Continental Cas. Co. v. PULLMAN, COMLEY, ET AL.

• Decision Date: 14 March 1989
• Docket Number: Civ. No. B-88-353 (AHN).
• Citation: 709 F. Supp. 44
• Court: U.S. District Court — District of Connecticut
• Parties: CONTINENTAL CASUALTY COMPANY v. PULLMAN, COMLEY, BRADLEY & REEVES, et al.

709 F. Supp. 44

CONTINENTAL CASUALTY COMPANY v. PULLMAN, COMLEY, BRADLEY & REEVES, et al.

Civ. No. B-88-353 (AHN).

United States District Court, D. Connecticut.

March 14, 1989.

Jacob D. Zeldes, L. Douglas Shrader, Zeldes, Needle & Cooper, P.C., Bridgeport, Conn., for plaintiff.

John C. Heffernan, Heffernan, Farr, Morrelli & McChord, Hartford, Conn., Cushing O. Condon, Ford, Marrin, Esposito & Whitmeyer, New York City, for defendant.

RULING ON MOTION FOR JUDGMENT ON THE PLEADINGS

NEVAS, District Judge.

Continental Casualty Company ("Continental"), the plaintiff in this diversity action, brought a two count complaint against the Connecticut law firm of Pullman, Comley, Bradley & Reeves and its partners (collectively "Pullman"), and against The Aetna Casualty & Surety Company ("Aetna"). Count one alleges legal malpractice by Pullman while defending a medical malpractice action tried in Connecticut state court, and count two charges Aetna with lack of good faith, negligence, and breach of its obligation to provide competent defense in the state suit. Pullman answered the complaint and is now pursuing a Rule 12(c), Fed.R.Civ.P., motion for judgment on the pleadings. For the reasons that follow, Pullman's motion is granted with leave for the plaintiff to amend.

I.

A.

Rule 12(c), Fed.R.Civ.P., provides:

After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

A Rule 12(c) motion may be granted "where material facts are undisputed and where a judgment on the merits is possible merely by considering the contents of the pleadings." Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir.1988) (citation omitted). When passing on a motion for judgment on the pleadings, a court must accept as true all well-pleaded facts alleged in the complaint and refrain from dismissing the action unless the non-movant can prove no set of facts that would entitle it to relief. Bloor v. Carro, Spanbock, Londin, Rodman & Fass, 754 F.2d 57, 61 (2d Cir.1985).

B.

Against this backdrop, Continental's complaint sketches the following narrative: In 1984 The Griffin Hospital ("Griffin") was sued because a newborn had suffered catastrophic injury in the hospital's delivery room.¹ Aetna provided primary insurance coverage for Griffin in the ensuing state court action. Aetna also retained Pullman to defend the hospital against the medical malpractice claim. Continental was Griffin's excess carrier, contractually obligated for losses ranging from one-half to twenty million dollars. The state court jury returned a verdict against the hospital; Continental paid $10,038,357 in satisfaction of that judgment.²

According to the plaintiff, Pullman, in addition to representing Griffin, also "represented Continental as excess insurer....," Complaint, para. 22, and in the course of defending the suit "failed to defend ... properly and ... negligently failed to comport with applicable legal standards of professional conduct." Id., para. 27. Continental sets forth a series of purported omissions by Pullman, including failure to: prepare properly for trial; conduct adequate discovery; introduce certain expert evidence; request applicable jury charges; and seek bifurcation of the trial into liability and damages phases. Id., para. 28(a), (c), (e), (f), (h), and (j). As for Aetna, the primary insurer "failed to act in good faith in defending the suit, acted negligently in preparing and providing that defense, failed to provide a proper and competent defense and failed to safeguard Continental's interests." Id., para. 33. The plaintiff alleges a direct right of recovery for the $10,038,357 it paid, an indirect right as a "foreseeable beneficiary" of Pullman's services, and "the right to proceed upon all rights and remedies otherwise available to Griffin, in the place of Griffin." Id., paras. 19-22, 25.

II.

A federal court sitting in diversity must be mindful that it follow the law determined by the highest court of the state whose law is applicable to resolution of the dispute. Plummer v. Lederle Laboratories, 819 F.2d 349, 355 (2d Cir.), cert. denied, ___ U.S. ___, 108 S.Ct. 232, 98 L.Ed. 2d 191 (1987). When that state court has not directly ruled on the issue under consideration, the federal court "`must make an estimate of what the state's highest court would rule to be its law.'" Carpentino v. Transport Ins. Co., 609 F.Supp. 556, 560 (D.Conn.1985) (Zampano, J.) (quoting Cunninghame v. Equitable Life Assurance Soc'y of the United States, 652 F.2d 306, 308 (2d Cir.1981)). See also Plummer, 819 F.2d at 355. In calculating this estimate, the federal court may consider all data the high court would use in reaching its decision. Doyle v. St. Paul Fire & Marine Ins. Co., 583 F.Supp. 554, 555 (D.Conn. 1984) (Dorsey, J.). Thus, the federal court may discern the forum state's law by examining relevant decisions from the forum state's inferior courts, decisions from sister states, federal decisions, and the general weight and trend of authority.

Pullman's motion raises an issue of first impression in Connecticut: whether an excess insurance carrier has standing to maintain a legal malpractice action against the defense counsel retained for the insured by the primary insurer.³ Continental offers alternative theories in support of its right to sue Pullman. First, the plaintiff argues that an attorney-client relationship existed by operation of law because Continental was an intended or foreseeable beneficiary of Pullman's legal services on behalf of Griffin. Second, the plaintiff contends that it is an equitable subrogee of Griffin, imbued with the insured's right to sue Pullman for malpractice. Last, Continental pleads that an actual attorney-client relationship existed between Pullman and the plaintiff. Each of these theories will be addressed in turn.

A.

Though the supreme court has not determined whether defense counsel for an insured owes a non-contractual duty of care to an excess carrier, the court has had the opportunity recently to comment in another context about the nature of the attorney-client relationship and an attorney's obligations to non-clients. In Krawczyk v. Stingle, 208 Conn. 239, 247, 543 A.2d 733, 736 (1988), the court held that the intended beneficiaries of an estate cannot maintain a cause of action for legal malpractice against the decedent's attorney for counsel's negligent failure to execute estate planning documents in a timely fashion. The facts in Krawczyk bear no resemblance to those in the instant matter, but the case deserves consideration for two reasons. First, the court's pronouncements on the dimensions of the attorney-client relationship are instructive on the issues before this court. Second, Continental bases part of its cause of action on the intended beneficiary theory relied on by the plaintiffs in Krawczyk. See Complaint, paras. 19 and 21.

The decedent in Krawczyk hired an attorney to prepare trust documents with certain of his relatives to be named as the intended beneficiaries of the estate. 208 Conn. at 241, 543 A.2d at 733-34. Several dates for execution of the documents passed because the attorney needed additional information for the completion of the instruments. Two days before the last scheduled execution date, the decedent suffered a massive heart attack and was hospitalized. Though informed about this development, the decedent's attorney did not continue work on the trust documents. The next day, the attorney received a telephone call from one of the intended beneficiaries, who told her to bring the documents to the hospital because the decedent's condition was rapidly deteriorating. After working for two hours, the attorney completed preparation of the instruments, but upon arrival at the hospital was unable to see the decedent, who died shortly thereafter without having executed the documents. Id. at 242-43, 543 A.2d at 734.

The intended beneficiaries sued the decedent's attorney and her law firm for legal malpractice. The jury found for the plaintiffs and awarded them $65,000. Id. at 241, 543 A.2d at 733. On appeal the supreme court began its analysis by recognizing a general rule: "Attorneys are not liable to persons other than their clients for the negligent rendering of services." Id. at 244, 543 A.2d at 735. The court noted, however, that some jurisdictions have permitted an exception to the general rule "when the plaintiff can demonstrate that he or she was the intended or foreseeable beneficiary of the attorney's services." Id. at 244-45, 543 A.2d at 735 (citing, among other sources, Mozzochi v. Beck, 204 Conn. 490, 499, 529 A.2d 171, 175 (1987)). After citing instances where attorneys who purportedly erred in the preparation or execution of wills were held liable to the intended beneficiaries,⁴ the court posited whether this liability should be expanded to include negligent delay in preparing trust instruments for execution by the client. Krawczyk, 208 Conn. at 245, 543 A.2d at 735.

Before concluding that expansion would be improper in the situation before it, the Krawczyk court set forth a test for determining when such liability should be allowed. A court must "look principally to whether the primary or direct purpose of the transaction was to benefit the third party."⁵ Id. at 245, 543 A.2d at 735 (citations omitted). The court continued:

Courts have refrained from imposing liability when such liability had the potential of interfering with the ethical obligations owed by an attorney to his or her client. See, e.g., Parnell v. Smart, 66 Cal.App.3d 833, 837-38, 136

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