Free Reply in Support of Motion - District Court of Arizona - Arizona

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Steven Plitt, Esq. (State Bar No. 007481) Daniel Maldonado, Esq. (State Bar No. 018483 KUNZ PLITT HYLAND DEMLONG & KLEIFIELD, P.C. 3838 North Central Avenue, Suite 1500 Phoenix, Arizona 85012-1092 Telephone: (602) 331-4600 Facsimile: (602) 331-8600 Attorneys for Defendant/Counter-Plaintiff IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA U-Haul International, Inc.; U-Haul Company; of Pennsylvania; U-Haul Company of Florida; and Republic Western Insurance Company, Plaintiffs, vs. Lumbermens Mutual Casualty Company, Defendants

No. CIV 04-0662 PHX DGC (Maricopa County Superior Court Cause No. CV 2004002438) LMC'S REPLY IN SUPPORT OF ITS MOTION TO SUBSTITUTE BONDS (Assigned to the Honorable David G. Campbell)

Defendant/Counter-Plaintiff,

LUMBERMENS

MUTUAL

CASUALTY

COMPANY ("LMC"), respectfully submits this reply in support of its motion to substitute two new bonds in place of the appeal bond previously filed in this action. LMC's Motion to Substitute Bonds is simple and has no adverse impact on UHaul. U-Haul's Memorandum in Opposition raises meritless objections without any legal support in an apparent attempt to cause confusion where none should exist. LMC's existing Supersedeas Bond, to which U-Haul has no objection, is in the amount of $2,858,000. By this motion, LMC seeks to substitute two new

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Supersedeas Bonds in place of the existing Supersedeas Bond, which will together total the same amount of $2,858,000. The first new Supersedeas Bond (the "LMC Bond") will be in the amount of $2,655,512.21 and identical in all other respects to the existing Supersedeas Bond. 1 The remaining amount will be secured by a second Supersedeas Bond (the "Scor Bond") in the amount of $202,487.79, and identical in all other respects to the existing Supersedeas Bond except that the surety will be North American Specialty Insurance Company Subsidiaries and Affiliates ("North American"), and the principal will be LMC's reinsurer, Scor Reinsurance Company ("Scor"). U-Haul's Opposition repeats the "mantra" that the two new bonds contain "ambiguities and/or anomolies" without citing to a single specific example. When UHaul's arguments are dismissed as nothing but "red herrings," the following points become clear: · U-Haul has raised no argument and has cited to no law suggesting that the surety under the Scor Bond, North American, would not have an

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obligation to perform under the Scor Bond. U-Haul does not challenge the irrefutable fact that the Scor Bond is an enforceable bond. For that reason alone LMC's motion should be granted. · U-Haul has made no objection to North American as the surety under the Scor Bond.

The LMC Bond will be issued by the same surety as the existing Supersedeas Bond, National Indemnity Company.

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· Since the Scor Bond is an obligation of the surety, North American, to the obligee, U-Haul, the fact that Scor is named as principal is irrelevant and has no impact upon the obligations of North American to perform under the bond. In its Opposition, U-Haul raises purported legal questions and potential difficulties it might encounter in collecting on the Scor Bond if LMC were to become insolvent. These objections are, as U-Haul itself almost concedes, "entirely

meritless." (See Opposition at 5-6). "The very purpose of a supersedeas bond is to protect judgment creditors from the risk that insolvency of the debtor may impair their ability to enforce the judgment promptly." Celotex Corp. v. Edwards, 514 U.S. 300, 332, 115 S.Ct. 1493, 1510 (1995). Both the existing Supersedeas Bond, and the proposed Supersedeas Bonds clearly satisfy that purpose and protect U-Haul. The fact that Scor is named as principal on the Scor Bond does not afford UHaul any less protection. The Scor Bond, which is identical in form to the LMC Bond, clearly and unequivocally binds Scor and its surety to pay the sum posted to U-

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Haul, and offers the identical protection to U-Haul as the LMC Bond. 2 Bond provides as follows:

The Scor

Scor Reinsurance Company ("Scor"), as Principal, and North American Specialty Insurance Company Subsidiaries and Affiliates, as Surety, are held and firmly bound unto U-Haul International, Inc. and Republic Western Insurance Company, as Obligee(s), in the penal Although Scor is an A-rated reinsurer with a significantly greater policyholder's surplus that LMC, that is irrelevant with respect to the amount of protection afforded to U-Haul under the Scor Bond since the Scor Bond represents an obligation to UHaul by the surety to which U-Haul has made no objection.

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sum of Two Hundred Two Thousand Four Hundred Eighty Seven Dollars and 79/100 Dollars ($202,487.79), lawful money of the United States of America, for the payment which, well and truly made, we bind ourselves, our heirs, legal representatives, successors and assigns, jointly and severally, firmly by these presents. (Proposed Scor Bond, Ex. E to Motion to Substitute (emphasis added)). It is

irrelevant what duty Scor might otherwise have to U-Haul, as LMC's reinsurer, absent the existence of Scor's and North American's express undertaking in the Scor Bond. It is not uncommon for a reinsurer to assume obligations directly to an insured such as, for example, in the mortgage market involving a small insurer unable to maintain the surplus required by large lending institutions. The Scor Bond, in which Scor and its surety have expressly bound themselves to U-Haul, operates in a similar

12 13 14 15 16 17 18 a stranger to the underlying transaction and whose obligation to pay is triggered by 19 20 21 22 23 24 25 be considered a "preference" in a hypothetical LMC insolvency because such a the default of the principal. It should therefore be irrelevant to U-Haul which entity is the "principal" under the Scor Bond because the surety remains bound to U-Haul to pay the bond amount. The fact that the Scor Bond is directly between North American and U-Haul makes it impossible that any payment by North American under the Scor Bond could fashion and provides U-Haul with financial protection in the event of an LMC insolvency. In any event, U-Haul's argument that Scor has no direct obligation to it outside of the Scor Bond ignores the essential nature of surety bonds and does not invalidate the Scor Bond in any way. The surety under such a bond is always an entity which is

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payment would not be made by an insolvent company. A preference issue could only arise under the Scor Bond if North American were insolvent, and thus LMC's financial condition is simply irrelevant to the enforceability of the Scor Bond. The only remaining complaint U-Haul raises is the purported time and expense

5 6 7 8 9 10 11 12 13 14 15 16 17 Court enter an order granting LMC leave to post two bonds, in the total amount of 18 19 20 21 22 23 24 25 ... ... $2,858,000.00 in substitution for the single bond in the same amount approved by this court in its July 20, 2007 order. As set forth above, U-Haul cites no authority to even suggest legal support for its mantra of "ambiguities and/or anomolies" with the new Supersedeas Bonds. In short, U-Haul has not raised any substantive questions regarding the security of the two proposed Supersedeas Bonds over the existing Supersedeas Bond. Based upon the foregoing, Defendant LMC respectfully requests that this associated with collecting on two bonds (assuming it is forced to do so). As

explained in LMC's motion, the act of collecting on these Supersedeas Bonds can fairly be described as ministerial. (Motion to Substitute at 3). U-Haul offers no evidence, or even explanation, regarding what costs and time it would incur collecting on the two proposed Supersedeas Bonds, as opposed to the existing one.

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DATED this 3rd day of July, 2008. KUNZ PLITT HYLAND DEMLONG & KLEIFIELD, P.C. By: s/ Daniel Maldonado Steven Plitt Daniel Maldonado 3838 N. Central Avenue, Suite 1500 Phoenix, AZ 85012-1902 Attorneys for Defendant ORIGINAL electronically filed with the USDC this 3rd day of July, 2008, and a Copy delivered to Judge Campbell; and a COPY electronically served/mailed to: Gerald Gaffaney, Esq. David J. Ouimette, Esq. MARISCAL, WEEKS, MCINTYRE & FRIEDLANDER, P.A. 2901 North Central, Suite 200 Phoenix, Arizona 85012 Attorneys for Plaintiff Bruce Friedman, Esq. Mark S. Fragner, Esq. RUBIN, FIORELLA & FRIEDMAN, LLP 292 Madison Avenue, 11th Floor New York, New York 10017 Attorneys for Plaintiff s/ Christine Valenzuela
Document #: 779067

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