Price Waicukauski & Riley, LLC v. Murray

Decision Date18 September 2014
Docket NumberCause No. 1:10–cv–1065–WTL–TAB.
PartiesPRICE WAICUKAUSKI & RILEY, LLC, Plaintiff/Counter–Defendant, v. Dennis E. MURRAY, Sr., Margaret A. Murray, and DPM, Ltd., Defendants/Counter–Claimants.
CourtU.S. District Court — Southern District of Indiana

Joseph N. Williams, William N. Riley, Price Waicukauski & Riley, Michael A. Dorelli, Sean T. White, Hoover Hull LLP, Indianapolis, IN, for Plaintiff/Counter–Defendant.

Michael A. Wilkins, Broyles Kight & Ricafort, P.C., Indianapolis, IN, for Defendants/Counter–Claimants.

ENTRY ON CROSS–MOTIONS FOR SUMMARY JUDGMENT

WILLIAM T. LAWRENCE, District Judge.

Before the Court are the parties' cross-motions for summary judgment (dkt. nos. 99, 118). The motions are fully briefed, and the Court rules as follows.

I. STANDARD

Federal Rule of Civil Procedure 56(a) provides that summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” In ruling on a motion for summary judgment, the admissible evidence presented by the non-moving party must be believed and all reasonable inferences must be drawn in the non-movant's favor. Hemsworth v. Quotesmith.com, Inc., 476 F.3d 487, 490 (7th Cir.2007) ; Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir.2009) (We view the record in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor.”). However, [a] party who bears the burden of proof on a particular issue may not rest on its pleadings, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact that requires trial.” Id. Finally, the non-moving party bears the burden of specifically identifying the relevant evidence of record, and “the court is not required to scour the record in search of evidence to defeat a motion for summary judgment.” Ritchie v. Glidden Co., 242 F.3d 713, 723 (7th Cir.2001).

The fact that the parties have filed cross-motions for summary judgment does not alter the standard set forth in Federal Rule of Civil Procedure 56. When evaluating each side's motion, the Court simply “construe[s] all inferences in favor of the party against whom the motion under consideration is made.” Metro Life Ins. Co. v. Johnson, 297 F.3d 558, 561–62 (7th Cir.2002) (quoting Hendricks–Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir.1998) ).

II. BACKGROUND

This case was filed in August 2010 by the Plaintiff, Price Waicukauski & Riley, LLC, (PWR) against the Defendants, Dennis and Margaret Murray and DPM, Ltd. (DPM), to recover over $125,000 in attorneys' fees owed to PWR. The attorneys' fees stem from PWR's representation of the Murrays1 in a rather contentious lawsuit2 against Conseco, Inc. (“Conseco”) and Conseco Services, LLC (“Services”) that spanned more than six years. Ultimately, the case settled. Unhappy with PWR's representation, in November 2010, the Murrays filed a counterclaim against PWR alleging legal malpractice. The present cross-motions for summary judgment address both sides' claims.

A brief recitation of the relevant facts pertaining to the Underlying Litigation, the allegations of PWR's legal malpractice, and the outstanding attorneys' fees still owed by the Murrays follow. Additional relevant facts will be provided in the Discussion section below.

A. Facts Leading to the Underlying Litigation

Mr. Murray served as a member of Conseco's Board of Directors from 1994 to 2000. He is also the general partner of DPM, an Ohio limited partnership. At some point during the late 1990s and early 2000s, Mr. Murray and DPM participated in Conseco's Director and Officer Loan Program (“the D & O program”). This allowed directors and officers to purchase Conseco stock by borrowing large sums of money from certain banks. Conseco guaranteed the loans, and Services paid the interest on the loans. Mr. Murray and DPM executed numerous documents in conjunction with this agreement—Participation Agreements, Credit Agreements, Promissory Notes, etc.—but all essentially boiled down to the fact that as borrowers, they promised to repay the loan and/or reimburse Conseco if Conseco paid the banks pursuant to its guaranty agreement. In all, Mr. Murray borrowed $41,618,499.03 from the banks, and DPM borrowed $58,002,106.52. They also borrowed over $30 million from Services.

Unfortunately, in the late 1990s, Conseco began to experience financial difficulties; it eventually filed for Chapter 11 bankruptcy in December 2002. This was considered an event of default; therefore, the loans were automatically accelerated and became immediately due. As part of its reorganization plan, Conseco paid the banks, pursuant to its guaranty agreement, with new debt and stock rather than cash. Accordingly, the banks transferred their rights under the loans to post-reorganization Conseco. Conseco was then able to seek $99 million for the principal on the loans from the Murrays; additionally, Services sought recovery of $30 million paid in interest on the loans.

B. The Underlying Litigation

In November 2003, Mr. Murray and DPM sued Conseco and Services in this court. Their complaint alleged nine counts, including several claims for declaratory judgment, rescission, and fraud. While numerous other lawsuits were filed in other courts, this lawsuit served as the “primary venue” for the Murrays' disputes with Conseco and Services. The case lasted for six years and resulted in various motions filed by both sides, orders from the district court judge, and an appeal to the Seventh Circuit. By July 2009, the Murrays had no remaining claims against Conseco or Services that survived summary judgment; therefore, they reached an eventual settlement—$5.8 million to be paid by the Murrays to Conseco and Services. The Murrays were represented by PWR throughout the entire case and paid the firm over $2.7 million in attorneys' fees.

C. PWR's Claim for Outstanding Attorneys' Fees

Beginning in November 2009, PWR sent the Murrays a bill for outstanding attorneys' fees. It sent similar bills in December 2009 and February 2010; however, the Murrays never paid. To date, $127,592.91 has been billed and not paid. PWR's sole claim against the Murrays in the instant lawsuit seeks to recover these fees.

D. The Murrays' Claims for Legal Malpractice

As a result of its representation in the underlying lawsuit, the Murrays have asserted a legal malpractice claim against PWR. Their eight allegations are briefly summarized below.

1. PWR's Conflict of Interest

In October 2002, PWR agreed to serve as local class counsel for a class of ERISA plaintiffs in “the Russell action.”3 The plaintiffs in the Russell action filed suit on behalf of themselves and other purchasers of Conseco stock as participants in Conseco's ConsecoSave Plan. The suit was filed against Conseco, Services, and John Does 1–30, and alleged that the defendants breached their fiduciary duties by, among other things, misrepresenting and failing to disclose material facts. The relevant time period for the class action was April 1999 through September 2003—a time in which Mr. Murray was on Conseco's Board of Directors.

PWR recognized that representing Mr. Murray in the underlying lawsuit while serving as local class counsel in the Russell action could potentially cause a conflict of interest. Therefore, it conducted its own research on the potential conflict, but it concluded that there was no direct conflict. While PWR asserts it obtained oral consent from Mr. Murray to the concurrent representation, it is undisputed that no written consent was ever obtained. Mr. Murray asserts he had no knowledge of the Russell action and did not consent to any concurrent representation.

Eventually, the Russell action settled for $9.75 million in October 2005. During the course of the Russell action, Conseco sought coverage from its insurance company, RLI, for its defense costs. As a result, this led to another lawsuit: “the RLI action.”4 The Murrays succinctly describe the relevant factual background of the RLI action as follows in their brief:

Murray and Conseco had given [releases] to RLI in the Conseco Securities litigation, in which they agreed to indemnify RLI if RLI was later required to incur expenses because of further claims made against Conseco arising out of the same conduct complained of in the Conseco Securities litigation. In the subsequent Russell [ ] action, PWR sought damages against Conseco arising out of the same conduct as that complained of in the Conseco Securities litigation. After Russell was commenced, Conseco sought indemnity from RLI. RLI incurred attorney fees as a result of Conseco's demand and then sued Murray and Conseco pursuant to the releases given in the Conseco Securities litigation. Murray retained PWR to defend him from the causes of action of RLI.
Murrays' Reply at 38. Eventually, the RLI action settled; pursuant to the settlement agreement, all claims against Mr. Murray were dismissed in July 2007. It is undisputed that two PWR attorneys withdrew from representing Mr. Murray in the RLI action because they were identified as witnesses due to their involvement in the Russell action. The Murrays allege that the conflict of interest—simultaneous representation of both the Murrays and the plaintiffs in the Russell action—“put at risk” PWR's representation of them in the Underlying Litigation. For example, the Murrays allege that Mr. Murray could have been a potential defendant and thus liable for damages in the Russell action, that the plaintiffs' interest in the Russell action were contrary to Mr. Murray's interest in the Underlying Litigation, that Mr. Murray was a potential witness in the Russell action, that both Mr. Murray and the plaintiffs in the Russell action were competing for limited resources, and that the Russell action gave rise to further litigation against Mr. Murray (the RLI action).See Murrays' Br. at 57–62.
2. PWR's Failure...

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