Redies v. Attorneys Liability Protection Soc.

• Decision Date: 17 January 2007
• Docket Number: No. 05-438.,05-438.
• Citation: 2007 MT 9,150 P.3d 930
• Parties: Janet REDIES, Plaintiff and Appellant, v. ATTORNEYS LIABILITY PROTECTION SOCIETY (A Mutual Risk Retention Group), a Montana corporation, Robert Tambler, and John Does 1-3, Defendants and Respondents.
• Court: Montana Supreme Court

Page 930

150 P.3d 930

2007 MT 9

Janet REDIES, Plaintiff and Appellant, v. ATTORNEYS LIABILITY PROTECTION SOCIETY (A Mutual Risk Retention Group), a Montana corporation, Robert Tambler, and John Does 1-3, Defendants and Respondents.

No. 05-438.

Supreme Court of Montana.

Submitted on Briefs June 7, 2006.

Decided January 17, 2007.

For Appellant: L.B. Cozzens, Cozzens, Harman, Warren, Harris & Odegaard, P.L.L.P., Billings, Montana, James A. Manley, Manley Law Firm, Polson, Montana.

For Respondents: John E. Bohyer and Fred Simpson, Phillips & Bohyer, P.C., Missoula, Montana.

Justice W. WILLIAM LEAPHART delivered the Opinion of the Court.

¶ 1 Janet Redies ("Redies") brought the instant action in the District Court for the Thirteenth Judicial District, Yellowstone County, against Attorneys Liability Protection Society, Inc., and four of its employees (collectively, "ALPS"). She alleged that ALPS had, two years earlier, engaged in unfair trade practices by failing to settle promptly the legal malpractice suit she had brought against John Kelly Addy ("Addy"), one of ALPS's insureds. Redies further alleged tortious breaches of statutory duties and the implied duty of good faith and fair dealing.

¶ 2 ALPS answered Redies' complaint and thereafter filed a motion for summary judgment, which the District Court granted. The court determined that ALPS had "a reasonable basis in law" under § 33-18-242(5), MCA, for contesting Redies' claims against Addy, that there were no genuine issues of material fact, and that ALPS was entitled to judgment as a matter of law. The court further determined that all other pending motions were moot. Redies timely appealed.

¶ 3 On appeal, Redies has framed a number of interrelated issues, all of which pertain to the following overarching question: Did the District Court err by granting ALPS's motion for summary judgment on the ground that ALPS had a reasonable basis in law for contesting Redies' claims against Addy?

¶ 4 In the course of answering this question, we address the following sub-issues raised by Redies: whether the reasonableness of ALPS's "basis in law" for contesting Redies' claims against Addy is a question of fact or a question of law; whether genuine issues of material fact remain, thus precluding summary judgment in this case; and, lastly, whether Redies' "reasonable investigation" claim under § 33-18-201(4), MCA, survives a determination under § 33-18-242(5), MCA, that ALPS had a reasonable basis in law for contesting Redies' claims against Addy.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Conservatorship

¶ 5 Redies was involved in a bicycling accident on May 29, 1995, as a result of which she suffered a traumatic brain injury and was comatose for approximately two weeks. Consequently, Redies' mother, Rosalie Redies ("Rosalie"), and sister, Judy Uerling ("Uerling"), filed a petition in the District Court¹ for the appointment of a temporary conservator of Redies' estate. The court granted the petition on June 8, 1995, appointing C.A. Cosner ("Cosner"), a certified public accountant with whom the family already had a relationship, to serve in this capacity.

¶ 6 Redies emerged from her coma in mid-June 1995; however, she remained somewhat disoriented and unaware of her surroundings. Given her persistent incapacity, Rosalie and Uerling petitioned the District Court to make Cosner's appointment permanent. The court first appointed Vicki W. Dunaway ("Dunaway"), who had previously represented Redies in a number of matters, to represent Redies as "attorney ad litem" in conjunction with Rosalie and Uerling's petition. Following an investigation, Dunaway reported that Redies' mental condition, although somewhat improved, was still not to the level of being able to handle either her financial affairs or arrangements concerning her person. Accordingly, on September 6, 1995, the court appointed Cosner as permanent conservator, a capacity in which he served through April 25, 2000. (This conservatorship, incidentally, was the subject of a previous appeal to this Court. See Redies v. Cosner, 2002 MT 86, 309 Mont. 315, 48 P.3d 697.)

¶ 7 After his appointment as temporary conservator, Cosner learned that Redies owned significant assets, most of which were heavily encumbered; that she did not have any health insurance; and that she was incurring substantial medical costs due to her injuries. In June 1995, he applied for Medicaid benefits on Redies' behalf; however, the extent of her assets apparently disqualified her from receiving such benefits.

¶ 8 Cosner became concerned that Redies' mounting medical bills would quickly exceed all equity in her assets. Thus, immediately following his appointment as permanent conservator, he met with Uerling, Dunaway, and Addy to discuss Redies' financial situation and how best to conserve and manage her estate. Addy—who, as noted above, was an ALPS-insured attorney—was already involved in the case, having been retained by Cosner for legal advice concerning the management and administration of Redies' estate. Addy also had represented Uerling in an earlier dispute with Redies, which was fully resolved the previous year. See Redies, ¶ 5.

¶ 9 Cosner, Uerling, Dunaway, and Addy discussed a number of assets in Redies' estate and agreed that a management plan should be developed to maximize the amount of Redies' wealth that would be exempt from recapture by the government or the claims of creditors. Of particular relevance, Addy suggested that Cosner "pauperize" (in other words, impoverish) Redies by selling off most of her assets so that she could qualify for and receive Medicaid payments for her supervised care. For instance, it was decided that Redies' twenty-acre parcel of land south of Red Lodge should be liquidated; that Cosner should dispose of Redies' five vehicles; and that Uerling should go into Redies' home and take anything Uerling thought she could use or that had significant sentimental value to her, particularly a knife set given to Redies by her father.² The possibility of filing a bankruptcy petition was also addressed, and Addy recommended that Rosalie's will be revised so that any bequest or devise to Redies would lapse in the event that she was still incapacitated at the time of Rosalie's death. That way, the bequest or devise would not end up going to creditors or the government under the recapture provisions of the Medicaid program.

¶ 10 Cosner proceeded to manage Redies' property according to the recommendations and decisions made at the September 6, 1995 meeting, selling real and personal property owned by Redies, putting the remaining personal property in storage, paying a number of Redies' debts, and seeking settlement with her remaining creditors. He successfully avoided bankruptcy and was able to negotiate forgiveness of approximately $123,000 in medical bills, after which Uerling (who had been appointed Redies' guardian at the same time Cosner was appointed Redies' conservator) qualified Redies for Medicaid and Social Security Supplemental Security Income ("SSI") coverage. Uerling also arranged medical care for Redies.

¶ 11 By 1998, Redies had made a significant recovery, and she began to question the disposition of her assets, as she was subsisting on SSI payments. Through new counsel, she sought an accounting of her assets and details regarding the management of her estate. Cosner and Uerling attempted to answer Redies' questions; however, each answer gave rise to new questions. The tone of the correspondence became adversarial, and Cosner and Uerling eventually filed petitions to terminate their respective roles as conservator and guardian. See Redies, ¶¶ 8-10. Litigation ensued, which ultimately culminated in Redies' previous appeal to this Court (which we decided May 2, 2002).

II. Redies v. Addy

¶ 12 Meanwhile, on or about July 9, 2001, Donald L. Harris ("Harris"), Redies' counsel at the time, notified Addy and Cosner of a complaint he was prepared to file on Redies' behalf. Among other things, Harris identified claims for negligence due to Addy and Cosner's failure, promptly after Redies' bicycling accident, to establish a trust to protect and preserve her estate. He also indicated that Redies preferred "to resolve this matter without filing a lawsuit if that is possible."

¶ 13 As it turns out, the parties were unable to negotiate a resolution, and Redies ended up filing a complaint in January 2002. The course of events during the period beginning in July 2001 and ending in December 2002—in particular, ALPS's refusal to settle Redies' claims against Addy both before and after she filed her complaint—formed the basis of her present unfair trade practices action against ALPS. Thus, it is necessary to set forth, in some detail, a number of the parties' communications and court filings during this period. Because negotiations over Redies' negligence claim against Cosner are not relevant to the issues before us (notably, he was not named in the complaint she ultimately filed), the ensuing discussion focuses solely on the exchanges pertaining to Redies' claims against Addy.

¶ 14 On receipt of Harris's letter, Addy immediately notified ALPS, which undertook an investigation into the merits of Redies' claims. The record discloses a number of communications between ALPS and Addy and between ALPS and Harris, as well as research on Harris's part, during the latter half of 2001. In October, Harris obtained a professional opinion on whether a self-sufficiency trust (see §§ 53-18-101 to -105, MCA, and Admin. R.M. 37.2.501 to .513) could and should have been established following Redies' bicycling accident to conserve her assets. He was advised that, given Redies' disabling brain injury, her substantial medical bills, and her lack of health insurance, the establishment of a self-sufficiency trust would have qualified her for Medicaid while preserving her assets in a trust. He was further advised that income from the trust...