                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-10-2004

IPSCO Steel v. Blaine Constr Corp
Precedential or Non-Precedential: Precedential

Docket No. 03-3109




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Recommended Citation
"IPSCO Steel v. Blaine Constr Corp" (2004). 2004 Decisions. Paper 557.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/557


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                      PRECEDENTIAL          U.S. INC., a Delaware Corporation;
                                            LIBERTY MUTUAL INSURANCE
   UNITED STATES COURT OF                      COMPANY, a Massachusetts
APPEALS FOR THE THIRD CIRCUIT               Corporation; MARSH USA, INC., a
          __________                          Delaware Corporation f/k/a J&H
                                             MARSH & MCLENNAN, INC.;
            No. 03-3109                       LIBERTY INTERNATIONAL
            __________                      CANADA, a division of LIBERTY
                                           MUTUAL INSURANCE COMPANY, a
IPSCO STEEL (ALABAMA), INC., an                 Massachusetts Corporation.
    Alabama Corporation; IPSCO
 CONSTRUCTION, INC., an Alabama                *Lexington Insurance Company,
Corporation; KVAERNER U.S. INC., a                       Appellant
        Delaware Corporation                    *(Pursuant to F.R.A.P. 12(a))

                 v.                          (D.C. Civil Action No. 01-cv-00440)

    BLAINE CONSTRUCTION                                  _________
   CORPORATION, a Tennessee
         Corporation.                                 On Appeal from the
                                             United States District Court for the
   *Lexington Insurance Company,              Western District of Pennsylvania
             Appellant                      District Judge: Hon. Arthur J. Schwab
    *(Pursuant to F.R.A.P. 12(a))                        __________

 (D.C. Civil Action No. 99-cv-02055)         Argued on Tuesday, April 20, 2004
                                                      ___________
            __________

            No. 03-3110                    Before:      SCIRICA, GARTH, and
            __________                                  BRIGHT,* Circuit Judges

    BLAINE CONSTRUCTION                         (Opinion Filed: June 10, 2004)
   CORPORATION, a Tennessee
          Corporation

                 v.
                                                 *
                                                  Honorable Myron H. Bright,
 IPSCO CONSTRUCTION, INC., an              United States Court of Appeals for the
 Alabama Corporation; KVAERNER             Eighth Circuit, sitting by designation.

                                       1
                                           Harper, Steven J. (argued)
DeCourcy, Dara A. (argued)                 Kirkland & Ellis LLP
Zimmer, Harry J.                           200 East Randolph Drive
Zimmer Kunz                                Suite 6500
600 Grant Street                           Chicago, IL 60601
3300 USX Tower
Pittsburgh, PA 15219                       Landau, Christopher
                                           Kirkland & Ellis LLP
Attorneys for Appellant Lexington          655 15th Street, N.W.
Insurance Company                          Suite 1200
                                           Washington, DC 20005
Doty, Robert W.
Ejzak, Richard A. (argued)                 Attorneys for Appellees IPSCO Steel
Roman, Andrew M.                           (Alabama) Inc. and IPSCO Construction
Cohen & Grigsby, P.C.                      Inc.
11 Stanwix Street, 15th Floor
Pittsburgh, PA 15222                       Medved, George M.
                                           Pepper Hamilton LLP
Rogers, E. Mabry                           500 Grant Street
Bradley, Arant, Rose & White, LLP          5000 One Mellon Bank Center
1819 Fifth Avenue North                    Pittsburgh, PA 15219
Birmingham, AL 35203
                                           Little, J. Ford
Attorneys for Appellee Kvaerner U.S.       Noell, Robert P.
Inc.                                       Walton, Monty L.
                                           Woolf, McClane, Bright, Allen &
Luciana, Joseph L. III                     Carpenter, PLLC
Lund, Kenneth J.                           900 South Gay Street
Paciaroni, Richard F.                      Suite 900, Riverview Tower
Kirkpatrick & Lockhart LLP                 Knoxville, TN 37902
535 Smithfield Street
Henry W. Oliver Building                   Attorneys for Appellee Blaine
Pittsburgh, PA 15222                       Construction Corporation

Lucas, Kevin P.                            Long, Kevin M.
Williams, Robert J.                        Van Vugt, Eric J.
Manion, McDonough & Lucas P.C.             Quarles & Brady LLP
600 Grant Street                           411 East Wisconsin Avenue, #2500
Suite 1414                                 Milwaukee, WI 53202
Pittsburgh, PA 15219

                                       2
Sommer, Robert B.                                  Construction, Inc. (collectively “IPSCO”),
Hergenroeder, Rega & Sommer                        Kvaerner U.S. Inc. (“Kvaerner”), Marsh
332 Fifth Avenue                                   USA, Inc. (“Marsh”), and Liberty Mutual
Suite 610                                          Insurance Company (“Liberty Mutual”),
Pittsburgh, PA 15222                               who had been embroiled in litigation
                                                   arising out of a construction project in
Attorney for Appellee Marsh USA, Inc.              Alabama. The Settlement Agreements
                                                   brought to an end the two lawsuits that
Reed, Jonathan S.                                  had been filed in Pennsylvania involving
Smith, Sean K.                                     those parties who, among others, were the
Traub, Richard K.                                  project owner (IPSCO), the project
Traub, Eglin, Lieberman & Straus                   manager (Kvaerner), the project insurer
100 Metroplex Drive                                (Liberty Mutual), and the insurance broker
Metroplex Corporate Center I, Suite 203            (Marsh).
Edison, NJ 08817
                                                              The instant appeal was filed by
Sherman, C. Leon                                   L e x i n g t o n I n s u r a n ce C o mp a n y
C. Leon Sherman & Associates                       (“Lexington”), which had issued a $25
20 Stanwix Street                                  million professional liability insurance
5th Floor                                          policy to Kvaerner in 1998. Under the
Pittsburgh, PA 15222                               terms of that policy, Kvaerner may look to
                                                   Lexington for insurance proceeds only
Attorneys for Appellee Liberty Mutual              after any “project-specific” policies are
Insurance Company                                  exhausted. Kvaerner is a named insured
                                                   under a $20 million policy issued by
               __________                          Liberty Mutual specifically for the
                                                   construction project.
                OPINION
               __________                                 Because the Settlement Agreements
                                                   effectively capped Liberty Mutual’s
                                                   “project specific” policy at approximately
Garth, Circuit Judge:                              $11 million,1 Lexington had registered

       In a companion case decided today,
see IPSCO Steel (Alabama) Inc. v. Blaine                  1
                                                             As we have discussed in the
Constr. Corp.,Docket Nos. 03-2929/2966,            companion case, IPSCO Steel (Alabama)
-- F.3d -- (3d Cir. 2004), we have held that       Inc. v. Blaine Constr. Corp., supra,
the District Court properly approved two           Liberty Mutual had paid $5 million in
Settlement Agreements involving IPSCO              court expenses for Kvaerner and had
Steel (Alabama), Inc. and IPSCO                    settled the Construction Action for $6

                                               3
objections in the District Court to the              appeal. Caplan v. Fellheimer Eichen
Settlement Agreements approved in the                Braverman & Kaskey, 68 F.3d 828, 836
companion case, IPSCO Steel (Alabama)                (3d Cir. 1995). However, our Court
Inc. v. Blaine Constr. Corp.,supra. Unlike           carved out an exception to that principle in
Kvaerner, however, Lexington was not a               1992 when it decided Binker v.
named party to the proceedings and did not           Pennsylvania, 977 F.2d 738 (3d Cir.
move to intervene pursuant to Federal                1992). The so-called Binker exception
Rule of Civil Procedure 24.2 After the               provides that “a nonparty may bring an
District Court approved the settlements              appeal when three conditions are met: (1)
and dismissed the two lawsuits, Kvaerner             the nonparty had a stake in the outcome of
and Lexington filed separate notices of              the proceedings that is discernible from
appeal. We have disposed of Kvaerner’s               the record; (2) the nonparty has
appeal in the companion case, leaving only           participated in the proceedings before the
Lexington as the Appellant here.                     district court; and (3) the equities favor the
                                                     appeal.”     Northview Motors, Inc. v.
        On appeal, Lexington presents two            Chrysler Motors Corp., 186 F.3d 346, 349
arguments as to why the District Court               (3d Cir. 1999).
should not have approved the Settlement
Agreements. However, IPSCO has moved                        Lexington contends that it fits
to dismiss Lexington’s appeal on grounds             within the Binker exception because (1) it
of standing. Quoting from Marino v.                  may potentially be liable to pay a judgment
Ortiz, 484 U.S. 301 (1988), IPSCO argues             that, in the absence of the Settlement
that “only parties to a lawsuit, or those that       Agreements, Liberty Mutual, as the
properly become parties, may appeal an               “project-specific” insurer, would have had
adverse judgment.” Id. at 304.                       to pay; (2) it attended a settlement
                                                     conference and mediation before the
       Ordinarily, only parties of record            District Court and submitted a brief in
before the district court have standing to           opposition to the motion to approve the
                                                     Settlement Agreements; and (3) it seeks to
                                                     protect not only its own interests, but also
million for a total expenditure of $11               those of its insured, Kvaerner.
million under the $20 million policy.
       2
         In its Notices of Appeal,                          Even if we were satisfied that
Lexington incorrectly states that it was             Lexington met all three prongs of the
an “Intervenor” in the District Court.               Binker exception, which we need not
Although Lexington filed briefs in the               decide, we are persuaded that it does not
District Court opposing the proposed                 have standing to pursue this appeal. To
settlements and participated in the                  understand why that is so, we must
hearing, it did not move to intervene in             consider three distinct but related
the District Court or in our Court.                  concepts: intervention pursuant to Federal

                                                 4
Rule of Civil Procedure 24; Article III            Jurisdiction 2d § 3902.
standing to pursue the original
controversy; and standing to appeal a                      The issue here is whether
district court ruling. Although the Binker         Lexington was sufficiently aggrieved by
Court couched its three-part test in terms         the District Court’s order such that it has
of “standing to appeal,” see Binker, 977           standing to appeal. Our decision in
F.2d at 745, the first prong of the Binker         Travelers Insurance Company v. H.K.
test focused on Article III standing to            Porter Co., 45 F.3d 737 (3d Cir. 1995) is
pursue the original controversy because it         particularly instructive.      There, the
required that the non-party had a stake in         plaintiff-insurer (Travelers) appealed a
the proceedings before the District Court,         bankruptcy court order granting a motion
thereby satisfying Article III’s “case-or-         to vacate the withdrawal of certain
controversy” requirement.                          creditors who had asbestos-related claims
                                                   against the bankrupt defendant-insured.
        Statutory standing to appeal, by           We held that Travelers lacked standing to
contrast, need not meet the case-or-               appeal because it was not a “person
controversy standard, but must meet the            aggrieved” by the order since its “potential
test of a party that is aggrieved. “In order       exposure [was] doubly removed, turning
to have standing to appeal a party must be         both on the success of the Claimants in
aggrieved by the order of the district court       their prosecution of claims against [the
from which it seeks to appeal.”                    insured party], and on a judicial
McLaughlin v. Pernsley, 876 F.2d 308,              determination that the policy issued by
313 (3d Cir. 1989) (citing Watson v.               Travelers cover[ed] the claims, a
Newark, 746 F.2d 1008 (3d Cir. 1984).              construction which Travelers strenuously
“The rule is one of federal appellate              reject[ed].” Id. at 742.
practice, however, derived from the
statutes granting appellate jurisdiction and              The same considerations that drove
the historic practices of the appellate            our decision in Travelers are present here.
courts; it does not have its source in the         Under the two Settlement Agreements
jurisdictional limitations of Art. III.”           approved by the District Court, Liberty
Deposit Guar. Nat’l Bank v. Roper, 445             Mutual and Marsh had agreed to pay a
U.S. 326, 333 (1980). Thus, a party who            total of $6.5 million to settle various
does not intervene in the district court (or       claims brought against them in the
did not have Article III standing to pursue        Pennsylvania lawsuits.3 The Settlement
the original action) may nevertheless have         Agreements do not require Lexington to
standing to pursue an appeal if it can show
that it was adversely affected by the
judgment. See e.g., Binker, 977 F.2d at                   3
                                                             Liberty Mutual paid $6 million
745; see also 15A Wright, Miller &                 in settlement; Marsh paid $500,000 in
Cooper, Federal Practice and Procedure:            settlement.

                                               5
make any payments, inasmuch as the                judgment being entered in the Alabama
“project-specific” insurer is Liberty             lawsuit against Kvaerner and in favor of
Mutual. Hence, Lexington was not                  IPSCO, an event that has not yet occurred.
directly aggrieved by either the Settlement       As in Travelers, Lexington is at least two
Agreements or the District Court’s orders         steps removed from any real effect to its
approving them.                                   policy because IPSCO must first succeed
                                                  on its claims against Kvaerner and, even if
        The only other lawsuit that has           it is successful, Kvaerner must prove that
been brought to our attention which               the policy covers the damages awarded in
potentially implicates the policy issued by       the Alabama action.5
Lexington is an action filed in Alabama by
IPSCO, the project owner, against                       Lexington has tried to distinguish
Kvaerner for alleged cost overruns. That          our holding in Travelers on the ground
lawsuit, which is ongoing and was not             that it involved an appeal from a
affected by the two Settlement                    bankruptcy court, which triggers its own
Agreements approved by the District               unique set of standing principles. It is true
Court, has resulted in substantial defense        that “the standing requirement in
costs for Kvaerner. But almost all of those       bankruptcy appeals is more restrictive than
defense costs have been paid and are
continuing to be paid by Liberty Mutual.4
Therefore, any real exposure to which                    5
                                                            We recognize two other factors
Lexington is subject is contingent on a           that further attenuate Lexington’s
                                                  standing to appeal. First, Lexington
                                                  might well resist paying any judgment
       4
          In a separate agreement, which          rendered against Kvaerner unless the
has been sealed by both the District              judgment exceeds $6.5 million because
Court and by us, Liberty Mutual agreed            IPSCO has already been reimbursed for
to pay 89% of Kvaerner’s defense costs            damages in that amount through the
in the Alabama action, with Kvaerner              Settlement Agreements with Liberty
paying the remaining 11%. If Kvaerner             Mutual and Marsh. Second, Kvaerner
prevailed on its counterclaims against            has informed us in the companion case
IPSCO, Liberty Mutual could recover its           of IPSCO Steel (Alabama) Inc. v. Blaine
costs. Although this agreement is sealed,         Constr. Corp., supra, that even if IPSCO
at least this provision was discussed at          was to obtain a judgment against
oral argument. The record does not                Kvaerner in the Alabama lawsuit,
disclose whether the obligation                   Lexington may argue that it has no
undertaken by Liberty Mutual is                   obligation to indemnify or reimburse
exclusive of the $11 million that                 Kvaerner because the Liberty Mutual
remained under the Liberty Mutual                 policy was not fully exhausted as a result
policy.                                           of the Settlement Agreements.

                                              6
the ‘case or controversy’ standing                  [class action] settlement . . . that would
requirement of Article III, which ‘need not         bind class members only after a hearing
be financial and need only be ‘fairly               and on finding that the settlement . . . is
traceable’ to the alleged illegal action.”          fair, reasonable, and adequate.”). Because
Travelers, 45 F.3d at 741 (quoting Kane v.          the lawsuits before the District Court here
Johns-Manville Corp., 843 F.2d 636, 642             were not class actions, the District Court
n.2 (2d Cir. 1988)). Yet in a non-                  was under no duty to review the proposed
bankruptcy context the Supreme Court has            Settlement Agreements for fairness or
stated that “[o]rdinarily, only a party             reasonableness. The parties’ relationships
aggrieved by a judgment or order of a               were defined entirely by fully-integrated
district court may exercise the statutory           contracts and there was no reason for the
right to appeal therefrom.” Deposit Guar.,          District Court to examine the fairness or
445 U.S. at 333 (emphasis added). Thus,             reasonableness of the two Settlement
it does not follow that we would have               Agreements, which were negotiated by
reached a different outcome in Travelers            sophisticated parties and their counsel.
under Article III’s slightly more relaxed
standing requirement. Even under the                       For the foregoing reasons, we will
“fairly traceable” standard, we hold that           dismiss the two appeals 6 taken by
Lexington does not have standing to                 Lexington from the District Court’s orders
appeal because its injury, if any, is far too       entered on June 6, 2003.
speculative and far too attenuated for
Lexington to be aggrieved.

        Moreover, even if Lexington had
standing to appeal, we would not be
persuaded by the arguments that it has
raised in its appellate briefs. Lexington’s
primary argument is that the District Court
abused its discretion because it did not
determine whether the proposed
Settlement Agreements were fair and
reasonable before approving them. The
“fair and reasonableness” analysis is,
however, generally reserved for
settlements in class action lawsuits (or
derivative shareholder lawsuits), where the                6
                                                             Lexington appealed from
district court must be vigilant in protecting       IPSCO Steel (Alabama) Inc. v. Blaine
the due process rights belonging to the             Constr. Corp., Civil Action Nos. 99-CV-
class members. See Fed. R. Civ. P.                  2055 and 01-CV-440, without having
23(e)(1)(C) (“The court may approve a               intervened in either.

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