Toomey v. Wachovia Ins. Services, Inc.

Decision Date30 May 2006
Docket NumberNo. 05-13242.,05-13242.
Citation450 F.3d 1225
PartiesRichard L. TOOMEY, Resident of Montgomery County, as an Individual and as an Assignee of IMC Mortgage Company, Brian D. Holman, Resident of Baltimore County, as an Individual and as an Assignee of IMC Mortgage Company, Plaintiffs-Appellees Cross-Appellants, v. WACHOVIA INSURANCE SERVICES, INC., Joel G. Williams, David Baldwin, Inc., a Division of Wachovia Insurance Services, Inc., Defendants-Appellants Cross-Appellees.
CourtU.S. Court of Appeals — Eleventh Circuit

John H. Pelzer, Ruden, McClosky, Smith, Schuster & Russell, P.A., Ft. Lauderdale, FL, Donald A. Mihokovich, Ruden, McClosky, Smith, Schuster & Russell, P.A., Tampa, FL, for Defendants-Appellants Cross-Appellees.

James F. Hibey, Lisa K. Hsiao, Romeo S. Quinto, Jr., Howrey LLP, Washington, DC, for Plaintiffs-Appellees Cross-Appellants.

Appeal from the United States District Court for the Middle District of Florida.

Before TJOFLAT, BARKETT and GOODWIN*, Circuit Judges.


In this diversity action, Wachovia Insurance Services, Inc., Davis Baldwin, Inc., a division of Wachovia Insurance Services, Inc., and Joel Williams, an officer/employee of Wachovia Insurance Services, Inc. (together "Wachovia"), appeal the $1,069,200 jury verdict in favor of Brian Holman and Richard Toomey for breach of a fiduciary duty owed by Wachovia to IMC Mortgage Company ("IMC"). In a previous settlement agreement between IMC and Holman and Toomey, IMC assigned its right to sue Wachovia and to receive damages to Holman and Toomey.

Holman and Toomey cross-appeal,1 arguing that the district court erred in granting judgment as a matter of law to Wachovia and dismissing their claims that (1) Wachovia was negligent; (2) Wachovia tortiously interfered with Holman and Toomey's business relationship with IMC; (3) Holman and Toomey were entitled to punitive damages; and (4) Wachovia breached its fiduciary duty to Holman and Toomey. Holman and Toomey also appeal the district court's dismissal of their Motion to Alter or Amend the Judgment taking into account pre-judgment interest and the alleged range of compensatory damages. After review of Wachovia's appeal, we certify questions to the Florida Supreme Court.


Holman and Toomey were employees and officers of IMC, a mortgage business based in Tampa, Florida. Wachovia was the insurance broker for IMC. In 1997, IMC purchased Holman and Toomey's mortgage business, Central Money Mortgage ("CMM"), and Holman and Toomey were appointed officers and employees of IMC's subsidiary. Each had a five-year employment contract with an annual salary of $300,000 and a severance clause requiring IMC to pay their full salary for the years remaining on the contract if IMC terminated Toomey or Holman without cause. Also in 1997, Joel Williams sold to IMC an Employment Practices Liability Insurance Policy (the "Policy") that covered claims for breaches of written employment contracts.

Under financial pressure, IMC decided to cease operations of its subsidiary and notified Holman and Toomey that it planned to terminate their employment contracts. Holman and Toomey sued IMC in the United States District Court for the District of Maryland, alleging that they had been formally terminated without cause. This litigation resulted in a judgment of $1.8 million in favor of Holman and Toomey against IMC.

IMC was unable to satisfy the judgment and initiated settlement negotiations. During these negotiations, IMC discovered that it had lost the Policy's coverage for breach of employment contract claims. Because the Policy had been due to expire during litigation, IMC had extended its coverage with Wachovia for several months to cover any potential claims, such as Holman and Toomey's breach of employment contract claims. However, in extending the Policy, Wachovia is alleged to have summarily removed coverage for breach of written employment contract claims without IMC's knowledge.

To satisfy the outstanding $1.8 million judgment, IMC executed a settlement agreement with Holman and Toomey. Under the terms of the agreement, Holman and Toomey, for consideration of $1.5 million, dismissed all their causes of action against IMC except the counts for breach of their employment contracts. Holman and Toomey, however, expressly reserved claims against Wachovia:

Provided however, that nothing contained herein shall operate to release or waive any claims the Releasors might have or herein acquire against the insurance companies specified in Sections 3(d) and (e) below, Wachovia, Davis Baldwin, or any partner, shareholder, associate, employee, servant, agent or broker of Federal/Chubb Insurance Company or Wachovia Davis Baldwin for claims which arise out of the claims referenced in Sections 3(d)-(e) below, including, but not limited to, any claims which may be made directly or indirectly to satisfy the $1.8 million judgment awarded by the Court in the Litigation, and further provided that nothing contained herein shall operate to release any obligations of the parties to this Agreement arising under this Agreement.

Additionally, IMC agreed to assign Holman and Toomey "all its rights, including its causes of action, which rights IMC may have under or because of the existence of [the Policy] . . . to secure indemnification sufficient to satisfy" the $1.8 million judgment.

Holman and Toomey subsequently brought suit against Wachovia. Pursuant to IMC's assignment of potential claims to them, they allege (1) that Wachovia breached fiduciary duties owed to IMC, and (2) that Wachovia was negligent in its dealings with IMC. They also allege direct claims against Wachovia alleging (3) intentional interference with their rights under their employment contracts; and (4) breach of fiduciary duties allegedly owed by Wachovia directly to them.

After trial, the district court granted Wachovia judgment as a matter of law on all claims except the count for breach of fiduciary duties owed by Wachovia to IMC, which was submitted to the jury. The jury returned a verdict of $1,069,200 in favor of Holman and Toomey on that claim. Wachovia now appeals, and Holman and Toomey cross-appeal.

On appeal, Wachovia argues that the district court erred because: (1) Holman and Toomey's underlying claims against IMC had been unconditionally released and thus, because IMC had no liability, Wachovia could not be liable; (2) a breach of fiduciary duty is a personal claim that cannot be assigned; and (3) Holman and Toomey should not be allowed to receive attorney's fees on behalf of IMC where IMC failed to assign attorney's fees to Holman and Toomey, and where Holman and Toomey failed to prove the specific amount of attorney's fees incurred by IMC.

On cross-appeal, Holman and Toomey argue that the district court erred in granting judgment as a matter of law to Wachovia on their claims.


We note initially that the issues raised by Wachovia on appeal are properly before us for review.2 In this diversity action, neither party contests the applicability of Florida law. Because we find that dispositive questions regarding both (1) Holman and Toomey's release of IMC and (2) the assignability of a claim for breach of fiduciary duty are unsettled under Florida law, we certify two questions to the Supreme Court of Florida pursuant to Fla. Stat. § 25.0313 and Fla. R.App. P. 9.150(a).4

A. Simultaneous release of IMC and assignment of IMC's causes of action against Wachovia to Holman and Toomey

A central issue in this appeal is whether the district court was correct in allowing Holman and Toomey's claim against Wachovia for breach of fiduciary duty to survive Holman and Toomey's release of IMC. Wachovia argues that the court erred because "the very Settlement Agreement by which Holman and Toomey acquired this claim also extinguished it, by releasing IMC from liability." Holman and Toomey respond that the same settlement agreement, by simultaneously reserving their rights to pursue Wachovia and others for their unpaid judgment against IMC, expressly did not release Wachovia from suit.5

While both parties point us to relevant Florida case law, we have found no precedential authority on this particular issue in this context. In Fidelity & Casualty Co. of New York v. Cope, 462 So.2d 459 (Fla. 1985), for example, the Florida Supreme Court held, in the context of a personal injury tort case, that "absent a prior assignment of the cause of action, once an injured party has released the tortfeasor from all liability, or has satisfied the underlying judgment, no such action may be maintained." Id. at 459 (emphasis added). In Cope, the injured party in a vehicle accident secured a $100,000 judgment against two insurance companies, Hartford and Fidelity, who insured the driver and owner of the vehicle, respectively. Each company paid its policy limit of $10,000. Id. at 460. Cope then brought an excess judgment action against Hartford, based on its bad faith failure to settle. Id. Hartford settled this action for $50,000 in return for Cope's execution of a release and a satisfaction of judgment in its favor and in favor of both the owner and driver of the vehicle. Id. Fidelity was not named in this release. Cope then filed another suit for bad faith failure to settle against Fidelity, for the $30,000 which remained unpaid on the final judgment. Id. After a bench trial, the trial court found Fidelity liable for $30,000 and rejected Fidelity's argument that Cope's release in favor of Fidelity's insured barred any subsequent bad faith action. Id. The Supreme Court of Florida reversed, noting that "if an excess judgment has been satisfied, absent an assignment of that cause of action prior to satisfaction, a third party cannot maintain action for a breach of duty between an insurer and its insured." Id. at 461 (emphasis added).

In Rosen v. Florida Insurance Guaranty Ass'n, 802 So.2d 291 (Fla.2001), the Supreme Court of Florida...

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