Failure to issue reservation of rights letter does not waive per claim/per claimant deductible
We previously noted the decision in Cincinnati Insurance Co. v. All Plumbing, Inc., Civil Action No. 12-851 (D.D.C. Oct. 18, 2013)(Kollar-Kotelly, J.), where the Court held that Cincinnati Insurance's failure to properly reserve its rights and five-month delay in disclaiming coverage while controlling important actions in the insureds' defense precluded Cincinnati from asserting any defenses to coverage in the underlying junk fax class action.
In the same case, on August 18, 2014, the Court granted in part and denied in part a motion for reconsideration filed by the insurer. Significantly, the Court found that the insurer's failure to properly reserve its rights in the underlying tort litigation does not prevent it from asserting the $1,000 deductible with regard to Coverage A under the Policy.
This was a significant victory for the insurer, given that the underlying litigation is a putative class action against the insured for sending unsolicited faxes to the plaintiff and others in violation of the Telephone Consumer Protection Act. The TCPA provides a private right of action for violations and statutory damages in the amount of $500 for each violation and up to $1,500 for each willful violation. When applied to a large number of faxes in a class action, the damages in these cases can become large. However, the $1,000 per claim, per claimant deductible mitigates the liability exposure for the insurer.
Coverage A under the Policy provided that a $1,000 deductible applies on a per claim, per claimant basis. The insurer in its motion for reconsideration requested clarification that, despite the Court's conclusion that the insurer failed to properly reserve its rights in the underlying action, the $1,000 per claim, per claimant deductible still applies with regard to Coverage A.
The Court agreed with the insurer. The Court reasoned that a deductible is the portion of the loss to be borne by the insured before the insurer becomes liable for payment. The Court further reasoned that a deductible endorsement is not a coverage defense or exclusion; it is a means of shifting a portion of the risk from the insurer to the insured. Even where, as here, an insurer assumes an insured's defense unconditionally, the insurer does not waive the deductible endorsement. Among other authorities, the Court relied on Couch on Insurance for the proposition that "While the defense of the action by an insurer without reservation of rights as to its defense may constitute a waiver of the insurer's defenses, it does not rewrite the policy so as to remove the maximum on the coverage provided."
Posted by David B. Stratton on 08/25/2014 at 12:22 PM
District of Columbia
DC: Legal malpractice verdict in favor of plaintiff reversed on appeal due to lack of privity
In Scott v. Burgin, No. 12-V-1474 (D.C. Aug. 14, 2014), the Court reversed a $255,000 jury award in a legal malpractice case against a divorce attorney. The plaintiff was not a client of the defendant law firm, and consequently the Court held that the defendant's duty of care did not extend to the Plaintiff, and reversed the judgment. In so doing, the Court refused to expand the third party beneficiary exception to the requirement of privity in a legal malpractice action.
The plaintiff's fiancé was a retired government employee, who was long separated from his first wife, but they had never gotten a divorce.
The plaintiff and her fiancé had a long-standing relationship of over 25 years. After the fiancé was diagnosed with terminal bone cancer, the plaintiff met with the defendant attorney to seek his help in getting the fiancé a divorce from his separated wife. The attorney said he would help the fiancé, if the fiancé chose to retain him. The fiancé wished to obtain a divorce so that he could marry the plaintiff. Although he had previously designated the plaintiff as the beneficiary of his federal benefits, he was aware that the plaintiff might not receive them unless their were married.
A year passed before the fiancé met with the attorney. Shortly thereafter, the fiancé signed a retainer agreement for the lawyer's representation in his divorce proceedings.
Unfortunately, the attorney did not serve the separated wife with the divorce complaint until November, 2007, about 11 months later. The fiancé died in April, 2008, and a divorce was never secured prior to his death.
Afterwards, the federal government denied the plaintiff's claim for survival benefits under the Civil Service Retirement System, based on evidence showing that the earlier marriage was never terminated.
The plaintiff brought suit against the lawyer for legal malpractice and the related breach of contract as a third-party beneficiary, and the jury returned a verdict in favor of the plaintiff.
On appeal, the sole issue was whether the plaintiff lacked standing to sue for legal malpractice or breach of contract.
The Court held that the plaintiff did not have standing. It was undisputed that the fiancé and the fiancé alone, was the lawyer's client. In the District of Columbia, both contracting parties must intend a direct benefit which the third party can enforce against the promisor, for classic third-party beneficiary liability to exist. Here, there was no real evidence that the attorney himself intended to incur any liability beyond that imposed by law as part of his duty of care.
The Court reaffirmed the general rule that the obligation of an attorney is to his client, and not to a third party. The Court distinguished the recognized exception to that rule, where the impact upon the third party is not an indirect or collateral consequence, but the end and aim of the transaction. The classic situation that meets that exception is the failure of an attorney to properly draft a will.
Here, the anticipated divorce decree did not provide the same direct benefits to the plaintiff. The Court stated that the fiancé of either party to a divorce is a complete stranger to the transaction, and the divorce does nothing to change that status. The newly divorced person would have had to take at least one further action, that is, marry the plaintiff. The Court noted that in the divorce proceedings, the pension rights at issue might have been the subject of controversy, since the separated wife had had four children in the marriage.
To permit the plaintiff's suit here would frustrate one of the primary goals of the privity rule, that is, avoiding exposure to the attorney to indeterminate liability to an indeterminate class of people. It would also undermine the ability of the attorney and the client to exercise control over their contractual agreement.
Posted by Jordan Coyne LLP on 08/16/2014 at 07:36 PM
District of Columbia
Expert witness ruling in District of Columbia cell phone litigation
“Can cell phones cause brain cancer?” That is a fundamental issue in Murray v. Motorola, Case No. 2001 CA 008479 (Superior Court for the District of Columbia, Aug. 8, 2014), in which Judge Frederick H. Weisberg has issued a 76 page opinion, ruling on the defendants’ Dyas/Frye challenges to the admissibility of the plaintiffs’ expert witnesses. Judge Weisberg, however, did not render an opinion on that causation issue. Rather, his opinion focuses only on whether plaintiffs’ expert witnesses should be permitted to testify before the jury.
Under the Dyas/Frye test which is currently the law in the District of Columbia, the expert testimony is presumptively admissible if the subject is beyond the ken of an average layperson, the expert is qualified to offer an opinion on the subject, the expert uses a methodology that is generally applied in the relevant scientific community to arrive at his opinion, and the probative value of the expert’s testimony is not substantially outweighed by the risk of undue prejudice.
In December 2013 and January 2014, Judge Weisberg conducted an evidentiary hearing to determine the admissibility of plaintiffs’ experts, hearing four weeks of testimony from plaintiffs’ eight experts and defendants’ four rebuttal experts, receiving 280 exhibits containing thousands of pages of documents, and reviewed hundreds of pages of legal briefing. At this stage of the litigation, the general causation question presented is whether the non-ionizing radiation from cell phones has a non-thermal effect that causes, promotes, or accelerates the growth of brain tumors, specifically gliomas and acoustic neuromas.
The opinion contains an in-depth discussion of the Dyas/Frye standard, which practitioners will find useful.
Further, Judge Weisberg included a four page discussion of the differences between the Dyas/Frye standard adopted by the D.C. Court of Appeals, and the federal Daubert standard governing the admissibility of expert testimony. The Court noted that “the scientific dispute in this case illustrates that the choice of one approach over the other can be outcome determinative.” This discussion may ultimately set the stage for the D.C. Court of Appeals to undertake an en banc review of whether to adopt the Daubert standard.
Out of the eight experts for the Plaintiffs, the Court excluded the testimony of three completely: Dr. Shira Kramer; Dr. Guatam Khurana; and Dr. Dimitris Panagopoulos. The Court further ruled that the testimony of three of the Plaintiffs’ experts on general causation is not excluded: Dr. Michael Kundi; Dr. Wilhelm Mosgoeller; and Dr. Abraham Liboff. Finally, the remaining two Plaintiffs’ experts were only excluded in part: Dr. Igor Belyaev; and Dr. Laura Plunkett. Thus, the Plaintiffs’ case has apparently survived a knockout punch in this round of litigation, and the parties will now move on to conduct broader discovery on the general causation issue before proceeding to specific causation.
Judge Weisberg’s opinion makes it clear that, based on the present record, he thinks that the scientific evidence on the general causation question is too unsettled for any scientist to say, to a reasonable degree of scientific certainty, that cell phones cause brain cancer. On the other hand, Judge Weisberg’s opinion also calls for more research and cautions that, “If there is even a reasonable possibility that cell phone radiation is carcinogenic, the time for action in the public health and regulatory sectors is upon us. Even though the financial and social cost of restricting such devices would be significant, those costs pale in comparison to the cost in human lives from doing nothing, only to discovery thirty or forty years from now that the early signs were pointing in the right direction.”
Posted by David B. Stratton on 08/10/2014 at 06:36 PM
District of Columbia
Expert Witness Issues
D.C. Court of Appeals affirms summary judgment based on judicial estoppel
In Atkins v. 4940 Wisconsin LLC, ___ A.2d ___, 2014 D.C. App. LEXIS 192 (D.C. July 3, 2014), the Court affirmed the trial court's award of summary judgment to the defendant on the grounds of judicial estoppel, based on the plaintiff's filings in bankruptcy court in which he represented in his schedules that he had no unliquidated claims. An aggravating factor here was that the defendant in the personal injury suit had had a claim of $328,606 against the plaintiff due to a retail lease, which claim was discharged in the bankruptcy.
In the District of Columbia, the courts generally consider three factors in deciding whether to apply judicial estoppel: (1) whether a party's later position is clearly inconsistent with its earlier position; (2) whether the party has succeeded in persuading a court to accept the party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled; and (3) whether the party seeking to impose an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.
The doctrine of judicial estoppel precludes a party from taking one position on an issue before one court and the opposite position before a different court, and has been adopted in the District of Columbia. See Fairman v. District of Columbia, 934 A.2d 438, 443 (D.C. 2007); Porter Novelli v. Bender, 817 A.2d 185, 188 (D.C. 2003); Thoubboron v. Ford Motor Co., 809 A.2d 1204, 1212 (D.C. 2002); Lofchie v. Wash. Square P'ship, 580 A.2d 665, 668-69 (D.C. 1990)(concurring opinion by Schwelb, J); See also Comcast Corp. v. FCC, 390 U.S. App. D.C. 111, 116, 600 F.3d 642, 647 (D.C. Cir. 2010).
In Moses v. Howard Univ. Hosp., 391 U.S. App. D.C. 21, 30, 606 F.3d 789, 798 (D.C. Cir. 2010), the United States Court of Appeals for the District of Columbia Circuit stated,
While “‘[t]he circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation of principle,’” Maine, 532 U.S. at 750 (quoting Zurich Ins. Co., 667 F.2d at 1166), we have explained that “[c]ourts may invoke judicial estoppel ‘[w]here a party assumes a certain position in a legal proceeding, . . . succeeds in maintaining that position, . . . [and then] simply because his interests have changed, assume[s] a contrary position.’” Comcast Corp., 600 F.3d at 647 (quoting Maine, 532 U.S. at 749).
The Moses Court stated that “[c]ourts may invoke judicial estoppel ‘[w]here a party assumes a certain position in a legal proceeding, . . . succeeds in maintaining that position, . . . [and then,] simply because his interests have changed, assume[s] a contrary position.’” Id. at 798. (citing Comcast Corp., 600 F.3d at 647 (quoting Maine, 532 U.S. at 749).
In New Hampshire v. Maine, 532 U.S. 742, 749 (3d ed. 2000), the Supreme Court spoke approvingly of judicial estoppel in that it “’prevents a party from asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding,’” (quoting 18 MOORE’S FEDERAL PRACTICE § 134.30 (3d ed. 2000)), and explained that judicial estoppel is “’an equitable doctrine invoked by a court at its discretion,’” Maine, 532 U.S. at 750 (quoting Rolfs, 893 F.3d at 1037). See also Moses v. Howard Univ. Hosp., 606 F.3d 789, 798 (D.C. Cir. 2010).
In the context of bankruptcy proceedings, “[a] debtor is required to disclose all potential claims in a bankruptcy petition. See 11 U.S.C. §§ 521(1), 541(a)(1). The Moses Court interpreted this to mean that “. . . a debtor is under a duty both to disclose the existence of pending lawsuits when he files a petition in bankruptcy and to amend his petition if circumstances change during the course of the bankruptcy.” Id. at 793.
The doctrine of judicial estoppel may be applied where the plaintiff has failed to comply with these statutory requirements:
Courts have routinely held that judicial estoppel is appropriate when a debtor fails to identify a claim in a bankruptcy proceeding and then proceeds to assert that claim in a separate judicial action. See Moses v. Howard Univ. Hosp., 606 F.3d at 798 ("[E]very circuit that has addressed the issue has found that judicial estoppel is justified to bar a debtor from pursuing a cause of action in district court where that debtor deliberately fails to disclose the pending suit in a bankruptcy case."); Kopff v. World Research Group, LLC, 568 F. Supp. 2d 39, 43-44 (D.D.C. 2008) (citing cases).
Frese v. Empire Fin. Servs., 725 F. Supp. 2d 130, 140 (D.D.C. 2010).
A debtor in bankruptcy court has a continuing duty to disclose all assets and potential assets to the court until her discharge date. 11 U.S.C. § 521(1) and 541(a)(7); In re Wilmoth, 412 B.R. 791, 798-99 (Bankr. E.D. Va. 2009) (explaining that [t]he duty to list all property and applicable exemption is an ongoing duty prior to closing of the case and the duty falls squarely on the Debtor’s shoulders); Burnes v. Pemco Aeroplex, 291 F.3d 1282, 1286 (11th Cir. 2002); Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207-08 (5th Cir. 1999).
“Reopening a case does not automatically grant the Debtor a right to amend schedules or take other actions that ought to have occurred prior to closing; instead, the reopening of the case allows administrative and ministerial loose ends to be tied. See Finch v. Coop (In re Finch), 378 B.R. 241, 246 (B.A.P. 8th Cir. 2007) (citing In re Barlett, 326 B.R. 436, 438 (Bankr. N.D. Ind. 2005)). Chapter 7 trustees are not automatically reappointed as trustees upon the reopening of a bankruptcy case. Fed. R. Bankr. P. 5010.” In re Wilmoth, 412 B.R. 791, 795-796 (Bankr. E.D. Va. 2009)
 Federal bankruptcy law requires a debtor to list in the initial petition, inter alia, a “schedule of assets.” 11 U.S.C. § 521(a)(1)(B)(1). Official Form 6 for Schedule B requires a debtor to list “all personal property of the debtor of whatever kind,” and property of a bankruptcy estate is defined broadly to include “all legal or equitable interests of the debtor in property as of commencement of the case.” 11 U.S. C. § 541(a)(1). Courts have interpreted this definition to include “all causes of action that could be brought by a debtor.” USinternetworking, Inc. v. Gen. Growth Mgmt., 310 B.R. 274, 281 (Bankr. D. Md. 2004) (citing Seward v. Devine, 888 F.2d 957, 963 (2d Cir. 1989)). The duty to disclose such claims continues for the duration of the bankruptcy proceeding. Id. at 282 (citing Browing Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207-08 (5th Cir. 1999)).
 "'The debtor need not know all the facts or even the legal basis for the cause of action; rather, if the debtor has enough information … prior to confirmation to suggest that it may have a possible cause of action, then that is a "known" cause of action such that it must be disclosed'". Browning Mfg., 179 F3d at 208, quoting Union Carbide Corp. v. Viskase Corp. (In re Envirodyne Indus., Inc.), 183 B.R. 812, 821 n.17 (Bankr. N.D. Ill. 1995)). "Any claim with potential must be disclosed, even if it is 'contingent, dependent, or conditional'". Browning Mfg., 179 F.3d at 208, quoting Westland Oil Dev. Corp. v. MCorp Management Solutions, Inc., 157 B.R. 100, 103 (S.D. Tex. 1993) (emphasis the Court’s).
Posted by David B. Stratton on 08/09/2014 at 03:13 PM
District of Columbia