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HARLEYSVILLE WORCESTER INSURANCE COMPANY v. HURWITZ

United States District Court, S.D. New York


April 4, 2005.

HARLEYSVILLE WORCESTER INSURANCE COMPANY, Plaintiff,
v.
ADAM M. HURWITZ and SILVERSTEIN & HURWITZ, P.C., Defendants.

The opinion of the court was delivered by: ROBERT CARTER, Senior District Judge

OPINION

In the current matter before the court, plaintiff, Harleysville Worcester Insurance Company, alleges that defendants, Adam M. Hurwitz in his individual capacity and his firm Silverstein & Hurwitz, P.C., committed legal malpractice in the representation of plaintiff's insured, Intedge Industries, Inc., and asks the court to enter partial summary judgment as to defendants' liability. Defendants counter by cross-moving for summary judgment and, additionally, dismissal of plaintiff's subrogation claim as duplicative of its legal malpractice claim. Defendants also seek leave pursuant to Rule 14(a), F.R.Civ.P., to serve a summons and third-party complaint on proposed third-party defendants, Joseph Redd in his individual capacity and his firm O'Connor, Redd, Gollihue & Sklarin, LLP.

  FACTS

  This legal malpractice action stems from defendants' representation of plaintiff's insured. Intedge Industries, Inc. ("Intedge"), in a product liability action brought in 1999 by Lidia Sokal in the United States District Court for the Eastern District of New York. In connection with this underlying action, (hereinafter "Sokal Action"), Sokal sought money damages for injuries she sustained when her right hand and arm were pulled into the chopping head attachment to a meat grinding machine. Sokal alleged causes of action against Hobart Manufacturing Company, the alleged manufacturer of the mixer, and Intedge, the alleged manufacturer of the component chopping head attachment, for negligence, strict products liability and breach of warranty. Pursuant to a policy of insurance issued to Intedge, Harleysville Worcester Insurance Company — the current plaintiff — retained defendants, Adam M. Hurwitz and his law firm Silverstein & Hurwitz, P.C. (collectively "S&H"), to serve as Intedge's defense counsel in the Sokal action.

  Defendants' actions as counsel for plaintiff's insured, Intedge, are the focus of the current litigation. On April 18, 2000, counsel for Sokal served defendants with a notice to admit in the underlying action which required defendants, among other things, to admit or deny whether Intedge manufactured the subject chopping head attachment. Defendants, however, failed to serve a response to Sokal's notice to admit within the allotted time period. As a result of defendants' failure to timely respond, the trial court sanctioned Intedge by entering an order barring it from introducing any evidence, in the trial of the action, regarding any other specific manufacturers of the subject chopping head attachment, though Intedge could still deny its own involvement as the manufacturer. Though the foregoing is undisputed — and defendants recognize that S&H's failure to respond was a departure from the applicable standard of care — plaintiff and defendants disagree as to what repercussions, if any, this order of preclusion had on plaintiff's insured's defense.

  In addition to defendants' failure to respond to the notice to admit, plaintiff alleges that S&H committed a number of other negligent acts in their representation of Intedge, all of which defendants dispute. The most contentious of these is defendants' decision to agree to the entry of a summary judgment motion in favor of Intedge's co-defendant, Hobart, the alleged manufacturer of the mixer.*fn1 Plaintiff claims that by releasing Hobart from the action, Intedge's ability to shift responsibility to a co-defendant was precluded and that, at the very least, defendants should have consulted with Intedge before agreeing to Hobart's dismissal. Furthermore, plaintiff alleges that defendants' failure to object to the entry of summary judgment resulted from counsel's failure to conduct adequate research and discovery, all of which left defendants, according to plaintiff, unprepared to contest the motion. Defendants' for their part, defend the decision as a proper exercise of their discretion as counsel in shaping a litigation strategy and note that counsel for Sokal also did not oppose the entry of summary judgment.

  In addition, plaintiff offers as further evidence of defendants' negligence, counsel's failure to: designate an expert or rebuttal expert witness in support of plaintiff's insured's defenses; serve written discovery requests on co-defendant Hobart and make initial disclosures pursuant to Rule 26(a), F.R.Civ.P; and, communicate with plaintiff and Intedge regarding allegedly crucial aspects of the litigation. As previously stated, defendants deny any negligence regarding these decisions and offer exculpatory evidence for their (in) actions, including that they attempted to find an expert but were unsuccessful in doing so and that the discovery requests served by co-defendant Hobart upon Sokal were sufficient.

  As a result of plaintiff's dissatisfaction with defendants' performance, S&H was dismissed as counsel in September 2001, whereupon plaintiff retained Joseph Redd and his firm O'Connor & O'Connor, LLP (now O'Connor, Redd, Gollihue & Sklarin, LLP) as new counsel. Citing the adverse impact of defendants' errors and omissions upon Intedge's available defenses, Intedge's new counsel suggested that plaintiff settle the Sokal matter. In June 2002, plaintiff settled with Sokal, on behalf of Intedge, for a lump sum payment of $900,000.

  Plaintiff claims that as a result of defendants' negligence, Intedge's defenses in the Sokal action were severely compromised and that plaintiff, as Intedge's insurer, was forced to pay Sokal an amount substantially higher than it would have otherwise paid had defendants properly discharged their duties. In order to recoup the losses allegedly caused by defendants' negligence, plaintiff filed the legal malpractice and subrogation claims currently before the court.

  JURISDICTION AND VENUE

  This court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1332 because plaintiff, Harleysville Worcester Insurance Company, is a citizen of Massachusetts and defendants, S&H, are citizens of New York, and the amount in controversy exceeds the sum of $75,000, exclusive of costs and interests. Venue is proper in the Southern District of New York pursuant to 28 U.S.C. § 1391.

  DISCUSSION

  Summary Judgment Motions Standard for Summary Judgment

  A moving party is entitled to summary judgment if the court determines that there exists no genuine issue of material fact to be tried and the party is entitled to judgment as a matter of law. See Rule 56, F.R.Civ.P; see also Holt v. KMI-Continental, Inc., 95 F.3d 123, 128 (2d Cir. 1996); Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the burden of showing that no genuine issue of material fact exists. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).

  The court's function in adjudicating a summary judgment motion is not to try issues of fact, but instead to determine whether such issues are present. See Sutera v. Schering Corp., 73 F.3d 13, 15-16 (2d Cir. 1995). In determining whether genuine issues of material fact exist, the court must resolve all ambiguities and draw all justifiable inferences in favor of the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also Holt, 95 F.3d at 129.

  Defendants' Motion for Summary Judgment

  Under New York law,*fn2 to prevail on a claim for legal malpractice, a plaintiff must prove that his attorney failed to exercise "that degree of care, skill and diligence commonly possessed and exercised by an ordinary member of the legal community, that such negligence was the proximate cause of the actual damages sustained by plaintiff, and that but for the attorney's negligence, plaintiff would have been successful in the underlying action." Carney v. Philippone, 332 F.3d 163, 167 (2d Cir. 2003) (citation omitted); see also Pistilli v. Gandin, 780 N.Y.S.2d 293, 293 (2d Dep't 2004); Reibman v. Senie, 756 N.Y.S.2d 164, 164 (1st Dep't 2003). Defendants cross-claim for summary judgment claiming that plaintiff is unable to prove the elements of its legal malpractice claim. See Ehlinger v. Ruberti, Girvin & Ferlazzo, P.C., 758 N.Y.S.2d 195, 196 (3d Dep't 2003) (to succeed on a summary judgment motion in a legal malpractice claim, a defendant is required to "present evidence in admissible form establishing that plaintiff is unable to prove at least one of these elements.") (citation omitted).

  Thus, defendants bear the burden of showing that plaintiff is unable to prove that (1) S&H "failed to exercise the skill commonly exercised by an ordinary member of the legal community" in their representation of Intedge; (2) that such negligence proximately caused Intedge's legal options to be significantly foreclosed and forced a settlement at an amount higher than otherwise would have been the case; and (3) but for that negligence, Intedge would have been successful in the underlying action or been able to settle for a lower amount.

  Defendants have failed to meet this burden. Indeed, plaintiff has submitted sufficient evidence to overcome S&H's motion for summary judgment. Plaintiff alleges that defendants committed several acts of negligence in their representation of Intedge in the Sokal action, including, the failure to propound written discovery or make Rule 26. F.R.Civ.P. disclosures, the failure to designate any experts, the failure to communicate with plaintiff or Intedge regarding crucial litigation decisions, the failure to oppose Hobart's motion for summary judgment, and perhaps most importantly, the failure to respond to Sokal's notice to admit. Plaintiff has submitted declarations from both its and defendants' legal expert opining that at least one of these failures constituted a departure from the ordinary duty of care, and that other such infractions may have been committed as well.*fn3 See Hatfield v. Herz, 109 F.Supp.2d 174, 179 (S.D.N.Y. 2000) (Leisure, J.) ("The courts generally require malpractice plaintiffs to proffer expert opinion evidence on the duty of care to meet their burden of proof in opposition to a properly supported summary judgment motion.") (citation omitted). Whether these failures ultimately amount to negligence on the defendants' part is a question of fact for the jury to determine. See Polin v. Wisehart & Koch, 2004 WL 1944721, *5 (S.D.N.Y.) (Cote, J.).

  Moreover, plaintiff has presented evidence sufficient that a jury could rationally decide that defendants' alleged negligence in their representation of Intedge was the proximate cause of plaintiff's damages and that, but for these failures, a settlement in a lower amount could have been obtained. Plaintiff submitted the declaration of Joseph T. Redd, counsel retained by Harleysville to replace S&H, stating that due to defendants' prior negligent handling of the Sokal action, counsel's ability to mount a proper defense on Intedge's behalf was severely impaired. Redd Decl. ¶ 9. Plaintiff's expert, J. Nicholas Suhr, also asserts in his declaration that but for defendants' "acts, errors and omissions . . . Harleysville would have paid an amount at least fifty (50) percent less than the amount ultimately paid by Harleysville to settle the Sokal action on behalf of Intedge." Suhr Decl. ¶ 9. In addition, plaintiff have put forward the transcript of proceedings in an action in Mississippi federal court — the Nichols action — involving similar claims, similar defenses, and the same two defendants as in the Sokal action — Intedge and Hobart, in which the court permitted Intedge to introduce evidence regarding other potential manufacturers of the subject chopping head attachment and in which Intedge was eventually acquitted of all liability.*fn4 Plaintiff claims that were it not for defendants' failure to respond to the notice to admit, a similar result would have been possible in the Sokal action. Resolving all ambiguities and drawing all justifiable inferences in favor of the non-moving party as required, the court believes that, taken as a whole, plaintiff's proffered evidence is sufficient to overcome defendants' summary judgment motion. As such defendants' motion for summary judgment is denied.

  Plaintiff's Motion for Partial Summary Judgment

  Plaintiff asks the court to enter partial summary judgment as to defendants' liability, leaving the amount and extent of plaintiff's damages as the only issue in dispute for trial. Such a grant would be inappropriate. As previously stated, whether defendants' failures amount to negligence is ultimately a question of fact for the jury to determine. See Polin, 2004 WL 1944721, *5. All but one of the alleged breaches are vigorously contested by defendants and even as to the one departure which is not contested — the failure to respond timely to the notice to submit — the issue of "but for" causation needs to be established at trial. Defendants' liability hinges in large part on plaintiff's ability to prove the proximate cause element of the legal malpractice claim and the court refuses to relieve plaintiff from its burden through an entry of partial summary judgment. Plaintiff's motion is therefore denied.

  Subrogation Claim

  While defendants concede that plaintiff may maintain an action for legal malpractice, defendants seek dismissal of plaintiff's subrogation claim arguing that the doctrine of subrogation has no application in the case at bar and that it is duplicative of plaintiff's claim for legal malpractice. Both of these contentions are addressed in turn.

  It is well established that an insurer has a right of subrogation, or, in other words, that it can "stand in the shoes" of its insured to seek repayment from a third party whose wrongdoing caused the loss to the insured which the insurer was obligated to cover. Federal Ins. Co. v. Andersen & Co., 75 NY2d 366, 373-374. Under New York law, the doctrine of subrogation is to be "liberally applied for the protection of those who are its natural beneficiaries — insurers that have been compelled by contract to pay for the loss caused by the negligence of another." Winkelmann v. Excelsior Ins. Co., 85 N.Y.2d 577, 581. Defendants' argument that plaintiff was not obligated to cover losses occasioned by defendants' alleged legal malpractice is unavailing. Plaintiff, as Intedge's insurer, could not have denied coverage for Intedge's indemnity obligations arising out of the Sokal action. Were it to be established that defendants' negligence created or contributed to these indemnity obligations, the doctrine of subrogation would permit plaintiff to recover the losses occasioned by defendants' malpractice. Moreover, since federal courts applying New York law have held that excess insurers may bring legal malpractice claims against an insured's counsel based on the doctrine of equitable subrogation, Allstate Ins. Co. v. American Transit Ins. Co., 977 F.Supp. 197, 201 (E.D.N.Y., 1997), the court believes that an insurer may allege a claim for subrogation based on counsel's negligent representation of its insured.

  The court nonetheless agrees with defendants that, even if a claim for subrogation is possible under New York law, plaintiff's claim for subrogation is duplicative of its legal malpractice claim and must be dismissed. Plaintiff attempts to differentiate the two claims by contrasting the duty of care owed directly to plaintiff, which gives rise to the legal malpractice claim, and the duty of care owed to Intedge, which gives rise to the subrogation claim. However, "[c]ontrary to plaintiffs' assumption, it is not the theory behind a claim that determines whether [the claims are] duplicative. Nevelson v. Carro, Spanbock, Kaster & Cuiffo, 290 A.D.2d 399, 400, 736 N.Y.S.2d 668, 670 (N.Y.A.D. 1 Dept., 2002). In truth, the two claims are redundant. The claims arise from the same conduct — defendants' alleged acts of negligence — and involve no distinct damages. Cf. Mecca v. Shang, 258 A.D.2d 569, 570, 685 N.Y.S.2d 458 (2d Dep't 1999) (dismissing breach of fiduciary duty, negligent misrepresentation, gross negligence, and fraud claims "since these claims . . . arise from the same facts as [plaintiff's] legal malpractice claim and do not allege distinct damages"); see also Nevelson, 736 N.Y.S.2d 670 (dismissing breach of contract and breach of fiduciary duty claims as duplicative since they were "predicated on the same allegations and seek relief identical to that sought in the malpractice cause of action."). Thus, plaintiff's claim for subrogation must be dismissed as duplicative.

  Defendants' Request to Serve Third-Party Complaint

  Defendants seek leave pursuant to Rule 14(a), F.R.Civ.P., to serve a third-party complaint upon Joseph Redd, in his individual capacity, and O'Connor, Redd, Gollihue & Sklarin, LLP. Rule 14(a), F.R.Civ.P. "permits a defending party to implead another who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff." Bank of India v. Trendi Sportswear, Inc., 239 F.3d 428, 437 (2d Cir. 2000) (quoting Rule 14(a), F.R.Civ.P.). Under New York law, "[a]n attorney sued for malpractice is entitled to commence a third-party claim for contribution against a subsequent attorney whose negligence has contributed to or aggravated the plaintiff's damages. Hansen v. Brognano, 137 A.D.2d 880, 881, 524 N.Y.S.2d 862, 863 (N.Y.A.D. 3 Dept., 1988) (citing Schauer v. Joyce, 54 N.Y.2d 1, 5, 444 N.Y.S.2d 564, 429 N.E.2d 83 and Catania v. Lippman, 98 A.D.2d 826, 827, 470 N.Y.S.2d 487).

  In the case a bar, plaintiff is claiming that it was forced to pay more to settle the underlying products liability action because of the negligence of defendants. Defendants, in turn, are claiming that if plaintiff did indeed pay too much to settle the underlying case, then such damages were caused by the negligence of Joseph Redd and his firm once they assumed Intedge's representation. Specifically, defendants claim that Joseph Redd and his firm were negligent in their advice that the order of preclusion adversely impacted plaintiff's insured defense. In the wake of Hansen and Schauer, there is little doubt that such a claim is cognizable under New York law and that defendants may implead proposed third-party defendants Joseph Redd and O'Connor, Redd, Gollihue & Sklarin, LLP.

  CONCLUSION

  Defendants' motion for summary judgment is denied. Plaintiff's motion for partial summary judgment is denied. Plaintiff's claim for subrogation is dismissed as duplicative of its legal malpractice claim. Defendants have thirty days within which to serve proposed third-party defendants Joseph Redd and O'Connor, Redd, Gollihue & Sklarin, LLP.

  IT IS SO ORDERED.


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