Wesco Ins. Co. v. Roderick Linton Belfance LLP

• Decision Date: 19 September 2018
• Docket Number: CASE NO. 1:17CV1813
• Parties: WESCO INSURANCE COMPANY, Plaintiff, v. RODERICK LINTON BELFANCE LLP, et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

WESCO INSURANCE COMPANY, Plaintiff, v. RODERICK LINTON BELFANCE LLP, et al., Defendants.

CASE NO. 1:17CV1813

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

September 19, 2018

PEARSON, J.

JUDGE BENITA Y. PEARSON

MEMORANDUM OF OPINION AND ORDER

[Resolving ECF Nos. 53, 55, 56]

Pending are cross-motions for summary judgment filed by Defendants Roderick Linton Belfance, LLP ("RLB") and Kristopher Immel (collectively, "RLB Defendants") (ECF No. 53), Plaintiff Wesco Insurance Company ("Wesco") (ECF No. 55), and Defendants Jason D. Wallace and Daniel R. Bache (ECF No. 56).

Wesco initiated this action for a declaratory judgment against Defendants RLB, Immel, Wallace, and Bache to determine whether Wesco had a duty to defend or indemnify Defendants in several actions filed against them under the Individuals with Disabilities Education Act ("IDEA") fee-shifting provision, 20 U.S.C. § 1415(i)(3)(B)(II) and (III).¹ The parties have filedmemoranda in opposition. ECF Nos. 58, 59, 60, and 61. They have also filed replies. ECF Nos. 62, 63, and 64. The Court has been advised, having reviewed the record, the parties' briefs, and applicable law. For the reasons that follow, Plaintiff's motion, ECF No. 55, is granted, and Defendants RLB, Immel, Wallace, and Bache's motions, ECF Nos. 53 and 56, are denied.

I. Factual and Procedural Background²

Wesco issued Defendant RLB two Lawyers Professional Liability insurance policies that covered individual Defendants Immel, Wallace, and Bache who were employed by RLB as employees or independent contractors for certain compensable injuries during the insured periods. ECF Nos. 51-8, 51-9. The policies at issue in the present action were valid from June 14, 2015, to June 14, 2016 (the "2015 Policy"), and June 14, 2016, to June 14, 2017 (the "2016 Policy") (hereinafter individually a "Policy" or collectively the "Policies"). The Policies provide, in part:

INSURING AGREEMENT

A. Coverage

The Company [Wesco] will pay on behalf of the Insured sums in excess of the deductible that the Insured shall become legally obligated to pay as damages because of a claim that is first made against the Insured and reported to the Company during the policy period or any Extended Reporting Period arising out of an act or omission in the performance of legal services by the Insured or by any person for whom the Insured is legally liable, provided that:

1. prior to the inception date of the policy period, the Insured did not give notice under any other insurance policy of such claim or related claim or such act or omission or related act or omission; and

2. prior to the inception date of the first policy, or if this policy has been continuously renewed, prior to the inception date of the first policy issued by the Company, no Insured knew of or could reasonably have foreseen that any such act or omission, or related act or omission, might be expected to be the basis of a claim.

The Company shall also pay claim expenses in connection with such claim.

B. Defense

The Company shall have the right and duty to defend, subject to and as part of the Limits of Liability, any claim against the Insured seeking damages which are payable under the terms of this Policy even if any of the allegations of the claim are groundless, false or fraudulent.

ECF Nos. 51-8 at PageID#: 1291; 51-9 at PageID#: 1316 (emphasis added). The Policies define "damages" to mean "judgments, awards and settlement if negotiated with the assistance and approval of the Company," and they expressly exclude "sanctions" from the definition. ECF No. 51-8 at PageID#: 1292-93; 51-9 at PageID#: 1317-18.

The Akron Board of Education (the "Akron Board"), Nordonia Hills City School District Board of Education (the "Nordonia Hills Board"), Solon City School District Board of Education (the "Solon Board"), and Cleveland Heights University Heights City School District Board ofEducation (the "Cleveland Heights Board") (collectively the "School Districts") filed separate complaints for recovery of fees pursuant to IDEA, 20 U.S.C. § 1415(i)(3)(B)(II) and (III) (the "IDEA fee-shifting provision"), against Defendants RLB, Immel, Wallace, and Bache, alleging that Defendants filed IDEA due process complaints that were frivolous, unreasonable, and without foundation, and that the claims asserted therein were based on factually erroneous allegations.³ ECF No. 55-1 at PageID#: 1551-58. In turn, Defendants RLB, Immel, Wallace, and Bache sought for Wesco to provide a defense to the School Districts' lawsuits (and indemnification if necessary) pursuant to the 2015 and 2016 Policies.^{4 5} See ECF Nos. 53 and 56. They also argue that Wesco's failure to defend and indemnify is a breach of contract.

In short, three motions for summary judgment are pending. Wesco asks for a declaration that it is not obligated to defend and indemnify any of the Defendants. ECF No. 55. Defendants RLB and Immel seek the opposite declaration against Wesco as to the Akron and Solon lawsuits⁶ and to recover from Wesco for an alleged breach of their insurance contract. ECF No. 53. Defendants Wallace and Bache seek a declaration insisting that Wesco defend and indemnify them as to all remaining School District lawsuits and to recover from Wesco for an alleged breach of their insurance contract. ECF No. 56.⁷

II. Standard of Review

Summary judgment is appropriately granted when the pleadings, the discovery and disclosure materials on file, and any affidavits show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. Pro. 56(a); see also Johnson v. Karnes, 398 F.3d 868, 873 (6th Cir. 2005). The moving party is not required to file affidavits or other similar materials negating a claim on which its opponent bears theburden of proof, so long as the movant relies upon the absence of the essential element in the pleadings, depositions, answers to interrogatories, and admissions on file. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party must "show that the non-moving party has failed to establish an essential element of his case upon which he would bear the ultimate burden of proof at trial." Guarino v. Brookfield Twp. Trustees., 980 F.2d 399, 403 (6th Cir. 1992).

Once the movant makes a properly supported motion, the burden shifts to the non-moving party to demonstrate the existence of a genuine dispute. An opposing party may not simply rely on its pleadings; rather, it must "produce evidence that results in a conflict of material fact to be resolved by a jury." Cox v. Ky. Dep't of Transp., 53 F.3d 146, 150 (6th Cir. 1995). To defeat the motion, the non-moving party must "show that there is doubt as to the material facts and that the record, taken as a whole, does not lead to a judgment for the movant." Guarino, 980 F.2d at 403. In reviewing a motion for summary judgment, the Court views the evidence in the light most favorable to the non-moving party when deciding whether a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970).

"The mere existence of some factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment . . . ." Scott v. Harris, 550 U.S. 372, 380 (2007) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)). The fact under dispute must be "material," and the dispute itself must be "genuine." A fact is "material" only if its resolution will affect the outcome of the lawsuit. Scott, 550 U.S. at 380. In determining whether a factual issue is "genuine," the Court assesses whether the evidence is suchthat a reasonable jury could find that the non-moving party is entitled to a verdict. Id. ("[Summary judgment] will not lie . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.")

This standard of review does not differ when reviewing cross-motions for summary judgment rather than a motion filed by only one party. U.S. SEC v. Sierra Brokerage Servs., Inc., 712 F.3d 321, 327 (6th Cir. 2013).

III. Law and Analysis

The Court first considers whether the recovery sought by the School Districts constitutes "damages" under the Policies. Put briefly, if the attorney-fee recovery sought by the School Districts is appropriately classified as "damages," then it is expressly contemplated by the insurance Policies. If the attorney-fee recovery sought by the School Districts is better classified as "sanctions," then the Policies expressly exclude it from coverage.

A. The IDEA Fee-Shifting Provision

Under IDEA, a school district can recover attorney fees and costs from an attorney who files a complaint that is "frivolous, unreasonable, or without foundation" or "continued to litigate after the litigation clearly became frivolous, unreasonable, or without foundation."⁸ 20 U.S.C. § 1415(i)(3)(B)(i)(II). It can also recover attorney fees and costs from the student's parents or fromtheir attorney if the suit was presented for "any improper purpose, such as to harass, to cause unnecessary delay, or to needlessly increase the cost of litigation." Id. § 1415(i)(3)(B)(i)(III).

"IDEA's fee-shifting provision is to be interpreted consistent with 42 U.S.C. § 1988, the attorney-fees provision for civil rights actions." Wikol ex rel Wikol v. Birmingham Pub. Sch. Bd. of Educ., 360 F.3d 604, 611 (6th Cir. 2004) (citing Phelan v. Bell, 8 F.3d 369, 373 (6th Cir. 1993). It is well settled that, under § 1988, a defendant may recover attorney fees from a plaintiff only when the suit was "frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith." Riddle v. Egensperger, 266 F.3d 542, 547 (6th Cir. 2001) (citing Wayne v. Village of Sebring, 36 F.3d 517, 530 (6th Cir. 1994). "An award of attorney's fees against a losing plaintiff in a civil rights action is an extreme sanction, and...