Cooper Industries, Ltd. v. National Union Fire Insurance Co. of Pittsburgh
876 F.3d 119
5th Cir.2017Background
- Cooper Industries’ pension plans invested ~$175M with Westridge entities (WCM/WGTC/WGTI) via a split strategy: a “beta” trust-account futures portion and an “alpha” promissory-note/limited‑partnership portion.
- Greenwood and Walsh ran WGTC/WGTI as a Ponzi scheme, commingling funds, inflating reported returns, and stealing assets; a receiver recovered assets and clawed back some payments to investors.
- Cooper recovered all equity-fund principal and most bond-fund principal but lost alleged earnings/principal ultimately claimed at about $17.2M.
- Cooper submitted a claim under a National Union commercial‑crime (fidelity) policy covering property Cooper “owned”; National Union denied coverage.
- District court granted summary judgment for National Union: held Cooper did not “own” the lost funds under the policy and did not suffer a covered “loss” until after title passed to the fraudsters.
- Fifth Circuit affirmed and dismissed National Union’s cross-appeal as improper (National Union had no adverse judgment to appeal) and resolved the case on the ownership/loss timing grounds without reaching other issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of “own” under the Policy | "Own" includes equitable/beneficial ownership; Cooper retained equitable ownership of funds/earnings. | "Own" means possession/control/legal title; Cooper gave up possession/control when it loaned funds. | "Own" uses ordinary/common meaning (possession/control/title); Cooper did not own funds once loaned. |
| When a covered “loss” occurs for a fraudulently induced loan | Loss occurs at funding—Cooper was immediately harmed when induced to loan funds. | A fraudulently induced loan is voidable, not void; title passed at funding and any covered loss occurred later when the funds were stolen. | Loss did not occur at funding; Cooper suffered loss only after Greenwood/Walsh stole funds (after title had passed). |
| Offset of claimed loss by profits from other investments | Cooper should not be required to offset or net its gains from other plan investments against the claimed loss. | Cooper’s substantial profits (equity fund) undercut any claim of loss and should offset losses on the bond fund. | Court did not need to decide offsets because Cooper failed ownership/loss elements; lower‑court finding on offsets need not be reached. |
| Procedural: National Union’s cross-appeal | N/A (Cooper moved to dismiss cross-appeal) | Cross-appeal challenged district court’s subsidiary rulings; characterized arguments as protective. | Cross-appeal dismissed: National Union prevailed and was not aggrieved; arguments treated as alternative grounds for affirmance rather than a proper cross-appeal. |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- 3M Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 858 F.3d 561 (8th Cir. 2017) (similar fidelity‑policy interpretation: insured did not “own” funds kept by fraudster)
- FDIC v. United Pac. Ins. Co., 20 F.3d 1070 (10th Cir. 1994) (fidelity loss requires actual pecuniary depletion of assets)
- Dole Food Co. v. Patrickson, 538 U.S. 468 (distinguishing contexts when interpreting “own”/ownership concepts)
- In re Sims, 994 F.2d 210 (5th Cir. 1993) (only aggrieved parties may appeal; cross‑appeal rules)