United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION & ORDER
H. Miller United States District Judge
before the court is the Magistrate Judge's Memorandum and
Recommendation (the “M&R”) (Dkt. 40) recommending
that the plaintiff's motion for summary judgment (Dkt.
24) be granted and that the defendants' motion for
judgment on the pleadings (Dkt. 26) be denied. Having
considered the motions, related briefing, and exhibits (Dkts.
24, 26, 28-32, 34-35, 38), the M&R (Dkt. 40), defendants'
objections (Dkt. 41), plaintiff's response to
defendants' objections (Dkt. 42), as well as other
relevant materials in the record, the court is of the opinion
that defendants' objections should be OVERRULED and the
M&R should be ADOPTED IN FULL.
International Inc. ("Oceaneering") purchased a
directors and officers defense policy (“D&O
policy”) from the plaintiff. Dkt. 24-2, Ex. A-1. The
policy covered, among others, Oceaneering's directors and
officers as insured persons. Id. In June 2014, an
Oceaneering shareholder filed a derivative action on behalf
of Oceaneering against the current directors and one former
director for granting themselves excess compensation. Dkt.
24-2, Ex. A-3. Oceaneering filed a claim for coverage of the
derivative action under the D&O policy, which, reserving
rights, the plaintiff agreed to cover with regard to defense
costs only. Dkt. 24-2, Ex. A-2, Ex. A-5. The plaintiff in the
derivative action made a settlement demand that consisted
mostly of disgorgement of the alleged excess compensation,
and the defendants to that suit made a settlement
counteroffer. Dkt. 28-1, Ex. B-2, Ex. B-3. The plaintiff here
then filed suit, seeking a declaration that it does not owe
indemnity coverage under the D&O policy for any settlement
reached in the derivative action. Dkt. 1.
Magistrate Judge treated the defendants' motion for
judgment on the pleadings as a motion for summary judgment
pursuant to Federal Rule of Civil Procedure 12(d). Dkt. 40 at
9-10. Regarding the coverage dispute, the Magistrate Judge
decided that any part of the settlement that covered
disgorgement of excess compensation did not constitute a
covered loss under the policy. Id. at 17. The
Magistrate Judge refrained from determining what portion of
the proposed settlement is in the nature of disgorgement.
Id. at 21.
dispositive matters, the court “determine(s) de novo
any part of the magistrate judge's disposition that has
been properly objected to.” See Fed. R. Civ.
P. 72(b)(3). “The district judge may accept, reject, or
modify the recommended disposition; receive further evidence;
or return the matter to the magistrate judge with
instructions.” Id. “When no timely
objection is filed, the court need only satisfy itself that
there is no clear error on the face of the record in order to
accept the recommendation.” Fed.R.Civ.P. 72(b),
Advisory Comm. Note (1983). For non-dispositive matters, the
court may set aside the magistrate judge's order only to
the extent that it is “clearly erroneous or contrary to
law.” Fed.R.Civ.P. 72(a).
Motion for Summary Judgment
shall grant summary judgment when a “movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(c). “[A] fact is genuinely in dispute
only if a reasonable jury could return a verdict for the
non-moving party.” Fordoche, Inc. v. Texaco,
Inc., 463 F.3d 388, 392 (5th Cir. 2006). The moving
party bears the initial burden of demonstrating the absence
of genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552 (1986).
If the party meets its burden, the burden shifts to the
non-moving party to set forth specific facts showing a
genuine issue for trial. Fed.R.Civ.P. 56(e). The court must
view the evidence in the light most favorable to the
non-movant and draw all justifiable inferences in favor of
the non-movant. Envtl. Conservation Org. v. City of
Dall., Tex., 529 F.3d 519, 524 (5th Cir. 2008).
defendants filed objections to the M&R (Dkt. 41). In summary,
the defendants contend that the Magistrate Judge incorrectly
concluded that payments in the nature of disgorgement are
uninsurable as a matter of law, misapplied and improperly
extended In re TransTexas Gas Corporation, 597 F.3d
298, 309 (5th Cir. 2010), and failed to interpret the D&O
policy as a whole in determining that the exception to the
“personal profit” exclusion did not restore
coverage . Dkt. 41. These are all arguments considered and
discussed by the Magistrate Judge in the M&R, and the court
reviewed the Magistrate Judge's rationale and conclusions
as expressed in the M&R de novo and ADOPTS them in
defendants' objections (Dkt. 41) are OVERRULED, and the
M&R (Dkt. 40) is hereby ADOPTED IN FULL. The plaintiffs
motion for summary judgment (Dkt. 24) is GRANTED and