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IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________________________________________________________ No. 10-3887 _____________________________________________________________ TRAVELERS PROPERTY AND CASUALTY COMPANY OF AMERICA, formerly known as The Travelers Indemnity Company of Illinois, Plaintiff-Appellee, v. ROBERT K. MERICLE; MERICLE CONSTRUCTION, INC., Defendants-Appellants. (Middle District of Pennsylvania District Court 09-cv-1747) _____________________________________________________________ _____________________________________________________________ REPLY BRIEF OF APPELLANTS ROBERT K. MERICLE AND MERICLE CONSTRUCTION, INC. _____________________________________________________________ R. Ted Cruz Howard M. Radzely MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Avenue, NW Washington, D.C. 20004 (202) 739-3000 Richard F. McMenamin MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 (215) 963-5000

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TABLE OF CONTENTS Page I. II. Introduction ......................................................................................... 1 Travelers Has A Duty To Defend Under The Personal Injury Coverage Provisions............................................................................ 5 A. Underlying Plaintiffs Allege Injuries That Arise Out Of Malicious Prosecution Or False Imprisonment, Triggering The Personal Injury Coverage Provisions .............. 5 The Penal Statute Exclusion Does Not Apply Because The Underlying Complaints Do Not Plead, And The Underlying Plaintiffs Do Not Need To Prove, That Their Alleged Injuries Arose Out Of A Willful Violation Of A Penal Statute By Or With The Consent of Mericle In Order To Recover Under 1983............................................... 8 The Knowing Violation Exclusion Does Not Apply Because The Underlying Complaints Do Not Allege That Mericle Caused Or Directed An Act With Knowledge That It Would Violate Underlying Plaintiffs Rights And Inflict Personal Injury ............................................................. 16

B.

C.

III.

Travelers Has A Duty To Defend Under The Bodily Injury Coverage Provisions Because There Are No Allegations That Mericle Expected Underlying Plaintiffs Injuries ............................. 20 Public Policy Does Not Bar Coverage .............................................. 25 Conclusion ......................................................................................... 29

IV. V.

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TABLE OF AUTHORITIES FEDERAL CASES Agora Syndicate, Inc. v. Levin, 977 F.Supp. 713 (E.D. Pa. 1997) ....10, 20, 24 Allstate Insurance Co. v. McClymonds, No. 06-805, 2007 WL 2254563 (W.D. Pa Aug. 6, 2007).......................................................21, 24 America Contract Bridge League v. Nationwide Mutual Fire Insurance Co., 752 F.2d 71 (3d Cir. 1985) ....................7, 8, 12, 22, 23, 30 Amquip Corp. v. Admiral Ins. Co., No. Civ. A. 03-4411, 2005 WL 742457 (E.D. Pa. Mar. 31, 2005) ............................................................19 CGU v. Travelers Prop. Casualty, 121 F. Supp. 2d 819 (E.D. Pa. 2000) ...........................................................................................................6 CGU v. Tyson Associate, 140 F. Supp. 2d 415 (E.D. Pa. 2001) ...................25 Carney v. Village of Darien, 60 F.3d 1273 (7th Cir. 1995) ..........................11 Caplan v. Johnson, 414 F.2d 615 (5th Cir. 1969) ...........................................7 City of Peoria v. Underwriter's at Lloyd's of London, Unincorporated, 290 F. Supp. 890 (S.D. Ill. 1968) ...............................................................6 Clark v. Conahan, No. 3:09-cv-2535, 2010 WL 3398888 (M.D. Pa. Aug. 25, 2010) .........................................................................4, 24, 25, 29 Colton v. Swain, 358 F. Supp. 859 (N.D. Ill. 1973) ........................................7 Crawford Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437 (1987)................17 Duff Supply Co. v. Crum & Forster Insurance Co., Civ. Action No. 96-8481, 1997 WL 255483 (E.D. Pa. May 8, 1997) ................................23 Green v. Bock Laundry Machine Co., 490 U.S. 504 (1989) .........................17 -ii-

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Home Insurance Co. v. Perlberger, 900 F. Supp. 768 (E.D. Pa. 1995)........25 Kirkpatrick v. AIU Insurance Co., 204 F. Supp. 2d 850 ((E.D.Pa. 2002) .........................................................................................................20 Landmark American Ins. Co. v. Rider Univ., No. 08-1250 2010 WL 4063199 (D.N.J. 2010) .............................................................................17 Lee v. Aetna Cas. & Sur. Co., 178 F.2d 750 (2d Cir. 1949) ........................29 National Union Fire Insurance Co. of Pitt. v. Alticor, Inc., No. 052479, 2007 WL 2733336 (6th Cir. Sept. 19, 2007)....................................5 Nationwide Mutual Insurance Co. v. Sedicum, No. 93-2996, 1993 WL 544414 (E.D. Pa. Dec. 27, 1993)..............................................................26 Pacific Indemnity Co. v. Linn, 766 F.2d 754 (3d Cir. 1985).........................25 Scalise v. Metropolitan Group, 2003 WL 24043984 (D. Conn. Mar. 21, 2003) ..................................................................................................11 Schwartz v. Liberty Mutual Insurance Co., 539 F.3d 135 (2d Cir. 2008) .........................................................................................................30 Selko v. Home Insurance Co., 139 F.3d 146 (3d Cir. 1998). ..........................8 Tellabs Inc. v. Makor Issues & Rights, 551 U.S. 308 (2007)........................10 Toanone v. Williams, 405 F. Supp. 36 (E.D. Pa. 1975).................................18 U.S. Fire Insurance Co. v. Rothenberg, Civ. Action No. 98-2275, 1998 WL 778354 (E.D. Pa. Sept. 25, 1998).............................................23 USX Corp. v. Adriatic Insurance Co., 99 F. Supp. 2d 593 (W.D. Pa. 2000) ...................................................................................................27, 28 Wallace v. Powell, No. 3:09-cv-286, 3:09-cv-291, 3:09-cv-357, 3:09cv-630, 2010 WL 3398995 (M.D. Pa. Aug. 24, 2010).............4, 24, 25, 29

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Westfield Group v. Campisi, No. 2:02CV997, 2006 WL 328415 (W.D. Pa. Feb. 10, 2006).....................................................................................23 Wiley v. State Farm Fire & Casualty Co., 995 F.2d 457 (3d Cir. 1993) ......11

STATE CASES America States Insurance Co. v. State Automobile Insurance Co., 721 A.2d 56 (Pa. Super Ct. 1991) .......................................................17, 18, 19 BLaST Intermediate Unite 17 v. CNA Insurance Cos., 674 A.2d 687 (Pa. 1996)..................................................................................................26 Biborosch v. Transamerica Insurance Co., 603 A.2d 1050 (Pa. Super Ct. 1992) .............................................................................................12, 13 Cadwallader v. New Amsterdam Ca. Co., 152 A.2d 484 (Pa. 1959) ......12, 29 Central Dauphin Sch. District v. American Casualty Co., 426 A.2d 94 (Pa. 1981).......................................................................................27, 28 Eisenman v. Hornberger, 264 A.2d 673 (Pa. 1970)......................................26 Erie Ins. Exchange v. Fidler, 808 A.2d 587 (Pa. Super. Ct. 2002) ..20, 21, 24 Flomerfelt v. Cardiello, 997 A.2d 991 (N.J. 2010) .......................................15 Gene's Restaurant v. Nationwide Insurance Co., 548 A.2d 246 (Pa. 1988) .........................................................................................................21 Hall v. Amica Mutual Insurance Co., 648 A.2d 755 (Pa. 1994) ...................26 Humphreys v. Niagara Fire Insurance Co., 590 A.2d 1267 (Pa. Super Ct. 1991) .......................................................................................12, 13, 14 Kvaerner v. Metals Divisions of Kvaerner U.S. v. Commercial Union Insurance Co., 908 A.2d 888 (Pa. 2006)..................................................20

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Minnesota Fire and Casualty Co. v. Greenfield, 855 A.2d 854 (Pa. 2004) .......................................................................................10, 11, 26, 27 Mohn v. American Casualty Co. of Reading, 326 A.2d 346 (Pa. 1974) .......20 Mutual Benefit Insurance Co. v. Haver, 725 A.2d 743 (Pa. 1999) ...........5, 24 Springfield Twp. v. Indemnity Insurance Co. of N.A., 64 A.2d 761 (Pa. 1949) .........................................................................................................12 Stidham v. Millvale Sportsmen's Club, 618 A.2d 945 (Pa. Super Ct. (1993)........................................................................................................12 Town of Goshen v. Grange Mutual Insurance Co., 424 A.2d 822 (N.H. 1980) ...........................................................................................................6 United Services Automobile Association v. Elitzky, 517 A.2d 982 (Pa. Super. Ct. 1986)..................................................................................20, 21

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I.

INTRODUCTION No one disputes that the allegations at the heart of the underlying

complaints is a scheme in which two corrupt judges engaged in a shameful scheme to enrich themselves by taking payments from the owner-operator of two juvenile detention centers in return for denying the constitutional rights of juveniles who appeared before Ciavarella and helping keep those centers full. See, e.g., J.A. at A-43-45, A-258-259. That allegedly corrupt bargain, between Robert Powell and Judges Ciavarella and Conahan, if true, was contemptible. But Mericle is not Powell.1 Just because the underlying complaints allege that Powell engaged in a corrupt quid pro quo does not mean that the complaints treat other defendants as equally blameworthy. The underlying complaints allege that Mericle built the centers, but contain no allegations that Mericle had any involvement in their operation. J.A. at A-67-69, A250-257, A-461-463. Nor do they allege that Mericle had any knowledge of the quid pro quo. Id. To be sure, the underlying complaints do make broad, generalized allegations that all Defendants conspired to deprive juveniles of their constitutional rights. See, e.g., J.A. at A-208-209. But the complaints also

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take pains to explicitly allege that it was Powell who engaged in the quid pro quo. See, e.g., J.A. at A-174-176, A-197, A-264-265. There is no specific allegation that Mericle was even aware of it, much less involved. For good reason as the federal prosecutors have expressly observed in open court, Mericle had nothing to do with and had no knowledge of the corrupt quid pro quo. J.A. at A-4470-474. Appellee Travelers Property and Casualty Co. of America (Travelers), like the court below, fails to recognize that the underlying complaints contain numerous specific allegations that expressly distinguish between the various underlying defendants. Indeed, the distinction made in the underlying complaints between Powell, on the one hand, and Mericle, on the other, which Travelers asks this Court to ignore, could not be more stark: In or before January 2003, defendants agreed that Powell and Mericle would pay $997,600 to Ciavarella and Conahan for their roles in facilitating the construction of the PA Child Care facility. Powell understood the payments to be a quid pro quo for the judges exercise of their judicial authority to send juveniles to PA Child Care and Western PA Child Care and other discretionary Acts.

Appellants Robert K. Mericle and Mericle Construction, Inc. will be referred to collectively as Mericle.

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J.A. at A-174 (emphasis added). This distinction was purposeful it was made frequently throughout the complaints. See, e.g., J.A. at A-174-176, A197, A-264-265. The underlying complaints do allege that Mericle built the facilities and made and concealed payments relating to the construction of the facilities, and those actions will determine if those payments were industrystandard referral fees (as Mericle maintains and as the federal prosecutors agree) or illicit kickbacks (as Travelers urges). Regardless of how Mericles payments are characterized, one thing is clear they had nothing to do with the quid pro quo that allegedly harmed the juveniles. When the specific allegations against Mericle are considered, Travelers has a clear duty to defend Mericle. As discussed in the opening brief and further herein, the personal injury coverage provisions apply to underlying plaintiffs 1983 claims, and the exclusions relied upon by the district court and Travelers are inapplicable. Travelers is also obligated to defend under the bodily injury coverage provisions because there is no allegation that Mericle either expected or intended that the former judges would maliciously prosecute or falsely imprison the juvenile plaintiffs. The district courts failure to consider the specific allegations against Mericle has put Mericle in an impossible position. The district courts Rule

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12 decisions in the underlying actions expressly endorsed a negligence theory of 1983 recovery, finding that underlying plaintiffs may recover by showing that defendants set[ ] in motion a series of acts by others which the actor knows or reasonably should know would cause others to inflict constitutional inquiry. 2 Wallace v. Powell, No. 3:09-cv-286, 3:09-cv-291, 3:09-cv-357, 3:09-cv-630, 2010 WL 3398995, at *7 n.4 (M.D. Pa. Aug. 24, 2010) (quotations omitted) (emphasis added); Clark v. Conahan, No. 3:09cv-2535, 2010 WL 3398888, at *28 n.4 (M.D. Pa. Aug. 25, 2010). At the same time, the court denied Mericle defense coverage because the underlying complaints include broad allegations of intentional and criminal conduct. These decisions are clearly inconsistent and result in an aberration that is fundamentally inconsistent with Pennsylvania law. Accordingly, the district courts decision should be reversed and this Court should order Travelers to defend Mericle in the underlying actions.

Mericle vehemently disagrees that a non-state actor such as Mericle can be held liable under 1983 under such a standard.

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II.

TRAVELERS HAS A DUTY TO DEFEND UNDER THE PERSONAL INJURY COVERAGE PROVISIONS. A. Underlying Plaintiffs Allege Injuries That Arise Out Of Malicious Prosecution Or False Imprisonment, Triggering The Personal Injury Coverage Provisions.

In its opening brief, Mericle established that: (1) the duty to defend a 1983 claim under personal injury coverage depends on the common-law torts implicated; and (2) courts have uniformly found coverage where 1983 claims sound in malicious prosecution or false imprisonment. Opening Br. at 28-30 (citing cases). Travelers does not seriously contest this position and makes no effort to distinguish the uniform line of cases finding personal injury coverage for 1983 claims that sound in malicious prosecution or false imprisonment. See Opp. at 27-29. Rather, Travelers makes two arguments. First, Travelers contends that 1983, civil RICO, and civil conspiracy are not listed or referenced anywhere in the list of personal injury offenses. Opp. at 28 (emphasis omitted). However, in determining whether there is a duty to defend, the particular causes of action in a complaint are not determinative of whether coverage has been triggered. Mut. Benefit Ins. Co. v. Haver, 725 A.2d 743, 745 (Pa. 1999). 3 As one court aptly noted in finding personal injury

To support its contention, Travelers cites a single unpublished case, National Union Fire Ins. Co. of Pitt. v. Alticor, Inc., No. 05-2479, 2007 5

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coverage for a 1983 claim: [i]t makes no difference that the claim is asserted in a statutory cause of action, as distinguished from an action grounded upon a common law tort theory. City of Peoria v. Underwriters at Lloyds of London, Unincorporated, 290 F. Supp. 890, 892 (S.D. Ill. 1968); see also, e.g., Town of Goshen v. Grange Mut. Ins. Co., 424 A.2d 822, 824 (N.H. 1980) (The fact that the underlying federal court action is based upon a statutory claim (42 U.S.C. 1983) rather than a direct common-law claim in State court does not relieve [the insurer] of the duty to defend if the policy otherwise insures against the common-law actions that are framed in a section 1983 pleading.); Opening Br. at 29-30.4

WL 2733336 (6th Cir. Sept. 19, 2007). Alticor did not involve 1983. Moreover, the court expressly noted that the alleged damages were for antitrust violations, not for the covered tort of misrepresentation, and that merely mentioning misrepresentation did not convert an antitrust claim into a misrepresentation claim. Id. at *6. Here, by contrast, the focal point of the underlying complaints is the wrongful prosecution or detention of juveniles. See Opening Br. at 9-17.
4

See also, e.g., CGU v. Travelers Prop. Cas., 121 F. Supp. 2d 819, 82324 (E.D. Pa. 2000) (policy covering slander and defamation obligated insurer to defend although only counts pled sought damages under the Sherman Act because injuries which underlying plaintiff allegedly suffered arose out of the defendants allegedly slanderous and defamatory remarks).

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The 1983 claims against Mericle plainly seek damages for alleged wrongful adjudications or detentions.5 The underlying plaintiffs allege that: (1) the juvenile plaintiffs were adjudicated delinquent by Ciavarella, and some were detained in PACC or WPACC as a result; (2) the delinquency adjudications were constitutionally flawed; and (3) the delinquency adjudications and detentions were unlawful. See, e.g., J.A. at A-81-170. Cf. Caplan v. Johnson, 414 F.2d 615, 616-17 (5th Cir. 1969) (coverage for 1983 claim where liability which was imposed on the insureds arose by reason of a series of false arrests); Colton v. Swain, 358 F. Supp. 859, 86364 (N.D. Ill. 1973) (same). Second, Travelers contends coverage is unavailable because any false imprisonment claim against Mericle would be meritless given the district courts dismissal of a false imprisonment claim against Mericle sounding in the Clark Action. Opp. at 28 & n.18. Mericle agrees that the 1983 claims against it are groundless. However, as this Court has recognized,

Pennsylvania law clearly holds that the obligation [to defend] arises whenever allegations against the insured state a claim to which the policy
5

See, e.g., J.A. at A-85 (B.W.s father was ordered to and paid $3,500to cover the costs of his placements in various facilities.); id. at A-86 (Kevins mother paid $450for the cost of placement.); id. at A-481 (Between November 2002 and 2005, Rauls parents paid $3,837.50to pay for Rauls incarceration and probation.). 7

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potentially applies even if the allegations are groundless, false or fraudulent. Am. Contract Bridge League v. Nationwide Mut. Fire Ins. Co., 752 F.2d 71, 75 (3d Cir. 1985) (internal quotation omitted) (second emphasis added). Thus, the fact that the underlying plaintiffs 1983 claims may be groundless does not render personal injury coverage unavailable. In sum, the district court properly determined that the underlying complaints 1983 claims trigger personal injury coverage because they sound in malicious prosecution or false imprisonment. B. The Penal Statute Exclusion Does Not Apply Because The Underlying Complaints Do Not Plead, And The Underlying Plaintiffs Do Not Need To Prove, That Their Alleged Injuries Arose Out Of A Willful Violation Of A Penal Statute By Or With The Consent of Mericle In Order To Recover Under 1983.

Pennsylvania law regarding the application of exclusionary provisions is clear they are construed narrowly against the insurer. See, e.g., Selko v. Home Ins. Co., 139 F.3d 146, 152 n.3 (3d Cir. 1998). The Penal Statute Exclusion in the January 1, 2000 to January 1, 2005 policies precludes coverage for personal injury [a]rising out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured. J.A. at A-1797, A-2047, A-2415. Travelers raises four arguments in defense of the district courts erroneous ruling, which failed, as the case law requires, to consider the specific allegations against Mericle. None has merit.

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First, Travelers contends that Plaintiffs allege that Mericle . . . paid Ciavarella and Conahan in exchange for their denial of the juvenile Plaintiffs rights and that the criminal acts of others were committed with Mericles consent. Opp. at 32 & 33. However, the underlying complaints are careful to avoid any specific allegation that Mericle made any payments in exchange for adjudications of juveniles or that Mericle was even aware of the improper adjudications. See supra pp. 1-4. This careful pleading is purposeful. Federal Rule of Civil Procedure 11(b)(3) mandates that parties and their attorneys make certain that the factual allegations have evidentiary support. The fact that the underlying complaints are hundreds of pages long and contain detailed, specific allegations regarding the alleged conduct of each defendant, including the facts concerning the quid pro quo between the judges and Powell, reflects that the underlying plaintiffs asserted every factual allegation which they thought they could make consistent with Rule 11. It is, therefore, telling particularly in the context of considering the extremely broad duty to defend that the underlying complaints do not contain a single specific factual allegation that the underlying plaintiffs personal injuries arose out of a willful violation of penal statute committed by or with Mericles consent. 6

The reason for the absence of such allegations was made clear by the 9

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Second, Travelers argues that the Penal Statute Exclusion can apply even where the insured is never convicted of or charged with a crime. Opp. at 34-37. As an initial matter, the Court need not address this argument because Mericle did not argue in its opening brief that a prior conviction was a necessary prerequisite before the exclusion could apply. This misplaced contention is also the only basis on which Travelers attempts to argue that the district court properly relied on out-of-jurisdiction cases involving sexual and child molestation. See, e.g., Opp. at 36. Mericle

prosecutors in the criminal case: there is no evidence that Mericle had any knowledge of the improper detention of juveniles or Powells illegal quid pro quo. J.A. at A-4470-474. Contrary to Travelers contention, information from the criminal cases can and should be considered given that the underlying complaints expressly incorporate by reference the criminal charges against Conahan and Ciavarella. See J.A. at A-190191, 257-259, 324-429, 462, 483; cf. Tellabs Inc. v. Makor Issues & Rights, 551 US 308, 322 (2007) (in considering Rule 12 motion, courts must consider documents incorporated by reference and matters of which courts may take judicial notice). Moreover, Travelers itself cites to several cases, including Minnesota Fire and Cas. Co. v. Greenfield, 855 A.2d 854, 858 (Pa. 2004) and Agora Syndicate, Inc. v. Levin, 977 F. Supp. 713, 715-16 (E.D. Pa. 1997), in which the courts analysis of the duty to defend included consideration of the records in parallel criminal actions. Opp. at 24 n.13. In any event, the statements by the prosecutors in Mericles criminal case merely confirm what the four corners of the underlying complaints already make clear that Mericle was not aware of the criminal activity by others regarding the judges detention of juveniles or Powells kickbacks for those placements. That is, even looking solely at the four corners of the underlying complaints, Travelers is obligated to provide Mericle coverage.

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demonstrated in its opening brief that the district court improperly relied on these out-of-jurisdiction cases in erroneously concluding that the Penal Statute Exclusion precludes personal injury coverage for Mericle. Opening Br. at 38 n.14. Travelers only response is to claim that there are a series of inconsequential differences between these cases and the instant case and to cite to another out-of-jurisdiction case also involving child molestation. Opp. at 35 n.27 & 37 (citing Scalise v. Metropolitan Group, 2003 WL 24043984 (D. Conn. Mar. 21, 2003)).7 Travelers position is incorrect. In fact, the Pennsylvania Supreme Court has held that cases involving child molestation are extraordinary and require unique rules in the insurance coverage context. Minnesota Fire and Cas. Co. v. Greenfield, 855 A.2d 854, 864-65 (Pa. 2004); see also, e.g., Wiley v. State Farm Fire & Cas. Co., 995 F.2d 457, 463-64 (3d Cir. 1993). For this reason, the sexual molestation

Carney v. Village of Darien, 60 F.3d 1273 (7th Cir. 1995) does not support Travelers argument. Carney involved a police officer who coerced individuals he arrested into performing sexual acts in exchange for voiding citations. Id. at 1280-81. Here by contrast it was third a party Ciavarella who falsely imprisoned the juveniles, and whose conduct is therefore analogous to that of the police officer in Carney. However, this case concerns coverage for Mericle, not Ciavarella. There is no allegation that Mericle engaged in any conduct with the intention of having Ciavarella violate the constitutional rights of the juvenile plaintiffs, and for that matter, no allegation that Mericle knew of the malicious prosecution or false imprisonment.

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coverage cases are neither controlling nor persuasive in regard to the coverage issue raised here. Third, Travelers contends that examining whether the underlying plaintiffs can prove their claims without proving a violation of a penal or criminal statute is contrary to . . . Pennsylvania insurance law. Opp. at 37-41. But as the Pennsylvania Supreme Court held over half a century ago, [i]t is clear that where a claim potentially may become one which is within the scope of the policy the insurer is obligated to defend. Cadwallader v. New Amsterdam Ca. Co., 152 A.2d 484, 488 (Pa. 1959).8 It is the nature of the claim which determines whether the insurer is required to defend. Humphreys v. Niagara Fire Ins. Co., 590 A.2d 1267, 1271-72 (Pa. Super. Ct. 1991) (emphasis added; quoting Springfield Twp. v. Indem. Ins. Co. of N.A., 64 A.2d 761, 464 (Pa. 1949)). Pennsylvania courts have squarely held that whether an exclusion applies depends on what must be proved to recover on a particular claim. For example, as one court explained: [The underlying plaintiff] may well succeed in proving a breach of contract without ever establishing malice on
8

See also, e.g., Am. Contract Bridge League, 752 F.2d at 75 (citing Cadwallader and concluding that the insurer is obligated to fully defend its insured until it can confine the possibility of recovery to claims outside the coverage of the policy); Stidham v. Millvale Sportsmens Club, 618 A.2d 945, 953 (Pa. Super. Ct. 1993) (same). 12

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[the insureds] part and that recovery may well fall within the coverage of the policy. Biborosch v. Transamerica Ins. Co., 603 A. 2d 1050, 1058 (Pa. Super. Ct. 1992) (emphasis added); see also Humphreys, 590 A.2d at 127172. Here, because the underlying plaintiffs could prove their 1983 claims without proving that Mericle committed, or consented to, the commission of a willful violation of a penal statute, Travelers has a duty to defend. Travelers attempts to distinguish the controlling Pennsylvania cases fall short. Travelers argues that Biborosch, supra, does not apply because the allegations of violations of penal statutes permeate[] all of the claims against Mericle. Opp. at 38-39. However, although the underlying

complaints are specific in alleging that Powell understood that the judges were improperly imprisoning juveniles, they do not specifically allege that Mericle had any involvement in or knowledge of the quid pro quo. See supra pp. 1-4. Moreover, Travelers fails to respond to the key holding in Biborosch as applied here: that the underlying plaintiffs do not need to prove a violation of a penal statute to recover under 1983. Travelers also argues that Humphreys, supra, is distinguishable because Humphreys did not address application of the Penal Statute exclusion. Opp. at 39. However, the criminal acts exclusion in Humphreys is broader than the Penal Statute Exclusion at issue here, excluding any

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claim arising out of any criminal act or omission of any insured. 590 A.2d at 1271-72. 9 Humphreys holding applies even more strongly in the context of a similar, but more stringent exclusion limited to willful violations. Travelers further seems to argue that Humphreys was wrongly decided, reasoning that under the courts holding the criminal act exclusion at issue there would never apply to claims in a civil action. Opp. at 40-41. But the criminal acts exclusion in Humphreys, like the Penal Statute Exclusion here, will apply to exclude a duty to defend where the excluded conduct necessarily must be proved to satisfy the elements of the applicable civil claim and the underlying complaint contains specific factual allegations triggering the exclusion. Indeed, in Humphreys, the court applied a

fraudulent acts exclusion to bar coverage for claims where, to establish violations of the statutes, it is necessary to prove that the defendant acted with specific intent to destroy competition and that such is tantamount to intentionally fraudulent . . . acts. Id. at 1272. Finally, Travelers argues that Mericle is reading a heightened causation requirement into the Penal Statute Exclusion. Opp. at 41-43. To

Ironically, Travelers also argues that the two exclusions are essentially the same. See Opp. at 34, 43.

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the contrary, Mericle expressly argued that regardless of how the Pennsylvania Supreme Court would interpret the arising out of language in the Penal Statute Exclusion, the alleged injuries do not arise out of any willful violations of a penal statute committed by or with Mericles consent. Opening Br. at 36-40. 10 Even under a broad but for standard, the

exclusion does not apply. As Mericle demonstrated in its opening brief at 38-39, it cannot be said that the underlying plaintiffs false imprisonment or malicious prosecution injuries were caused by Mericles allegedly concealed payments in connection with the construction of the facilities, even assuming arguendo that such allegations constitute the willful violation of a penal statute. In short, under Pennsylvania law, the Penal Statute Exclusion does not apply to preclude personal injury coverage because the underlying complaints do not plead that Mericle committed or consented to the willful

10

The New Jersey Supreme Court recently noted that whether the phrase arising out of is unambiguous depends on the context it is used: Although in [an earlier case] we referred to the arising out of language of the exclusion as clear and unambiguous, the circumstances presented in this appeal reveal an inherent and heretofore unseen ambiguity that requires us to consider the phrase in a new and different context. Flomerfelt v. Cardiello, 997 A.2d 991, 1003 (N.J. 2010).

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violation of a penal statute that led to underlying plaintiffs injuries, and need not prove that their injuries arose out of the willful violation of a penal statute in order to recover against Mericle.11 C. The Knowing Violation Exclusion Does Not Apply Because The Underlying Complaints Do Not Allege That Mericle Caused Or Directed An Act With Knowledge That It Would Violate Underlying Plaintiffs Rights And Inflict Personal Injury.

Travelers contends that the Knowing Violation Exclusion applicable to the 2005-2009 policies bars coverage because [t]he underlying Complaints specifically allege that Mericle . . . . caused and directed the Plaintiffs harm with knowledge that their actions would violate the juveniles rights and inflict injury. Opp. at 44 (emphasis added). To the contrary, while the underlying complaints allege that Powell understood his payments were for judicial action to further his economic interest and were a quid pro quo, e.g., J.A. at A-174, the underlying complaints assiduously avoid making any such factual allegations about Mericle. See supra pp. 1-4. Recognizing that the specific allegations against Mericle are limited, Travelers spends much of its opposition contending that the general,
11

Although broader, the Criminal Acts Exclusion contained in the policies beginning January 1, 2005 and ending January 1, 2009, does not apply

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conclusory allegations against all Defendants should trump the specific allegations against each individual defendant. See, e.g., Opp. at 45-46. 12 Travelers does not cite a case for this proposition, which is contrary to insurance law and general principles of interpretation. See Landmark

American Ins. Co. v. Rider Univ., No. 08-1250, 2010 WL 4063199, at *1011 (D.N.J. 2010); cf. Green v. Bock Laundry Mach. Co., 490 U.S. 504, 52426 (1989); Crawford Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437, 444-45 (1987). Travelers contends that Landmark American Insurance, which held that a complaint must be parsed and that the specific allegations as to each individual defendant considered, is distinguishable because it is not a Pennsylvania case. Opp. at 45. Although the district court decision in Landmark is not controlling, Travelers does not attempt to explain why that courts analysis and individualized assessment of the specific allegations against each defendant is not entirely consistent with the approach of

for essentially the same reasons that the Penal Statute Exclusion does not apply. See Opening Br. at 40 n.15.
12

To make its point, Travelers inserts the words including Mericle in brackets in paragraph after paragraph generally pertaining to all Defendants. Opp. at 11-15. Significantly, Travelers does not insert the words including Mericle in brackets in the specific quid pro quo allegations as to Powell, likely because doing so would only underscore

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Pennsylvania courts. In fact, there is no difference between Pennsylvania and New Jersey law on this issue. See, e.g., Am. States Ins. Co. v. State Auto Ins. Co., 721 A.2d 56, 61 (Pa. Super. Ct. 1991) (noting that there were no specific allegations); Opening Br. at 44-45 (citing cases).13 Moreover, it is a well-settled rule of pleading that [i]n the interpretation of plaintiffs pleading, specific allegations control over general. Toanone v. Williams, 405 F. Supp. 36, 38 (E.D. Pa. 1975) (in the context of a removal action) (citing 1A J. Moore, Federal Practice, 163(4.3)). Travelers offers no reason to depart from this well-established rule here. Travelers also attempts to dismiss the specific allegations of knowledge and a quid pro quo by Powell and not Mericle by contending that those isolated allegations simply are not addressed to Mericles participation in, or knowledge respecting, the quid pro quo agreement among the co-conspirators. Opp. at 15. But the allegations concerning quid pro quo between the judges and Powell are not isolated ones. They are the key allegations regarding the quid pro quo, and the critical point for

the absence of Mericle-specific allegations involving the prosecution or detention of juveniles.

13

Travelers contends that Pennsylvania cases such as American States are inapposite because they are artful pleading cases. Opp. Br. at 45 n.37. There is nothing about these cases that suggest they involve artful

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purposes of Travelers duty to defend Mericle is that those allegations as recognized by Travelers do not claim that Mericle had knowledge of, or consented to, any payments in exchange for sending juveniles to Powells facilities. Moreover, in one telling paragraph in the underlying complaints, which is consistent with numerous other paragraphs, the underlying plaintiffs allege that defendants agreed that Powell and Mericle would pay $997,600 to Ciavarella and Conahan for their roles in facilitating the construction of the PA Child Care facility. Powell understood the

payments to be a quid pro quo for the judges exercise of their judicial authority. J.A. at A-174 (emphasis added). Neither the district court nor Travelers have cited to a single allegation stating that Mericle understood that the payments were a quid pro quo in exchange for the placement of juveniles in PACC and/or WPACC or that Mericle knew Powell made such quid pro quo payments. The absence of such allegations is conclusive of the inapplicability of the Knowing Violation Exclusion.14

pleading, and they demonstrate that Pennsylvania, like most other states, requires a close examination of the specific factual allegations.
14

The exclusion does not apply for a second, independent reason the underlying complaints contain numerous allegations of recklessness. See, e.g., Amquip Corp. v. Admiral Ins. Co., No. Civ. A. 03-4411, 2005 WL 742457 (E.D. Pa. Mar. 31, 2005) (rejecting insurers argument that 19

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III.

TRAVELERS HAS A DUTY TO DEFEND UNDER THE BODILY INJURY COVERAGE PROVISIONS BECAUSE THERE ARE NO ALLEGATIONS THAT MERICLE EXPECTED UNDERLYING PLAINTIFFS INJURIES The determinative factor of the policies bodily injury provisions is

whether the insured expected to cause the injury alleged by the underlying plaintiff. See, e.g., Kvaerner v. Metals Divisions of Kvaerner U.S. v.

Commercial Union Ins. Co., 908 A.2d 888, 897-98 (Pa. 2006); Mohn v. American Cas. Co. of Reading, 326 A.2d 346, 348 (Pa. 1974). In making such a determination, courts have found that there is no occurrence when it is alleged that the insured subjectively intends or expects to cause the injury for which the underlying plaintiff seeks damages. See, e.g., Kirkpatrick v. AIU Ins. Co., 204 F. Supp. 2d 850, 854 (E.D. Pa. 2002). 15 Most of

allegations of intentional conduct triggered knowing violation exclusion where, [i]n several paragraphs in the complaint, [plaintiff] alleges that [the insured] and its employees acted with reckless indifference to [plaintiffs] interests (emphasis added)). Once again, Travelers only response is that the case cited is not a Pennsylvania state court case and that Pennsylvania applies the four corners doctrine. Opp. at 46 n.40. However, the four corners of the underlying complaints plainly: (1) fail to allege any intent by Mericle to falsely imprison juveniles; and (2) contain numerous allegations of recklessness or negligence, see supra pp. 1-4, infra pp. 24-26.
15

Travelers claims that Mericle improperly relies on cases regarding the expected or intended exclusion. Opp. at 25-26. Yet, Travelers itself relies upon such cases. Id. at 24 n.13 (citing Erie Ins. Exchange v. Fidler, 808 A.2d 587 (Pa. Super. Ct. 2002) and Agora, 977 F. Supp. at 715-16). Moreover, many courts combine their coverage analysis with an examination of the expected and intended exclusion because that exclusion is a corollary of the idea that insurance is meant to cover only 20

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Travelers opposition ignores this critical aspect of the law that the insured must expect or intend the underlying plaintiffs injury for bodily injury coverage not to apply. Thus, Pennsylvania courts have found no bodily injury coverage where, for example, the underlying complaint alleges physical assault, a tort that requires plaintiffs to prove intent to cause harm to recover, and for which there can be little doubt that injury was expected. For that reason, Travelers reliance on Allstate Ins. Co. v. McClymonds, No. 06-805, 2007 WL 2254563 (W.D. Pa. Aug. 6, 2007), and the cases it cites, is misplaced. These cases all involve allegations of physical assault and injury. See

Allstate, 2007 WL 2254563, at *6 (insured kick[ed] [victim] in the head); Genes Rest. v. Nationwide Ins. Co., 548 A.2d 246, 247 (Pa. 1988) (insured assaulted and beat [victim]); Fidler, 808 A.2d at 589 (insured threw [victim] with such great force). As it did with regard to the Knowing Violation Exclusion, the district court failed to properly evaluate the specific allegations against Mericle and instead concluded that there is no bodily injury coverage based on the specific allegations against other defendants. Neither the district court nor

fortuitous losses. United Services Auto. Assn v. Elitzky, 517 A.2d 982, 986 (Pa. Super. Ct. 1986).

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Travelers has cited any specific allegations stating that Mericle knew of or intended underlying plaintiffs harm because there are none. See supra pp. 1-4. The underlying complaints specific factual allegations as to Mericle speak only of Mericles payment and alleged concealment of referral fees in connection with the construction and expansion of the PACC and WPACC facilities. Id. Because there are no specific allegations that Mericle

participated in, or was even aware of, any quid pro quo to improperly adjudicate and detain the juvenile plaintiffs, any harm to juveniles appearing before Ciavarella would necessarily be unintended and unexpected from Mericles standpoint. Travelers also contends that civil rights violations, RICO violations, and civil conspiracy are intent-based. Opp. at 20-23. Mericle agrees. However, the fact that a plaintiff has brought claims that he or she cannot prove does not render insurance coverage unavailable, especially where, as here, the factual allegations do not specifically allege that the insured engaged in intentional conduct with the intent or expectation that it would cause bodily injury. Indeed, insurers have an obligation to defend even the allegations against the insured are groundless, false, or fraudulent. See Am. Contract Bridge League, 752 F.2d at 75.

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Even if the underlying plaintiffs had in clear violation of Rule 11 made specific allegations against Mericle of a quid pro quo to impermissibly prosecute or detain juveniles, Travelers efforts to avoid its coverage obligation would still fail. Where the underlying complaint alleges both intentional and reckless conduct, the insurers duty to defend is triggered under a policy that covers damages for bodily injury because of an occurrence. See, e.g., U.S. Fire Ins. Co. v. Rothenberg, Civ. Action No. 982275, 1998 WL 778354, at *10-11 (E.D. Pa. Sept. 25, 1998) (Although each count does allege intentional acts . . . there are also a number of allegations to the effect that the defendants acted recklessly rather than with the specific intention to inflict bodily injury.).16 Here, the underlying complaints contain allegations that defendants knew or should have known of the likely harm to underlying plaintiffs. For example:
16

See also Duff Supply Co. v. Crum & Forster Ins. Co., Civ. Action No. 96-8481, 1997 WL 255483, at *14 (E.D. Pa. May 8, 1997) (occurrencebased coverage for complaints alleging violations of, inter alia, Civil Rights Act of 1964 where the complaints included recklessness allegations and the claims could have been proven by reckless conduct); Westfield Group v. Campisi, No. 2:02CV997, 2006 WL 328415, at *17 (W.D. Pa. Feb. 10, 2006) (An intent to harm may [] be presumed where the insured is held liable under a cause of action that implies an intent to harm, but only where potential liability for reckless or negligent conduct under the same cause of action against the insured has been eliminated.). 23

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Defendants knew or should have known and acted with deliberate indifference to the fact that the actions of Defendants CONAHAN and CIAVARELLA created the potential for an increased number of juveniles to be sent to PACC and/or WPACC, thus ensuring high occupancy rates and increasing the revenues of PACC and/or WPACC . . . . J.A. at A-293 (emphasis added). These allegations of negligence are not a few isolated allegations. See, e.g., J.A. at A-289, A-293, A-294, A-296, A300, A-302-303, A-306, A-313, A-314, A-496.17 These allegations of recklessness and negligence, among others, are the basis for underlying plaintiffs damages claim under 1983. Because the district court expressly (albeit erroneously) endorsed the knew or
17

Travelers contends that a few isolated allegations of negligence cannot be permitted to control a coverage determination where the overarching nature of a complaint is intent-based. Opp. at 24. That may be true when the factual allegations regarding the insured allege intentional acts that caused harm and that the insured subjectively intended to cause that particular harm. Here, there are no specific allegations that Mericle engaged in any conduct with the intent or expectation that it would cause underlying plaintiffs harm. By contrast, in all of the cases Travelers cites, the specific factual allegations allege conduct by the insured that directly caused and could be expected to directly cause harm. See Haver, 725 A.2d at 745 (insured pharmacist sold Schedule III drugs without prescriptions despite multiple requests from victims family and doctors that he not do so); Agora, 977 F. Supp. at 716 (looking to insureds criminal conviction and finding that the conviction, from which the civil suit arose, established that insured acted intentionally); Fidler, 808 A.2d at 589 (insured threw victim against wall and into desk); McClymonds, 2007 WL 2254563, at *6 (insured kicked victim in head rendering him unconscious). 24

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should have known standard as a viable theory of recovery, these allegations may ultimately be the basis for a recovery against Mericle. See Wallace 2010 WL 3398995, at *7 n.4 (quotations omitted) (emphasis added); Clark, 2010 WL 3398888, at *28 n.4.18 Therefore, the district court erred in finding no bodily injury coverage, and Travelers also has a duty to defend Mericle under those provisions in effect between 2002 and 2008. IV. PUBLIC POLICY DOES NOT BAR COVERAGE Travelers argues that, even if the district court erred in denying coverage, public policy prohibits coverage. As an initial matter, Travelers argument is premature because this issue is not appropriately considered during the duty to defend analysis. CGU v. Tyson Assoc., 140 F. Supp. 2d 415, 421 (E.D. Pa. 2001)(; see also, e.g., Home Ins. Co. v. Perlberger, 900 F. Supp. 768, 771 (E.D. Pa. 1995) (public policy argument affects only

18

Mericle agrees with Travelers that the district courts standard is not appropriate for finding a non-state actor liable in connection with a 1983 claim. See Opp. at 25 n.14. However, the district courts endorsement of the theory makes it possible that Mericle would be liable in the underlying actions based on conduct by Mericle that would constitute an occurrence, and as to which no exclusion would apply. Thus, Travelers duty to defend is triggered. Pacific Indemnity Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985) (Under Pennsylvania law, an insurance company is obligated to defend an insured whenever the complaint filed by the injured party may potentially come within the policys coverage. (emphasis in original)).

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insurers duty to indemnify); Nationwide Mut. Ins. Co. v. Sedicum, No. 932996, 1993 WL 544414, at *3 (E.D. Pa. Dec. 27, 1993). Even where public policy could override a duty to defend, there would still be no basis for this Court to re-write the policies in favor of Travelers. Only in the clearest casesmay a court make an alleged public policy the basis of a judicial decision. See BLaST Intermediate Unite 17 v. CNA Ins. Cos., 674 A.2d 687, 689 (Pa. 1996) (quoting Hall v. Amica Mut. Ins. Co., 648 A.2d 755, 760 (Pa. 1994)). This is not such a case. The Pennsylvania Supreme Court has primarily considered four factors in determining whether public policy precludes insurance coverage, whether: (a) there is evidence that the policies were procured in

contemplation of a crime; (b) the policies promoted the unlawful conduct; (c) denial of coverage would serve as a deterrent; and (d) the policies save the insured from the consequences of his criminal act. Hornberger, 264 A.2d 673, 675 (Pa. 1970). More recently, the Pennsylvania Supreme Court reiterated these principles: our decision in Eisenman, reiterating the test traditionally required for an insurer to disclaim liability; i.e. the insurer must prove that the insured intended by his act to produce the damage which did actually occur, retains its validity. See Eisenman v.

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Greenfield, 855 A.2d at 867 (Pa. 2004) (emphasis added). Travelers does not make any allegation in its Amended Complaint that: (a) the policies were procured in contemplation of any crime or violation of law; (b) the policies promoted any alleged violation of law; (c) denying coverage would serve as a deterrent; or (d) enforcing the policies as written somehow saves Mericle from the consequences of its alleged conduct.19 Nor is there any evidence that Mericle intended by its conduct to harm juvenile plaintiffs. Rather, an examination of the factual record reflects that Mericle had no involvement in or knowledge of the alleged quid pro quo involving the placement of juveniles.20

19

Indeed, Travelers cannot make any such allegations in light of the district courts observation that the underlying plaintiffs can recover against defendants based on a knew or should have known theory. Travelers insists that the Court cannot look beyond the four corners of the underlying complaints in considering whether public policy bars coverage. As previously noted, the underlying complaints expressly incorporate by reference the record in the criminal matter, thus rendering that record part of the four corners for purposes of the coverage determination. See supra, note 5. Moreover, the very cases upon which Travelers relies examined the applicable factual records, including, in the Greenfield case, the criminal plea colloquy and deposition testimony. See, e.g., Greenfield, 855 A.2d at 858; Central Dauphin Sch. Dist. v. American Cas. Co., 426 A.2d 94, 96 (Pa. 1981) (referring to proceedings in underlying case); USX Corp. v. Adriatic Ins. Co., 99 F. Supp. 2d 593, 600, 630-35 (W.D. Pa. 2000) (examining and quoting record from underlying case trial).

20

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The factual allegations in the underlying complaints against Mericle, and the record in the criminal case, stand in sharp contrast to the facts of the cases Travelers cited in its Opposition Brief at 49 to 52: Greenfield, 855 A.2d at 867: public policy precludes coverage to homeowner convicted of manslaughter, abuse of a corpse, and unlawful delivery of heroin for selling heroin in a bag labeled Suicide to houseguest, leaving her laying semi-conscious for hours, and dumping her body near a creek when he found her dead upon returning from work. Central Dauphin, 426 A.2d at 95: public policy barred coverage of the insured, a school board, that had unlawfully collected taxes and was required to refund them, because any insurance coverage would have constituted repayment of the lost taxes to which the insured was not entitled, resulting in a windfall. USX Corp., 99 F. Supp. 2d at 600, 630-35: public policy barred indemnification of insured for damages in civil antitrust litigation that arose from the same conduct for which the insured had been criminally convicted of violating the Sherman Act. Here, in contrast, Mericle was not convicted of manslaughter, will not receive a windfall if provided with defense coverage, and, as federal prosecutors have expressly noted in open court was unaware of the corrupt quid pro quo between Powell, Conahan and Ciavarella. J.A. at A-4470-474. The federal prosecutors also concluded that the payments Mericle made were not a kickback or bribe in any sense, and were common practice between businessmen in real estate transactions. Id. at 4472.

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Accordingly, even were the public policy doctrine applicable at the duty to defend stage, it simply cannot apply given the facts of this case. V. CONCLUSION In denying coverage, the district court created a situation in which Mericle will have no insurance coverage because the underlying complaints include allegations of intentional and criminal conduct, but where it is possible that Mericle can be found liable on underlying plaintiffs 1983 claims based on a negligence or recklessness theory. See Wallace, 2010 WL 3398995, at *7 n.4; Clark, 2010 WL 3398888, at *28 n.4. The law does not intend such a result. As the Pennsylvania Supreme Court stated, citing Judge Learned Hand, so long as the complaint filed by the injured party covered an injury which might or might not fall within the coverage of the policy the insurance company was obligated to defend. Cadwallader, 152 A.2d at 488 (quoting Lee v. Aetna Cas. & Sur. Co., 178 F.2d 750, 752 (2d Cir. 1949)). For this reason, courts are required to construe the allegations of a complaint in favor of coverage. Travelers does just the opposite. Moreover, in setting forth a

purported false imprisonment hypothetical, (Opp. at 47-48), Travelers would have this Court believe that Mericle paid over $1 million in premiums to

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protect itself against a potential liability of mere nuisance value. Companies like Mericle purchase defense coverage to protect themselves against the possibility of lawsuits seeking significant damages. See, e.g., Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 150 (2d Cir. 2008). Insurance

companies like Travelers are in the business of accepting high premiums in return for providing such protection even where, as Mericle believes is the case here, the allegations against the insured are groundless, false, or fraudulent. See Am. Contract Bridge League, supra. The underlying complaints do not allege any involvement of Mericle, or knowledge concerning, the allegedly improper adjudications and detentions of juveniles. Travelers acknowledges this when it argues that underlying plaintiffs cannot possibly prove any involvement of Mericle in the alleged malicious prosecution and false imprisonment.

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For the foregoing reasons, the Court should reverse the judgment and find that Travelers owes Mericle a duty to defend.

Respectfully submitted,

/s/R. Ted Cruz R. Ted Cruz (TX Id. 24001953; DC Id. 459672) Howard M. Radzely (DC Id. 437957) MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Avenue, NW Washington, D.C. 20004 (202) 739-3000 Richard F. McMenamin (PA Id. 26209) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 (215) 963-5000 Dated: April 21, 2011

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ATTORNEY CERTIFICATIONS Bar Membership I am a member in good standing of the bar of this Court. Word Count and Typeface 1. This brief complies with the type-volume limitation of Fed. R. App. P. 32. It contains 6,995 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii); 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type-style requirements of Fed. R. App. P. 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word, Version 2003 in 14-point Times New Roman font. Service Upon Counsel This brief was submitted electronically to the Court on April 21, 2011 and 10 paper copies will be filed with the Office of the Clerk. In addition, the brief was served electronically upon Travelers counsel, all of whom are Filing Users: Samuel J. Arena Karl S. Myers Heather T. Fritts Stradley, Ronon, Stevens & Young 2600 One Commerce Square 2005 Market Street Philadelphia, PA 19103 sarena@stradley.com kmyers@stradley.com hfritts@stradley.com

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Identical Compliance of Briefs The text of the electronic version of this brief is identical to the text of the paper copies filed with the Court and served upon counsel. Virus Check I certify that McAfee VirusScan Enterprise, version 8.7.0i was run on the electronic file and that no virus was detected.

/s/R. Ted Cruz R. Ted Cruz MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Avenue, NW Washington, D.C. 20004 (202) 739-3000 Dated: April 21, 2011