Ironshore Europe DAC v. Schiff Hardin, L.L.P.
| Decision Date | 02 January 2019 |
| Docket Number | No. 18-40101,18-40101 |
| Parties | IRONSHORE EUROPE DAC, Plaintiff - Appellee v. SCHIFF HARDIN, L.L.P., Defendant - Appellant |
| Court | U.S. Court of Appeals — Fifth Circuit |
Sawnie A. McEntire, Robert Michael Rosen, David Alan Walton, Parsons McEntire McCleary, P.L.L.C., Dallas, TX, Angela Rowland Webster, Counsel Direct: 713-960-7315, Parsons McEntire McCleary, P.L.L.C., Houston, TX, for Plaintiff-Appellee.
George M. Kryder, III, Matthew Walter Moran, Esq., Vinson & Elkins, L.L.P., Dallas, TX, for Defendant-Appellant.
Before DAVIS, COSTA, and OLDHAM, Circuit Judges.
Defendant Schiff Hardin, L.L.P. ("Schiff Hardin"), a law firm, challenges the district court’s denial of its Rule 12(b)(6) motion to dismiss the complaint and rejection of its attorney immunity defense. The Plaintiff, Ironshore Europe DAC ("Ironshore"), issued an excess insurance policy to the firm’s client Dorel Juvenile Group, Inc. ("Dorel"). Ironshore casts its complaint as one for negligent misrepresentation against Schiff Hardin, alleging that the firm made misstatements and omissions in the course of reporting on the litigation against Ironshore’s insured Dorel, the firm’s client. Schiff Hardin argues that it is entitled to attorney immunity against Ironshore’s negligent misrepresentation claim. As discussed below, we conclude that the district court erred in rejecting Schiff Hardin’s attorney immunity defense because the conduct sued on occurred during the representation of the firm’s client, Dorel. We therefore REVERSE the denial of Schiff Hardin’s motion and RENDER judgment dismissing the plaintiff’s complaint pursuant to Rule 12(b)(6).1
In 2015, Nicole and Cameron Hinson filed a lawsuit in the Eastern District of Texas against Dorel, which allegedly designed, marketed, and sold the forward-facing car seat in which their one-year-old child, C.H., was seated when the Hinson vehicle was involved in an accident in Texas. The Hinsons alleged that C.H. suffered a paralyzing spinal cord injury
and a brain injury in the accident. They asserted claims of negligence, gross negligence, marketing defect, and failure to adequately warn consumers of the risks posed by the use of forward-facing car seats with young children.
Dorel was self-insured up to $6 million. The appellee Ironshore issued a policy of excess insurance to Dorel for liability above $6 million up to $25 million. The policy included an "assistance and cooperation" provision giving Ironshore the right to associate with Dorel in the defense of any claim, requiring Dorel to cooperate in the event Ironshore exercised that right, and requiring Dorel to promptly provide any litigation-related information requested by Ironshore.
Dorel retained the law firm Schiff Hardin, the defendant-appellant, to defend it in the Hinson suit. Although Schiff Hardin did not represent Ironshore, the firm did provide Ironshore with information about the litigation, including developments in the litigation and Schiff Hardin’s opinions of the settlement value and potential judgment value of the case.
The Hinson case went to trial in June 2016, and the jury returned a verdict adverse to Dorel and awarded total compensatory damages of $24,438,000 and an additional $10 million in exemplary damages. After the verdict, Ironshore retained its own counsel for the first time. The parties participated in post-trial mediation, during which a confidential settlement was agreed upon in an amount that reached Ironshore’s policy.
Ironshore then filed the instant lawsuit against Schiff Hardin asserting a claim for negligent misrepresentation pursuant to the Restatement (Second) of Torts § 552,2 which has been adopted by the Supreme Court of Texas.3 Ironshore alleged that the firm made various misrepresentations and omissions in the course of reporting on the Hinson litigation to Ironshore, including making false statements in verbal and written reports and failing to disclose certain information about the underlying suit’s facts and settlement and judgment value. Ironshore alleged that the firm’s conduct led it to believe that the suit posed no threat of exposure to its policy.
Ironshore’s complaint alleged that the misrepresentations took place "[i]n the course of Schiff’s business" representing Dorel but "were made by Schiff separate from its representation and defense of Dorel in the Lawsuit and were not necessary to, nor a part of, Schiff’s defense of Dorel in the Lawsuit." Ironshore also alleged that the firm failed to disclose certain developments in the Hinson litigation, including adverse pre-trial rulings and a pre-trial settlement offer of $3.25 million. Ironshore argued that it relied to its detriment on the negligent misrepresentations and that had it known the true facts about the developments in the lawsuit, settlement offers, and the danger to its policy, it would have settled with the Hinsons for a much lower amount than the ultimate verdict or post-verdict settlement.
Schiff Hardin filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), asserting that it was entitled to attorney immunity under Texas law. The firm argued that any communications with Ironshore were part of the discharge of the firm’s duties to its client, Dorel.
The district court denied Schiff Hardin’s motion to dismiss based on attorney immunity.4 The district court ventured an Erie5 guess to determine that the attorney immunity doctrine under Texas law did not foreclose a negligent misrepresentation claim. Schiff Hardin timely filed this appeal challenging that ruling.
A district court’s order denying a defendant’s motion to dismiss on the basis of attorney immunity under Texas law is an appealable collateral order because "attorney immunity is properly characterized as a true immunity from suit, not as a defense to liability."6 This court reviews de novo the denial of a motion to dismiss based on immunity.7
"The ultimate question in a Rule 12(b)(6) motion is whether the complaint states a valid claim when all well-pleaded facts are assumed true and are viewed in the light most favorable to the plaintiff."8 "Although dismissal under [R]ule 12(b)(6) may be appropriate based on a successful affirmative defense, that defense must appear on the face of the complaint."9 "The court’s review is limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint."10 "[A]n attorney seeking dismissal based on attorney immunity bears the burden of establishing entitlement to the defense."11 "To meet this burden, the attorney must ‘conclusively establish that [the] alleged conduct was within the scope of [the attorney’s] legal representation of [the] client.’ "12 "Texas courts occasionally grant attorney immunity at the motion to dismiss stage [where] the scope of the attorney’s representation—and thus entitlement to the immunity—[i]s apparent on the face of the complaint."13
This court also reviews de novo a district court’s interpretation of state law and is bound to resolve the issue as the state’s highest court would.14 "In applying Texas law, we look first to the decisions of the Texas Supreme Court."15 "If the Texas Supreme Court has not ruled on an issue, we ‘make an Erie guess, predicting what [the Texas Supreme Court] would do if faced with the [same] facts.’ "16 "In doing so, we typically ‘treat state intermediate courts’ decisions as the strongest indicator of what a state supreme court would do, absent a compelling reason to believe that the state supreme court would reject the lower courts’ reasoning.’ "17
As discussed in greater detail below, the attorney immunity doctrine under Texas law generally insulates a lawyer from civil liability to a non-client for conduct performed as part of the discharge of the lawyer’s duties to his client. We first make an Erie guess as to whether the Supreme Court of Texas would extend the attorney immunity doctrine to claims of negligent misrepresentation. Next, we consider whether the requirements of attorney immunity are satisfied on the facts alleged in this case.
As indicated, this appeal raises the question whether the attorney immunity doctrine under Texas law shields an attorney against claims by a non-client based on negligent misrepresentation made in the course of counsel’s representation of his clients. Having found no decisions from the Supreme Court of Texas that directly address this issue, we make an Erie guess that the Supreme Court of Texas would apply the attorney immunity doctrine to shield attorneys for such negligent misrepresentation claims.
The Supreme Court of Texas recognized in McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests18 that the absence of privity of contract does not preclude a non-client from suing an attorney for negligent misrepresentation under the Restatement (Second) of Torts § 552, which creates liability for providing false information to persons other than his client. In that 1999 decision, the court did not address the issue of attorney immunity but focused its analysis on the issue of privity, which it found was not required for a negligent misrepresentation claim against an attorney.19
More recently, the Supreme Court of Texas clarified the scope and application of the attorney immunity doctrine under Texas law in Cantey Hanger, LLP v. Byrd20 and Youngkin v. Hines .21 In Cantey Hanger , the court described this doctrine as "intended to ensure ‘loyal, faithful, and aggressive representation by attorneys employed as advocates’ " by avoiding "the inevitable conflict that would arise if [they] were ‘forced constantly to balance [their] own potential exposure against [their] client’s best interest.’ "22
The Cantey Hanger court made it clear that attorneys are generally "immune from...
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