St. Paul Fire v. Birch, Stewart, Kolasch & Birch, CIV.A. 01-10327-RBC.

• Decision Date: 28 July 2005
• Docket Number: No. CIV.A. 01-10327-RBC.,CIV.A. 01-10327-RBC.
• Citation: 379 F.Supp.2d 183
• 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

379 F.Supp.2d 183

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.

No. CIV.A. 01-10327-RBC.

United States District Court, D. Massachusetts.

July 28, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

David A. Barry, William L. Boesch, Sugarman, Rogers, Barshak & Cohen, Boston, MA, Warren E. Zirkle McGuire Woods LLP, McLean, VA, for Birch, Stewart, Kolasch & Birch, LLP., Bernard L. Sweeney, Leonard R. Svensson, Counter Claimants.

Thomas J. Conlin Robins, Kaplan, Miller & Ciresi LLP., Minneapolis, MN, Bruce A. Finzen, Robins, Kaplan, Miller & Ciresi LLP., Minneapolis, MN, Lisa A. Furnald, Robins, Kaplan, Miller & Ciresi L.L.P., Boston, MA, for St. Paul Fire and Marine Insurance Company, Counter Defendant.

Guive Mirfendereski, Newton, for Vicam Limited Partnership, Interested Party.

MEMORANDUM AND ORDER ON DEFENDANTS' LEONARD R. SVENSSON AND BERNARD R. SWEENEY'S MOTIONS FOR SUMMARY JUDGMENT ( 71 & 73)

COLLINGS, United States Magistrate Judge.

I. INTRODUCTION

In this action, St. Paul Fire and Marine Insurance Company ("St.Paul"), as subrogee of Vicam, L.P. ("Vicam"), has alleged legal malpractice claims against the law firm of Birch, Stewart, Kolasch & Birch, LLP. ("BSKB") and two of its attorneys, Leonard R. Svensson ("Svensson") and Bernard R. Sweeney ("Sweeney"). This matter is before the Court on Svensson's and Sweeney's Motions for Summary Judgment, # 71 and # 73 respectively. St. Paul has submitted its Opposition to Defendant Svensson's Motion for Summary Judgment, # 85, and its Opposition to Defendant Sweeney's Motion for Summary Judgment, # 86. Both Svensson and Sweeney have submitted Reply Memoranda in support of their motions for summary judgment, # 83 and # 82 respectively. The motions are now in a posture for resolution. For the reasons set forth below, the Court denies both motions for summary judgment.

II. FACTUAL BACKGROUND¹

Beginning in February, 1995, Vicam learned that its competitor, Neogen Corporation ("Neogen"), had begun developing a product to compete with Vicam's AflaTest, for which Vicam held two patents. # 87, Exh. 2 at 1:76. In July, 1996, Neogen sent a letter to Vicam informing Vicam that it had started to field test its product, and assuring Vicam that its product had been "thoroughly reviewed by patent counsel and found not to infringe" Vicam's patents Complaint, # 1, ¶ 13; Answer, # 2, ¶ 13; # 87, Exh.2 at 1:81-82. In early August, 1996, Vicam employees obtained a brochure for Neogen's product at a trade conference. The brochure distressed Jack Radlo, Vicam's President and Chief Executive Officer ("Radlo"), because Neogen's product looked like a "direct knock-off" of the AflaTest. # 87, Exh. 2 at 1:97. Vicam began to discuss with Svensson, its patent attorney, the possibility that Neogen was promoting a product that potentially infringed its patent. # 87, Exh.1 at 1:100. Radlo and Svensson discussed a number of options for dealing with the threat posed by Neogen's new product. # 87, Exh. 1 at 100-102; 120-21; 125. Ultimately, Svensson proposed that Vicam send a letter to Vicam's customers advising them of the situation with Neogen. # 32 Exh. D; # 87, Exh.1 at 2:237-38. Svensson drafted a letter, most or all of which Radlo and Vicam adopted in their letter, and advised Radlo and Vicam that they could appropriately send the letter to customers. # 2, ¶ 20. The letter, dated August 12, 1996, notifies customers that its competitor, Neogen, had developed a test kit that Vicam considered to infringe Vicam's patents relating to the detection of aflotoxins, and that Vicam was prepared to take legal action against infringers of its patent. # 87, Exh. 5. Relying on Svensson's advice, Radlo faxed the letter ("Dear Valued Customer Letter") that Svensson had drafted to Vicam's customers.

Though the parties dispute the specifics of discussions surrounding the decision to send the Dear Valued Customer Letter, Svensson admits that he did not discuss what might happen if Vicam sent the letter and a court found no infringement. # 87, Exh. 1, at 124-25; 132; 155-56. Further, Svensson did not discuss with Radlo the types of claims that Neogen might raise in a lawsuit, id. at 178, although he told Radlo that he thought there was a "low chance" of Neogen filing suit and that "that would be a pretty aggressive move on Neogen's part." Id. at 194. Svensson believed, in any event, that Vicam had a good faith basis for alleging infringement in the August 12 letter. # 87, Exh. 1 at 207. Thus, Svensson apparently did not advise Vicam that sending the letter might expose Vicam to liability for defamation and other torts if Neogen could establish that Vicam was acting in bad faith in sending the letter. # 88 at 2 ¶ 2. Although Svensson raised a concern with Radlo about the importance of determining whether Neogen's product used monoclonal or polyclonal antibodies, # 87, Exh.2 at 1:130, a distinction that ultimately bore on the infringement issue, id., Radlo testified in his deposition that Svensson did not advise Radlo to wait to send the letter until Vicam could establish whether Neogen's product in fact infringed Vicam's patents. Id. at 129-131; Exh. 1 at 132.

On or about August 16, 1996, Neogen sued Vicam and Radlo in the United States District Court for the Western District of Michigan for trade libel, tortious interference with potential advantageous relationships, and tortious interference with contractual relationships. # 1 ¶ 21. Sweeney represented Vicam and Radlo in that action. # 1, ¶ 22; # 2, ¶ 22. Although that suit was dismissed for lack of personal jurisdiction, # 1 ¶¶ 22, 23, Neogen refiled its complaint against Vicam and Radlo in the United States District Court for the Middle District of Florida (the "Florida Lawsuit"), # 1 ¶ 24, this time alleging corporate defamation and other business torts, and seeking a declaratory judgment on the question of infringement. # 1 ¶ 24. St. Paul, Vicam's insurer, agreed to pay one-half of the attorney's fees and costs incurred by Vicam in the Florida Lawsuit. # 1 ¶ 27. St. Paul also agreed to defend Vicam and Radlo in the Florida Lawsuit under a reservation of rights, and referred the matter to its Florida staff counsel, J. Scott Murphy ("Murphy"). Murphy had several years experience as a litigator, but no background or expertise in intellectual property. # 32 ¶ 12. At Vicam's and Murphy's request, BSKB and Sweeney represented Vicam and Radlo in the Florida Lawsuit. During the course of the litigation, Svensson and Sweeney assured Vicam that Neogen's claims were baseless and that Vicam had a high likelihood of prevailing. # 88, ¶ 8; # 87, Exh. 10 at 231-3.

During a hearing before the Florida trial judge, Sweeney made the strategic decision that Vicam would not assert the advice-of-counsel defense and would not waive the attorney-client privilege. # 88 at 7 ¶ 9. In January 2000, the Florida trial court entered judgment in favor of Neogen on the question of infringement and found that Neogen's new product did not infringe the Vicam patents. Id. at 8 ¶ 17. The Florida court, ruling from the bench, also denied Vicam's motion for summary judgment on the tort claims and found that the issue of whether Vicam had sent the "Dear Valued Customer Letter" in "bad faith" was an issue for the jury. # 88 at 8 ¶ 16. At the pretrial conference on March 15, 2000, Sweeney reaffirmed his decision not to assert the advice-of-counsel defense. # 88 at 9 ¶ 19. Trial began on the remaining tort claims sometime later in March 2000. After two days of trial, Vicam and Radlo agreed to settle the remaining claims with Neogen for two million dollars, which St. Paul paid under the terms of the insurance policy. St. Paul, pursuant to the general liability policy and agreement with Vicam, paid one-half of BSKB's fees, amounting to $1.8 million.

Sometime later, Vicam settled its own claims against BSKB for legal malpractice, Plaintiff's Undisputed Material Facts, # 40 ¶ 26, in an agreement that acknowledged St. Paul's right to proceed against BSKB in a separate action. Settlement and Mutual Release # 41, filed under seal. In a separate document, "Disclosure Authorization and Confidentiality Agreement," Vicam agreed to waive its attorney-client privilege. Reply Mem. in Support of Def.'s Mot. to Dismiss, # 43, Exh. A. On February 22, 2001, St. Paul brought this action as Vicam's "subrogee" asserting claims of legal malpractice against BSKB.

III. DISCUSSION

A. Standard of Review

Summary judgment is appropriate when the record shows that "the pleadings, depositions, answers to interrogatories and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is "material if it carries with it the potential to affect the outcome of the suit under the applicable law." Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir.2000) (citation omitted.). "[A]n issue is `genuine' if the evidence presented is such that a reasonable jury could resolve the issue in favor of the nonmoving party." Fajardo Shopping Center, S.E. v. Sun Alliance Ins. Co. of Puerto Rico, Inc., 167 F.3d 1, 7 (1st Cir.1999); see also Nat'l Amusements, Inc. v. Town of Dedham, 43 F.3d 731, 735 (1st Cir.), cert. denied, 515 U.S. 1103, 115 S.Ct. 2247, 132 L.Ed.2d 255 (1995).

The party moving for summary judgment "bears the initial burden, which may be discharged by pointing to the absence of adequate evidence supporting the nonmoving party's case." Michelson v. Digital Financial Services, 167 F.3d 715, 720 (1st Cir.1999) (citations omitted). Once the moving party has met its burden, "the onus is on the nonmoving party to present facts that show a genuine issue for trial." Id. (citations omitted). In determining...