Denbo v. Debray

• Decision Date: 30 June 2006
• Docket Number: 1041430.
• Parties: Joel DENBO et al. v. Thomas R. DeBRAY and Kaufman and Rothfeder, P.C.
• Court: Alabama Supreme Court

968 So.2d 983

Joel DENBO et al. v. Thomas R. DeBRAY and Kaufman and Rothfeder, P.C.

1041430.

Supreme Court of Alabama.

June 30, 2006.

Clarence L. McDorman, Birmingham, for appellants.

Robert P. MacKenzie III and Aldos L. Vance of Starnes & Atchison, LLP, Birmingham, for appellees.

HARWOOD, Justice.

Denbo Iron & Metal Company, Inc. ("Denbo"), and its executive vice president Joel Denbo ("Joel") sued Thomas R. DeBray and the law firm in which he was a partner, Kaufman & Rothfeder, P.C. ("K & R"), alleging legal malpractice arising out of K & R's representation of Denbo. Also named as a plaintiff in the complaint was Tennessee Valley Recycling, LLC, whose only standing in the case was stated by the complaint to be that it had been Denbo's "operating entity" "since 2000"; accordingly, all references to "Denbo" for periods after 2000 will include Tennessee Valley Recycling. All three plaintiffs will be referred to collectively as "the plaintiffs"; DeBray and K & R will be referred to jointly as "the defendants." The trial court entered a summary judgment in favor of the defendants in this legal-malpractice action. The plaintiffs appeal; we affirm.

From 1976 to 1979, Denbo shipped scrap batteries and battery plates to a disposal facility located in Leeds, which was operated by Interstate Lead Company ("ILCO"). In the mid-1980's the United States Environmental Protection Agency ("the EPA") listed the site as a Superfund site ("the ILCO site"). On October 19, 1993, the EPA notified Denbo that it was a "potential responsible party" with respect to the ILCO site. Joel searched for, but was unable to locate, insurance policies covering the relevant time periods, but he was able to locate certificates of insurance for the years in question. He contacted Denbo's former insurance agent to report that he had been notified by the EPA of the potential claim and to request copies of the insurance policies covering the applicable periods. The agent informed Joel that copies of the policies were no longer available. Denbo then retained K & R to represent it in matters relating to the ILCO site ("the ILCO claim"). On December 11, 1993, Joel wrote DeBray, forwarding copies of the certificates of insurance he had located, explaining that the actual policies could not be located by either Denbo or its agent, and stating, "I would like for you to notify these companies of our claim against them and that we expect them to pay our liability."

The itemized billings from K & R to Denbo for services rendered over the period beginning on October 14, 1993, and ending on October 31, 2000, reflect that throughout that period DeBray and other K & R personnel were working actively on the ILCO claim. The itemized billing entries identify by individual, date, and description numerous telephone conversations, written communications, meetings, conferences, and other contacts and communications between DeBray and other K & R personnel, on the one hand, and Joel and other Denbo personnel, on the other hand, relating specifically to the ILCO claim. Records submitted by Denbo also show that it paid all of those billing statements with its own funds, never seeking payment or reimbursement from any insurance company or inquiring of DeBray or K & R why payment or reimbursement by an insurance company was not forthcoming. According to the plaintiffs' complaint in their legal-malpractice action, Denbo paid DeBray and K & R "over $104,000.00 in fees and expenses arising out of the EPA claims and [the] Federal lawsuits," which were instituted in 1998, as hereinafter explained.

Other than as reflected by the detailed billing entries, neither the parties' appellate briefs nor the record reflects what transpired over the course of the two years following Denbo's notification by EPA of the ILCO claim in October 1993. The complaint states, however:

"On October 18, 1995, Joel Denbo telephoned DeBray to discuss Denbo's coverage. Joel Denbo spoke with DeBray's paralegal about whether DeBray had notified the insurance companies of the claim and whether coverage would be afforded Denbo. On December 7, 1995, DeBray's paralegal wrote a letter to Joel Denbo stating that she had gone through the files of Kaufman & Rothfeder to determine whether notice had been sent and coverage would be afforded Denbo. She stated that she could not locate the insurance certificates. On December 11, 1995, Joel Denbo mailed DeBray's paralegal a second copy of the insurance certificates. He was assured that DeBray would take care of giving notice to the insurance carriers."

Shortly thereafter DeBray prepared, but never sent, letters to the insurance companies identified by the certificates of insurance, which would have notified them of the claims against Denbo, asserting that "each or all of the insurers may be obligated to provide a defense or indemnify Denbo Iron pursuant to its individual policy coverage." Joel states in the affidavit he filed in opposition to the defendants' motion for a summary judgment that "[d]uring 1997 DeBray continued to represent Denbo in the ILCO claim. I talked with DeBray by telephone about the insurance matters in 1997, and was again assured that the matters were being timely handled."

The briefs of the parties and the record are again silent, apart from the dated entries in K & R's continuing billing statements to Denbo, concerning what pertinent events might have transpired during 1997 and 1998, up to October 8, 1998, when the United States of America, on behalf of the EPA, sued Denbo and numerous other companies in federal district court for their alleged contribution of hazardous substances to the ILCO site, seeking damages in excess of $16,000,000, together with other relief. On November 18, 1998, Exide Corporation and Johnston Controls, Inc., filed a separate action in the same federal district court against Denbo and others seeking private damages relating to the ILCO site. The plaintiffs allege in their legal-malpractice complaint against the defendants that "Denbo continued to ask defendants if they had notified the insurance carriers of the claims and litigation. The defendants advised Denbo that the insurance claims were being handled in a timely manner." Finally, however, on December 2, 1998, Joel, assisted by his cousin, Don Denbo, an insurance agent, met with DeBray. According to Joel's affidavit, "[d]uring this meeting DeBray advised he had not yet contacted the comprehensive liability insurance carriers for 1976 through 1980." Neither Joel's affidavit nor any other part of the record discusses his reaction to that revelation; the affidavit simply goes on to state that Don Denbo advised DeBray how to contact the companies; that "DeBray stated that he would take care of the notification to the companies and not to worry about it"; that Don Denbo then sent DeBray information concerning exactly who to notify and DeBray assured Don Denbo a few days later that "he would take care of the notification"; and that when Joel talked to DeBray on December 29 and December 30, 1998, DeBray assured him on each occasion that "the notification was taken care of."

The two federal actions were consolidated and, according to Joel's affidavit, "[i]n October or November 1999 I was amended into the complaint in my individual capacity and it was alleged that I had authority to exercise control over the disposal of hazardous substance at the ILCO site in 1976 through 1979." Joel retained DeBray to represent him in his individual capacity in the litigation. The billing records reflect that DeBray and K & R continued to represent Denbo throughout with respect to the ILCO claim and the federal litigation and included within the itemized activities on billing statements are frequent communications and conferences between DeBray and Joel. For example, the billing statement covering the period from June 10, 1998, to June 30, 1999, details numerous such contacts between them, and totals $15,829.72. Denbo paid that statement in two equal payments, one on August 17 and the other on September 10, 1999. K & R's statement to Denbo for the next billing period, covering activities up to January 5, 2000, totaled $14,898.89, and Denbo paid that statement on February 10, 2000. Another billing statement was issued for services rendered from January 17, 2000, to March 24, 2000, in the amount of $5,177.36; Denbo paid that statement on May 10, 2000. Subsequent billing statements were paid by Denbo on June 10, August 10, September 9, and December 9 of that year. At no time, as far as the record reflects or the plaintiffs suggest, did Joel or Denbo question why no defense or other financial assistance was being provided by any insurance company.

According to Joel's affidavit, "[s]ome time in August 2000 DeBray called me and said he thought he could settle the cases in the $150,000.00 range." DeBray had previously filed separate motions for a summary judgment on behalf of Denbo and Joel in the federal litigation and on August 16, 2000, he filed with the court formal withdrawals of each of those summary-judgment motions, advising the court that Denbo and Joel had each "now settled with the plaintiffs and no longer wishes to pursue [its] [his] motion." Joel further asserts in his affidavit:

"DeBray sent a proposed settlement agreement sometime in October. DeBray called me and told me that he had a settlement for $158,000.00 and urged me very strongly to sign. DeBray told me that it would cost me more than it was worth to pursue those arguments in court, and advised of the threat that if I did not sign, the government would not release me personally from the suit, and that I could be held personally responsible for whatever the amount of the judgment ultimately was jointly and severally in the amount of $1.2 million. Under this pressure, I told DeBray that I would sign the settlement, and did sign the settlement. DeBray also advised that I must sign the note on behalf of...