From left, Eastern District Magistrate Judges Gary Brown, Cheryl Pollak and Ramon Reyes Jr. shepherded a docket of more than 1,400 insurance disputes from Hurricane Sandy. (EDNY)
About a year after Hurricane Sandy bore down on the East Coast, applying its full force to Brooklyn, Queens, Staten Island and Long Island, a steady flow of insurance cases began pouring into the Eastern District.
But only 73 of 1,400 cases remained as of May 23 in which homeowners argued insurers had wrongly underpaid or denied their claims after the 2012 superstorm. Nine have settled and are awaiting the submission of stipulations.
Attorneys involved in the insurance litigation said one important reason for the quick resolutions was the work done by Eastern District Magistrate Judges Cheryl Pollak, Ramon Reyes Jr. and Gary Brown, the three-judge panel overseeing and troubleshooting discovery, settlement and other matters.
J. Steve Mostyn of Mostyn Law in Houston, lead plaintiff flood liaison counsel, said the trio understood “whatever the resolution is going to be, let’s get to it quickly. They made it a priority, and that made the difference.”
Mostyn­—who has appeared as plaintiff liaison counsel in other natural disasters, such as Hurricane Ike and Hurricane Rita—said the three “took a much more hands-on approach to bringing the parties together.”
Mostyn said “the biggest difference” was that in the Ike and Rita catastrophe litigations “you didn’t have … the court sitting at the table with you.”
Jared Greisman, a partner at White Fleischner & Fino who served as defense-side liaison counsel for the non-National Flood Insurance Program, said “the set-up of the Sandy docket was indispensable” for the case resolution.
The litigation took a sharp turn in 2014 after Brown sanctioned an insurer offering federally backed flood insurance for secretly re-written damage reports.
“What just a few litigants of the defense might have done was sometimes viewed as an insurance industrywide behavior, which was unfair at times,” said Greisman. “But at the end of the day, for more than 1,000 cases to have been resolved at this point in time, I don’t know it would have happened but for the creation of the docket and these judges’ oversight.”
In interviews, Reyes and Pollak emphasized their focus on quick resolution.
Reyes said the panel took an “expedited and efficient” approach and he credited the parties for their “successful cooperation.”
Pollak said the litigants “were people who were hurting as a result of the hurricane. To the extent we could expedite cases and not have injury prolonged by court delays, was our mandate.”‘
Brown, who has been nominated for a spot on the district court bench, declined to comment.
The Eastern District’s Board of Judges appointed Pollak, Reyes and Brown to oversee the litigation; their assignment added roughly 450 cases on top of their normal caseload of about 400.
Recalling the period when the cases were beginning to accumulate, Judge Carol Bagley Amon, then the Eastern District’s chief judge, said she was looking for a way to handle “the large mass of cases without simply assigning all the cases to a single judge.”
Amon said she was concerned about a lack of coordinated discovery, as well as differing schedules and varying decisions for common issues. Her concern was to “grab a hold of the situation and [find] an expeditious and coordinated way to deal with them,” she said.
District of New Jersey Chief Judge Jerome Simandle said the state’s federal Sandy litigation followed a similar path as its Eastern District counterpart.
As of May 20, 189 cases, most recently filed, remained pending out of 1,789 Sandy cases.
Simandle said “in hindsight, we borrowed some very good ideas from the Eastern District of New York,” on aspects of case management. “It turned out much better than I ever would have imagined. I can breathe a sigh of relief. … If we had to try every case, we would become a flood insurance court and nothing else.”
Typical Exchanges Bypassed
According to Pollak, the typical track for discovery in federal civil litigation involved document and interrogatory exchanges, with depositions to follow.
Pollak said that in In Re Hurricane Sandy Cases 14-mc-41, the plaintiffs and defense initially told the panel what information they needed to assess for settlement purposes.
Pollak said the effort bypassed the typical request exchanges by determining “right off the bat” what each side required. “It eliminated any dispute over what one side or another had to produce,” she said, noting depositions were “put on hold” though testimony could be elicited if needed.
As early as an initial February 2014 conference, Brown made it clear the three magistrates judges were pushing for “automatic disclosures to avoid the individualized discovery determinations, meetings, conferences” that could mean delays (NYLJ, Feb. 13, 2014).
In subsequent court appearances and case management orders, the judges kept up the drumbeat of quick resolution. “This is not a time for ‘business as usual,’” it said in an April 2014 order.
As the magistrate judges coped with the scale of the litigation, Pollak said they also faced a learning curve on the subject matter.
Pollak said she “didn’t appreciate how different” a FEMA-backed flood policy was from other insurance matters she encountered as a judge.
Reyes, who had once represented insurers as an O’Melveny & Myers associate, agreed. “It was nothing like this,” he said, speaking of the “more regimented” federally backed flood insurance.
The vast majority of flood insurance comes through FEMA’s National Flood Insurance Program, which permits 79 participating insurance companies to offer coverage through the “Write Your Own” program.
The other type of insurance at issue in the Sandy litigation, though labeled “wind” cases, pertained to non-flood homeowners insurance from private carriers that covered risks like wind damage.
Reyes said the panel “had to push FEMA hard to ease up on some formal requirements that weren’t practical, that didn’t take into account life on the street.”
He said “a lot paid cash and had nothing,” as far as receipts or expense documentation.
The magistrate judges arranged for some 80 mediators to aid in the case resolution. The mediators, mostly from the court’s Alternative Dispute Resolution Program, were given subject matter training on Sandy and the types of policies at issue.
Reyes said the trio did not want to quicken discovery only to have the court overwhelmed by some 1,400 trials or summary judgment motions. “We wanted provide relief as soon as possible to homeowners,” he said.
Denis Kelly of Long Beach, an attorney for a homeowner who saw his office and house flooded in the storm, said if mediations failed, the panel did not quickly send the case to a district judge for litigation.
“They’d first have you in one more time with them,” said Kelly. For each of his cases reaching such an impasse, that one last conference led to a settlement. “They really have thrown their energy into this,” said Kelly, one of the flood liaison counsel.
In the fall of 2014, months into the supervision of the litigation, Brown ordered a hearing in a case where Long Beach homeowners Deborah Raimey and Larry Raisfeld said in court papers an engineering report had been “fraudulently altered to deny coverage.”
In November 2014, Brown sanctioned the insurer, Wright National Flood Insurance, saying a report was secretly rewritten and exposed “reprehensible gamesmanship.” Brown said “evidence suggests that these unprincipled practices may be widespread” (NYLJ, Nov. 13, 2014).
“Once that broke, everything changed,” said Reyes.
A week after the ruling, New York’s senators Charles Schumer and Kirsten Gillibrand, and New Jersey’s senators Robert Menendez and Cory Booker demanded FEMA investigate manipulation claims.
When Schumer nominated Brown for a judgeship, his announcement noted the Raimey case.
In light of Raimey, the three judges reiterated case management orders that all draft, redline and mark-up reports be produced.
Brown, Reyes and Pollak set a February 2015 date to start holding evidentiary hearings into plaintiff-side alteration claims.
They adjourned the proceedings without a date when FEMA stepped in to directly negotiate the flood cases with plaintiffs counsel (NYLJ, Feb. 19, 2015).
Apart from the Raimey case, there was just one hearing into questions over the documentation. Pollak oversaw proceedings connected to certain Standard Fire Insurance cases (NYLJ, May 21, 2015).
The plaintiffs and defense “resolved issues with respect to the evidentiary hearing,” according to a docket entry months later.
In other instances, insurers agreed to pay a portion of attorneys fees to foreclose the need for hearings.
John Houghtaling of Gauthier, Houghtaling & Williams in Metairie, Louisiana, praised the three magistrate judges for their work.
He said after hearing “fire and brimstone” from both sides they typically would say, “OK, the truth is probably in the middle.”
“To these judges’ credit … [t]hey spent a significant amount of time trying in good faith to get to the bottom of what’s going on,” he said.
Houghtaling was co-counsel on the Raimey case with Kelly. Mostyn was brought in for the hearing.
A FEMA spokesman said in an interview the agency would be changing its policies in the wake of the storm.
Rafael Lemaitre said the National Flood Insurance Program “worked before Sandy. Clearly, Sandy demonstrated areas in which substantial reform and improvements were needed.”
Lemaitre said he could not reference any particular case or litigant, nor could he speak to how Pollak, Reyes and Brown handled the Sandy litigation.
But he said there was a “paradigm shift” for how both FEMA and its flood insurance program approached litigation. “Settling cases was the right thing to do because of the information we had regarding allegations of fraud and underpayments,” he said.
The agency is looking to reform its litigation strategy, said Lemaitre.
“The cost to settle versus the cost to litigate is something we’ve been looking at and continue to look at,” he said.
On May 23, the agency put in a Federal Register notice of proposed rulemaking to remove decades-old policies pertaining to financial arrangements between the agency and the “Write Your Own” insurers.
Lemaitre said the agency would also be making changes to the claims process that occurs before a suit is filed, in order to quicken and better explain the process.
He said the agency was taking steps to have increased oversight and final determination on the litigation of flood cases.
As FEMA studies how to proceed, the magistrate judges in the Eastern District say they’ve figured out their own approach.
“In the end, we achieved justice in an expedited fashion that would not have occurred if we followed the normal process,” Pollak said.
“God forbid there’s another hurricane, we have a system now pretty well set up,” she said.