Professional Managers, Inc. v. Fawer, Brian, Hardy & Zatzkis

Decision Date10 September 1986
Docket NumberNo. 85-3432,85-3432
Citation799 F.2d 218
PartiesPROFESSIONAL MANAGERS, INC., and Fremont Indemnity Company, Plaintiffs-Appellees, Cross-Appellants, v. FAWER, BRIAN, HARDY & ZATZKIS and Michael S. Fawer, Defendants-Third Party Plaintiffs-Appellants, Cross-Appellees, v. GEORGE F. BROWN & SONS, INC., Third Party Defendant-Appellee and Edward R. Drury, Defendant-Appellee
CourtU.S. Court of Appeals — Fifth Circuit

Dodge, Friend, Wilson & Spedale, Gordon F. Wilson, Jr., New Orleans, La., for defendants-third party plaintiffs-appellants, cross-appellees.

Deutsch, Kerrigan & Stiles, Malcolm W. Monroe, Paul S. Hughes, New Orleans, La., for Professional Mgrs. & Fremont.

John P. Hammond, New Orleans, La., for Geo. Brown & Sons.

Edward R. Drury, New Orleans, La., pro se.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before CLARK, Chief Judge, RUBIN, and GARZA, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

A law firm and its members contend that they are insured under a legal malpractice binder covering losses resulting from claims made within the effective term of the policy, but resulting from errors and omissions committed prior to that time, provided that the insured did not know before the binder was issued of "any circumstance" that might result in a claim being made against the firm or any of its partners. On the basis of the evidence adduced by the firm in opposition to the insurer's motion for summary judgment, viewed in the manner most favorable to it, we affirm the summary judgment holding that members of the firm knew when the binder was issued of just such circumstances relating to a specific claim and that the insured, therefore, were not entitled to coverage as to that claim.


The law firm of Fawer, Brian, Hardy & Zatzkis, in which Michael S. Fawer and A. Morgan Brian were partners, obtained a conditional binder to issue a policy of professional liability insurance from Fremont Indemnity Company ("Fremont") covering claims made after October 29, 1982, for errors and omissions in rendering legal services. Although the policy was never in fact issued and the conditions of the binder may not have been fulfilled, for purposes of this appeal it is presumed that the binder remained effective until its rescission on December 1, 1982, and that it provided the same coverage over that period as the contemplated policy would have provided. The policy for which the Fawer firm applied would have provided claims-made coverage, that is it would have covered claims asserted during the policy period even for errors and omissions that had occurred "prior to the effective date of the policy, provided that ... no insured had knowledge of any circumstance which might result in a claim at the effective date of the ... policy...."

Edward R. Drury, a lawyer who had been unsuccessfully defended by Fawer in a criminal case at a time prior to issuance of Fremont's policy, filed suit in state court on November 23, 1982, after the binder had been issued, asserting a malpractice claim against Fawer based on Fawer's alleged errors and omissions while representing him in that trial. Fawer's lawyer sent a copy of the complaint to Fremont, requesting that Fremont defend and insure Fawer and his law firm. Fremont responded with this suit, seeking a declaratory judgment against both the Fawer firm and Drury that the policy does not afford coverage for Drury's claim.

The issue at the heart of this appeal is whether Fawer and his firm had knowledge, at the time the binder was issued, of circumstances surrounding Fawer's representation of Drury that might result in a claim. The district court considered Fremont's motion for summary judgment on the basis of evidence brought to its attention in regard to previous motions for summary judgment. This included two memoranda, one by Brian and the other by Fawer, for the Fawer firm's files. Brian's file memorandum, prepared on October 27, 1982 before Drury filed suit, recounted various developments in his efforts to obtain professional liability insurance for the law firm, which had been formed only a short time earlier. Discussing a telephone conference with an insurance broker, this memorandum stated:

He [Berry, the insurance broker] also asked me, or Mike Fawer, to let him know further details about the case in which Mike has been told by opposing counsel Drury [sic] that, if we sue for the unpaid fee, Drury intends to counter-claim for professional negligence in the handling of the case. I gave that message to MSF [Fawer] and he said that he would telephone Berry and discuss it directly.

The binder was issued two days later.

The second file memorandum, prepared by Fawer after Drury had filed suit, confirms that before Fremont issued its binder a serious dispute with Drury had erupted. Fawer's memo states that, following Drury's trial and conviction, Drury's "displeasure with what had occurred mounted." After Fawer had filed an appeal from the Drury conviction and while he was working on the appellate brief, the memorandum continues, he met a number of times with Drury and Drury's law partner, Clark Richard. "Throughout this period Ed [Drury] was becoming increasingly antagonistic in the sense that he was terribly frustrated by [the district judge's] ruling and was looking to blame everyone but himself for the difficulties he then found himself in."

According to the memorandum, Drury had complained of the amount of Fawer's bill when it was tendered in mid-June, 1982, and, in meetings to discuss the bill, had "complained about a number of items such as his not being sent copies of certain pleadings prior to the trial, about our failure to file a motion for a new trial, about his failure to be notified in advance of our request for additional time within which to file the brief," and about the lack of detail in the time records Fawer submitted with his bill.

The memorandum continues:

In the course of this meeting, at which Ronda Lustman, my associate, was present, Ed stated that because of these problems he would not pay us until after the Fifth Circuit had rendered its decision and would, at that time decide how much he would remit. At this time he also suggested that he wanted Clark Richard, his partner and an individual who had absolutely no experience in the trial or appeal of criminal cases, to argue the matter. The discussion ended in a very acrimonious way and it was clear to me that we were going to have substantial difficulty collecting our fee....

Upon Drury's instructions, Fawer withdrew from the case, and the appeal was taken over by Richard. Ultimately, Drury's conviction was affirmed.

Relying upon the information contained in these memoranda, the district court concluded that the Fawer firm knew that the facts of the Drury case presented "a 'ticking bomb' situation" and, accordingly, granted summary judgment in Fremont's favor. Fawer and the Fawer firm immediately moved for rehearing, contending that they had not been given ample opportunity to present evidence clarifying what was written in their file memoranda. The district court agreed to consider new evidence, and the firm submitted additional affidavits.

An affidavit submitted by Brian explains the statements contained in his October 27 memorandum. In that affidavit, he asserts that he

had no first hand knowledge of what Drury had told Fawer about his intentions if a suit for attorney's fees were filed. Any information which deponent had about this was obtained as second hand, hearsay from Fawer. At the time when the memo about insurance was written, deponent was under the impression that Drury himself had threatened to counter-sue Fawer if a claim for fees was made.

Deponent later learned from discussions with Fawer that his impression was due to a misunderstanding as to what Fawer told deponent. Fawer never reported any direct threat by Drury that he would counter-sue. Fawer had been told by another attorney who knew Drury that if Fawer sued Drury for attorney's fees, the other attorney wouldn't be surprised if Drury counter-sued. Fawer considered this to be an unfounded rumor without any substance and, therefore, this was not disclosed in the Fremont application.

Fawer also filed an affidavit explaining his earlier memorandum. Fawer's affidavit states that Drury's complaints "concerned the number of hours and amount of fee I was charging only.... At no time did I have knowledge of any circumstances which might result in a claim being made against me by Mr. Drury for actions covered by Fremont's policy."

The district court, however, adhered to its conclusion that, at the time the binder was issued, the Fawer firm "was aware of problems presented by the Drury case...." The court, therefore, maintained the summary judgment in Fremont's favor and issued a final judgment granting Fremont relief against the Fawer firm, but dismissing Fremont's complaint against Drury without prejudice and preserving Drury's rights against Fawer and the Fawer law firm as asserted in his state court action. Fawer and the Fawer firm appeal the summary judgment, and Fremont appeals the denial of its motion for summary judgment against Drury.


Summary judgment procedure has provoked a galaxy of opinions and myriad commentaries. The purpose of the procedure has sometimes been misunderstood, perhaps in part because the motion for summary judgment has often been used improperly: as a discovery device; to educate the trial judge; in the hope, however faint, of quick victory; and in the expectation, frequently realized of retarding the progress of a suit and making litigation more expensive. Trial court reluctance to grant summary judgment has been increased by frequent appellate reversals.

Professor Moore in his Treatise on Federal Practice aptly states, "In its broadest scope the summary judgment procedure is in the nature of a pre-trial inquiry, brought on...

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