St. Paul Fire and Marine v. Birch, Stewart
| Decision Date | 25 November 2002 |
| Docket Number | No. CIV.A.2001-10327-RBC.<SMALL><SUP>1</SUP></SMALL>,CIV.A.2001-10327-RBC.<SMALL><SUP>1</SUP></SMALL> |
| Citation | 233 F.Supp.2d 171 |
| Parties | ST. PAUL FIRE AND MARINE INSURANCE COMPANY, as Subrogee of Vicam, L.P., Plaintiff, v. BIRCH, STEWART, KOLASCH & BIRCH, LLP, Leonard R. Svensson, Bernard L. Sweeney, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Lisa A. Furnald, Robins, Kaplan, Miller & Ciresi, LLP, Boston, MA, Thomas J. Conlin, Bruce A. Finzen, Kaplan, Miller & Ciresi, LLP, Minneapolis, MN, for Plaintiff.
William L. Boesch, Sugarman, Rogers, Barshak & Cohen, Boston, MA, David A. Barry, Warren E. Zirkle, McGuire Woods LLP, McLean, VA, for Defendants.
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS (# 30)
On January 15, 2001, defendant Birch, Stewart, Kolasch & Birch LLP ("BSKB"), Leonard R. Svensson ("Svensson") and Bernard I. Sweeney ("Sweeney") filed a Motion to Dismiss pursuant to Rule 12(b)(6), Fed.R.Civ.P. (# 30) and a memorandum in support thereof (# 31), contending that the action should be dismissed because, as a matter of law, an insurer has no standing as a subrogee to sue for legal malpractice. Defendants' motion presents and relies upon matters outside the pleadings, set forth in a separate Statement of Undisputed Material Facts (# 32), and therefore defendants sought to have their motion treated as a summary judgment motion under Rule 56, Fed.R.Civ.P. Plaintiff St. Paul Fire and Marine Insurance Company, as Subrogee of Vicam, L.P. ("St. Paul"), filed Plaintiff's Brief in Opposition to Defendants' Motion for Summary Judgment Based on Choice of Law (# 37) and Plaintiff's Undisputed Material Facts, and Its Statement in Response to Defendants' Statement of Undisputed Material Facts (# 40). Defendants' motion (# 30) is in a posture for resolution.
For purposes of the instant motion, the material facts do not seem to be in dispute. Rather, the legal conclusion to be drawn from the facts forms the basis of the parties' disagreement on the law which is to govern the litigation.
BSKB is a law firm based in Virginia. Complaint (# 1) ¶ 2. Svensson is an attorney licensed to practice law in Virginia and California. # 1 ¶ 7. At all times relevant to this matter, Svensson was based in BSKB's Virginia office. Defendants' Statement of Undisputed Material Facts (# 32) ¶ 2.2 Sweeney is an attorney licensed to practice law in Massachusetts. # 1 ¶ 8. Although admitted to numerous federal jurisdictions, Sweeney is not admitted to any state bar other than Massachusetts. # 32 ¶ 3. Sweeney is also based in BSKB's Virginia office. # 32 ¶ 3. At all relevant times, Vicam L.P. ("Vicam") was a company organized in Delaware and located in Watertown, Massachusetts. # 1 ¶ 1. Svensson, Sweeney, and through them, the law firm of BSKB, served as counsel to Vicam with respect to certain matters, including patent infringement. # 1 ¶¶ 6, 16; # 32 ¶ 4, Plaintiff's Undisputed Materials [sic] Facts, and Its Statement In Response to Defendants' Statement of Undisputed Material Facts (# 40) ¶ 2. During the years of BSKB's representation of Vicam, BSKB attorneys regularly engaged in mail, telephonic and electronic communications with Vicam employees in Massachusetts and periodically attended meetings in Massachusetts. # 40 ¶ 3.
Vicam was the exclusive licensee of two patents relating to the detection of aflatoxins. # 1 ¶ 9. Beginning in February 1995, Vicam learned that Neogen Corporation ("Neogen") was developing a product which might infringe Vicam's patents. # 1 ¶ 12. Vicam's President consulted with Svensson to discuss its concerns about Neogen's product and obtain legal advice by telephone and facsimile about the matter. # 1 ¶ 15; # 32 ¶¶ 5-11. On the recommendation of BSKB, Vicam faxed from Massachusetts a letter dated August 12, 1996 ("Dear Valued Customer Letter") to its customers, stating essentially that Neogen's new product infringed Vicam's patents and threatening to take legal action against any infringers. # 1 ¶¶ 19, 20; # 32 ¶¶ 10, 11; # 40 ¶¶ 9, 10, 13.
Svensson had suggested the language which should be contained in the letter. # 32 ¶ 10; # 40 ¶ 10. Vicam personnel prepared a first draft of the letter, and thereafter, various drafts were exchanged during the day on August 12, 1996. # 40 ¶ 10. After this exchange, Svensson "...faxed a letter to Vicam in Massachusetts setting forth a final version of the letter he proposed to be sent to Vicam customers." # 40 ¶ 10. Svensson did not advise anyone at Vicam that such a letter could trigger a lawsuit by Neogen, or of any other risks of sending it. # 40 ¶¶ 11, 15, Exh. F.
On or about August 16, 1996, Neogen sued Vicam and its President and Chief Executive Officer, Jack Radlo ("Radlo"), in the United States District Court for the Western District of Michigan, alleging trade libel, tortious interference with potential advantageous business relationships, and tortious interference with contractual relationships. # 1 ¶ 21. Sweeney represented Vicam and Radlo in the Michigan lawsuit, which was dismissed for lack of personal jurisdiction over the defendants. # 1 ¶¶ 22, 23. Neogen then sued Vicam and Radlo in the United States District Court for the Middle District of Florida (the "Florida Lawsuit"). # 1 ¶ 24. Neogen alleged in its Second Amended Complaint filed in the Florida Lawsuit claims of corporate defamation, product disparagement/trade libel, tortious interference with advantageous business relationships/expectancies, tortious interference with contractual business relationships, and common law unfair competition, and sought a declaratory judgment that its product does not infringe Vicam's patents and/or that Vicam's patents are invalid. # 1 ¶ 24; # 40 ¶ 16.
St. Paul is a Minnesota corporation with a principal place of business in Minnesota. # 1 ¶ 1. St. Paul issued a comprehensive general liability insurance policy to Vicam. # 1 ¶ 27. Pursuant to the policy and an agreement with Vicam, St. Paul paid one-half of the attorneys' fees and costs incurred by Vicam in the Florida Lawsuit. # 1 ¶ 27. St. Paul agreed to defend Radlo and Vicam in the Florida Lawsuit under a reservation of rights, and referred the matter to a Florida attorney, J. Scott Murphy ("Murphy"). # 32 ¶ 12. At Vicam's and Murphy's request, BSKB and Sweeney also represented Vicam and Radlo in the Florida Lawsuit. # 1 ¶ 26; # 32 ¶ 13; # 40 ¶ 17. Sweeney was admitted pro hac vice in the Florida court to defend the Florida Lawsuit. # 32 ¶ 15.
Sweeney's (and BSKB's) legal services in connection with the Florida Lawsuit included regular contact with Vicam employees in Massachusetts by phone, facsimile and e-mail. # 40 ¶ 19. Sweeney filed a "Declaration" in support of a motion by Vicam to have the case transferred to Massachusetts pursuant to 28 U.S.C. § 1404(a). # 40, Exh. P. In the pleading, Sweeney pointed out that the majority of documents and witnesses were in Massachusetts and that the caseload and the time for disposing of cases was less in the District of Massachusetts than in the Middle District of Florida. # 40, Exh. P.
Parts of discovery in the Florida Lawsuit took place in Michigan, Massachusetts, Illinois, Georgia, Florida and by telephone from Virginia to Texas and South Dakota. # 32 ¶ 17. During the pendency of the Florida Lawsuit, there were numerous telephone communications between Sweeney in Virginia and Vicam in Massachusetts. # 32 ¶ 18. Sweeney and a colleague from BSKB made numerous visits to Massachusetts to meet with Vicam representatives about the Florida Lawsuit. # 32 ¶ 18; # 40 ¶ 19.
The question of whether there could be discovery of what Svensson advised Vicam regarding sending the Dear Valued Customer Letter or whether Vicam would assert an attorney-client privilege was first raised in Radlo's deposition on November 17, 1997 in Boston. # 40 ¶ 21. In that deposition, Sweeney instructed Radlo not to answer any questions respecting discussions he had had with Vicam's attorneys which led to the conclusion that Neogen had infringed Vicam's patents. # 40, Exh. M. Specifically, the following colloquy took place:
Q. August 12, '96 you write the letter, the "Dear Valued Customer" letter. Why didn't you file your claim for infringement then?
MR. SWEENEY: I will caution you at this time not to get into matters discussed between you and counsel in answering that question.
# 40, Exh. M.
On the advice and instruction of Sweeney, at various points during the Florida Lawsuit Vicam and Radlo asserted the attorney-client privilege to prevent discovery concerning the advice given by BSKB regarding infringement and the Dear Valued Customer Letter. # 1 ¶ 2; # 40 ¶¶ 20, 21. In June 1998, Sweeney stated at a hearing in Florida that Vicam and Radlo did not intend to present evidence at trial of opinions Svensson had given in August 1996 regarding infringement. # 32 ¶¶ 19, 20.
Radlo avers that:
On numerous occasions I requested Mr. Sweeney to get Mr. Svensson involved in the case as a witness since he had both prosecuted the patents involved, and given us his advice and opinion that the Neogen product infringed together with the opinion that we should send the Dear Valued Customer letter to clients. Mr. Sweeney refused, saying that it was against Birch Stewart firm policy to have lawyers testify as witnesses in cases.
* * * * * *
Neither Mr. Sweeney nor anyone else from Birch Stewart discussed with me what the significance would be of my waiving or not waiving the attorneyclient privilege during my deposition in Massachusetts.
# 40, Exh. 1, ¶¶ 27, 28.
On or about January 27, 2000, the trial court in the Florida Lawsuit entered judgment in favor of Neogen on infringement, finding that Neogen's product does not infringe Vicam's patents. # 1 ¶ 34. In March 2000, trial commenced in the Florida Lawsuit with respect to the remaining claims. # 1 ¶ 35. On the second day of trial, March 28, 2000, acting on the advice of Sweeney, Vicam and Radlo agreed to pay Neogen $2,000,020 in...
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