Alternative Energy v. St. Paul Fire Insurance

• Citation: 267 F.3d 30
• Decision Date: 03 August 2001
• Docket Number: No. 01-1133,BEAVER-CADILLA,G,01-1133
• Parties: (1st Cir. 2001) ALTERNATIVE ENERGY, INC.,P., INC., BEAVER PLANT OPERATIONS, INC., CHRISTOPHER HUTCHINS, Plaintiffs, Appellants, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant, Appellee. Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

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267 F.3d 30 (1st Cir. 2001) ALTERNATIVE ENERGY, INC., BEAVER-CADILLAC, G.P., INC., BEAVER PLANT OPERATIONS, INC., CHRISTOPHER HUTCHINS, Plaintiffs, Appellants,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant, Appellee. No. 01-1133 United States Court of Appeals For the First Circuit Heard Aug. 3, 2001
Decided October 11, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE

[Hon. D. Brock Hornby, U.S. District Judge]

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Jeffrey Bennett, with whom The Bennett Law Firm, P.A., Daniel G. Lilley and Daniel G. Lilley Law Offices, P.A., were on brief, for appellants.

Richard A. Simpson, with whom Lynda Guild Simpson, Jeffrey J. Ward, Ross, Dixon & Bell, L.L.P., Karen Frink Wolf and Friedman Babcock & Gaythwaite, were on brief, for appellee.

Before Boudin, Chief Judge, Gibson,^* Senior Circuit Judge, and Torruella, Circuit Judge.

TORRUELLA, Circuit Judge.

Appellants filed professional malpractice suits in Maine state court against attorneys John Lightbody, Peter Murray, and their law firm Murray, Plumb & Murray ("MPM Law Firm"), which was insured by appellee St. Paul Fire & Marine Insurance Company ("St. Paul"). St. Paul settled at least some of these claims in a 1998 settlement agreement. Appellants then filed a second claim against St. Paul, arising out of alleged malpractice by attorney Murray, under the theory that this claim was not covered by the 1998 agreement with St. Paul. The district court, based on its interpretation of the 1998 agreement, dismissed appellants' suit for failure to state a claim upon which relief can be granted. For the reasons discussed below, we affirm.

BACKGROUND

In May 1997, appellants Alternative Energy, Inc., Beaver Cadillac, G.P., Inc., Beaver Plant Operations, Inc., and Christopher Hutchins brought legal malpractice

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and other claims in Cumberland County Superior Court (the "Maine lawsuit") against the MPM Law Firm and one of its attorneys, John Lightbody. Peter Murray, another attorney of the MPM Law Firm, was added as a defendant to the Maine lawsuit in August 1998. The claim against Murray did not arise until the summer of 1993.

Murray practiced law with the MPM Law Firm until May 1, 1993, when he established his own firm, Peter L. Murray Law Offices ("Murray Law Offices"). In addition, Murray remained "of counsel" to the MPM Law Firm after opening his own firm. Murray represented the appellants in two different capacities relevant to the Maine lawsuit: as "of counsel" to the MPM Law Firm and as an attorney of Murray Law Offices.

St. Paul was the professional liability insurer for the MPM Law Firm and its employees, and Zurich American Insurance Company ("Zurich") issued professional liability insurance for Murray Law Offices. Thus, two separate policies covered Murray, depending upon which hat he was wearing at the time of his actions.

In November 1998, appellants and St. Paul entered into a General Release and Indemnity Agreement ("1998 Settlement Agreement"). The 1998 Settlement Agreement provided that the appellants released all claims they had against "John C. Lightbody, Peter L. Murray, Murray, Plumb & Murray and its past and present officers, directors, stockholders, partners, and employees, and its insurer, St. Paul. . . except as provided below." The 1998 Settlement Agreement then stated that the appellants:

expressly reserve and do not release any and all claims, causes of action, or actions against Peter L. Murray, Peter L. Murray Law Offices, and their insurer, Zurich-American Insurance Company, with respect to any acts or omissions committed or performed by him in his legal representation of the Releasors [appellants], or any of them, from the date of May 1, 1993 to the present including, without limitation, all claims, causes of action or actions for professional malpractice arising out of the representation of the Releasors, or any of them, by Peter L. Murray and Peter L. Murray Law Offices....

In April 2000, appellants entered into an agreement with Zurich ("Zurich Agreement") to settle the malpractice claims under Zurich's coverage. The Zurich Agreement settled claims against Murray Law Offices and Peter Murray, as attorney for Murray Law Offices, for actions taken on or after May 1, 1993.

Appellants then filed a First Amended Complaint for Declaratory Judgment against St. Paul for malpractice and other claims arising out of representation by Peter Murray in his "of counsel" capacity after May 1, 1993. Appellants sought a declaratory judgment that St. Paul, appellee, had a duty to defend and indemnify Murray with respect to these claims, and sought monetary damages arising out of St. Paul's refusal to defend and indemnify Murray.¹ St. Paul removed the action to federal court.

Appellee filed a Motion to Dismiss the Declaratory Judgment Complaint for failure to state a claim upon which relief could be granted and attached a copy of the 1998 Settlement Agreement. Appellee claimed that the 1998 Settlement Agreement between

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appellants and appellee released all claims against Murray covered by St. Paul's insurance, including any claims against Murray in his "of counsel" capacity to the MPM Law Firm on or after May 1, 1993.

The District Court for the District of Maine, finding that the 1998 Settlement Agreement "unambiguously released St. Paul," granted appellee's motion to dismiss. On December 19, 2000, the court entered judgment in favor of appellee. The district court determined that the 1998 Settlement Agreement was "a broad and general surrender of all claims against St. Paul and against Attorney Murray and the Murray, Plumb & Murray firm for malpractice within St. Paul's coverage." The express exception to the release, the court stated, did not include claims against Murray under St. Paul's insurance coverage. Rather, the district court asserted that "[t]he only reasonable reading of the exception is that it saved claims for the plaintiffs to assert against the Zurich-American coverage." The court reasoned that the 1998 Settlement Agreement demonstrated that St. Paul and appellants "thought they were laying matters to rest." Otherwise, if St. Paul was to remain subject to further liability, there would be no reason for St. Paul to settle.

Appellants filed a timely notice of appeal on January 12, 2001. They argue that the district court erred in three ways. First, the district court should not have considered the 1998 Settlement Agreement in deciding appellee's Rule 12(b)(6) motion to dismiss, because the agreement was not appended to or expressly incorporated in the complaint. Second, the district court erred in determining that the 1998 Settlement Agreement...