United States District Court For the Northern District of California 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 there isagenuineissuefor trial.” moving partymust setforth,byaffida absence of any genuine issuesof material fact, burden ofidentifyingforthecourtt 56(c). Inamotion forsummary judgment, “[if]th material factandthatthemoving party isentitled admissions onfile,together withaffidavits,if and arguments ofcounsel,theCourtGRANTSSt.Paul’s motion. summary judgment re:collateralsourcerule.Aftercaref COMPANY, ST. PAULFIRE&MARINEINSURANCE v. ATMEL CORPORATION, 626, 630(9thCir.1987) (citing Case 3:04-cv-04082-SIDocument543Filed03/27/06Page1of6 Summary adjudicationisproperwhen“theplead On March17,2006,theCourtheardoralargument ondefendantSt.Paul’s motion for partial Defendant. Plaintiff, FOR THENORTHERNDISTRICTOFCALIFORNIA IN THEUNITEDSTATESDISTRICTCOURT CelotexCorp.v.Catrett SeeT.W.Elec.Service,Inc., v.Pac.Elec.ContractorsAss’n hose portionsofthematerials onfile vit orasotherwiseprovidedin LEGAL STANDARD / the burdenofproductionthen e moving partyforsummary judgment meets itsinitial to ajudgment asamatter any, showthatthereisnogenuineissueastoany SOURCE RULE JUDGMENT RE:COLLATERAL MOTION FORPARTIALSUMMARY ORDER GRANTINGDEFENDANT’S No. C04-04082SI ul considerationoftheparties’papersand , 477U.S.317(1986)). ings, depositions,answerstointerrogatories, Rule 56,specificfactsshowingthat thatitbelievesdemonstrate the of law.” Fed. R. Civ. P. Fed.R.Civ. of law.” shifts sothatthenon- , 809F.2d United States District Court For the Northern District of California 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 and settlethe $5,900,000 settlement. Atmel contendsthatitisentitledtothe$5,115,036Royalpaid defend paid $3,865,036ofAtmel’s totaldefensecosts the in compensatory damages, althoughithaspaid outatotalof$8,239,958. $2,557,518). Thus,settingaside assignee, “atleast”one-halfoftheamounts paid the 37 Cal.3d813,187(1985).Atmel isseekingascont insured tocompel payment ofbenefitsdueunderaninsurancepolicy. facts tothislawsuit.TheCourtincorporatesthoseherein. 1979). defeat summary judgment. speculative testimony inaffidavitsandmoving papersis The evidencepresentedbythepartiesmust beadmissible. Zenith RadioCorp. non-moving party. determinations orweighconflictingevidence,anddraws St. Paul. recovery ofone-halfRoyal’s pa payments collateralsourcedoctrineisnotnecessarily“inconsistent” withitsrequestfor underthe payments andone-half ofRoyal’spayments, orabout150% ofwhatRoyalpaid. initsmemo, however,AtmelRule), at1.Later makes itclearthatseeksboth100%ofRoyal’s Seagate Seagate Case 3:04-cv-04082-SIDocument543Filed03/27/06Page2of6 In addition,however,Atmel isseekingasdama Atmel isseekingastortdamages its In itsordersfiledOctober11,2005andFebr In judgingevidenceatthesummary judgment 1 Initsoppositionmemo, Atmel initiallystatesthatitsrequestforrecoveryof100%Royal’s See defense andsettlement, based onthecollateralsourcerule. defense($3,589,958)andsettlement ($4,650,000).Atmel isalsoseeking,asRoyal’s Atmel’s Memo inOppositionto Motionfor Seagate , 475U.S.574(1986)); See T.W.Electric actionpursuanttothecollateralsourcerule See ThornhillPubl’gC Brandt yments based on Royal’s assigned ri yments assigned basedonRoyal’s , 809F.2dat630-31(citing feesandpunitivedamages, Atmel isseekingover$10,797,476 Ting v.UnitedStates DISCUSSION Brandt of $7,454,994andRoyalcontributed$1,250,000 to the 2 fees,whicharethefees o., Inc.v.GTECorp. by Royal in the defenseandsettlementby Royalinthe (atleast uary 21,2006,theCourtsetforthbackground ract damages theamounts that Atmel paidtoward ges 100%oftheamount thatRoyalpaidtoward insufficienttoraisegenuineissuesoffactand Partial Summary Judgment (CollateralSource all inferences inthelightmost favorable tothe stage, theCourt doe See , 927F.2d1504,1509(9thCir.1991). , whichdeniesanoffsettoinsurer Fed. R. Civ. P.56(e).Conclusory, R.Civ. Fed. Matsushita Elec.Indus.Co.,Ltd.v. ght toequitablecontribution from 1 See Brandtv.SuperiorCourt Inthe , 594F.2d730,738(9thCir. reasonablyincurredbyan s notmake credibility Seagate Id ., at11. action,Royal , United States District Court For the Northern District of California 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 independent thirdparty,here,theallegedtortfeasor a tortfeasorhascausedtheinjuryandinsured required Royaltodefendandindemnify Atmel incove because SeagatesuedAtmel, andAtmel wascoveredbyaninsurancepolicyissuedRoyalthat by Atmel asaresultofSt.Paul’sactions.Instead, toward thedefense andsettlement inthe for badfaith damages. Thecriticalflaw inAtmel’ by Royalwerenot“compensation fortortdamages inflictedbythetortfeasor.” seeking torecovercompensation fortortdamages inf compensation fortortdamages allegedlycausedbySt.Pa to gratuitouswagepayments; tortfeasor causinginabilitytowork notentitledtoreductionindamages). v. Wells payments ofmedical bills;tortfeasorcausing e.g, Helfend by thecollateralsourcewouldnothavebeenmade “ lawsuit. Incontrast,in that Royal’scontributi Seagate contends thatthemonies paidbyRoyalonbehalf of Atmel towardthedefense andsettlement of the from thetortfeasor.” such payment shouldnotbedeductedfrom thedamages plaintiffwouldotherwisecollect whichthe party receivessome compensation forhisinjuriesfr is inapplicablehere. for aninsured’srecoveriesfrom anindependentsource. from St.Paul,nearlydoublewhatAtmel actuallypa Case 3:04-cv-04082-SIDocument543Filed03/27/06Page3of6 The Courtagreesthatthecollateralsourcerule The CaliforniaSupreme Courthasdescribedtheco 2 , 72Cal.App.4th1006,1010-12(1999)(inpersonal in actionarenotacollateralsourceastheruleisde Addingthecollateralsource recoveryto , 2Cal.3dat4-5(inpersonalinjuryaction,collateral sourceruleappliedtoinsurance Helfend v.SouthernCal.RapidTransitDist. Helfend the cases inwhichcourtshaveapplie cases the on towardAtmel’s defense andsettlement of the Seagate accident notentitledtoreductionindamages); actionwerenotpayments forany“injuries”suffered theotherdamages claimed, Atmel seeks$15,912,512 s reasoningisthatthemonies that Royalcontributed receives compensationfortheinjuryfrom awholly 3 as St.Paulcorrectlynotes,Royalpaidthesemonies –St.Pauldidnotcau id out,making defectivechipsanew profit center. om asourcewhollyindependentofthetortfeasor, but for”theinjurycausedbytortfeasor. licted bySt.Paulasatortfeasor,themonies paid red third-partylawsuits.Unlikeasituationwhere does notapplytoAtmel’ 2 St.Paulcontendsthatthecollateralsourcerule fined andappliedinCalif ul, andthatevenifAtmel isan“injuredparty” llateral sourceruleasfollows: “if aninjured d thecollateralsourcerule,payment jury action,collateralsourceruleapplied , 2Cal.3d1,6(1970).St.Paul se the“injury”– Seagate s claim againstSt.Paul ornia. St.Paulargues actionwasnot Arambula Seagate See, United States District Court For the Northern District of California 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 the Kardlyswereseekingadoublerecoverybecause th insurance policy,andtheysought, distress. obtained adamages verdictinapersonalinjuryacti tortfeasor (anindividualnamed Short)if they believedthe settlement offer wasinadequate.TheKardlys reach asettlement ontheremaining claims, andStateFarm informed theKardlystheycouldsue a radiothatwasstolenfrom the lost personalgoods,andmedical expenses. accident andtheyfiledaclaim with theirinsurer,StateFarm, forcollisiondamage, towingexpenses, Automobile InsuranceCompany policy allowingforsuch recovery,norhasAtmel Seagate extent tortfeasors –andaccordinglythecolla insured had settled could not be considered collateral sources – presumably because they were joint 1061 (2004),isunavailing.In Corporationv.NationalUnionFireInsuranceCompanyofPittsburgh Financial ofthecollateralsourceruleinthiscontext.Atmel’s relianceon application to supportthe breach ofcontract.”). authority inCalifornia andotherjurisdictionshasrejectedtheextension of thecollateralsourceruleto Plut v.Fireman’sFund Ins. Co. of contractclaim, itwillbeentitledto“receive company agreedtoindemnify him.” with thirdpersonswhichrelievehim whollyor cannot reducetheamount recoverable merely because[theinsured]hascollateralcontracts orrelations that “aninsuredisentitledtoreceivecompensation Case 3:04-cv-04082-SIDocument543Filed03/27/06Page4of6 Textron The otherprincipalcasereliedonby 3 The casescitedbyAtmel donotholdotherwise, defense andsettlement ascontractdamages, TotheextentAtmel suggeststhatitisen Id. TheKardlysthensuedStateFarm alleging abadfaithdenialoftheirclaims underthe discussesthecollateralsourceru Textron car aftertheaccidentoccurred.St , 207Cal.App.3d479(1989),theplaintiffswereinvolvedinacar , 85Cal.App.4th98,107 (2000)(“[T]heoverwhelming weightof inter alia Id. , thetrialcourtheldthatthir teral sourceruledidnotapply. at1077.Here,justasin , emotional distressdamages. Id Atmel isalsoinapposite.In . at482.StateFarm paidforthemedical expensesand compensation inaccordance le, thecaseisinapposite.The cited anylegalauthority forsuchaproposition. 4 on againstShort,includingarecoveryforemotional partly from thelossagai in accordancewiththepolicyterms, andaninsurer titled to the amounts that Royal paidtoward the Royal titled totheamounts that ey hadreceivedfullreliefintheiractionagainst Atmel hasnotidentified and indeedAtmel hasnotcitedanyauthority Textron ate Farm and the Kardlyscouldnot d partieswithwhom theplaintiff See id. , if Atmel prevailsonitsbreach Kardly v.StateFarmMutual Id. at1077-78.Thus,tothe nst whichtheinsurance with thepolicyterms.” StateFarm arguedthat Textron any provisionsof the , 118Cal.App.4th courtalsoheld Textron Cf. 3

United States District Court For the Northern District of California 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 St. Pauldidornotdo. insurance policyRoyalissuedAtmel, andRoyalmade liability simply becauseaseparatetortfeasoralsoowedtheKardlysdamages foraseparatetort. that StateFarm wasliableforthe injuries thatSt that ShortowedtheKardlys,whichise Importantly, the liability foritstortand collateralsourcerulewasnotapplied,thesecondtortfeasor,StateFarm, the wouldhaveescaped if injuries atthehandsofthesetort Kardly liability of StateFarm inthissuit.” “[t]he Kardlys’recoveryfrom damages verdict–because“[e]veryoneisresponsible that thecollateralsourceruleapplied–andthusSt 484-85. Thecourtfurtherheldthat the Kardlyscouldnothaverecoveredinthat case againstShorthadexcludedevidenceconcerningth 483. Short, includingfullcompensation formental dist damages claim onthatbasis. however, asRoyal’sassignee onRoyal’sequitable defended andindemnified Atmel inthe St Paul’sallegedmisconduct. the Royalpayments wouldresultinAtmel recoveri St. Paul Case 3:04-cv-04082-SIDocument543Filed03/27/06Page5of6 wasconcernedwithensuringthat Kardly Here, Royalcontributedtothe The 4 Ifitisdetermined thatSt.PaulbreacheditsdutiestoAtmel andthatSt.Paulshouldhave for theinjuriescausedbySt.Paul Kardly ’s holdingdoesnotsupporttheapplicationofcollateralsourceruleinthiscontext. Kardly courtrejectedStateFarm’s arguments, andnot courtdidnotholdthatStateFarm wasrequiredtopaytheKardlysamount 4 the victims wouldhavereceivedlessthanfullrecoveryfortheirinjuries. the

Kardly Cf. EmeraldBayCommunityAss’nv.GoldenEagle Ins.Corp. Short for hernegligentdrivingb feasors, isabletoobtainfullrecoveryforhisorherinjuries.In simply holdsthatif Atmel preva Short andStateFarm wereseparate Id. at486. ssentially whatAtmel seekshere;instead, Seagate Seagate avictim of twoseparatetort . ApplyingthecollateralsourceruletoallowAtmel toseek case for emotional distress caused by State Farm. Farm. case foremotional distresscausedbyState action,itmay bethatRoyal ate Farm caused,andthatStateFarm couldnotavoid defense andsettlement pursuanttotheterms of the ate Farm’s liabilitycouldnotbereducedbytheShort ress causedbyStateFarm’s tortiousconduct. 5 ng “damages” thatwerenotproximately causedby contribution rights, Atmel is alreadypursuinga is contribution rights,Atmel fortheconsequencesofhisorherwrongs”and thesepayments withoutregardtoanythingthat e Kardlys’dealingswithStateFarm, andthus ed thatthetrialcourtinplaintiffs’ ears norelationshiptothepotential ils, itisentitledtofull recoveryfrom feasors, whohassufferedseparate andindependenttortfeasors, paid more thanitsshare; Kardly simply held , 130Cal. Kardly Id. Id. at at , United States District Court For the Northern District of California 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Dated: March24,2006 motion forpartialsummary judgment re:collateralsourcerule.(DocketNo.320). benefit from itspolicywithRoyal. mitigate damages withpayments from Atmel’s otherinsurancecarrier,orthatAtmel hasnotearneda inflicted bySt.Paul,thereisnoconcern,asarticulatedin for theinjuryinflicted.” Howe 2 Cal.3dat10.Here,ifSt.Paul the CaliforniaSupreme Courtstatedin quotations omitted). theinsuredmust showproofofeconomic loss.”)(internalcitationsand personal injury,toprevail for breachofthecovenantgoodfa detriment proximately causedthereby,whetheritcouldha App. 4th1078,1093-94(2005)(“Tortdamages aretheamount whichwillcompensate forallthe Case 3:04-cv-04082-SIDocument543Filed03/27/06Page6of IT ISSOORDERED. provide himself withinsurance. compensation fortheinjuryinflictedmerely would haveearnednobenefit.Defendants position inferiortothatof having boughtnoinsurance,becausehispayment ofpremiums to mitigate damages withpayments from plai without respecttoanyotherpossiblesourceof Courts considerinsuranceaform ofinvest to purchaseandmaintain insurancefor pe The collateralsourceruleexpressesapolicyjudgment infavorofencouragingcitizens The Court’sholdingisalsoconsistentwithth For the foregoing reasons and for good cause shown, the CourtherebyGRANTSSt.Paul’s the For theforegoingreasonsandforgoodcauseshown,

isfoundliabletoAtmel, itwillbe ver, becausetheRoyal payments were notconnected toanyinjury ith andfairdealingisoneseekingrecoveryofapropertyright,not Helfend CONCLUSION , ment, thebenefitsofwhichbecome payable 6 rsonal injuriesandfor othereventualities. hould notbeabletoavoidpayment offull because thevictim hashadtheforesight to e policyunderlyingthecollateralsourcerule.As ntiff’s insurance,plaintiff wouldbeina funds.Ifweweretopermit atortfeasor ve beenanticipatedornot.Sinceatortaction Helfend

United StatesDistrictJudge SUSAN ILLSTON requiredtopay“fullcompensation , that St.Paulisbeingallowedto , that