Royal Ins. Co. of America v. Miles & Stockbridge
| Citation | 133 F.Supp.2d 747 |
| Decision Date | 13 March 2001 |
| Docket Number | No. CIV.A. S-99-1351.,CIV.A. S-99-1351. |
| Parties | ROYAL INSURANCE COMPANY OF AMERICA, Plaintiff, v. MILES & STOCKBRIDGE, P.C., et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
Mitchell A. Stearn, porter Wright Morris & Arthur, LLP, Washington, DC, Virginia Elizabeth Richards, Law Office, Washington, DC, for Plaintiff.
William J. Murphy, Baltimore, MD, Robert T. Shaffer, III, Murphy & Shaffer, Baltimore, MD, Alvin I. Frederick, James Edward Dickerman, Eccleston and Wolf, Baltimore, MD, for Defendants.
This professional malpractice action is before the Court as a result of numerous procedural errors in what should have been a run-of-the-mill asbestos case. The comedy (or, perhaps, tragedy) of errors that occurred here allowed a plaintiff — who at one time was prepared to accept a settlement of $125,0001 — to collect $1.6 million in an asbestos lawsuit that was barred by limitations, res judicata, and a general release executed by the plaintiff in a prior lawsuit! In the wake of this monstrosity, the parties footing the bill and successive sets of lawyers are slinging the barbs of blame at one another. They have filed motions in support of their positions.
Three separate summary judgment motions are now before the Court. Royal Insurance Company of America ("Royal") moves for summary judgment against Miles & Stockbridge ("Miles"), alleging that Miles was negligent in representing Royal's insured, Salomon, Inc. ("Salomon"), in an asbestos lawsuit brought by Corinne Jerome ("Jerome"). Royal's and Salomon's interests are identical for the purposes of this suit. Royal alleges that Miles's negligence caused Royal to pay out the $1.6 million settlement. Specifically, Royal claims that Miles was negligent in failing to respond timely to Jerome's complaint, causing a second default judgment to be entered against Salomon, and in failing to timely identify third-party defendants, thereby precluding Salomon from seeking contribution from joint tortfeasors.
Miles concedes that it was negligent in failing to respond to Jerome's complaint, and in failing to argue the appropriate standard for setting aside a default judgment. Nevertheless, Miles contends that Royal was contributorily negligent in handling the settlement of the Jerome case after discovering that Jerome had executed a general release in earlier litigation, precluding her from suing Salomon. Miles maintains that Royal should have sought to have the default judgment set aside, or challenged the default judgment on appeal, instead of entering into a $1.6 million settlement. Miles further contends that Royal's negligent decision to withhold authorization to accept Jerome's May 22, 1998 settlement offer for $450,000 was a superseding cause, absolving Miles from liability for any damages over $450,000. Finally, Miles denies that it was negligent in failing to file third-party claims. In particular, it claims that it did not file third-party claims at Salomon's express direction. Miles moves for summary judgment on all of these issues.
Parler & Wobber ("Parler"), successor counsel to Royal/Salomon, and a third-party defendant here, also moves for summary judgment, claiming that it is not, as a matter of law, liable to Miles for indemnification or contribution as a joint tortfeasor based on its representation of Royal/Salomon, after Royal discharged Miles.
For reasons discussed below, Royal's Motion for Summary Judgment on the issue of third-party claims is DENIED. On all other claims, Royal's Motion for Summary Judgment is GRANTED. Miles's Motion of Summary on the issue of third-party claims is GRANTED. On all other claims, Miles's Motion for Summary Judgment is DENIED. Finally, on the issue of indemnification, Parler's Motion for Summary Judgment is GRANTED. On the issue of contribution, Parler's Motion for Summary Judgment is DENIED.
The following recitation of facts will demonstrate, above all else, the need for developing less complex and more responsive and responsible ways of sorting out the blame and cost for industrial-age ills such as asbestosis than a system of litigation meant to sort out competing claims to straying cattle. Yet, the system lumbers on because no one has the incentive or initiative to change it, perhaps because everyone is so invested in the status quo. But, one digresses too easily. On to the facts.
Royal, the plaintiff in this case, hired Miles to defend its insured, Salomon, in a lawsuit brought by Corinne Jerome in Baltimore City Circuit Court, seeking recovery of compensatory and punitive damages for the asbestos-related death of her husband, Theodore Jerome. Jerome also filed a nearly identical action2 in the New York Supreme Court, which was pending at the time Jerome filed the Maryland action. The New York Supreme Court dismissed Jerome's action, pursuant to Salomon's motion, based on the defense of statute of limitations. Meanwhile, the summons and complaint in the Maryland action were served on Salomon's resident agent and sent to Salomon. The first of the series of deplorable errors giving birth to this Frankenstein occurred when Salomon's mail room failed to forward the summons and complaint to Salomon's legal department. Consequently, Salomon did not file a response to the complaint and, upon Jerome's request, the Baltimore City Circuit Court issued on order of default against Salomon for failure to plead. Salomon then contacted Royal, who took over the defense of the Maryland action.
Almost immediately after taking over the defense of Jerome's Maryland lawsuit, Royal contacted Mauricio Barreiro, Esq., of Miles, and arranged for him and his firm to represent Salomon in the Maryland lawsuit. Miles successfully petitioned the circuit court to vacate the order of default issued against Salomon. In its order granting Salomon's motion to vacate the order of default, the court gave Salomon twenty-one days to respond to Jerome's complaint.
With knowledge that it had twenty-one days to respond to Salomon's complaint, and aware that service had been effected on Salomon eight months earlier, Mr. Barreiro removed the case to this Court. While the case was here, Mr. Barreiro chose not to file a responsive pleading, as required by Federal Rule of Civil Procedure 81(c) and the circuit court's order vacating the first default, and ignored the admonition of Mr. Amato, counsel for Jerome, to remand the case voluntarily because remand was improper. This decision started a chain reaction of errors, leading to the present action.
Just as Mr. Amato had promised, he filed a motion for remand due to improper removal. Judge Blake granted Mr. Amato's motion on behalf of Jerome, and refused Mr. Barreiro's request for ten additional days after remand to respond to Jerome's complaint. Because no responsive pleading had been filed within the time provided by the circuit court, Jerome filed a motion for default judgment there. The next day, Miles finally filed an answer to Jerome's complaint asserting defenses based on the statute of limitations, collateral estoppel, and res judicata. Miles also filed an opposition to Jerome's motion for default judgment, wherein it argued that an order of default was inappropriate because the circuit court was divested of jurisdiction while the case was pending in federal court, and thus, the time period for filing an answer in circuit court was stayed until the case was remanded. Miles also set forth several meritorious defenses to Jerome's action and stated that Jerome would suffer no prejudice if the court refused to enter a default judgment.3
On May 8, 1998, Judge Angeletti, of the Baltimore City Circuit Court, granted Jerome's motion and entered a judgment of default against Salomon, directing that the case be scheduled for trial on the issue of damages only. The issuance of the default judgment was not, however, in compliance with Md. Rule 2-613. This procedural error confounded the very straightforward and structured process set forth in Rule 2-613 for dealing with an order of default, and led to a series of misguided arguments by Miles in an attempt to set aside the judgment. Instead of challenging the procedural validity of the default judgment, Miles moved to vacate the default judgment in accordance with Rule 2-613(d), which provides that a defendant may move to vacate an order of default within thirty days of its entry by motion stating the reasons for the failure to plead and the legal and factual bases for the defense to the claim. But, because Judge Angeletti issued a default judgment instead of a mere order of default, Miles assumed 2-613(g)4 precluded revision of the judgment absent fraud, mistake or irregularity. Thus, Miles argued that the default judgment should be revised pursuant to Rule 2-535(b)5, because of a jurisdictional mistake. Miles contended that the state court had no jurisdiction while the case was pending in federal court, and that the twenty-one day period to respond to the complaint, ordered by the circuit court judge who vacated the first default, was tolled until the case was remanded. Miles later discovered that it erred in assuming that Rule 2-613(g) precluded revision of a judgment absent fraud, mistake, or irregularity, and realized that it should have argued that the judgment was an interlocutory order that could be set aside based on a more liberal standard.
Shortly after Judge Angeletti entered the default judgment, Mr. Amato contacted Mr. Barreiro and offered to settle the Jerome case for $450,000. At the time of this settlement offer, the motion to vacate the default judgment was still outstanding. The offer was conveyed to Royal, which decided not to settle the case at that time.
On August 11, 1998, Judge Angeletti denied Salomon's motion to vacate without holding a hearing as provided...
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