Hartford Ins. Co. of Midwest v. Koeppel
| Decision Date | 05 May 2009 |
| Docket Number | Case No. 2:07-cv-785. |
| Citation | 629 F.Supp.2d 1293 |
| Parties | HARTFORD INSURANCE CO. OF the MIDWEST, Plaintiff, v. Steven G. KOEPPEL, and Yeslow & Koeppel, Defendants. |
| Court | U.S. District Court — Middle District of Florida |
John David Dickenson, Edwards Angell Palmer & Dodge, LLP, West Palm Beach, FL, Adam R. Bowers, Gary A. Grasso, Grasso, Bass & Williams, PC, Burr Ridge, IL, Craig E. Stewart, Edwards Angell Palmer & Dodge, LLP, Boston, MA, for Plaintiff.
Michael Joseph Corso, Henderson, Franklin, Starnes & Holt, PA, Ft. Myers, FL, for Defendants.
Plaintiff Hartford Insurance Company of the Midwest ("Hartford") filed this diversity action against Defendants seeking damages for legal malpractice (Count I), equitable subrogation (Count II), legal malpractice as third-party beneficiary (Count III), and breach of contract as third-party beneficiary (Count IV).1 Hartford's lawsuit arises from its retention of Defendant Steven Koeppel ("Koeppel"), a member of the Florida Bar and a shareholder of Defendant Yeslow & Koeppel, to handle a demand letter from an attorney representing an individual injured in an accident with one of Hartford's insureds. Presently before the Court is Defendants' motion to dismiss pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure. The motion has been fully briefed.2 On April 8, 2009, this Court held a motion hearing.
Defendants move to dismiss Hartford's complaint pursuant to Rule 12(b)(1), contending that Hartford does not have standing to brings its claims against Defendants and therefore the Court lacks subject matter jurisdiction. Defendants also move to dismiss Hartford's complaint pursuant to Rule 12(b)(6), arguing that Hartford fails to state a claim upon which relief may be granted.
The Eleventh Circuit Court of Appeals has provided the following standard for deciding Rule 12(b)(1) motions:
Attacks on subject matter jurisdiction under [Federal Rule of Civil Procedure] 12(b)(1) come in two forms. "Facial attacks" on the complaint require the court merely to look and see if the plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the allegations in his complaint are taken as true for the purposes of the motion. . . . "Factual attacks," on the other hand, challenge the existence of subject matter jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings, such as testimony and affidavits, are considered.
Lawrence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir.1990) (internal quotation marks and citations omitted). Defendants assert a facial attack in this case. Thus Hartford "is afforded safeguards similar to those provided in opposing a Rule 12(b)(6) motion . . ." Id. at 1529 (citing Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir. 1981)).
When reviewing a defendant's Rule 12(b)(6) motion, a court must accept all of the allegations in the plaintiff's complaint as true and construe the facts in a light most favorable to the plaintiff. GJR Invs. v. County of Escambia, 132 F.3d 1359, 1367 (11th Cir.1998). Pursuant to Federal Rule of Civil Procedure 8(a), the plaintiff need only provide "a short and plain statement of the grounds upon which the court's jurisdiction depends," "a short and plain statement showing that the pleader is entitled to relief," and "a demand for judgment for the relief the pleader seeks." As the United States Supreme Court has recently provided, however, "a plaintiff's obligation to provide the `grounds' of his `entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007).
On March 2, 2005, while operating his automobile, Ronald Davis ("Davis") collided with a motorcycle driven by Gaspare Oliveri, III ("Oliveri"), in Lee County, Florida. (Compl. ¶ 7.) Oliveri suffered significant injuries in the accident. (Id. ¶ 8.) At the time of the accident, Davis and his wife, Elizabeth Sturgis ("Sturgis") were insured under an automobile liability policy issued by Hartford. (Id. ¶ 9.) The policy had a liability limit of $100,000 applicable to the accident. (Id.)
Oliveri subsequently filed a claim against Davis and Sturgis (hereafter collectively the "Insureds"). After being contacted about the accident, Hartford assessed that Oliveri's claim would greatly exceed the policy limit. (Id. ¶ 10.) On March 9, 2005, Hartford tendered the policy's limit by delivering a check to Oliveri along with a proposed release of his claim against the Insureds. (Id.) Oliveri did not negotiate the $100,000 check or execute Hartford's proposed release. (Id. ¶ 12.)
Hartford thereafter informed the Insureds that Oliveri's damages exceeded the policy limit and thus they were exposed to potential liability for a judgment in excess of the policy limit. (Id. ¶ 13.) Hartford therefore advised the Insureds to retain personal legal counsel. (Id.) On or about April 1, 2005, the Insureds retained attorney Pablo Lense to represent them in defense of Oliveri's claim. (Id. ¶ 14.)
Hartford thereafter continued to pursue a settlement of Oliveri's claim within the policy limit with Oliveri's attorney. (Id. ¶ 18.) Hartford shared information it received regarding Oliveri with the attorney retained by the Insureds. (Id. ¶¶ 17, 19.)
On August 4, 2005, Oliveri's attorney issued a time sensitive policy limit demand letter to Hartford, offering to settle Oliveri's claim for inter alia a check for the $100,000 policy limit and a "mutual notarized general release." (Id. ¶ 22.) Hartford thereafter sent a copy of the demand letter to the Insureds' personal attorney. (Id. ¶ 23.) On August 25, 2005, Hartford retained Koeppel "to properly accept the . . . [demand letter], including drafting and delivering the `mutual notarized general release.'" (Id. ¶ 24.) Hartford thereafter informed the Insureds' personal attorney of its retention of Koeppel to effectuate a settlement of Oliveri's claim in accordance with the demand letter. (Id. ¶ 27.)
In its complaint, Hartford maintains that Koeppel negligently responded to the demand letter, resulting in Oliveri pursuing a lawsuit against the Insureds in Florida state court. Sometime before February 12, 2007—when the state court matter was scheduled for trial—Hartford settled the case for an amount substantially in excess of the policy limit, thereby protecting the Insureds from a potential excess judgment. (Compl. ¶ 36.) On November 30, 2007, Hartford filed this legal malpractice action against Defendants.
Defendants argue that Hartford lacks standing to assert its legal malpractice claim against them because there was no attorney-client relationship between Hartford and Koeppel. Defendants argue that Koeppel's attorney-client relationship was with the Insureds, alone. Defendants further argue that, pursuant to Florida law, an attorney's liability for negligence arising out of his or her professional duties is limited to clients with whom the attorney shares privity of contract.
Defendants acknowledge that the Florida courts recognize a limited exception to the privity requirement in the area of will drafting because the client's intent to benefit a third party in that context is "readily apparent." (Defs.' Mot. at 10) (citing Espinosa v. Sparber, Shevin, Shapo, Rosen & Heilbronner, 612 So.2d 1378, 1379 (Fla.1993).) Defendants, however, contend that the exception does not extend to this case because Hartford has not alleged any facts to suggest that the Insureds intended to benefit the insurance company in "their" contract with Koeppel. Defendants therefore argue that Hartford also lacks standing to pursue its third-party beneficiary legal malpractice and breach of contract claims.3
Lastly, Defendants argue that Hartford fails to state a claim upon which relief may be granted in its claim for equitable subrogation. Defendants argue that the claim is not viable under Florida law because the Florida courts prohibit the subrogation of legal malpractice claims.
As an initial matter, the Court believes that the factual premise of Defendants' motion—i.e. that Hartford retained Koeppel only to represent the Insureds— is not supported by the allegations in Hartford's complaint. The facts Hartford alleges—which this Court must presume true for purposes of deciding Defendants' motion—indicate that the attorney-client relationship was between Koeppel and Hartford, not the Insureds. For example, Hartford alleges that Oliveri's attorney "issued a time-sensitive Policy limit demand letter to HARTFORD, offering to settle the Oliveri claim . . ." and that "HARTFORD decided to accept the [demand letter and] retained STEVEN KOEPPEL . . . to properly accept [the demand letter] . . ." (Compl. ¶¶ 22, 24.) Hartford further alleges that at least four months before Hartford retained Koeppel, it advised the Insureds to retain their own attorney to represent their interests and the Insureds in fact hired an attorney. (Id. ¶¶ 13, 14.)
Based on these facts, it would appear that Hartford was in privity of contract with Koeppel and there would be no question as to whether Koeppel could be held liable to Hartford for the alleged negligence in the performance of his professional duties. Hartford therefore would have standing to pursue its legal malpractice claim. The Court nevertheless will address whether Hartford has standing if Defendants' factual assumption is correct—i.e. that Hartford retained Koeppel to represent the Insureds, only.
Where federal subject matter jurisdiction is based on diversity, the district court must apply the substantive law of the jurisdiction in which it sits. Shapiro v. Assoc. Int'l Ins. Co., 899 F.2d 1116, 1118...
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