Eureka Inv. Corp., N.V. v. Chicago Title Ins. Co., Nos. 82-1156

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBefore BORK and SCALIA, Circuit Judges, and BAZELON; PER CURIAM
Citation743 F.2d 932,240 U.S.App.D.C. 88
Parties, 39 Fed.R.Serv.2d 1327, 16 Fed. R. Evid. Serv. 308 EUREKA INVESTMENT CORPORATION, N.V. v. CHICAGO TITLE INSURANCE COMPANY, Appellant. CHICAGO TITLE INSURANCE COMPANY, Appellant, v. EUREKA INVESTMENT CORPORATION, N.V. EUREKA INVESTMENT CORPORATION, N.V., Appellant v. CHICAGO TITLE INSURANCE COMPANY.
Decision Date14 September 1984
Docket NumberNos. 82-1156,82-1157 and 82-1201

Page 932

743 F.2d 932
240 U.S.App.D.C. 88, 39 Fed.R.Serv.2d 1327,
16 Fed. R. Evid. Serv. 308
EUREKA INVESTMENT CORPORATION, N.V.
v.
CHICAGO TITLE INSURANCE COMPANY, Appellant.
CHICAGO TITLE INSURANCE COMPANY, Appellant,
v.
EUREKA INVESTMENT CORPORATION, N.V.
EUREKA INVESTMENT CORPORATION, N.V., Appellant
v.
CHICAGO TITLE INSURANCE COMPANY.
Nos. 82-1156, 82-1157 and 82-1201.
United States Court of Appeals,
District of Columbia Circuit.
Argued Dec. 7, 1982.
Decided Sept. 14, 1984.

Page 934

Appeals from the United States District Court for the District of columbia.

(Civil Action Nos. 80-01014, 80-02021).

Roger E. Warin, Washington, D.C., with whom Alice L. Mattice, Washington, D.C., and Colleen P. Mahoney, Dallas, Tex., were on the brief, for appellant in 82-1156 and 82-1157, and cross appellee in 82-1201.

Michael C. Miller, Washington, D.C., also entered an appearance for appellant in 82-1156 and 82-1157 and cross appellee in 82-1201.

Stephen M. Sacks, Washington, D.C., with whom Lawrence V. Stein and Daniel I. Prywes, Washington, D.C., were on the brief, for appellee in 82-1156 and 82-1157 and cross appellant in 82-1201.

Before BORK and SCALIA, Circuit Judges, and BAZELON, Senior Circuit Judge.

Opinion PER CURIAM.

Page 935

PER CURIAM:

This appeal arises out of consolidated diversity actions involving a dispute over contractual rights and obligations under a title insurance policy issued in February, 1979 by Chicago Title Insurance Company ("CTI"), a Missouri Corporation, to Eureka Investment Corporation, N.V. ("Eureka"), a Netherlands Antilles Corporation, to insure certain real property in the District of Columbia known as Carrollsburg Square. This court has jurisdiction pursuant to 28 U.S.C. Sec. 1391 (1982).

I. BACKGROUND

On April 30, 1979, Eureka announced its intention to convert into condominiums one of the large buildings in Carrollsburg Square. Eureka's efforts met with opposition from tenants relying on the protections granted by Section 602 of the Rental Housing Act of 1977 (District of Columbia Law 2-54). Eureka's policy with CTI contained a special Note II which provided:

The policy insures against loss or damage arising out of an enforcement or attempted enforcement of the rights, if any, of Tenants in the property pursuant to the provisions of Section 602 of the Rental Housing Act of 1977 (District of Columbia Law 2-54) or the Emergency Multi-Family Rental Housing Purchase Act of 1979, as the same may be amended.

On May 9, 1979 the tenants asked the District of Columbia Rent Administrator to conduct an investigation to determine whether their Sec. 602 rights had been violated. The Rent Administrator dismissed the tenants' petition, but on August 14, 1979, the D.C. Rental Accommodations Commission reversed the Administrator's decision in part and enjoined Eureka from proceeding with the conversion. Because of that injunction, Eureka's exclusive sales agent, Shannon and Luchs, refused to commence sales as planned. Sales did not begin until early November, after Eureka agreed to indemnify Shannon and Luchs for any liability arising from its sales activities.

The Rental Accommodations Commission injunction remained in effect until January 4, 1980. In addition, during the fall of 1979 the tenants brought suit in the Superior Court of the District of Columbia to enjoin the conversion; and on December 27, 1979 the D.C. Department of Housing and Community Development sent a letter to Eureka threatening to issue a cease and desist order.

Eureka opposed the tenants' actions and kept CTI informed about all developments as they occurred. CTI promptly agreed that the tenant actions were within the risks covered by Note II and agreed to pay all of Eureka's legal expenses in opposing the tenants. Eureka began settlement negotiations with the tenants in the fall of 1979. During January and early February 1980, representatives of Eureka had several meetings with CTI officials, but reached no agreement on settlement terms the insurer could approve.

Eureka entered a settlement agreement without CTI's consent on February 6, 1980. This agreement eliminated the major obstacles arising from the tenants' actions under Sec. 602. Eureka was not able, however, to begin closing on condominium sales until March 21, 1980 because it lacked necessary permissions from District of Columbia and federal officials and from certain private entities.

At trial, Eureka claimed the cost of its settlement with the tenants, delay damages, and attorney's fees. The court found that CTI was liable under the policy despite Eureka's unilateral settlement with the tenants. It awarded Eureka the full cost of the settlement and $100,000 in delay damages, but rejected Eureka's claim for attorney's fees. In this appeal, CTI contends that the trial court erred (1) in finding that Eureka's unilateral settlement with the tenants was justified by CTI's wrongful refusal to admit liability for delay damages; (2) in denying discovery of certain documents which CTI contends would show that Eureka breached the duty of cooperation it owed CTI under the policy; and (3) in awarding delay damages that were unjustified by the evidence. Eureka on cross-appeal

Page 936

urges us to award attorney's fees that were denied by the district court.

We affirm the trial court's finding of liability and its award of settlement costs for the reasons given in its opinion. For the reasons given below, we sustain the district court's ruling on the discovery issue; we reverse in part the award of delay damages and remand for a new determination of their amount; and finally, we sustain the refusal to award Eureka attorney's fees incurred in its action against CTI but remand to assess the attorney's fees Eureka incurred in reaching a settlement with the tenants.

II. THE DISCOVERY ISSUE

CTI has argued throughout this litigation that it is excused from any breach of its insurance policy with Eureka because Eureka breached the duty of cooperation it owed CTI under the policy. CTI contends that Eureka breached this duty by planning legal action against CTI with Daniel Singer and his firm, Fried, Frank, Harris, Shriver, & Kampelman ("Fried, Frank"), who at the time were counsel to both CTI and Eureka in their common interest in defeating tenant claims. To gather support for this claim, CTI sought discovery from Eureka of documents relating to Eureka's consultation with Fried, Frank about legal action against CTI. Upon Eureka's resistance on grounds of attorney-client privilege, the district court ordered the disclosure only of those documents that related to the tenant dispute or were prepared with a view toward litigation with the tenants, in effect upholding Eureka's claim of privilege. The district court found after trial that CTI had failed to establish Eureka's alleged noncooperation. CTI now contends that the denial of discovery was in error (and prejudicial) insofar as it prevented disclosure to CTI of seven documents regarding (to the extent withheld) Eureka's possible claims against CTI: four memoranda to Mr. Singer from other Fried, Frank attorneys; two telexes from Mr. Singer to a Eureka official; and notes by Mr. Singer.

CTI concedes that, in preparing the documents, "Eureka and Fried Frank were acting against CTI's interest." 1 This concession confirms Eureka's statement that, although Fried, Frank "represented CTI and Eureka jointly with respect to the defense of the tenant ... actions," it "represented Eureka individually with respect to the conversion generally and Eureka's rights vis-a-vis CTI." 2 Against the background of Fried, Frank's longstanding representation of Eureka in all aspects of the condominium conversion, including the negotiation of the insurance policy, there can be no doubt that Eureka and Mr. Singer thought they had an attorney-client relationship in which communications were privileged from CTI to the extent those communications concerned possible legal action against CTI. For the following reasons, this conclusion justifies Eureka's invocation of the attorney-client privilege.

CTI and Eureka agree that Wigmore's treatise states the relevant law of attorney-client privilege. 3 This case falls at the intersection of two principles stated by Wigmore. First, "a communication by A to X as the common attorney of A and B, who afterwards become party opponents, is not privileged as between A and B since there

Page 937

was no secrecy between them at the time of communication." 4 Second,

[a] communication by A to X as A's attorney, X being then also the attorney of B, now become the party opponent, is ordinarily privileged because of the relation of X toward A. Nor does the fact of A's knowledge that X is already B's attorney, nor the fact of B's being already adversely interested destroy the privilege. This is so because, although X ought not to undertake to act for both in any matter where there is a possibility of adverse interests, nonetheless A is protected by reason of the relation. 5

Evidently in contemplation of the situation presented here (the matter on which X represents B being a matter of common interest to A and B as joint clients of X), Wigmore points out that, "[i]n practice, difficulty often will arise here in distinguishing this situation from that of" the first principle. 6

CTI contends that this case falls under Wigmore's first principle, which can be found as well in C. MCCORMICK, HANDBOOK OF THE LAW OF EVIDENCE 219-20 (3d ed. 1984) and in many cases, e.g., Truck Insurance Exchange v. St. Paul Fire and Marine Insurance Co., 66 F.R.D. 129, 132 (E.D.Pa.1975); LaRocca v. State Farm Mutual Automobile Insurance Co., 47 F.R.D. 278, 280 (W.D.Pa.1969); Henke v. Iowa Home Mutual Casualty Co., 249 Iowa 614, 87 N.W.2d 920 (1958). Eureka contends to the contrary that this case falls under Wigmore's second principle. 7 For several reasons, we agree with Eureka.

First, Wigmore's first principle presupposes the...

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61 practice notes
  • Independent Petrochem. Corp. v. Aetna Cas. & Sur., Civ. A. No. 83-3347.
    • United States
    • United States District Courts. United States District Court (Columbia)
    • February 4, 1986
    ...not privileged vis-a-vis the insured's carriers in subsequent litigation. See, e.g., Eureka Investment Corp. v. Chicago Title Ins. Co., 743 F.2d 932, 936-37 (D.C.Cir.1984); Car & General Ins. Corp. v. Goldstein, 179 F.Supp. 888, 890-91 (S.D. N.Y.1959), aff'd, 277 F.2d 162 (2d Cir.1960); Tru......
  • Nepera Chemical, Inc. v. Sea-Land Service, Inc., SEA-LAND
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 17, 1986
    ...Ins. Co. v. American Sec. Bank, 241 U.S.App.D.C. 379, 388, 747 F.2d 1493, 1502 (1984); Eureka Inv. Corp. v. Chicago Title Ins. Co., 240 U.S.App.D.C. 88, 101-102, 743 F.2d 932, 945-946 101 This type of bad faith may manifest itself in a variety of ways, such as in the filing of a claim or mo......
  • Harvey v. Mohammed, Civil No. 02–2476 (RCL).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • June 26, 2013
    ...[than] would be sought or could reasonably be recovered from most private parties.” Eureka Inv. Corp., N.V. v. Chicago Title Ins. Co., 743 F.2d 932, 941 (D.C.Cir.1984) (internal citation [951 F.Supp.2d 55]omitted); see also Ctr. for Biological Diversity v. Norton, 2005 WL 6127286, at *1 (D.......
  • Rhodes v. United States, Civil Action No. 12–0449(BAH).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 9, 2013
    ...for the determination of the damages award and tether these reasons to the record. See Eureka Inv. Corp. v. Chicago Title Ins. Co., 743 F.2d 932, 940 (D.C.Cir.1984) (“[I]t is essential that the trial court give sufficient indication of how it computed the amount so that the reviewing court ......
  • Request a trial to view additional results
61 cases
  • Independent Petrochem. Corp. v. Aetna Cas. & Sur., Civ. A. No. 83-3347.
    • United States
    • United States District Courts. United States District Court (Columbia)
    • February 4, 1986
    ...not privileged vis-a-vis the insured's carriers in subsequent litigation. See, e.g., Eureka Investment Corp. v. Chicago Title Ins. Co., 743 F.2d 932, 936-37 (D.C.Cir.1984); Car & General Ins. Corp. v. Goldstein, 179 F.Supp. 888, 890-91 (S.D. N.Y.1959), aff'd, 277 F.2d 162 (2d Cir.1960); Tru......
  • Nepera Chemical, Inc. v. Sea-Land Service, Inc., SEA-LAND
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 17, 1986
    ...Ins. Co. v. American Sec. Bank, 241 U.S.App.D.C. 379, 388, 747 F.2d 1493, 1502 (1984); Eureka Inv. Corp. v. Chicago Title Ins. Co., 240 U.S.App.D.C. 88, 101-102, 743 F.2d 932, 945-946 101 This type of bad faith may manifest itself in a variety of ways, such as in the filing of a claim or mo......
  • Harvey v. Mohammed, Civil No. 02–2476 (RCL).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • June 26, 2013
    ...[than] would be sought or could reasonably be recovered from most private parties.” Eureka Inv. Corp., N.V. v. Chicago Title Ins. Co., 743 F.2d 932, 941 (D.C.Cir.1984) (internal citation [951 F.Supp.2d 55]omitted); see also Ctr. for Biological Diversity v. Norton, 2005 WL 6127286, at *1 (D.......
  • Rhodes v. United States, Civil Action No. 12–0449(BAH).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 9, 2013
    ...for the determination of the damages award and tether these reasons to the record. See Eureka Inv. Corp. v. Chicago Title Ins. Co., 743 F.2d 932, 940 (D.C.Cir.1984) (“[I]t is essential that the trial court give sufficient indication of how it computed the amount so that the reviewing court ......
  • Request a trial to view additional results

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