ATT CORP. v. CLARENDON AMERICA INS. CO., 04C-11-167 JRJ (Del.Super. 2006)

C.A. No. 04C-11-167 (JRJ).Superior Court of Delaware for New Castle County.Submitted: September 20, 2005.
Decided: April 13, 2006. Amended: April 25, 2006.

Upon Defendant Continental Casualty Co.’s Motion for Partial Summary Judgment for a Declaration That There is No Coverage for the Williamson Fiduciary and Leykin Actions Under the Excess Run-Off and 2001 Continental Policies (D.I. 65/E-File 109) — GRANTED.

Upon Defendant Zurich American Ins. Co.’s Motion for Summary Judgment and Joinder in Defendant Federal Ins. Co.’s Motion for Partial Summary Judgment as to the 2001-2007 ATT Run-Off Policies (D.I. 66/E-File 110) — GRANTED.

Upon Defendant National Union Fire Ins. Co.’s Motion for Partial Summary Judgment and/or Judgment on the Pleadings (D.I. 69/E-File 113) — GRANTED.

Upon Defendant Federal Ins. Co.’s Motion for Partial Summary Judgment as to the 2001-2007 ATT Run-Off Policies (D.I. 72/E-File 117) — GRANTED.

Upon Defendant Gulf Ins. Co.’s Joinder in Continental Casualty Co.’s Motion for Partial Summary Judgment for a Declaration That There is No Coverage for the Williamson Fiduciary and Leykin Actions Under the Excess Run-Off and 2001 Continental Policies (D.I. 73/E-File 118) — GRANTED.

Upon Defendant Gulf Ins. Co.’s Joinder in Federal Ins. Co.’s Motion for Partial Summary Judgment for a Declaration That There is No Coverage for the Underlying Litigation Under the ATT Run-Off Policy Tower (D.I. 75/E-File 120) — GRANTED.

Upon Defendant Twin City Fire Ins. Co.’s Joinder in Motions for Partial Summary Judgment Filed in Connection With the Williamson Fiduciary and Leykin Actions (D.I. 81/Lexis 130) — GRANTED.

Upon Defendant Faraday Capital Limited’s (“Lloyd’s”) Joinder in Federal Ins. Co.’s Motion for Partial Summary Judgment (D.I. 82/E-File 135) — GRANTED.

John E. James, Esquire and Sarah DiLuzio, Esquire of Potter Anderson Corroon, Wilmington, Delaware, and Jeffery M. Johnson, Esquire (Argued), Deborah Goldstock Ringel, Esquire, Ryan S. Luft, Esquire, Jason D. Wallach, Esquire, B. Haven Walling, Jr., Esquire and Karen L. Bush, Esquire (Pro Hac Vice) of Dickstein, Shapiro Morin Oshinsky, N.W., Washington, D.C. and Alexander D. Widell, Esquire (Pro Hac Vice) of Dickstein, Shapiro, Morin
Oshinsky, New York, New York, Attorneys for the Plaintiff ATT Corp.

John D. Balaguer, Esquire and William L. Doerler, Esquire of White and Williams, Wilmington, Delaware, and Geoffrey W. Heineman, Esquire, and Matthew Bryant, Esquire (Pro Hac Vice) of Ohrenstein Brown, New York, New York, Attorneys for the Defendant Travelers Indem. Co., as successor in interest by merger to Gulf Ins. Co.

David A. Denham, Esquire of Bifferato Gentilotti Biden
Balick, Wilmington, Delaware, and Martin J. Flannery, Jr., Esquire and David A. Richman, Esquire (Pro Hac Vice) of Pattison Flannery, New York, New York, Attorneys for the Defendants Faraday Capital Limited, Individually and as Representative of those Underwriters at Lloyd’s.

Anthony G. Flynn, Esquire, Timothy Jay Houseal, Esquire, and Martin S. Lessner, Esquire of Young, Conaway, Stargatt Taylor, Wilmington, Delaware, and David Newmann, Esquire (Argued) and Michelle A. Kisloff, Esquire (Pro Hac Vice) of Hogan Hartson, N.W., Washington, D.C., Attorneys for the Defendant Federal Ins. Co.

Carmella P. Keener, Esquire of Rosenthal, Monhait Goddess, Wilmington, Delaware, and Leslie Ahari, Esquire (Argued) and Marc E. Rindner, Esquire (Pro Hac Vice) of Ross, Dixon Bell, N.W., Washington, D.C., Attorneys for the Defendants Columbia Casualty Co. and Continental Casualty Co.

Kevin F. Brady, Esquire, Connolly, Bove, Lodge Hutz, Wilmington, Delaware, and William E. Smith, Esquire (Argued), Cara Tseng Duffield, Esquire, and Daniel J. Standish, Esquire (Pro Hac Vice) of Wiley Rein Fielding, Washington, D.C., Attorneys for the Defendant Genesis Ins. Co.

Francis J. Murphy, Esquire of Murphy, Spadaro Landon, Wilmington, Delaware, and Alexis J. Rogoski, Esquire and Daniela Levarda, Esquire (Pro Hac Vice) of Boundas, Skarzynski, Walsh
Black, New York, New York, Attorneys for the Defendant XL Specialty Ins. Co.

John C. Phillips, Jr., Esquire and Brian Farnan, Esquire of Phillips, Goldman Spence, Wilmington, Delaware, and Douglas M. Mangel, Esquire (Pro Hac Vice) of Drinker Biddle Reath, Washington, D.C., Attorneys for the Defendants Clarendon America Ins. Co. and Twin City Fire Ins. Co.

Edward M. McNally, Esquire and Mary B. Matterer, Esquire of Morris James Hitchens Williams, Wilmington, Delaware, and Jeffrey G. Weil, Esquire, Rick L. Swedloff, Esquire (Pro Hac Vice) of Dechert, LLP, Philadelphia, Pennsylvania, Attorneys for the Defendant North American Speciality Ins. Co.

Edward M. McNally, Esquire and Mary B. Matterer, Esquire of Morris James Hitchens Williams, Wilmington, Delaware, and Michael Manire, Esquire, Deeana M. Galla, Esquire, J. Lloyd Herman, Esquire, William P. Larsen, III, Esquire (Argued) (Pro Hac Vice) of D’Amato Lynch, New York, New York, Attorneys for the Defendant National Union Fire Ins. Co.

C. Scott Reese, Esquire and Noriss E. Cosgrove, Esquire of Cooch and Taylor, Wilmington, Delaware, and Randall Block, Esquire (Argued) (Pro Hac Vice) of Sedgwick, Detert, Moran
Arnold, LLP, San Francisco, California, Attorneys for the Defendant Zurich American Ins. Co.

OPINION
JAN R. JURDEN, Judge

I. INTRODUCTIONA. Procedural Posture

This is a vast insurance coverage case involving Directors and Officers and Company (“DO”) Liability policies purchased bytwo corporations, the Plaintiff ATT Corp. (“ATT”) and At Home Corp. (“At Home”). Procedurally, the litigation is shifting from Phase 1 into Phase 2.[1] This Opinion addresses the first of three sets of dispositive motions, and ATT’s opposition thereto, filed pursuant to Phase 1 of Case Management Order No. 1.[2] It contains the Court’s determination of counterclaims raised by the Defendant Insurers,[3] who issued policies to ATT and its directors and officers. Thus, beyond presenting relevant underlying facts and California case law, this Opinion addresses potential coverage under the ATT Programs but not the At Home Towers.[4]

B. Phase I Motions for Partial Summary Judgment

The Insured, ATT, seeks coverage in connection with several underlying shareholder suits brought against it, and certain directors and officers of ATT and At Home Corp. To that end, it seeks indemnity and payment of defense fees, costs, settlements or judgments resulting from these suits under various DO Liability insurance policies purchased from the Defendant Primary and Excess Insurers (referred to collectively as “the Defendants” or “the Insurers”).[5]

As part of the Phase I briefing, the Defendants timely filed the multiple dispositive motions and joinders presently before the Court, in which they assert that ATT’s claims fall outside the scope of coverage afforded under the DO policies. Subsequently, on August 15, 2005, ATT filed its answering briefs and its First Amended Complaint. The Defendants responded on September 2, 2005.[6] On September 20, 2005, the Court heard oral argument on the Defendants’ individual motions. For the reasons that follow, the Defendants’ Motions are GRANTED..

C. Background — ATT’s Complaint and the DO Policies

Given the complex circumstances that bring this matter before the Court, a recitation of the pertinent events, party relationships and DO policies is in order before discussing the substance of the Defendants’ Motions. Through this action, ATT seeks damages and declaratory judgment as to its rights and the Defendants’ obligations under a number of DO policies for liability it incurred or may incur, as a result of various shareholder lawsuits.[7]

At various points in time, both the now bankrupt At Home Corp. and its primary shareholder, ATT, purchased DO insurance “Programs” or “Towers” from the Defendants. All of the DO policies at issue are “Claims made” policies and each Program or Tower consists of a primary policy and multiple excess policies. Once the underlying primary policy limits are exhausted by a covered loss, this type of policy structure operates to provide further coverage under each of the excess policies seriatim.
Under such a structure, an excess insurer’s coverage obligations are not triggered until the preceding or underlying excess policy is exhausted.[8] Likewise, and except as otherwise provided by their terms, excess policies generally follow the form of and provide coverage in conformance with the terms, conditions and exclusions of an underlying insurance policy.[9] In this case, the excess policies incorporate the terms, conditions and limitations of the Primary Policies and other underlying excess insurance policies.[10]

In this case, the Defendants Lloyd’s, National Union and Genesis[11] issued the underlying Primary Policies, while the other Defendant Insurers together with National Union provided excess coverage.[12] The following four Policy Programs[13] purchased by ATT are at issue in the present action:[14]

1. The “1997 ATT Program” was issued for the July 1, 1997 to July 1, 2001 policy period. It is composed of a Lloyd’s Primary Policy and seven excess policies.[15]
2. The “2001 ATT Program” was issued for the July 9, 2001 to July 9, 2002 policy period. It is composed of a Lloyd’s Primary Policy and seven excess policies.[16]
3. The “2002 ATT Program” was issued for the July 31, 2002 to July 31, 2003 policy period. It is composed of a National Union primary policy and twelve excess policies.[17]
4. The “2001 ATT Run-Off Program” was issued for the July 9, 2001 to July 9, 2007 policy period. It is composed of a Lloyd’s Primary Policy and eight excess policies.[18]

D. The Underlying Shareholder Litigation: The At HomeLitigation

The lawsuit sub judice stems from ATT’s acquisition of At Home Corp. stock in March, 2000.[19] On March 28, 2000, ATT, At Home Corp. (“At Home”), Comcast Corporation (“Comcast”) and Cox Communications (“Cox”) entered into an agreement whereby ATT acquired 25% of the total outstanding shares of At Home’s common stock and approximately 74% of At Home’s voting power. In the wake of this agreement, ATT’s acquisition, and At Home’s subsequent demise, shareholders filed suit in Delaware, California and New York challenging the propriety of the March 2000 Transactions.

Because the timing and nature of the allegations made in these shareholder actions is crucial to determining which policies, under what Programs, are implicated at this stage of the proceedings, a brief overview of the underlying shareholder suits is necessary.

1. Delaware — The Pittleman Action

The Pittleman derivative action was filed on October 19, 1999, in the Court of Chancery of the State of Delaware, by an At Home shareholder against ATT, At Home, and certain directors and officers of both companies. ATT gave notice of this Action to certain of its insurers, which that issued policies as part of the 1997 ATT Program.[20]

The Pittleman plaintiff asserted that the proposed March 2000 Transactions would be detrimental to At Home because, if effectuated, the Transactions would substantially increase ATT’s control over At Home and would give ATT, an At Home direct competitor, power to control At Home for its own self-interests.[21] Therefore, he sought to enjoin the March 2000 Transactions and to direct the defendants to account to At Home for damages and profits. To that end, the Pittleman
plaintiff alleged, inter alia, that: (a) At Home was controlled by[22] and its business depended on ATT;[23] (b) ATT competed with At Home[24] and “conflicts of interest” were “inherent . . . in [these] business relationships;”[25] (c) the March 2000 Transactions would eliminate “checks and balances” on ATT’s control;[26] (d) through the March 2000 Transactions, “ATT will have the power to control At Home in its own self-interest to the detriment of At Home and its public shareholders, free of [those] checks and balances[;]”[27] and (d) the March 2000 Transactions would give cable companies “more favorable distribution arrangements,” “reduce [At Home’s] share of subscriber fees,” and make it easier for Cox and Comcast to terminate exclusivity.[28]

Further, the plaintiff in Pittleman alleged that the March 2000 Transactions would:

eradicate any protections that currently exist to protect At Home and its public shareholders from complete domination by the conflicted majority shareholder, ATT. . . . Lacking independence, At Home will be unable to enter into agreements or engage in enterprises with third parties without heeding ATT’s wishes to which it will be subservient. As a result, At Home will lose valuable opportunities and be forced to accord ATT and its allies advantageous terms which would be unwarranted if At Home were free to conduct its business unfettered by ATT’s dominance and directives.[29]

The Pittleman Action was dismissed, without prejudice, in June 2001.[30]
2. California — Cases Consolidated Into the At HomeStockholders Litigation

a. Schaffer

Schaffer, a class action for breach of fiduciary duties and injunctive relief, was filed on May 26, 2000, in the Superior Court of the State of California for the County of San Mateo, against ATT, At Home, and certain directors and officers of ATT and At Home.[31] ATT gave notice of the Schaffer action to those insurers that issued policies under the 1997 Run-Off Program.[32]

b. Yourman

Yourman, a class action for breach of fiduciary duties and injunctive relief, was filed on May 30, 2000, in the same court, against ATT, At Home, and certain directors and officers of both companies.[33] In addition to being filed by the same attorneys in the same court against the same parties, the allegations made in the Yourman
complaint are identical to those made in the Schaffer complaint.[34] ATT noticed Yourman to the insurers that issued policies under the 1997 Run-Off Program.[35]

c. Ward

Ward, a class action for breach of fiduciary duties and injunctive relief, was filed in the same court as the Yourman and Schaffer actions on September 6, 2001, against ATT, At Home, and certain directors and officers of both companies.[36] The Ward
action involves the same parties, the same attorneys, and the same allegations as Schaffer and Yourman.
It was also noticed to appropriate insurers.[37]

3. California — The San Mateo Action

Eventually, Schaffer, Yourman and Ward were all consolidated in the Superior Court under the caption: In re At Home Stockholders Litigation (Master File No. 413094) (hereinafter the “San Mateo Action”). On October 23, 2000, the plaintiffs in the San Mateo Action filed their First Amended Consolidated Complaint for Breach of Fiduciary Duties and Injunctive Relief on behalf of all At Home shareholders as of March 28, 2000, against ATT, At Home, and certain directors and officers of ATT and At Home.

The First Amended Consolidated complaint in the San Mateo
Action contains one “cause of action” against all the named defendants for breach of the fiduciary duties of care, candor and loyalty.[38] The San Mateo plaintiffs also alleged inter alia, that: (a) on March 28, 2000, as part of the March 2000 Transactions, At Home announced an agreement between itself, ATT, Comcast and Cox whereby ATT would acquire 25% of At Home’s total outstanding shares of common stock and approximately 74% of At Home voting power, effectively giving ATT sole control over At Home;[39] (b) “At Home will be under the complete control and domination of ATT[;][40] (c) ATT now has the ability to receive more favorable distribution agreements . . . with At Home[;]”[41] (d) “Due to the . . . [March 2000 Transaction] At Home has become subject to both board and stockholder voting control by ATT[;]” and (e) “the Purchase price of At Home’s assets was not the result of arm’s-length negotiations but was unilaterally set by ATT, Cox, Comcast, and At Home and agreed to by defendants as part of a scheme to allow ATT to obtain complete control of At Home’s business at the lowest possible price[.]”[42]

In September 2002, for reasons outlined below, the Bankruptcy Court for the Northern District of California enjoined the San Mateo Action in favor of an action to be pursed by a litigation trust created during the bankruptcy proceedings.

4. California — The At Home Bankruptcy and Dismissal of theSan Mateo Action

On September 28, 2001, At Home filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of California.[43] The Bankruptcy Court appointed Richard Williamson as Trustee of the At Home Bondholders’ Liquidating Trust. On June 28, 2002, At Home’s Unsecured Bondholders filed a Motion to Enforce an Automatic Stay of th San Mateo Action, alleging that the claims asserted therein were derivative and therefore property of At Home’s Bankruptcy Estate.[44] On August 19, 2002, ATT joined the Unsecured Bondholders in filing a Motion to Enforce the Automatic Stay and Prevent Prosecution of Derivative Claims of the San Mateo
Action.[45] The Bankruptcy Court granted this motion on September 10, 2002.

The Bankruptcy Court ordered dismissal of the San Mateo
Action on the ground that the claims asserted in that Action belonged to the debtor and should be prosecuted by the Bondholders’ Trustee, Richard Williamson.[46] It found:

[t]he gravamen of the San Mateo Action is that the March 2000 Agreement represented a decision by the majority shareholders to break up the corporation, close its business and sell its assets. Shareholders style the wrong embodied in this act as the majority shareholders’ failure to disclose the effects of the Agreement to minority shareholders, the majority shareholders’ breach of their duty to the minority shareholders to maximize value recovered upon breakup of the corporation. These allegations state a claims for damages, however, only to the extent that the March 2000 Agreement harmed the corporation (and hence the value of the minority shares). Thus, the harm claimed by Shareholders in the San Mateo Action is closely intertwined with the harm suffered by the corporation and its creditors from the same transaction. . . . Under the confirmed plan, all causes of action of the corporation against the controlling shareholders pass to the Bondholders Liquidating Trust . . . The plan requires the Trust to prosecute an action against the same defendants for the same acts alleged in the San Mateo Action.[47]

Consequently, the Bankruptcy Court enjoined “the prosecution of the San Mateo Action to prevent interference with the action to be brought by the corporation.”[48]

On November 13, 2002, the Bondholders’ Liquidating Trust filed an action asserting the derivative claims of At Home against the defendants, including ATT and certain of it and At Home’s Board of Directors.[49] The San Mateo plaintiffs appealed the Bankruptcy Court’s September 10, 2002 Order to the U.S. District Court for the Northern District of California. In its January 8, 2003 response to that appeal, ATT urged the U.S. District Court to affirm the Bankruptcy Court’s Order, arguing that “permitting duplicative litigation in multiple jurisdictions would cause confusion and necessarily prejudice the non-bankrupt defendants, including ATT Corp.”[50]

On September 29, 2003, the U.S. District Court affirmed the Bankruptcy Court’s September 10, 2002 Order,[51] prompting the San Mateo plaintiffs to appeal that decision to the U.S. Court of Appeals for the Ninth Circuit. ATT urged the Ninth Circuit to affirm the lower courts’ decisions based on the existence of “substantial overlap” between the San Mateo and the Bondholders’ Actions:[52]

[t]he purported “direct” claim to be pursued in state court and the purported “derivative” claim previously asserted in the San Mateo Action and now sought by the Bondholders to be pursued in an action filed in Santa Clara Superior Court involve identical allegations of fact, an identical claim for breach of fiduciary duty, and identical prayers for relief.
Were the two cases allowed to proceed simultaneously, the substantial overlap between them would create a serious risk of conflicting rulings of fact and law. . . . And obviously, it would be a wasteful and inefficient use of scarce judicial and party resources to allow duplicative claims to go forward in two courts at once.[53]

The San Mateo plaintiffs’ appeal to the Ninth Circuit is still pending.

5. California — The Williamson Fiduciary Action

On November 7, 2002, the Trustee for the Bondholders’ Liquidating Trust, Richard Williamson, filed the initial complaint in Williamson v. ATT Corp., et al. (the “Williamson Fiduciary Action”) against ATT, At Home, and certain directors and officers of ATT and At Home.[54] In the First Amended Complaint, filed on June 20, 2003,[55] Williamson alleges that: (a) the defendants breached their fiduciary duties to At Home based on ATT’s having resolved all conflicts of interest between it and At Home in ATT’s own self-interest over a two-year period, beginning with its taking complete control of At Home in the March 2000 Transactions;[56] (b) “[p]ursuant to . . . the March 2000 Transactions, [1] ATT gained complete control of At Home’s Board . . . [2] Cox and Comcast received, among other things, the ability at a later date to `put’ some or all of the At Home shares to ATT, which ultimately allowed them to realize more than $3 billion from ATT;”[57] (c) ATT, Cox and Comcast received “an unfair split of the revenue generated from customers of the At Home service;”[58] (d) in connection with the March 2000 Transactions, “ATT and the other defendants contravened every cardinal principle of corporate governance upon which our system depends. For two years, ATT exercised a stranglehold on the Board of Directors of now bankrupt At Home Corporation[;]”[59] (e) as a direct result of the March 2000 Transactions “At Home receives nothing for losing critical leverage over Cox and Comcast. And ATT extends its contracts with At Home on terms that continue to be uneconomical for At Home[;]”[60] (f) the March 2000 Transactions resulted in giving ATT sole control over At Home and in exchange for giving ATT control, Cox and Comcast were given a $3 billion pay-off for which At Home received nothing;[61] (g) ATT did not follow the “basic precepts of corporate governance,” and that at every turn, “[i]n derogation of their fiduciary duties to At Home, defendants did what was in ATT’s best interests, even when it meant damaging At Home[;]”[62] (h) the March 2000 Transactions were entirely unfair to At Home and plaintiffs were damaged as a result of the March 2000 Transactions;[63] and (i) “as part of the March 2000 Transactions, Cox and Comcast jointly agreed to waive most of their rights under the Stockholders’ Agreement, including their right to elect Cox and Comcast designees to the Board. The Cox and Comcast directors resigned from the At Home Board on August 28, 2000. From that date until after the bankruptcy filing in September 2001, ATT at all times exercised complete control over the At Home Board.”[64]

In support of its January 10, 2003 Motion to Dismiss or Stay for Forum Non Conveniens[65] filed in the Williamson Fiduciary Action, ATT summarized a portion of the allegations in that Action as follows:

Plaintiff alleges, inter alia, (1) that the defendants breached their fiduciary duties to At Home causing At Home to enter into certain allegedly unfair agreements with Cox and Comcast in March 2000, permitting At Home’s cash situation to deteriorate, misappropriating At Home’s proprietary technology, engagingin an unfair strategy either to buy At Home at a cheap price or to build out its own network for providing high-speed Internet access, and generally managing and operating At Home in ATT’s, as opposed to At Home’s interest (Cmplt. ¶¶ 121-59); (2) that ATT breached certain contractual obligations to At Home (id. ¶¶ 160-68); (3) that ATT operated At Home as its alter ego (id. ¶¶ 169-71); (4) that ATT, Eslambolchi, and Burns misappropriated At Home’s proprietary technology and trade secrets through their “in depth access to [At Home’s] Trade Secrets by virtue of Project 90” (id. ¶¶ 172-84); (5) that ATT, Eslambolchi and Burns breached At Home’s confidence by using At Home’s proprietary technology for ATT’s own purposes (id. ¶¶ 185-98); (6) that ATT engaged in unfair competition in violation of California Business Professions Code Sections 17200 et seq. (id. ¶¶ 199-202); and (7) that ATT has been unjustly enriched by its conduct vis-à-vis At Home (id. ¶¶ 203-04).[66] On November 15, 2002, the Bondholders’ Liquidating Trust brought a separate action in the U.S. District Court, Northern District of California, captioned Williamson v. ATT Corp. (the “Williamson Patent
Action”).[67] In this action, Williamson alleged that ATT infringed on an At Home patent.[68] Again, in support of its Motion to Dismiss or Stay for Forum Non Conveniens, ATT represented that the Williamson Patent Action “is related to the trade secret misappropriation and breach of confidence claims in [the Williamson Fiduciary Action].”[69]

On May 3, 2005, ATT announced its settlement of both th Williamson Fiduciary Action and the Williamson Patent Action for $340 million.[70] Pursuant to the terms of the settlement agreement, ATT and Comcast agreed to relinquish claims to approximately $60 million being held in reserve by the At Home Bankruptcy Estate to satisfy ATT’s pending claims against At Home.[71]
6. New York — Cases Consolidated Into the Leykin v. ATT,et al. Litigation

a. Leykin

Leykin is a securities class action suit, filed on March 5, 2002, in the United States District Court for the Southern District of New York against ATT, and certain directors and officers of ATT and At Home.[72]

b. Unger

Unger is a securities class action suit, filed on March 11, 2002, in the United States District Court for the Southern District of New York against ATT and certain of it and At Home’s directors and officers.[73]

c. Eksler

Eksler is a securities class action suit filed in the United States District Court for the Southern District of New York on March 14, 2002, with a complaint virtually identical to the Unger
complaint, against ATT and certain of it and At Home’s directors and officers.[74]

d. James

James is a shareholder class action suit, filed on July 3, 2003, in the United States District Court for the Southern District of New York against ATT and certain of both companies directors and officers.[75] The James plaintiffs alleged violations of §§ 10(b) and 20(a) of the Securities and Exchange Act of 1934 and Rule 10b-5. James was filed by the same plaintiffs’ attorneys as Leykin
and the complaint is nearly identical to the Leykin
Consolidated Complaint. Ultimately, finding the James Action “duplicative” of Leykin, the District Court dismissed it without prejudice.[76]

e. The Leykin Action

On November 7, 2002, Leykin, Eksler, and Unger were consolidated under the caption, Leykin v. ATT Corp., et al.
(the “Leykin Action”).[77] The consolidated Leykin
Action is a putative class action suit, filed on behalf of At Home’s public shareholders during the period from March 28, 2000[78] to September 28, 2001. The Leykin plaintiffs allege both securities and common law fraud, and breach of fiduciary duty by ATT, its directors and officers, certain of At Home’s directors and officers, and others.

In the First Amended Consolidated Complaint the Leykin
plaintiffs’ allege the following: (a) ATT developed the “Steamboat Project”[79] in February 2000, and that during this project, ATT allegedly copied, took and converted to its own possession, benefit and use At Home’s proprietary technology; (b) the “plan, the subsequent conversion and its material adverse consequences for At Home were never revealed to the public until partial revelations of the consequences (but not of the plan nor of the conversion) began to occur during 2001;”[80] and (c) “[a]s part of such plan, on March 28, 2000, At Home entered into a series of agreements with ATT, Cox and Comcast”[81] and “an important purpose” for ATT in entering these agreements was to ensure that ATT could execute its plan “to copy and convert At Home’s proprietary technology to ATT’s own possession, use and benefit” and make ATT independent from At Home and its need for At Home’s services.[82]

The Leykin plaintiffs further assert that “ATT had, by March 28, 2000 at the latest, a plan to copy and convert At Home’s proprietary technology” and that “[a]n important purpose of transactions therein which required shareholder approval was to `ensure that ATT could execute its plan to copy and convert At Home’s technology.'”[83] They claim that “after the March 28, 2000 agreements were signed, ATT personnel began asking for, and were given, unique and unfettered access to At Home’s proprietary technology, intellectual property and know-how.”[84]

The First Amended Consolidated Complaint also alleges: (a) ATT converted and used At Home’s formerly proprietary technology to build and deploy a parallel network that would compete with At Home as soon as ATT was not bound by its exclusivity obligations to At Home[;][85] (b) “ATT dominated and controlled At Home’s finances and strategic relationships such that At Home management could not exercise independent judgment, and At Home could neither access the capital markets nor align with an appropriate strategic partner[;]”[86] (c) the defendants violated the securities laws and committed fraud, inter alia, by failing to disclose ATT’s plan to convert At Home’s proprietary technology and artificially inflating the market price of and demand for At Home common stock[;][87] (d) At Home’s directors breached their fiduciary duties of candor, due care, loyalty and good faith to At Home shareholders between March 28, 2000 and the end of the class period, when At Home filed for bankruptcy;[88] and (e) “ATT, as a controlling and dominant shareholder, owed fiduciary duties to the other shareholders of At Home. These duties included a fiduciary duty of entire fairness to minority shareholders. . . . ATT breached this fiduciary duty of entire fairness and full candor.”[89]

ATT represented in its January 10, 2003 Motion to Dismiss or Stay for Forum Non Conveniens,[90] filed in th Williamson Fiduciary Action, that the Williamson Fiduciary
Action “implicate[s] many of the same issues already being litigated” in the Leykin Action.[91] On February 11, 2003, ATT moved to dismiss the Leykin Action asserting in part that “a large portion of the [Leykin Consolidated] Complaint centers around plaintiffs’ wholly unsubstantiated allegations that ATT had formulated by March 28, 2000 — and later carried out — a `secret plan’ to convert At Home’s proprietary technology to its own use.”[92] The U.S. District Court for the Southern District of New York certified a class in the Leykin
Action but dismissed the Action on March 23, 2006.[93]

E. The Coverage Action — ATT Corp. v. Clarendon Am. Ins.,et. al.

In the present action, ATT asserts that it is entitled to coverage for losses arising from the Williamson Fiduciary an Leykin Actions under the ATT Programs and At Home Towers, which cover several policy periods, spanning the year 1997 through the year 2007. The Defendants counter that coverage, if any exists at all, is limited by the terms of their policies to the 1997 ATT Program and is barred under other Program.

II. STANDARD OF REVIEWA. Summary Judgment

“Summary Judgment may only be granted where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.”[94] To make this determination, the Court considers the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits.[95] In evaluating motions for summary judgment, the Court must view all facts in the light most favorable to the non-moving party.[96] Thus, the moving party bears the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law.[97]
Consequently, if the moving party establishes “there is no genuine issue of material fact regarding the dispute . . . that party is entitled to judgment as a matter of law, [and] summary judgment should be granted.”[98] Finally, “[t]o the extent that the case’s facts are not in dispute and the insurance policies are not ambiguous, the Court will decide coverage issues through . . . a motion for summary judgment” pursuant to Superior Court Civil Rule 56.[99]

B. Rules of Construction for Contracts of Insurance

As a preliminary matter, the Court recognizes the parties’ disagreement as to whether the insurance policies at issue should be interpreted in accordance with New York, New Jersey or California law.[100] However, the parties agreed during the September 20, 2005 Hearing that resolution of the pending motions does not require the Court to decide the issue at this time.[101] Thus, because “neither the Court nor the parties believes there are significant conflicts on any of the relevant legal principles,” the Court “need not determine which state law controls and will set forth the guiding legal principles of insurance policy construction” applicable in all three states.[102] In so doing, the Court recognizes that it is delaying the inevitable, in that the resolution of future interpretation and construction questions in this case will necessitate a determination of the “threshold issue” of which law applies to these policies.[103]

In New York, New Jersey and California, as in Delaware, determining whether insurance contract language is ambiguous is a question of law for the Court to decide.[104] As a general rule, these courts interpret insurance policy language according to the general rules of contract interpretation.[105] Thus, in the absence of ambiguity, these courts construe insurance policies by giving the policy language its “common,” “plain,” and “ordinary” meaning,[106] unless used by the parties “in a technical sense” or where “a special meaning is given to them by usage.”[107] Accordingly, as a general rule,[108]
policy language found to be clear and unambiguous should be interpreted and enforced as written.[109]

Generally, an insured’s burden is to establish that a claim falls within the basic scope of coverage, while an insurer’s burden is to establish that a claim is specifically excluded.[110] Courts determine an insurer’s coverage obligations by comparing the allegations made in a complaint with the terms of the policy.[111] Coverage language is interpreted broadly to protect the objectively reasonable expectations of the insured.[112] Conversely, exclusionary clauses are “accorded a strict and narrow construction.”[113] Even so, courts give effect to such exclusionary language where it is found to be “specific,” “clear,” “plain,” “conspicuous”[114] and “not contrary to public policy.”[115]

This is because insurance contracts are contracts of adhesion,[116] so policy language found to be ambiguous is construed against the drafter,[117] in favor of coverage[118] and the insured’s reasonable expectations.[119] However, these courts do not employ the rule of contra proferentem unless ambiguity exists.[120]

The Court recognizes that, due to insurance policies not being “readily understood”[121] and inequality in bargaining positions among contracting parties,[122] case law exists that permits judicial application of the reasonable expectation doctrine to fulfill an insured’s expectations even where those expectations contravene the unambiguous, plain meaning of exclusionary clauses.[123] For purposes of these Motions, however, the Court defers consideration of whether application of this “exception to the rule of strict construction of policy terms” is appropriate in the case at bar, which involve commercial policies, some of which contain “amendatory endorsements.”[124] At this point, any determination of whether the exception applies is premature because the issue is not fully briefed and the choice of law question remains in dispute.[125]

New York, New Jersey and California courts use similar standards to ascertain the existence of ambiguity,[126] and all find ambiguity where language in an insurance policy is “reasonably susceptible to more than one interpretation.”[127] The mere suggestion that there are two conflicting interpretations for the same policy language does not create ambiguity.[128] The courts in all three states are in agreement that a court is not required to find ambiguity where an interpretation advocated by a litigant “would strain the language of the contract beyond its reasonable and ordinary meaning.”[129] Again, both interpretations must reflect a reasonable reading of the contractual language before ambiguity will be found.

Further, absent any ambiguity, the law in these states provides that a court should not write or rewrite a policy for an insured to make it “better” than the policy purchased.[130] Thus, if the disputed language is found unambiguous, the court should give the policy terms their plain and ordinary meaning,[131] and enforce the contract according to those terms.[132]

III. DISCUSSION
The question before the Court at this juncture is whether ATT is entitled to coverage for the Williamson Fiduciary an Leykin Actions under the 2001 ATT Program, the 2001 ATT Run-Off Program and/or the 2002 ATT Program. Not surprisingly, the parties disagree about how the burden of proof should be allocated in this case.[133] Because the burden of proof is considered a procedural issue, the forum will apply its burden of proof unless the “`the primary purpose of the relevant rule of the state of the otherwise applicable law is to affect decision of the issue rather than to regulate conduct of the trial.'”[134] The Court finds the burden of proof question “is designed to affect the outcome at trial,” and thus will not apply the rules of the forum state.[135] After reviewing the relevant case law of New York, New Jersey and California concerning the burden of proof in coverage cases, the Court is satisfied that regardless of how the burden is allocated, the result is the same under either parties’ proposed method of allocation.

A. ATT’s Definition of “Claim”

In its effort to spread coverage for the Subsequent Actions[136] over multiple policy periods, ATT alleges that each misrepresentation or omission averred in the underlying complaints is “the basis for a separate claim
against the Directors. . . .”[137] According to ATT, th Williamson Fiduciary and Leykin Actions are not merely two “Claim.” Rather, it maintains that “Leykin asserts at least fifteen separate alleged misrepresentations or omissions, each of which, standing alone, is sufficient to state an independent and distinct claim[,] . . .” and that “Williamson include numerous Claims. . . .”[138] Conversely, the Defendants argue that ATT’s assertion that the Subsequent Actions constitute in excess of fifteen individual “Claims” requires the Court to equate the policy term “Claim” with the policy term “Wrongful Act,” a result that the Defendant Insurers argue ignores the clear and unambiguous definition of “Claim” as set forth in their policies.

Lloyd’s Primary 2001 ATT Run-Off Policy and Lloyd’s Primary 2001 ATT Policy define “Claim” as: “1. any written or oral demand for damages or other relief against any of the Assureds, . . . . 2. any civil, criminal, administrative or regulatory proceeding initiated against any of the Assureds, including [a] any appeal therefrom; [b] any Securities Action Claim.”[139] Meanwhile, “Wrongful Act” is defined as:

1. any actual or alleged act, error, omission, misstatement, misleading statement, neglect, or breach of duty by the Directors or Officers, individually or collectively, whilst acting in their respective capacities.
2. any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty by the Company in the purchase or sale or offer to purchase or sell any securities of the Company or in preparing materials of the Company filed with the Securities and Exchange Commission or any similar state agency or in rendering any other public statements regarding the Company, which is alleged in any Securities Action Claim.[140]

This language is clear and unambiguous. Each alleged misrepresentation, omission, act or breach is a “Wrongful Act,” and not a “Claim.” The Court agrees with the Defendants that ATT’s “assertion that Williamson and Leykin `Claims’ may be subdivided into dozens of separate acts would impermissibly render meaningless the term `Wrongful Act’ as it is used in the Policies.”[141] The Court also agrees with the Defendants Insurers that if the term “Claim” were so defined and then applied, it would have a “nonsensical impact” on the Insuring Clauses and would render the term “Wrongful Act” superfluous. As the Defendant Insurers correctly note, “[i]f `Claim’ were to mean each alleged misrepresentation, omission, act or breach by an insured, the Insuring Clause then would have to be read to state that coverage is provided for `Loss resulting from any [misrepresentation, omission, act or breach] first made against
the Directors and Officers during the policy period for a `Wrongful Act.'”[142]

The Court finds that the clear and unambiguous language used to define “Claim” and “Wrongful Act” makes clear that these are two separate and distinct terms, which cannot be conflated. Moreover, contrary to ATT’s assertions, each misrepresentation, act, omission or breach does not constitute a “Claim” because, standing alone, it may never result in a loss or a demand for relief against the insureds.[143]

Given the clear and unambiguous language of the policies at issue, the Court finds the cases offered on this point by ATT unpersuasive.[144] Unlike the policies at issue in the cases on which ATT relies, the Defendant Insurers’ policies do not limit the definition of “Claim” to a demand for money including institution or service of a suit.[145] Instead, under these policies an entire civil proceeding constitutes a “Claim.”[146] A plain reading of the clear and unambiguous definition of “Claim” compels the Court to conclude that th Williamson Fiduciary Action and the are each one “civil proceeding.”

Another flaw in ATT’s argument that each alleged misrepresentation, omission, act or breach constitutes a “Claim,” is that no party, including ATT itself, can under ATT’s proposed definition of the term, tell the Court exactly how many “Claims” are allegedly covered by the policies. At oral argument, the Defendant Insurers informed the Court that:

. . . months and months into this litigation. . . . We still don’t know how many claims ATT thinks there are in this case. It’s totally arbitrary. They offer no principal basis for delineating between the different allegations here to figure out what constitutes a claim.[147]

During that same argument, when specifically asked by the Court “[h]ow many claims are there?” ATT could only respond that “[t]here are at least 17 claims. . . .”[148]

The policy language is undeniable, clear and unambiguous. A civil proceeding equals a “Claim,” while an alleged misrepresentation, omission, act or breach equals a “Wrongful Act.” Because these terms are unambiguous, the Court need not look beyond them to make its determination.

B. The Insuring Clause and Single Claim Provisions

Having determined that the Williamson Fiduciary and Leykin
Actions each constitute one “Claim,” the Court turns to the Defendants’ argument that any potential coverage is limited to “Claims” “first made” during the applicable policy periods. They assert that because the Subsequent Actions must be deemed “first made” at the time when the earlier suits[149] were filed, ATT is only potentially entitled to coverage under the policies in effect at the time it notified them about the Prior Actions.[150] The Defendant Insurers base their argument on the Insuring Clause and the Single Claim Provision. The Insuring Clause in both the Lloyd’s Primary 2001 Run-Off Policy and the Lloyd’s Primary 2001 ATT Policy provides:

A. Underwriters shall pay on behalf of the Directors and Officers Loss resulting from any Claim first made against the Directors and Officers during the Policy Period for a Wrongful Act.
B. Underwriters shall pay on behalf of the Company Loss which the Company is required or permitted to pay as indemnification to any of the Directors and Officers resulting from any Claim first made against the Directors and Officers during the Policy Period for a Wrongful Act.
C. Underwriters shall pay on behalf of the Company Loss resulting from any Securities Action Claim first made against the Company during the Policy Period for a Wrongful Act.[151]

The Single Claim Provision found in Lloyd’s Primary 2001 Run-Off Policy and Primary 2001 ATT Policy provides:

More than one Claim involving the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to constitute a single Claim and shall be deemed to have been made at the earliest of the following times:
1. The time at which the earliest Claim involving the same Wrongful Act or Interrelated Wrongful Acts is first made, or
2. The time at which the Claim involving the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to have been made pursuant to Clause VI.B.[152]

The National Union 2002 ATT Primary Policy Notice/Reporting Provision provides:

. . . (b) if written notice of a Claim has been given to the Insurer pursuant to Clause 7(a) above, then a Claim which is subsequently made against an Insured and reported to the Insurer alleging, arising out of, based upon or attributable to the facts alleged in the Claim for which such notice has been given, or alleging any Wrongful Act which is the same as or related to any Wrongful Act alleged in the Claim of which such notice has been given, shall be considered related to the first Claim and made at the time such notice was given.[153]

Additionally, the National Union 2002 ATT Primary Policy also contains a New York Claims-Made Amendatory Endorsement that provides, in pertinent part:

Claims reported to the Insurer alleging the same or related Wrongful Acts shall be considered reported to the Insurer at the time and during the policy period when the first such Claim was reported.[154]

Based on its reading of these provisions, the Court finds that the Insuring Clauses of Lloyd’s Primary Policies limits coverage to “Claims” “first made” during the July 9, 2001 to July 9, 2007 policy period,[155] and to the time during which the earliest Claim, as interpreted above, involving the same “Wrongful Act” or “Interrelated Wrongful Acts” was “first made.”[156]

“Wrongful Act” is defined as “any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty[.]”[157] “Interrelated Wrongful Acts” are defined as “Wrongful Acts which have as a common nexus any fact, circumstance, situation, event, transaction or series of facts, circumstances, situations, events or transactions.”[158]
The Court finds the language of these definitions is clear and unambiguous,[159] and thus will give these policy terms their plain and ordinary meaning.[160]

Clause IV.C of the Lloyd’s Primary Policies applies when separate lawsuits involve the same “Wrongful Act” or “Interrelated Wrongful Acts.” After carefully comparing the complaints in the Prior and Subsequent Actions, the Court finds that any claims arising from the Williamson and Leykin
Actions must be deemed “first made” within the 1997 to 2001 policy period. This is because the Subsequent Actions involve the same “Wrongful Acts” and “Interrelated Wrongful Acts” as those that gave rise to the Prior Actions filed in 1999 and 2000.[161]

The “Wrongful Act” that spawned all of the underlying litigation in this case is the March 2000 Transaction, which among other things, resulted in ATT gaining control of At Home. That “Wrongful Act” gave rise to the Prior Actions. Each of the complaints in Prior Actions advances the same questions of law and fact: (a) whether the Proposed March 2000 Transactions were grossly unfair to the public stockholders of At Home; (b) whether defendants involved with those ransactions failed to disclose all material facts relating to the Proposed Transactions, including the potential positive future financial benefits that they expect to derive from At Home; (c) whether those defendants willfully and wrongfully failed or refused to obtain or attempt to obtain a purchaser for the assets of At Home at a higher price than that given to Cox and Comcast; (d) whether plaintiffs and members of the Class would be irreparably damaged if the Proposed Transactions were consummated; (e) whether defendants breached or aided and abetted the breach of the fiduciary and other common law duties owed by them to plaintiffs and members of the Class; and (f) whether plaintiffs and members of the Class have been damaged and, if so, what is the proper measure of those damages.

Thus, the Court finds the Prior and Subsequent Actions have inter alia, the following “Interrelated Wrongful Acts” in common: (a) ATT’s relationship with At Home created conflicts of interest that the defendants improperly resolved in ATT’s favor;[162] (b) ATT improperly used the March 2000 Transactions in a scheme to obtain complete control of At Home;[163] (c) the March 2000 Transactions were unfair to At Home and involved self-dealing by ATT;[164] and (d) the March 2000 Transactions subjected At Home to disadvantageous distribution agreements, including an insufficient share of subscriber revenue and reduced exclusivity rights.[165]

Claims “share a sufficient factual nexus when they are `based on the same agreement’ or when they involve the `same underlying circumstance.'”[166] A comparison of the underlying complaints in this case reveals that Pittleman and the Leykin
Action, and San Mateo and the Williamson Fiduciary Action, have more in common than just the required “any fact” “common nexus.”[167] These Actions have as their “common nexus” many facts, all originating from the March 2000 Transactions.[168] Thus, based on its comparison of the underling complaints, it is clear to the Court that the March 2000 Transactions, together with the facts, circumstances, and events constituting and attendant to them, tie together the Prior and Subsequent Actions rendering Pittleman and Leykin a single “Claim,” and San Mateo and Williamson a single “Claim,” as defined in the policies.

Therefore, by operation of the clear and unambiguous policy terms and as a matter of law, the Court finds that ATT’s claims arising from the Subsequent Williamson Fiduciary and Leykin
Actions were “first made” during the July 1, 1997 to July 1, 2001 coverage period and fall outside the scope of coverage under the 2001 ATT Program, the 2001 Run-Off Program and the 2002 ATT Program.

C. The Prior Notice Exclusion

The Defendant Insurers advance another independent ground for denying ATT coverage for the Williamson Fiduciary and Leykin
Actions — the Prior Notice Exclusions.[169] They assert that as a matter of law, the Court should find the Prior Notice Exclusions operate to bar coverage for these Actions under the 2001 ATT Program, the 2001 ATT Run-Off Program, and the 2002 ATT Program.

The Prior Notice Exclusion contained in Lloyd’s Primary 2001 ATT Policy and Lloyd’s Primary 2001 ATT Run-Off Policy state:

Underwriters shall not be liable to make any payment in connection with any Claim . . . based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving:
A. Any Wrongful Act or any fact, circumstance or situation which has been the subject of any notice given prior to the Policy Period under any other Directors and Officers liability policy, or
B. Any other Wrongful Act whenever occurring, which, together with a Wrongful Act which has been the subject of such notice, would constitute Interrelated Wrongful Acts.[170]

The Exclusion applies to any “Claim . . . based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving:”

(1) any Wrongful Act or any fact, circumstance or situation which has been the subject of any notice given prior to the Policy Period under any other Directors and Officers liability policy, or
(2) any other Wrongful Act whenever occurring, which, together with a Wrongful Act which has been the subject of such notice, would constitute Interrelated Wrongful Acts[.][171]

Similarly, the Defendant National Union 2002 Primary Policy contains a Prior Notice Exclusion that reads:

The Insurer shall not be liable to make any payment of Loss in connection with any Claim made against an Insured: . . .
(d) alleging, arising out of, based upon or attributable to the facts alleged, or to the same or related Wrongful Acts alleged or contained in any Claim which has been reported, or in any circumstances of which notice has been given, under any policy of which this policy is a renewal or replacement or which it may succeed in time[.][172]

As explained above, Defendant Excess Insurers’ policies apply in conformity with exclusions found in the Primary Policies.[173] Similarly, National Union’s 5th and 9th Excess Policies apply subject to the exclusions and limitations found in its 2002 Primary Policy, which also contains the above Exclusion.[174]

The Court finds that the language of the Prior Notice Exclusions is clear, unambiguous, and undeniably broad.[175] As written, the language of this Exclusion encompasses not only any “Claims,” whether “directly or indirectly” caused by a “Wrongful Act,” but also any “Claims” that in any way involve any “Wrongful Act,” fact, circumstance or situations alleged in the prior litigation.”[176] Further, as “[n]othing in the policy requires that a claim involve precisely the same parties legal theories, `Wrongful Act[s],’ or requests for relief for [the Prior Notice exclusion] to apply,” the Court finds that the allegations set forth in the Williamson Fiduciary and Leykin Actions are based upon, arise out of, directly and indirectly result from, and involve the same “Wrongful Act.”[177] Moreover, it finds the “Wrongful Acts” alleged in both the Subsequent and Prior Actions are “Interrelated Wrongful Acts.” The complaints in the underlying actions allege that the March 2000 Transactions led to, or would lead to, ATT’s domination and control of At Home. Thus, they have as a “common nexus” many of the same facts, circumstances, situations, events, transactions, or series of the same.

ATT argues, as a matter of public policy, that the Court should not interpret the Prior Notice Exclusion so that ATT’s status as controlling shareholder of At Home becomes a triggering “fact, circumstance or situation.”[178] It asserts that this interpretation would amount to a blanket exemption from DO coverage for any future directors, officers or controlling shareholders after a single reference to that status — which occurs as a matter of course in shareholder actions alleging breach of duties — could be determined to interrelate to all ensuing Wrongful Acts.[179] Given the plain language of the policies and the allegations made in the Underlying Actions the Court finds this reasoning unpersuasive. It ignores the clear policy definition of “Interrelated Wrongful Acts,” and the common nexus of facts among the Prior and Subsequent Actions (stemming from the 2000 Transactions) which gave rise to repeated allegations of ATT’s exercise and abuse of control over At Home.[180]

Therefore, the Court finds as a matter of law that ATT is not entitled to coverage for the Williamson Fiduciary and Leykin Actions. The Prior Notice Exclusions bar coverage for these Subsequent Actions, because they involve the same and/or “Interrelated Wrongful Acts” as the Pittleman and San Mateo
Actions.

D. The Prior Acts and The Prior and Pending LitigationExclusions
1. The Prior Acts Exclusion

The Prior Acts Exclusion found in Lloyd’s 2001 ATT Primary Policy states that the “Underwriter shall not be liable to make any payment in connection with any Claim:

L. based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving:
1. any Wrongful Act actually or allegedly committed prior to 9:00 a.m. Eastern Standard Time on 9th
July, 2001, or
2. any Wrongful Act occurring on or subsequent to 9:00 a.m. Eastern Standard Time on 9th July, 2001, which, together with a Wrongful Act occurring prior to such date would constitute Interrelated Wrongful Acts[.][181] As noted above, the Defendants’ Excess Insurer policies apply in conformity with the Primary Policy exclusion.[182] Moreover, similar Prior Acts Exclusions also exist in the Defendants National Union, Zurich, Twin City, and Gulf excess policies, under the 2001 ATT Program and ATT 2001 Run-Off Program.[183]

Additionally, in their Joint Reply, the Defendants Zurich, Twin City, and Gulf represent that their Prior Acts exclusions are “substantially similar” to the Defendant Continental’s Prior Acts Exclusion.[184] The Defendant Continental’s 2001 Excess Policy provides that “any claim based upon, arising out of, relating to, directly or indirectly resulting from, or in consequence of, or in any way involving:”

4. any Wrongful Act (as that term is defined in the Primary Policy), occurring prior to 7/9/01, or any other Wrongful Act, (as that term is defined in the Primary Policy), occurring 7/9/01 which, together with a Wrongful Act occurring prior to 7/9/01, would be considered interrelated Wrongful Acts (as that term is defined in the Primary Policy).[185]

Similarly, the Prior Acts Exclusion found in the National Union 2002 ATT Primary Policy reads:

[T]he Insurer shall not be liable to make any payment for Loss in connection with a Claim made against an Insured alleging any Wrongful Act occurring prior to July 9, 2001 or after the end of the Policy Period. This policy only provides coverage for Wrongful Act occurring on or after July 9, 2001 and prior to the end of the Policy Period and otherwise covered by this policy. Loss arising out of the same or related Wrongful Act shall be deemed to arise from the first such same or related Wrongful Act.[186]

National Union’s 5th and 9th Excess Policies apply subject to the Prior Acts Exclusion found in its 2002 Primary Policy.[187] These policies “provide . . . coverage in accordance with the same terms, conditions, exclusions and limitations as the Followed” 2002 ATT National Union Primary Policy, which contains the above Exclusion.[188]

The Defendants urge that the Prior Acts Exclusions in the Primary and Excess Policies bar coverage for the Williamson Fiduciary and Leykin Actions because these Actions are based on, arise out of or are attributable to alleged “Wrongful Acts” that occurred, were committed or attempted, before July 9, 2001, and “Wrongful Acts” that occurred after July 9, 2001, which they assert share a common nexus with the pre-July 9, 2001 acts.[189] They further aver that the Williamson Fiduciary Action arose from “Wrongful Acts,” occurring before the March 2000 Transactions and continuing through the September 2001 At Home Bankruptcy, and that all “Wrongful Acts” occurring after July 9, 2001, share a common nexus with those acts occurring before that date. Thus, they assert that th Williamson Fiduciary and Leykin Actions are not covered “Claims.”

With a few exceptions, ATT disputes the Defendants’ contentions that the allegations made in the Subsequent Actions arise from the March 2000 Transactions and argue that the Defendants’ exclusions are ambiguous.[190] Thus, ATT maintains that the exclusions must be strictly construed in favor of coverage. Specifically, as to the Prior Acts Exclusions, ATT admits that “certain of the Claims in Leykin and Williamson
are based on “Wrongful Acts” allegedly committed prior to July 9, 2001.”[191] However, it argues that other Claims took place after July 9, 2001, and that the Defendants present no undisputed evidence proving the “Wrongful Acts” alleged in the underlying complaints actually occurred.[192] Finally, it challenges the Defendants’ “overly broad application of policy language,” arguing their determination that the post July 9, 2001 “Wrongful Acts” are interrelated to the pre-July 9, 2001 “Wrongful Acts” is “`too tenuous.'”[193]

As with the Defendants’ Prior Notice Exclusions, after careful comparison of the plain, unambiguous definition of “common nexus” and the allegations made in the Prior and Subsequent Actions,[194] the Court finds that the Prior Acts Exclusion bars coverage for the Williamson Fiduciary and Leykin
Actions. Moreover, the Court does not find ambiguity in the phrases “same or related,” “based upon” and “arising out of,” even where such terms are not defined within these policies.[195] The Court agrees with the Defendant National Union that the mere absence of a definition for a term, by itself, does not render the undefined term ambiguous.[196]
“Indeed, any rule that rigidly presumed ambiguity from the absence of a definition would be illogical and unworkable.”[197] Therefore, as ATT offers no reasonable alternative interpretation for the Prior Acts Exclusions, the Court finds its clear, unambiguous terms enforceable as written.[198]

2. The Pending and Prior Litigation Exclusion

Pending and Prior Litigation Exclusions are found in the 2001 ATT Program, the 2001 ATT Run-Off Programs, and the 2002 ATT Program.[199] The Defendant Continental’s Excess Policies, contain Pending and Prior Litigation Exclusions that provide:

“any claim based upon, arising out of, relating to, directly or indirectly resulting from, or in consequence of, or in any way involving: 3a. Any fact, circumstance, situation, transaction or event underlying or alleged in any prior and/or pending litigation as of 7/9/01, regardless of the legal theory upon which such litigation is predicated.[200]

Likewise, the National Union 2001 ATT Excess Policy Pending and Prior Litigation Exclusion states:

Insurer shall not be liable for any Loss in connection with any Claim(s) made against any Insured(s): alleging, arising out of, based upon or attributable to any pending or prior litigation as of July 9, 2001 or alleging or derived from the same or essentially the same facts as alleged in such pending or prior litigation.[201]

The Defendant Insurers Zurich and Twin City, in their Joint Reply, represent that their Exclusions are “substantially similar” to the Continental Prior Litigation Exclusions.[202] These Defendants, together with Defendant Gulf, also state that their policies follow form, incorporate or apply subject to or in accordance with the terms, conditions, endorsements and exclusions of the underlying policies.[203]

A Prior Litigation Exclusion also exists in the National Union 2002 ATT Primary Policy. It states:

The Insurer shall not be liable to make any payment of Loss in connection with any Claim made against an Insured: . . .
(e) alleging, arising out of, based upon or attributable to, as of the Continuity Date, any pending or prior: (1) litigation; or (2) administrative or regulatory proceeding or investigation of which an Insured had notice, or alleging or derived from the same or essentially the same facts as alleged in such pending or prior litigation or administrative or regulatory proceeding or investigation[.][204]

As noted above, the National Union 5th and 9th Excess Policies apply subject to the exclusions and limitations found in its 2002 ATT Primary Policy, which contains the above Exclusion.[205]

The Defendants argue that the language of their Exclusions is “clear and enforceable according to their terms.”[206]
Therefore, the Defendants assert that this language plainly excludes the Leykin Action and Williamson Fiduciary Action Claims because these two Claims are “derived from [the] same or essentially the same facts,”[207] and are “based on, arising out of, relating to, directly or indirectly resulting from, or in consequence of, or in any way involving” the same “facts, circumstances, situations, transactions or events” already alleged in the Pittleman and the San Mateo Actions, which were pending as of, or filed prior to July 9, 2001.[208]

After contesting the Defendants’ arguments that the Subsequent Actions arise from the March 2000 Transactions and asserting that the Defendants’ exclusions are ambiguous,[209] ATT argues that public policy precludes “treat[ing]” its status as controlling shareholder as a “fact, circumstance or situation” sufficient to trigger the Prior Litigation Exclusion.[210]
It asserts that the Defendants’ proposed interpretation is “absurd,” overly broad and would “eviscerate” coverage, thus rendering it “illusory.”[211] ATT maintains this exclusion must be strictly construed against the Defendant Insurers in favor of coverage.[212]

As explained above, based on its comparison of the underlying complaints and the plain and unambiguous policy language, the Court finds the pre-July 9, 2001 Pittleman and San Mateo
Actions have a “common nexus” with the later filed Leykin an Williamson Actions based in the multiple shared facts, circumstances, and situations stemming from the March 2000 Transactions. The Pending and Prior Litigation Exclusion bars coverage because these Subsequent Actions involve the same and/or “Interrelated Wrongful Acts” as the Prior Actions, in that the allegations in the underlying complaints concern ATT’s domination and control of At Home arising from the March 2000 Transactions.

Thus, the Court agrees with the Defendants that the Leykin
and Williamson Fiduciary Action Claims fall within the scope of this Exclusion because these Actions derive from the “same or essentially the same facts” and are “based upon, arise out of, directly or indirectly result from, are in consequence of, and in any way involve” the “same facts, circumstances, situations, transactions or events” that underlie the Prior Actions.

ATT’s public policy argument as to its controlling shareholder status triggering the Pending and Prior Litigation Exclusion is unpersuasive for the reasons set forth above.[213] Further, the Court finds this clause is clear, unambiguous[214] and therefore “not against public policy to enforce. . . .”[215]

E. Consideration of the Allegations in the Underlying SuitsVersus”Actual Facts”

ATT contends that the Defendants improperly and exclusively relied on the allegations in underlying complaints, not “actual facts,” to bar coverage for the Williamson Fiduciary an Leykin Actions. Therefore, it asserts that the Defendants fail to satisfy their burden on summary judgment.[216] In opposition, the Defendants argue that the Court “need not look beyond the complaints nor determine for itself the `actual facts’ in the underlying litigation,” to resolve the coverage issues raised at this stage of the proceedings.[217] According to the Defendants, ATT’s submission in this case of thousands of pages of documents produced during discovery in the Williamson Fiduciary Action is a ploy “to preclude summary judgment” by creating “the appearance of some factual dispute.”[218]
ATT disagrees, arguing that, in addition to the underlying shareholder allegations, the Court should consider the “actual facts” ATT developed through discovery in the Williamson Fiduciary Action.[219] It offers this “amply supported record evidence” to show the existence of genuine issues of material fact as to whether the underlying claims in the Prior and Subsequent Actions are interrelated.[220] It maintains the Defendants “exclusive reliance on bald, unsupported allegations fails to satisfy their summary judgment burden to show that undisputed facts establish an interrelationship between all of the Claims asserted in” these Actions.[221]

In cases involving policies with similar single claim provisions, prior notice and/or prior litigation exclusions, courts determine coverage based on the allegations in the underlying complaints and not the “actual facts.”[222]
Moreover, as explained above, where policy language is clear and unambiguous, it is given its plain meaning.

Unquestionably, there are factual disputes in the underlying shareholder suits. For example, ATT vehemently denies it abused its control over At Home for its own benefit and maintains that it tried to help At Home.[223] However, in the present coverage action and, notwithstanding the voluminous exhibits proffered in support of its position, ATT’s denials of various allegations asserted against it in the underlying actions do not constitute factual disputes sufficient to defeat summary judgment. Further, by their present motions, the Defendants seek a determination as to whether the Subsequent Actions involve the same or “Interrelated Wrongful Acts.” Moreover, it is undisputed that the terms of the policies at issue address “alleged” wrongful acts.[224] Therefore, the law requires that the Court decide these issues based on the allegations in the complaints and the relevant policy provisions.[225]

At this stage of the proceedings, it is not the Court’s role to evaluate the validity or truth of allegations made in the underlying complaints by undertaking an analysis of the “actual facts” or extrinsic evidence offered to refute allegations made in those Actions. For purposes of these Motions, such evidence does not create genuine issues of material fact necessary to preclude summary judgment. ATT’s theory that this Court must, in essence, adjudicate the underlying shareholder suits to determine the applicability of particular policy exclusions or coverage provisions is contrary to case law and the express terms of the policies. If such an approach were necessary to determine coverage obligations, it would be virtually impossible for insurers issuing “Claims made” policies to decide whether a particular lawsuit falls within an earlier policy period until all underlying allegations are proven or refuted. As the Defendants aptly note, “ATT’s theory would wreak havoc with the entire system of claims made insurance.”[226]

IV. CONCLUSION
For the reasons set forth above, the Defendants’ Motions for Partial Summary Judgment filed pursuant to Phase 1 of the Case Management Order are GRANTED.
IT IS SO ORDERED.