.; 2016 WL 4076421, at *4-5.19 12 Within twenty-four hours of receiving notice, National Union made the snap decision to 13 deny coverage for Suen based on an exclusion for “breach of contract,” and a host of other 14 inapplicable exclusions. Ex. 1 at APP00017. National Union then sent a letter denying coverage 15 based on an incomplete review of the Suen Complaint’s allegations, completely missing the 16 Complaint’s third cause of action for quantum meruit, and then it simply ignored the email sent 17 by LVS’s broker representative contesting National Union’s grounds for denial. Supra at Section 18 II.C. And National Union has been trying to backfill that initial, incorrect evaluation for the Suen 19 20 21 22 23 24 25 26 27 28 18 For example, in Netherlands Insurance Co. v. Lexington Insurance Co., 2013 WL 2120817, at *4 (W.D. Ky. May 15, 2013), the defendant insurer (an AIG-affiliated company) argued that the plaintiff insurer could not recover under quantum meruit because “quantum meruit only applies to situations when there is no applicable contract.” The court rejected the argument because quantum meruit could apply “in the alternative, meaning that if there was no express contract between the parties, the theory applies.” Id. (emphasis added). 19 Moreover, even if the Suen plaintiffs or the Nevada courts had couched the quantum meruit claim as one for breach of an “implied contract,” that still would not be sufficient to deny coverage for Defense Costs because the Contract Exclusion requires an “express contract or agreement.” Had National Union sought to broaden the Contract Exclusion to apply to implied contracts, it could have easily done so as other policies provide. See, e.g., Evanston Ins. Co. v. Rells Fire Prot. Inc., 2018 WL 3603066, at *2 (W.D. Wash. Apr. 4, 2018) (“The breach-ofcontract exclusion applies to ‘[c]laims arising out of breach of contract, whether written or oral, express or implied, implied-in-law, or implied-in-fact contract’ . . . .”); Am. Int’l Specialty Lines Ins. Co. v. U.S. Olympic Comm., 219 A.D.2d 458, 458-59 (N.Y. App. Div. 1995) (finding that quantum meruit claims based on implied contract are not subject to similar contract exclusions where the exclusions did not mention implied contracts). 23 PROOF OF SERVICE 1 Action ever since, but its continued pursuit to avoid coverage has rung hollow. For example, in 2 2017, when National Union did address coverage for the quantum meruit claim,20 but maintained 3 the Contract Exclusion applied to that claim as well, it stated: 7 Plaintiff’s quantum meruit claim . . . is based entirely and exclusively on an alleged agreement between Las Vegas Sands and the plaintiffs for the payment of compensation in exchange for certain services. Thus, plaintiffs’ quantum meruit claim is excluded under the Contract Exclusion, as it plainly arises out of, is based upon or attributable to an alleged contractual liability of Las Vegas Sands pursuant to an alleged agreement between the parties. 8 ECF No. 1-6 at 1 (emphasis added). First, in referring to precluding all liability as arising out of 9 an “alleged agreement,” National Union sidestepped both the requirement that the loss arise out 10 of a claim for “contractual liability” and the requirement that there must be an “express contract 11 or agreement” for the Contract Exclusion to be triggered. The Contract Exclusion’s use of the 12 words “actual or alleged” modifies the language immediately following it, i.e., the “contractual 13 liability.” In other words, the Contract Exclusion applies when contractual liability is ultimately 14 proven or alleged as the claim for breach of contract alleged in the Suen Action. But those 15 words do not modify the Contract Exclusion’s requirement for an “express contract or 16 agreement” there still has to be an “express contract or agreement” that the “actual or alleged 17 contractual liability” is based on, and here for quantum meruit there was none. 4 5 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 6 18 Second, even if National Union’s attempt to broaden the scope of the Contract Exclusion 19 beyond its plain terms were allowed, its application is still wrong under the facts of Suen. 20 Contrary to National Union’s contention, the claim for quantum meruit in the Complaint was 21 not “based entirely and exclusively on an alleged agreement.” ECF No. 1-6 at 1. Rather, the 22 quantum meruit claim was based on the services rendered (including those in the Complaint’s 23 paragraph 18), and the claim existed irrespective of the 2001 faxes, and thus did not “arise out 24 25 National Union’s corporate representative, Mr. Trager, testified in this litigation that it was National Union’s position that the initial 2004 denial letter impliedly addressed the quantum meruit claim (Ex. 16 (Trager Tr.) 115:4-116:24; id. 120:9-121:21), even though this assertion was contradicted by National Union’s own internal documents (supra at Section II.C.), and Mr. Trager’s own letter in 2017 that addressed each Suen count specifically and individually (ECF No. 1-5 at 4). 20 26 27 28 24 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 of,” nor was it “based upon” or “attributable to,” contractual liability under an express contract. 2 See, e.g., Crosby Est. at Rancho Santa Fe Master Ass’n v. Ironshore Specialty Ins. Co., 578 F. 3 Supp. 3d 1123, 1133 (S.D. Cal. 2022) (holding that a nearly identical contract exclusion did not 4 apply to claims that “could exist irrespective of the [express agreement] between the parties”); 5 see also Lifespan Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 59 F. Supp. 3d 427, 452 6 (D.R.I. 2014) (“National Union’s Exclusion 4(k) does not apply to a breach of fiduciary duty 7 claim, even if it occurs within the context of a contract or agreement.”). Here, the quantum 8 meruit claim did not arise out of an express contract; it exists only in the absence of the contract 9 claim. 10 While National Union has criticized LVS’s interpretation of the Contract Exclusion as 11 “narrow” (ECF No. 1-6 at 1), that is the proper analysis under Nevada law. Nevada law holds 12 that exclusions are construed narrowly and apply only when the insurer’s interpretation is the 13 only reasonable one, and policies are interpreted “so as to afford the greatest possible coverage 14 to the insured.” Casino W., 329 P.3d at 616. And this is especially the case in the context of a 15 defense obligation, where coverage is triggered if the claim is even potentially or arguably 16 covered, with any doubts resolved in favor of obligating the insurer to defend. Supra at Section 17 III.B. At a minimum, LVS’s interpretation that the Contract Exclusion does not apply to the 18 quantum meruit claim is reasonable, and therefore, National Union had a duty to pay all the 19 Defense Costs incurred for Suen for the length of the case until the Policy limit was exhausted. 20 However, even if the quantum meruit claim were precluded by the Contract Exclusion 21 (and it is not), there is no dispute that the Suen plaintiffs’ claim for fraud was a covered 22 “Wrongful Act” under the Policy and does not fall within the Contract Exclusion. Even in 2017, 23 National Union’s letter conceded that the Contract Exclusion did not unambiguously apply to 24 the fraud count that was potentially covered, and it asked LVS to submit copies of defense 25 invoices for work done to defend that specific claim (which was effectively impossible), before 26 LVS realized that National Union was not going to pay for anything. ECF No. 1-6 at 3. 27 Accordingly, LVS is entitled to coverage for its Defense Costs through at least November 2010, 28 when the Nevada Supreme Court affirmed the trial court’s dismissal of the fraud count. 25 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 2. The Illegal Profit Exclusion Does Not Apply To Preclude Coverage For The Suen Action 2 While National Union’s decades-long denial has been based on the Contract Exclusion, 3 National Union has cited the Illegal Profit Exclusion 4(a) in the Policy as well. ECF No. 1-4 at 4 3; ECF No. 1-5 at 3-4. This Exclusion, however, does not get National Union any closer to 5 avoiding coverage. The Illegal Profit Exclusion applies to any Claim for Loss “arising out of, 6 based upon or attributable to the gaining of any profit or advantage” to which the insured was 7 “not legally entitled,” and requires a “final adjudication . . . establish[ing]” that such illicit 8 conduct took place. Supra at Section II.A. That never happened in Suen, nor would it have 9 impeded National Union’s obligation to pay Defense Costs on a contemporaneous basis as the 10 Policy required. 11 Indeed, courts have refused to broaden the intended scope of the Illegal Profit Exclusion 12 as National Union attempts to do here, stating that the Exclusion’s purpose is “clear—to prevent 13 the looting of corporate assets by directors and officers and then, after being forced to remit the 14 funds, turning to an insurer seeking indemnification for their wrongful acts under a directors and 15 officers policy.” Nicholls v. Zurich Am. Ins. Grp., 244 F. Supp. 2d 1144, 1160 (D. Colo. 2003); 16 see also Alstrin v. St. Paul Mercury Ins. Co., 179 F. Supp. 2d 376, 400 (D. Del. 2002) (analyzing 17 a nearly identical National Union exclusion 4(a) and finding that it “would be applicable in cases 18 of theft, such as insider trading, [where] an element of the cause of action that must be proved 19 requires that the insured gained a profit or advantage to which [it] was not legally entitled” but 20 is inapplicable where the gain might be incidental to the conduct). The Ninth Circuit also has 21 rejected a similarly broad reading of the exclusion beyond this intended purpose to apply to the 22 gaining of any economic benefit. In Research Corp. v. Westport Insurance Corp., 289 F. App’x 23 989, 991 (9th Cir. 2008) (applying Arizona law), the court considered an exclusion for “any 24 ‘claim’, or ‘loss’ alleging or ‘arising out of’ . . . [a]n ‘insured’s’ unjust enrichment, obtaining 25 profit, or advantage to which the ‘insureds’ were not entitled.” The court held that applying the 26 exclusion as broadly as the insurer argued would “amount to illusory coverage” because “no 27 coverage [would be] afforded under the policy for any economic damages,” thus “eviscerat[ing] 28 the policy’s essential coverage for all losses . . . from civil claims.” Id. at 993. 26 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 Corporate looting and insider trading were not the allegations here. The Suen plaintiffs 2 alleged that LVS breached a contract, or that they had performed services for which they 3 believed they were entitled to reasonable value under quantum meruit. The plaintiffs sought 4 “compensation” from LVS. ECF No. 1-2 ¶ 41 and ECF No. 1-3 ¶ 47. At no point was there any 5 charge that LVS obtained a profit or advantage to which it was not legally entitled, nor was there 6 any final adjudication establishing the same. The factfinders in Suen that held for the plaintiffs 7 on quantum meruit did not find that LVS was “not legally entitled” to keep a profit or advantage 8 that it had to return; rather, they found that LVS should separately compensate the Suen plaintiffs 9 for their services. The Nevada Supreme Court repeatedly said that the Suen plaintiffs sought and 10 then were awarded “compensation.” Suen, 2010 WL 4673567, at *1, *2, *4, *8; Suen, 2016 WL 11 4076421, at *5 (“relying solely on the success fee does not ensure reasonable compensation” for 12 Suen plaintiffs’ services). Quantum meruit is not a claim for the return of “any profit or 13 advantage to which [a defendant] was not legally entitled,” but rather a claim for “reasonable 14 compensation” where “there is no express agreement.” Suen, 2010 WL 4673567, at *2. 15 The Illegal Profit Exclusion does not apply to the Suen Action because the factual 16 predicates for its application are absent. That is why National Union in 2017 after the second 17 and last Nevada Supreme Court decision still acknowledged that, at a minimum, the fraud 18 cause of action was potentially covered. Construing the Illegal Profit Exclusion narrowly, as 19 required under Nevada law, the Exclusion does not retroactively apply to excuse National Union 20 from its duty to advance LVS’s Defense Costs for Suen, and it does not ultimately apply to 21 National Union’s duty to cover the settlement. 22 23 C. LVS’s Defense Costs Exceeded the Policy Limit And Were Reasonable And Necessary To Its Defense Of The Suen Action 24 National Union was obligated to contemporaneously pay LVS’s and Messrs. Adelson 25 and Weidner’s Defense Costs as they were incurred during Suen, based solely on the allegations 26 in the Suen Complaints, beginning in October 2004. Instead, National Union breached that duty, 27 denied coverage, and refused to pay any Defense Costs for the next fifteen years in the Suen 28 Action, even after acknowledging in 2017 that, at a minimum, the fraud count was not strictly 27 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 excluded by the Contract Exclusion. With no insurance, LVS prudently defended Suen, and its 2 costs were reasonable and necessary to that defense. 3 Courts have held that a policyholder’s fees and costs are presumed to be reasonable, and 4 the insurer bears the burden of proving otherwise when the insurer has wrongly denied coverage 5 and left the policyholder to defend against the underlying claim on its own, and thus has every 6 financial incentive to minimize its costs. See, e.g., Taco Bell Corp. v. Cont’l Cas. Co., 388 F.3d 7 1069, 1076 (7th Cir. 2004) (finding “where there are market incentives to economize, there is 8 no occasion for a painstaking judicial review” of defense costs); Chicago Title Ins. Co. v. 9 F.D.I.C., 172 F.3d 601, 606 (8th Cir. 1999) (“an insurer’s ability to dispute the reasonableness 10 of attorney fees is diminished when it has improperly declined a tender of defense” (quotation 11 omitted)); Arenson v. Nat’l Auto. & Cas. Ins. Co., 310 P.2d 961, 967-68 (Cal. 1957) (“An 12 insurance company may not wrongfully refuse to defend its insured and thus force the insured 13 into the position of having to engage outside counsel, and then, because the defense was not 14 handled in a manner to the liking of the [insurer], refuse to hold the insured harmless against 15 payment of fees for all services reasonably performed in such defense.”).21 16 Assuming a showing of reasonableness is necessary, under Nevada law, the Court has 17 discretion in choosing the “method upon which a reasonable fee is determined,” such as a 18 lodestar amount or a contingency fee, subject only to “reason and fairness.” Shuette v. Beazer 19 Homes Holdings Corp., 124 P.3d 530, 548-49 (Nev. 2005) (quotation omitted). Though the 20 Court is not limited to one specific approach, it must conduct its analysis by “considering the 21 requested amount in light of the [Brunzell] factors,” which include “the advocate’s professional 22 qualities, the nature of the litigation, the work performed, and the result.” Id. 23 LVS’s Defense Costs are reasonable under the Brunzell factors. First, Suen was one of 24 the longest and most complex civil actions in Nevada’s history, a fifteen-year litigation that 25 involved years of discovery, depositions, and motion practice, two trials and the start of a third, 26 27 28 21 See also Columbus McKinnon Corp. v. Travelers Indem. Co., 367 F. Supp. 3d 123, 155 n.15 (S.D.N.Y. 2018) (“[I]f Defendants are required to reimburse Plaintiff for defense costs because of Defendants’ breach of the duty to defend, then the fees incurred by Plaintiff must be presumed reasonable, and the burden to demonstrate ‘unreasonableness’ will lie with Defendants.”). 28 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 and two separate appeals to the Nevada Supreme Court. Second, LVS’s defense counsel 2 obtained several favorable outcomes in the Suen Action by obtaining dismissals of claims 3 (including the fraud claims against LVS’s executives), and getting affirmances and reversals at 4 the Nevada Supreme Court. Third, the plaintiffs in Suen were seeking hundreds of millions of 5 dollars in damages. Fourth, LVS had numerous layers of in-house attorneys, including LVS’s 6 general counsel, associate general counsel, and assistant general counsel, review the defense 7 invoices in the Suen Action for reasonableness and necessity before they were paid, and they 8 disputed certain amounts that they determined were unreasonable or unnecessary. See Exs. 26, 9 27, 28; see also Ex. 24 (Batarseh Tr.) 73:25-74:16.22 LVS incurred and paid at least 10 approximately $34,176,225.49 in Defense Costs and related expenses for Suen, of which LVS 11 has been able to produce the defense invoices and proofs of payment for $33,072,714.30. Ex. 12 13.23 All of the Defense Costs in the Suen Action were both reasonable and necessary. However, 13 at the very least, $20 million of LVS’s Defense Costs were reasonable and necessary for Suen, 14 which National Union cannot dispute. As such, the Policy limit is exhausted by coverage for 15 LVS’s Defense Costs alone. 16 D. 17 To The Extent The Policy Limit Is Not Exhausted By Defense Costs, The Suen Settlement Exhausts Any Remaining Limit 18 Even if the Policy were not exhausted by Defense Costs, the settlement in Suen does 19 exhaust the limit. See Ex. 12. The duty to indemnify provides policyholders with financial 20 protection against judgments and settlements. See Century Sur. Co. v. Andrew, 432 P.3d 180, 21 183 (Nev. 2018); ECF No. 49-1 § 2(k). As opposed to the mere “potential for coverage” standard 22 for defense coverage, the “duty to indemnify arises when an insured becomes legally obligated 23 to pay damages in the underlying action that gives rise to a claim under the policy. In other 24 The reasonableness and necessity of LVS’s Defense Costs in Suen is discussed in more detail in the Rebuttal Expert Report of Kirk Lenhard, dated July 31, 2023. Ex. 29. 23 The proofs of payment include detailed CounselLink records, LVS processing sheets, copies of checks, ACH records, and bank statements that include defense counsel’s name, defense counsel’s invoice number, the purchase order or reference number, the payment reference or check number, the originating bank account number, the pay code description (e.g., “CHECK,” “ACH,” or “WIRE”), the payment month and year, the total dollar amount, the trace number or bank reference number, and the bank statement date. See ECF No. 62 at 9-10. 29 PROOF OF SERVICE 22 25 26 27 28 kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 1 words, for an insurer to be obligated to indemnify an insured, the insured’s activity and the 2 resulting loss or damage must actually fall within the policy’s coverage.” Century Sur. Co. v. 3 Casino W., Inc., 2010 WL 762188, at *5 (D. Nev. Mar. 4, 2010), aff’d, 578 F. App’x 720 (9th 4 Cir. 2014) (quotation omitted). Here, LVS settled the Suen Action for less than the amount that 5 the court awarded in the second trial for Suen six years earlier, thus minimizing the potential 6 exposure LVS faced. See supra at Section II.B. National Union has never challenged the 7 reasonableness of LVS’s settlement, nor could it in light of LVS’s prudent business decision to 8 finally end the fifteen-year litigation prior to its third trial. Additionally, for the reasons stated 9 above, the only remaining claim in Suen at the time of settlement was quantum meruit, and no 10 exclusion applies to that claim. Accordingly, to the extent that the Court finds that the $20 11 million Policy limit is not exhausted by reasonable and necessary Defense Costs, the Suen 12 settlement is still covered, and any remaining coverage under the Policy is exhausted. 13 V. CONCLUSION 14 For the foregoing reasons, LVS respectfully requests that the Court grant this Motion for 15 partial summary judgment on LVS’s Second and Third Causes of Action, ruling that National 16 Union breached its obligations under the Policy by failing and refusing to pay the Defense Costs 17 and settlement incurred for the Suen Action. DATED this 29th day of September, 2023. 18 19 KEMP JONES, LLP 20 _/s/ Michael Gayan_______________ J. Randall Jones, Esq. (#1927) Michael J. Gayan, Esq. (#11135) 3800 Howard Hughes Parkway Seventeenth Floor Las Vegas, Nevada 89169 21 22 23 24 25 26 27 28 Robin L. Cohen, Esq. (Admitted pro hac vice) Marc T. Ladd, Esq. (Admitted pro hac vice) Alexander M. Sugzda, Esq. (Admitted pro hac vice) Jason D. Meyers, Esq. (Admitted pro hac vice) COHEN ZIFFER FRENCHMAN & MCKENNA LLP 1325 Avenue of the Americas New York, New York 10019 30 PROOF OF SERVICE Attorneys for Plaintiffs Las Vegas Sands, Inc. n/k/a Las Vegas Sands, LLC & Las Vegas Sands Corp. 1 2 3 4 PROOF OF SERVICE kjc@kempjones.com KEMP JONES LLP 3800 Howard Hughes Parkway, Suite 1700 Las Vegas, Nevada 89169 (702) 385-6000 Fax (702) 385-6001 5 6 I hereby certify that on the 29th day of September, 2023, I served a true and correct copy 7 of the foregoing PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT via 8 the United States District Court’s CM/ECF electronic filing system to all parties on the e-service 9 list. 10 11 12 13 14 15 Paul R. Hejmanowski (#94) Charles H. McCrea (#104) HEJMANOWSKI & McCREA LLC 520 South Fourth Street, Suite 320 Las Vegas, Nevada 89101 Michael J. Hartley (Admitted Pro Hac Vice) Courtney A. Palko (Admitted Pro Hac Vice) 777 South Figueroa Street, Suite 3800 Los Angeles, California 90017 16 17 Attorneys for Defendant National Union Fire Insurance Company of Pittsburgh, Pa. Attorneys for Plaintiff/Counterclaim Defendants 18 19 20 /s/ Pamela McAfee__________________ An employee of Kemp Jones LLP 21 22 23 24 25 26 27 28 31 PROOF OF SERVICE

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