BENITA Y. PEARSON, District Judge.
This matter is before the Court on the cross Motions for Summary Judgment filed by Plaintiff/Counter-Defendant Carolina Casualty Insurance Co. ("Carolina")
This legal malpractice case arises out of an underlying legal malpractice case filed in 2002 against the law firm Goodman Weiss Miller LLP ("Goodman"). ECF No. 82-1 at 5. That underlying legal malpractice action was filed by Goodman's former clients, Environmental Network Corporation and Environmental Network and Management Corporation (collectively, "ENC"). ECF No. 82-1 at 5. Carolina administered a professional liability insurance policy for the defense of the case against Goodman. ECF No. 82-1 at 5. The policy had a limit of $3,000,000 and was a "declining limits" policy, whereby the liability limit was reduced with the expenditure of defense fees and costs. ECF No. 84-1 at 8. Carolina hired Alton Stephens and Robert Eddy, partners of the Gallagher Sharp law firm, to represent Goodman. ECF Nos 1 at 2; 82-1 at 5.
During trial, in September 2005, the parties to the ENC lawsuit entered into a "high-low" settlement agreement (hereafter the "2005 high-low," or "first high-low") which was designed to cap the amount that ENC could recover in the event that they prevailed on their claims while at the same time guaranteeing them a minimum recovery if they lost. ECF No. 82-1 at 8. The "high" component was to be the amount of the remaining policy limits, and the "low" component was to be $100,000. ECF No. 84-1 at 9. If a jury awarded an amount in excess of the policy limit, Goodman would be required to pay the excess. ECF No. 84-1 at 11. The 2005 high-low agreement, therefore, ensured that Goodman would not be liable for an amount in excess of the policy limit. ECF No. 84-1 at 12.
In October 2005, the jury returned a verdict in favor of ENC on its malpractice claim. ECF No. 82-1 at 8. The jury awarded ENC $2,419,616.81, approximately $100,000 in excess of what was then remaining on the Carolina policy. ECF No. 84-1 at 11. Thereafter, ENC repudiated the high-low agreement, claiming that it was unenforceable. ECF No. 82-1 at 8-9. As a result, in June 2006, Goodman and Carolina filed a declaratory action in the Hamilton County Court of Common Pleas seeking to have the agreement declared valid and binding.
Goodman appealed the ENC jury verdict to Ohio's Eighth District Court of Appeals, which affirmed the "judgment of the trial court" in March 2007. ECF No. 1 at 3. Goodman then appealed to the Ohio Supreme Court. ECF No. 91 at 12. On or about August 24, 2007, ENC, Goodman and Carolina entered into a new high-low agreement (the "second high-low agreement") in which the low component was to be $1.75 million. ECF No. 84-1 at 13. At that time, Goodman's potential exposure in
On December 20, 2007, prior to the Ohio Supreme Court issuing its ruling, Carolina, Goodman and Gallagher Sharp entered into a Confidential Tolling Agreement ("Tolling Agreement"). ECF No. 84-1 at 13. The Tolling Agreement was signed by Alan Petrov, the Managing Partner of Gallagher Sharp, and purported to bind Defendants to the agreement. ECF No. 84-1 at 13. The agreement tolled the statute of limitations and all other time-related defenses. ECF No. 84-1 at 13-14.
Carolina brought this legal malpractice action against Defendants, alleging that attorneys Robert Eddy and Alton Stephens were negligent in drafting the 2005 high-low agreement thus rendering it unenforceable. ECF No. 1 at 2, 4. Carolina alleges that the Defendants' negligence caused Carolina to pay the low amount specified under the terms of the second high-low agreement, $1.75 million, rather than the $100,000 amount that Carolina would have been obligated to pay under the terms of the 2005 high-low agreement. ECF Nos. 1 at 4; 84-1 at 13.
Defendants deny the allegations and further assert the affirmative defense of statute of limitations, arguing that the Tolling Agreement does not bind the individuals Eddy and Stephens.
Summary judgment is proper if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).Johnson v. Univ. of Cincinnati, 215 F.3d 561, 572 (6th Cir.2000). A party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Entry of summary judgment is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322-23.
Defendants argues that Carolina lacks standing to assert a malpractice claim against them. ECF No. 82-1 at 12. Defendants assert that in order to maintain a legal malpractice action against an attorney, a plaintiff must establish that it was the attorney's client or that it was in privity with the attorney's client, neither of which, they argue, apply to Carolina.
"An attorney is immune from liability to third persons arising from his performance as an attorney in good faith on behalf of, and with the knowledge of his client, unless such third person is in privity with the client or the attorney acts maliciously." Scholler v. Scholler, 10 Ohio St.3d 98, 462 N.E.2d 158, 159-160 (1984). The Supreme Court of Ohio defines privity as "[t]he connection or relationship between two parties, each having a legally recognized interest in the same subject matter." Shoemaker v. Gindlesberger, 118 Ohio St.3d 226, 887 N.E.2d 1167, 1170 (2008) (citing Black's Law Dictionary 8th ed. 2004). In the context of legal malpractice, "privity between a third person and the client exists where the client and the third person share a mutual or successive right of property or other interest." CardioGrip Corp. v. Mueller and Smith, L.P.A., 2008 WL 150000, at *5 (S.D.Ohio Jan. 14, 2008) (citing Sayyah v. Cutrell, 143 Ohio App.3d 102, 757 N.E.2d 779, 787 (Ohio Ct.App.2001)). "Privity exists if the interest of the client is concurrent [i.e., mutuality of interest] with the interest of the third person." Id.
Both parties rely upon Swiss Reinsurance Am. Corp., v. Roetzel & Andress, 163 Ohio App.3d 336, 837 N.E.2d 1215 (2005). In Roetzel, a doctor was sued for malpractice and his liability insurer retained an attorney to represent him. Id. at 1218. The attorney eventually urged both the insurance company and the doctor to settle the case. Id. While the doctor agreed to settle, the insurance company refused. Id. When the insurance company brought suit for legal malpractice against the attorney, the court found that the insurance company and the doctor were not in privity because the insurer and the doctor's interests were in "clear conflict." Id. at 1222-23.
Defendants argue that privity does not exist between Carolina and Goodman because their interests were in clear conflict. ECF No. 82-1 at 17. Defendants assert that the "divergence of interests with respect to settlement that the [Roetzel] court recognized is inherent in every insurer-insured relationship where, as here, there is the possibility of a judgment in excess of the insurance policy limits." ECF No. 82-1 at 17. The Roetzel court did not make such a finding. Instead, Roetzel considered the facts of the case and concluded that, because the insured urged settlement and the insurer repeatedly refused to engage in settlement, the parties interests, "while in harmony at the inception of the case, ... diverged quickly." 837 N.E.2d at 1223. In the instant case, it, therefore, cannot be said that the mere identity of the parties and the existence of a partial settlement, the 2005 high-low agreement, inherently precludes a finding of privity. Privity does not equate to identical interests; rather, privity exists when the interests of one adequately represents the interests of another. See Sayyah, 143 Ohio App.3d at 112, 757 N.E.2d 779.
Defendants trot out other conflicts that allegedly arose between Carolina and Goodman in the hopes of destroying privity, none of them availing. That Carolina and Goodman initially disagreed as to whether Defendants should be hired to represent Goodman does not evince a divergence of interest. ECF No. 82-1 at 17. Nor does the fact that a side-agreement was entered into by Goodman and ENC prior to the 2005 high-low agreement, as the side agreement did not change the aforementioned interests of Carolina and Goodman.
Additionally, Defendants point to further alleged disagreements between Carolina and Goodman that occurred after the 2005 high-low agreement. ECF No. 82-1 at 18-19. However, any disagreements that may have occurred after the 2005 high-low agreement does not destroy the mutuality of interests Carolina and Goodman had at the time the alleged malpractice occurred.
For the reasons provided, the Court finds that privity existed between Carolina and Goodman prior to the 2005 high-low agreement, and Carolina has standing to bring its claim for legal malpractice against Defendants.
In a prior ruling, the Court determined that Allen Petrov, Gallagher Sharp's managing partner, had the authority to bind individual partners Eddy and Stephens upon signing the Tolling Agreement. ECF No. 32 at 12.
Carolina asserts that the plain language of the Tolling Agreement states that the agreement is binding on partners, employees and/or attorneys at Gallagher Sharp, which includes Eddy and Stephens. ECF No. 99 at 20. The Tolling Agreement was entered into by Carolina, Goodman and Gallagher Sharp and reads, in pertinent part,
ECF No. 11 at 2. Because Eddy and Stephens were partners of Gallagher Sharp, Carolina asserts, the plain language of the agreement binds them. ECF No. 99 at 19.
"Under Ohio law, the interpretation of written contract terms, including the determination of whether those terms are ambiguous, is a matter of law for initial determination by the court." Savedoff v. Access Group, Inc., 524 F.3d 754, 763 (6th Cir.2008). "The intent of the parties is presumed to reside in the language they choose to use in their agreement." Graham v. Drydock Coal Co., 76 Ohio St.3d 311, 667 N.E.2d 949, 952 (1996). "A court `is not permitted to alter a lawful contract by imputing an intent contrary to that expressed by the parties' in the terms of their written contract." Savedoff, 524 F.3d at 763 (quoting Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 797 N.E.2d 1256, 1261-62 (2003)). The intent of the parties, as unequivocally expressed by the language of the written contract, is that the agreement would be binding upon the partners of Gallagher Sharp. That language binds Eddy and Stephens.
Defendants argue that the provision quoted above is a commonly used contract
Defendants argue that Petrov, the managing partner who signed the Tolling Agreement, disclaimed any apparent authority to bind Eddy and Stephens as individuals to Carolina when negotiating the terms of the Tolling Agreement. ECF Nos. 93 at 20; 97 at 10. Carolina retorts that, even if Petrov did not intend to bind Eddy and Stephens to the Tolling Agreement, such evidence is irrelevant because Ohio contract law precludes considering that evidence in the face of unambiguous contract terms. ECF No. 91 at 25.
Because the plain language of the agreement states that the agreement is binding on all partners, the Tolling Agreement is not ambiguous, and the Court may look no further than the writing itself to find the intent of the parties. See Savedoff, 524 F.3d at 763; Westfield, 797 N.E.2d at 1261. Thus, the Court may not consider evidence of prior negotiations and drafts of the Tolling Agreement to impute a contrary intent to that expressed by the parties in the Tolling Agreement.
Defendants argue that even if the Tolling Agreement could be read as purporting to waive the rights of Eddy and Stephens, Petrov disclaimed any such authority and, therefore, Carolina could not have reasonably relied on Petrov's apparent authority. ECF No. 97 at 13. Defendants quote Ohio partnership law, which provides,
R.C. 1775.08(A) (emphasis added). Even assuming, arguendo, that Petrov conclusively disclaimed his authority to bind individual partners, Petrov, as the Court has previously determined, did "in fact" have authority to act for the partnership and, in so doing, to bind Eddy and Stephens individually to the agreement.
Because Petrov had the requisite authority to enter into the Tolling Agreement and its plain language binds Eddy and Stephens, Carolina's action is not time-barred.
"To establish a cause of action for legal malpractice under Ohio law, `a plaintiff must show (1) that the attorney owed a duty or obligation to the plaintiff, (2) that there was a breach of that duty or obligation and that the attorney failed to conform to the standard required by law, and (3) that there is a causal connection between the conduct complained of and the resulting damage or loss.'" Sasaya v. Earle, 2012 WL 314159, at *4 (N.D.Ohio Feb. 1, 2012) (quoting Vahila v. Hall, 77 Ohio St.3d 421, 674 N.E.2d 1164 (1997) (syllabus)). "The plaintiff's failure to prove any one of these elements entitles the defendant-attorney to summary judgment." Sasaya, 2012 WL 314159, at *4 (quoting Simmons v. Rauser & Assoc., L.P.A., 2011 WL 3925624, at *2 (Ohio Ct. App. Sept. 8, 2011)).
As discussed in the standing section, supra, the Court has determined there was privity between Carolina and Goodman. Accordingly, the Court finds that Defendants owed a duty or obligation to Carolina. See Macken, 2007 WL 2296431, at *3 (in the context of legal malpractice, an attorney may be liable if the third party is in privity with the client, citing Simon v. Zipperstein, 32 Ohio St.3d 74, 512 N.E.2d 636, 638 (1987)).
Carolina asserts that under Ohio law, legal malpractice may be decided as a matter of law in cases wherein an attorney's breach is obvious. ECF No. 84-1 at 18. Carolina urges that the instant case is one such case because Goodman and ENC reached an agreement on the terms of the 2005 high-low agreement; Defendants were tasked with reducing the agreement to writing; and the agreement was found unenforceable by the Hamilton County Court. ECF No. 84-1 at 19. Because Stephens and Eddy did not abide by their client's instructions in drafting the 2005 high-low agreement as an enforceable contract, Carolina argues, they committed malpractice. ECF No. 84-1 at 19. Defendants retort that the exception allowing legal malpractice to be determined as matter of law is very narrow and not applicable to the instant case. ECF No. 93 at 10. Specifically, Defendants argue that a genuine issue of material fact exists as to whether Defendants were tasked with preparing the 2005 high-low agreement and whether they were ever informed that the document was intended to be a final agreement. ECF No. 93 at 10, 12.
Pursuant to Ohio law, an attorney's conformance to the standard of care is an issue of fact on which expert testimony is typically required. See, e.g., Sasaya, 2012 WL 314159, at *9; Nu-Trend Homes v. Law Offices of DeLibera, Lyons & Bibbo, 2003 WL 1699841, at *7 (Ohio App.Ct. March 32, 2003); McInnis v. Hyatt Legal Clinics, 10 Ohio St.3d 112, 461 N.E.2d 1295, 1297 (1984). Expert testimony is not required, however, in cases in which the breach is "so obvious that it may be determined by the court as a matter of law." Kreuzer v. Merritt, 2000 WL 1643794, at *2 (Ohio Ct.App. Nov. 3, 2000) (quoting Bloom v. Dieckmann, 11 Ohio App.3d 202, 464 N.E.2d 187, 188 (1983)). "The failure to abide by a client's specific instructions may be sufficient to establish a breach of a professional duty without expert testimony." Dimacchia v. Burke, 904 F.2d 36, 1990 WL 75196 at *2 (6th Cir.1990) (Table) (citing McInnis, 461 N.E.2d at 1297).
Defendants argue that they were not "tasked with preparing an agreement reflecting
Stephens testified that Miller and Levin negotiated the 2005 high-low agreement in the hallway during the trial then came to Stephens and told him to draft a high-low agreement representing the terms Miller and Levin had recited.
Stephens testified in his deposition that he did not believe that the agreement was intended to be final.
ECF No. 84-14 at 3-4. Carolina argues that when Levin struck this paragraph from the agreement, Stephens should have known the parties intended the then existing agreement to be final. ECF No. 84-1 at 20.
That Levin struck paragraph 5 but not any other full paragraph or language in the draft undercuts Carolina's argument that the striking of Paragraph 5 should have indicated to Stephens that the parties intended the agreement to be final. The agreement, which was titled "Memorandum of Understanding," also recited,
ECF No. 84-17 at 3-5. (emphasis added). Despite edits by Attorneys Miller and Levin, the resulting language clearly indicates a proposal, counterproposal and makes no mention of an acceptance. It is, therefore, not obvious that Stephens should have known, from Levin's striking of paragraph 5, that the parties intended the document to be a final contract.
Proving proximate cause in a legal malpractice action "generally requires evidence that a result was more likely than not to have been caused by [the attorney's] negligence." Southern Elec. Supply Co. v. Lienguard, Inc., 2007 WL 4224225, at *6 (S.D.Ohio Nov. 27, 2007) (quoting Huffer v. Cicero, 107 Ohio App.3d 65, 667 N.E.2d 1031, 1037 (1995)). The proximate cause determination is ordinarily an issue to be determined by the trier of fact, but "where no facts are alleged justifying any reasonable inference that the acts or failure of the defendant constitute the proximate cause of the injury, there is nothing for the jury [to decide], and, as a matter of law, judgment must be given." Wesley v. Walraven, 2013 WL 544053, at *12 (Ohio Ct.App., Feb. 5, 2013) (quoting Kemerer v. Antwerp Bd. of Education, 105 Ohio App.3d 792, 664 N.E.2d 1380, 1383 (1995), quoting Case v. Miami Chevrolet Co., 38 Ohio App. 41, 175 N.E. 224, 225 (1930); Vermett v. Fred Christen & Sons Co., 138 Ohio App.3d 586, 741 N.E.2d 954, 973 (2000)).
In Mudrich v. Standard Oil Co., 153 Ohio St. 31, 90 N.E.2d 859, 863 (1950), the Ohio Supreme Court stated,
See also Marsh v. Heartland Behavorial Health Ctr., 2010 WL 1248290, at *10 (Ohio Ct.App. March 31, 2010). Furthermore,
Johnson v. Pohlman, 162 Ohio App.3d 240, 833 N.E.2d 313, 321 (2005) (internal quotations and citations omitted).
The Ohio Supreme Court has stated that when considering proximate cause in legal malpractice cases, a court need not conduct a "trial within a trial" to show the validity of a plaintiff's underlying claim. Vahila, 674 N.E.2d at 1169 (quoting Note, The Standard of Proof of Causation in Legal Malpractice Cases, 63 Cornell L.Rev. 666, 670-671 (1978)). See also Environmental Network Corp. v. Goodman Weiss Miller, L.L.P., 119 Ohio St.3d 209, 893 N.E.2d 173, 176-77 (2008). In Vahila, the Court reversed the appellate court's affirmance of the trial court's grant of summary judgment to the defendant attorney. 674 N.E.2d at 1167. The trial court had found that because the plaintiffs alleging legal malpractice failed to establish they would have been successful in the underlying action in which the alleged malpractice occurred "but for" the defendant's alleged breach, the defendants were entitled to summary judgment. 674 N.E.2d at 1167. The Ohio Supreme Court reversed, rejecting a rule that would require a plaintiff to "prove in every instance that he or she would have been successful in the underlying matters giving rise to the complaint." Id. at 1168-69.
Defendants, in the instant case, urge the Court to consider a slightly different but analogous scenario. Defendants argue that Carolina's damages were the result of Carolina's declaratory judgment action in the Hamilton County Court of Common
The Court is not persuaded by Defendants' arguments. As an initial matter, the Court notes that the Hamilton County Court decision is not the underlying case in this malpractice action as contemplated by Vahila.
The Court will not conduct a "trial within a trial" to determine the different possible legal arguments that could have been made in addition to the arguments that were made to the Hamilton County Court. Nor will the Court speculate about the possibilities of success had Carolina's lawyers adopted the strategy Defendants now present.
The Court is aware that motions for summary judgment on issues of proximate causation and intervening acts generally result in denial due to the existence of questions of fact. See Leibreich v. A.J. Refrigeration, Inc., 67 Ohio St.3d 266, 617 N.E.2d 1068, 1071 (1993). Despite that trend, the Court finds that no reasonable factfinder could conclude that the second high-low agreement was not proximately caused by the unenforceability of the first one. ENC, Goodman and Carolina sought a partial settlement in the form of the high-low agreements in the underlying action in order to avoid risking liability in excess of the policy limits. See ECF Nos. 84-2 at 37; 84-8 at 33. Indeed, Ohio law requires that insurers consider and, in some cases, accept settlement offers within policy limits when the insured faces the threat of exposure beyond policy limits. See, e.g., Centennial Ins. Co. v. Liberty Mut. Ins. Co., 62 Ohio St.2d 221, 404 N.E.2d 759, 761 (1980) (citing Hart v. Republic Mut. Ins. Co., 152 Ohio St. 185, 87 N.E.2d 347, (1949)); Logan v. Allstate Ins. Co., 169 Ohio App.3d 754, 865 N.E.2d 57, 61 (Ohio Ct.App.2006).
The 2005 high-low agreement was adjudged unenforceable. Therefore, it is foreseeable that the parties would thereafter have entered into another high-low agreement to replace the infirmed original agreement. The second high-low agreement
Defendants argue that there is a genuine dispute as to whether Carolina's decision to enter into the second high-low agreement is an intervening cause. Defendants assert that because the Ohio Supreme Court ultimately reversed the trial court and entered judgment in favor of Goodman, Carolina "actually benefitted" from the unenforceability of the 2005 high-low agreement. This interesting perspective on causation could be applied to any proximate causation analysis without end — one could say that a person injured in a car accident consequently missed a plane that crashed, thus the negligent acts of the tortfeaser actually benefitted the injured person, in the grand scheme of things — but the law does not take such a philosophical view of causation. Defendants themselves concede that the Ohio Supreme Court's decision in favor of Goodman was a "landmark decision that redefined the causation standard for legal malpractice claims in Ohio." ECF No. 82-1 at 12. The Court finds Defendants' argument that Carolina should have foreseen the ultimate reversal of the trial court to be without merit.
Defendants also advance alternative ways, other than the second high-low agreement, in which it believes Carolina could have hedged its bet in the underlying malpractice action that would have resulted in a less than $1.75 million minimum payment to ENC. ECF No. 93 at 16-17. Defendants do not cite legal authority for their arguments and do not respond to Carolina's assertion that such issues are to be considered in the context of Carolina's duty to mitigate damages. ECF No. 84-1 at 22. See BP Exploration & Oil Co. v. Maintenance Services, Inc., 313 F.3d 936, 946-947 (6th Cir.2002) (discussing the difference between conduct that has a causal role in liability versus the mitigation of damages after the injury occurs, citing Petrolia Corp. v. Elam, 1992 WL 31299 (6th Cir. Feb. 20, 1992)). Because such issues are to be considered in the context of Carolina's duty to mitigate damages, the Court considers Defendants' arguments in that context.
Carolina argues that it used ordinary and reasonable care in attempting to mitigate its damages after Defendants' alleged negligence and is therefore entitled to summary judgment. ECF Nos. 84-1 at 22; 99 at 18. "As a general rule, `an injured party has a duty to mitigate and may not recover for damages that could reasonably have been avoided.'" Baird v. Crop Prod. Servs., Inc., 2012 WL 3815314, at *8 (Ohio Ct.App. Sept. 4, 2012) (quoting Chicago Title Ins. Co. v. Huntington Natl. Bank, 87 Ohio St.3d 270, 719 N.E.2d 955, 961 (1999)). An injured party is required to use ordinary and reasonable care, diligence, and prudence. Foust v. Valleybrook Realty Co., 4 Ohio App.3d 164, 446 N.E.2d 1122, 1127 (1981).
To the extent Defendants respond to Carolina's mitigation argument, they state that instead of agreeing to the second high-low which required Carolina to pay $1.75 million as the low, Carolina could have foregone entering into the second high-low at all, and simply agreed to pay the $700,000 Goodman would have faced in excess on its policy.
For the aforementioned reasons, the Court:
IT IS SO ORDERED.
