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  • George Meierhofer, partner at Kaufman Dolowich & Voluck LLP in New York City, was featured in an article by Cristina Violante in 360Law on July 30th, 2015.

    She wrote: The U.S. Department of Justice has petitioned the U.S. Supreme Court to overturn its ruling in U.S. v. Newman et al. that raised the bar for prosecuting insider trading cases. Here, attorneys tell Law360 why the appeal is significant.

    George Meierhofer  was quoted as saying, “The Newman decision placed onerous restrictions on the ability of the SEC and DOJ to allege insider trading by ‘tippees’ of material, nonpublic information. It requires stronger evidence of a personal benefit obtained by the tipper and casts into doubt the government’s theory that ‘constructive knowledge’ of a breach suffices to impose liability. After the Second Circuit denied an en banc rehearing, the DOJ was forced to appeal. However, since the Newman court purported to follow closely the reasoning of SEC v. Dirks, 463 U.S. 646 (1983), I would expect Newman to be affirmed and the number of future insider trading cases (both civil and criminal) to be significantly reduced.”

  • Jul 10, 2015

    Acting at the behest of President Obama’s March 13, 2014 Presidential Memoranda, the U.S. Department of Labor (DOL) recently released a proposed rule which, if adopted, could expand federal overtime coverage to approximately 4.6 million more workers in its first year. Noting that the current minimum salary for an overtime exemption under federal law has not changed in eleven years and falls below the poverty line for a family of four, was certainly a motivating factor behind the proposed rule.

  • Jul 9, 2015

    By Kevin M. Mattessich, Michael L. Zigelman, and Jonathan B. Isaacson

    In  Jacobson Family Investments, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA, 2015 Slip Op. 05273 (1st Dep’t 2015), New York’s Appellate Division was asked to interpret the coverage afforded under a financial institution bond for losses arising from the notorious Madoff Ponzi Scheme.   A non-jury trial resulted in  a $7.6M  damage award against the Insurer.   On appeal, the First Department unanimously reversed, on the law, holding that the losses were not sustained solely as a result of Madoff’s activities as an “Investment Advisor.”

    The Plaintiff investment vehicle was insured under a Financial Institution Bond issued by National Union, and sought coverage for losses sustained when its investments with Madoff disappeared.    The First Department identified two (2) critical coverage issues to resolve in order to determine whether Plaintiff was entitled to coverage under the Bond’s fidelity insuring agreement.

    The first issue was whether Plaintiff’s alleged damages qualified as a covered loss pursuant to Rider 14 of the bond which provided, in part, that covered losses included those “resulting directly from the dishonest acts of any Outside Investment Advisor, named in the Schedule below, solely for their duties as an Outside Investment Advisor, on behalf of the Insured…” [emphasis added].  It was undisputed that Madoff was listed as an Outside Investment Advisor on the relevant schedule that followed.  However, the First Department held that the evidence presented during trial[1] indisputably established that in perpetrating his Ponzi Scheme, Madoff acted in a “hybrid capacity” as both an investment advisor and a securities broker.  The Court reasoned that since Rider 14 limited coverage to losses where the identified Outside Investment Advisor acted “solely” in that capacity, any interpretation that allowed coverage for a situation in which Madoff acted, in part, as a securities broker would render the use of the term “solely” in Rider 14 superfluous and had to be rejected.

    The second issue, which in light of the first ruling became less significant, was whether coverage under the bond was excluded under Exclusion x, for “loss resulting directly or indirectly from any dishonest or fraudulent act or acts committed by any non-Employee who is a securities … broker.” The First Department held that even if there were coverage under Rider 14, such coverage would have been excluded pursuant to Exclusion x. In so holding, the Court reasoned that Exclusion x did not provide that the nonemployee must have actually been “acting as” a securities broker at the time of the loss, it only required that the nonemployee “is” a securities broker. As the trial evidence established that Madoff was not Plaintiff’s “Employee” (as that term is defined in the bond) and that he was a registered broker-dealer during the entire period he dealt with Plaintiff, Exclusion x was applicable.

    Jacobson Family Investments, Inc. provides a powerful example of how the title or role that an alleged fraudster played with respect to a scheme can affect the rights of an insured to collect on a policy of insurance or bond.  As such, it is important for insurers and their insureds to diligently investigate claims and obtain a complete understanding of an alleged scheme in order to accurately assess the coverage available for losses arising from that scheme.

     

     

    [1] That evidence included that (1) in perpetrating the Ponzi scheme resulting in Plaintiff’s losses, Madoff not only provided fraudulent investment advice, he also serviced a securities brokerage account for Plaintiff; (2) a Customer Agreement between Plaintiff and Madoff to service the brokerage account expressly referred to the creation of a broker/customer relationship; (3) in connection with the creation of the brokerage account, Plaintiff designated Madoff to act as its agent for purchases, sales or trades of securities on its behalf; (4) Plaintiff provided Madoff with funds through a brokerage account that were supposed to be used for purchases, sales or trades pursuant to the brokerage agreement, however Madoff misused those funds and provided Plaintiff with false brokerage account statements to conceal his malfeasance; (5) compensation was paid to Madoff in the form of commissions on the falsely reported trades; and (6) after criminal charges were brought against Madoff, Plaintiff filed a customer claim for compensation with Madoff’s trustee pursuant to the Securities Investor Protection Act (SIPA), asserting that its funds were stolen by Madoff, as securities broker.

  • Jul 7, 2015

    By Kevin M. Mattessich & Daniel H. Brody

    A California federal court enforced a professional liability policy’s forum-selection clause and transferred pending litigation to New York in the recently decided case of Crown Capital Sec., L.P. v. Liberty Surplus Ins. Corp., No. 8:14-cv-01065 (C.D. Cal. Mar. 30, 2015). Significantly, the Court rejected the argument that California’s bad faith laws trump a policy provision selecting New York as the forum for coverage disputes under the policy (Kaufman Dolowich & Voluck, LLP represents the insurance company in this litigation).

    The insured broker-dealer sued the carrier in the Central District of California, asserting claims for breach of contract, breach of implied covenant of good faith and fair dealing, and declaratory relief. The policy contained a forum-selection clause providing that coverage disputes be litigated in New York, and the insurer filed a motion to dismiss or, alternatively, transfer the action to the Southern District of New York.

    The insured broker-dealer’s primary argument against transfer was the contention the forum-selection clause was unenforceable on public policy grounds. The insured contended the forum-selection clause, taken in tandem with a choice-of-law clause in the same policy, contradicts California’s public policy goals as expressed through its insurance laws.

    The Court rejected this argument for several reasons. First, the fact that the insured viewed New York’s remedies as supposedly “less favorable” than those available in California does not present a valid basis to deny enforcement of a forum-selection clause. Second, the insured failed to provide a legal basis for treating its California insurance law claim as an unwaivable right, as it did not identify a California statute or judicial decision that prohibits a party from waiving the right to pursue legal actions. Moreover, the insured failed to demonstrate that any such public policy underlying California’s remedies relates to venue. Finally, the Court explained that the insured will still have the opportunity to argue that California law should apply to its claims in the Southern District of New York.

    With this decision, parties seeking uniform interpretation of insurance contract terms, something that ultimately benefits both policyholders and insurance companies, may take comfort in knowing that forum-selection clauses may be upheld.

    Click on Read more below to view the decision in its entirety.

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Dean Herman and Hee Young Lee Join Kaufman Dolowich & Voluck as Partners in Firm’s Los Angeles Office; Senior Counsel and Three Associates Also Join LA Office

(June 3, 2013, Los Angeles, CA) — Kaufman Dolowich & Voluck, LLP (KDV), a leading national law firm, today announced that Dean B. Herman, who has more than 30 years of experience in insurance industry and business litigation, and Hee Young Lee, who has represented insurers and policyholders for more than a decade, have joined the firm as partners in its Los Angeles office. They will be accompanied by Craig D. Aronson as senior counsel and Steven S. Son, Andrew C. Johnson and Mikhaile P. Savary as associates.

Dean Herman defends and advises insurers and professionals on liability, first and third party insurance coverage issues, bad faith, and errors and omissions issues. His experience also includes sophisticated business and commercial litigation in state and federal trial and appellate courts on issues across a broad range of industry sectors and a diversified array of issues, ranging from IP to employment and contract disputes, executive risk exposures,  entertainment, wine industry,  as well as professional liability claims involving lawyers, insurance agents and brokers, real estate agents and brokers, directors and officers, business managers, financial advisors among others. He has also served as an expert witness and consultant and acts as a mediator in complex insurance coverage and other disputes. He comes to Kaufman Dolowich & Voluck from Mendes & Mount where he was a partner in the firm’s Los Angeles office.

Hee Young Lee also joins from Mendes & Mount, where she was a partner and her practice is focused on advising and defending insurers and their insureds in federal and state courts in matters involving intellectual property, environmental, construction defect, agribusiness, privacy, and personal lines claims. She also defends insureds in professional liability claims.

“Dean and Hee Young are preeminent insurance attorneys who will enhance not only our West Coast but our national presence in this field, which has always been a core strength of the firm,” said Ivan J. Dolowich, co-managing partner of KDV.  “This group enhances our practice on the West Coast providing insurance coverage, business litigation, professional liability, labor & employment and financial services for our clients.”

Herman will also be working out of the KDV San Francisco office due to the considerable work he does in the Bay area for clients based there.  He earned his B.A.  from California State University at Fullerton, his J.D. from Loyola Law School and his Master of Laws from the University of California, Berkeley. He is admitted to practice in California, and regularly handles matters in many other states either on a pro hac vice basis or an advisory or national coordinating counsel basis.

Lee will have a leadership role in the Los Angeles office. She earned her B.A. from the University of California, Los Angeles and her J.D. from the University of California Hastings College of the Law. She is admitted to practice in California, and also handles insurance coverage matters in many other states.

“Hee Young and I are excited to be joining a firm whose key practice areas are so compatible with our strengths,” said Herman. “We look forward to the opportunity to helping to grow KDV’s already strong insurance, professional liability and litigation practices on the West Coast and nationally.”

Craig Aronson, who has been practicing law for 30 years and whose practice focuses on coverage and professional liability, joins KDV from Gaglione, Dolan & Kaplan (Los Angeles) where he was a partner. He is admitted to practice in California. Aronson graduated summa cum laude and Phi Beta Kappa from Dartmouth College and earned his law degree from the University of Chicago Law School.

Steven Son, Andrew Johnson and Mikhaile Savary are litigation attorneys joining KDV from Mendes & Mount where they were all associates. Son, admitted to practice in California, earned his B.A. from the University of California, Los Angeles and his J.D. from the University of Illinois College of Law.  Johnson, admitted to practice in California and Nevada, received his B.F.A. from the University of Kansas and his J.D. from St. John’s University School of Law. Savary, admitted to practice in California and New York, received his B. A. from Cornell University and his J.D. from Columbia Law School.

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