United States District Court, S.D. New York
WILLIAM L. McBURNIE, Plaintiff,
DANE KELLER RUTLEDGE, ESQ., MARSH & McLENNAN COMPANIES, INC., MARSH INC., and MARSH USA INC., Defendants.
OPINION AND ORDER
J. PAUL OETKEN, District Judge.
Plaintiff William L. McBurnie brings this diversity action against Defendants Dane Keller Rutledge ("Rutledge"), as well as Marsh & McLennan Companies, Inc., Marsh Inc., and Marsh USA Inc. (collectively "Marsh"), alleging various causes of actions stemming from Marsh's agreement to indemnify McBurnie against the costs of defending a criminal prosecution. Rutledge and Marsh now move to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6); McBurnie moves for leave to amend the Complaint under Federal Rule of Civil Procedure 15; and Rutledge moves for sanctions under Federal Rule of Civil Procedure 11. For the reasons that follow, Rutledge's and Marsh's motions to dismiss are granted, McBurnie's motion for leave to amend is denied, and decision is reserved on Rutledge's motion for sanctions.
From 1997 to 2005, McBurnie worked for Marsh, a global insurance broker. (Dkt. No. 7, First Amended Complaint ¶ 11.) McBurnie worked in Marsh's excess casualty division, which, starting in 2004, became the subject of an investigation by the New York Attorney General ("NYAG"). (¶ 13); see also Gilman v. Marsh & McLennan Cos., No. 10-CV-8158 (JPO), 2015 WL 321827, at *1 (S.D.N.Y. Jan. 26, 2015) (Oetken, J.). The investigation centered on contingent commission practices that the NYAG alleged were in violation of New York State securities and antitrust regulations. (¶¶ 13-14.) McBurnie cooperated with the NYAG investigation and Marsh's internal investigation of the matter. (¶¶ 16-18.) Despite his contention that he had refused to place illegal bids-a contention for which he offered several emails as evidence (¶ 17)-McBurnie was fired on February 8, 2005 (¶ 20).
In early September 2005, McBurnie learned that he was about to be criminally indicted in connection with the NYAG investigation. (¶ 23.) He voluntarily surrendered for arrest and processing on September 15, 2005, the same day his indictment was announced by the NYAG. (¶¶ 24-25.) On October 15, 2005, McBurnie hired Rutledge, his long-time friend, to represent him. (¶ 27.) Pursuant to Marsh's bylaws, Marsh had agreed to indemnify McBurnie against "all expense, liability and loss, (including attorneys' fees, ...) reasonably incurred or suffered" in connection with his prosecution and to "to pay expenses incurred by McBurnie in defending any such proceeding in advance of its final disposition." (¶¶ 28(a), 28(b) (ellipsis in original; internal quotation marks omitted).) Marsh sent Rutledge an engagement letter that specified that he was being hired to "to protect and vigorously defend Mr. McBurnie's interests, " but that he also "owes a concomitant duty to [Marsh]." (¶ 30 (internal quotation marks omitted).) A few months later, because McBurnie was concerned that "the only written agreement... addressing Rutledge's representation of McBurnie was not an agreement between Rutledge and McBurnie, but rather was an agreement between Rutledge and McBurnie's indemnitor and former employer, Marsh, " McBurnie signed an attorney retainer agreement with Rutledge. (¶¶ 36-37.) At no point did Rutledge explain "the potential for conflicts arising from his dual engagement." (¶ 38.)
Soon after Rutledge was engaged, Marsh became concerned about Rutledge's bills. A Marsh employee emailed McBurnie to note that the invoices Rutledge was submitting made him "higher paid than any of the attorneys [representing other Marsh employees], higher even that the one [Marsh] got for former President and Chief Operating Officer Roger Egan." (¶ 40 (internal brackets omitted).) In December 2006, Rutledge sent Marsh eleven invoices totaling $1, 750, 973.47 for services rendered between January 2006 and November 2006. (¶ 43.) After some negotiation, Marsh agreed to pay $1, 074, 993.72, but imposed a $50, 000-per-month cap on Rutledge's fees going forward. (¶ 45.)
By late March 2010, Marsh had paid Rutledge a total of around $3, 100, 000 to represent McBurnie. Still, Rutledge claimed that Marsh owed him an additional $3, 200, 000 in unpaid invoices. Marsh took umbrage at this amount. It offered, instead, "to approve and process for payment... the total aggregate amount of $412, 000, provided that it is clearly understood and agreed-in writing-that this payment (and Marsh's prior payments of approximately $3.1 million) are in complete satisfaction of all billings to Mr. McBurnie for fees and disbursements, and all requests for advancement by Mr. McBurnie from Marsh." (¶ 47 (internal quotation mark omitted).) Rutledge and Marsh began to negotiate the outstanding balance. During these negotiations, Marsh insisted that any settlement of the fee dispute with Rutledge would also involve McBurnie's waiver of his right to bring any civil actions against Marsh. (¶ 50.) McBurnie refused to waive his own right to bring suit against Marsh. ( Id. )
In December 2010, Marsh sent Rutledge a draft settlement agreement under which Marsh would agree to pay Rutledge $2, 300, 000 in full satisfaction of his outstanding demand for legal fees. (¶ 51.) But the draft settlement also included a waiver by McBurnie of all his potential claims against Marsh. To this McBurnie "strenuously objected." (¶ 54.) McBurnie told Rutledge that he could do one of the following two things: "(i) achieve whatever settlement he could solely for his fees and without any waiver by McBurnie of rights to bring subsequent legal action against Marsh; or (ii) determine what portion of the $2, 300, 000 settlement amount was for Rutledge's reasonable legal fees and what portion was a settlement with McBurnie for his agreement not to pursue certain civil actions against Marsh." (¶ 53.)
Ultimately, because he felt that their interests had diverged, McBurnie fired Rutledge in March 2011. (¶ 64.) A few months later, Rutledge signed a settlement agreement with Marsh extinguishing his own claims to unpaid fees in exchange for $2, 300, 000. McBurnie did not sign the agreement. The agreement contained the following language regarding McBurnie's claims:
To the best of his knowledge and belief, Rutledge warrants and agrees that the payment of the Settlement Amount extinguishes any and all past or potential claims that McBurnie has or might make against Marsh & McLennan Companies, Inc, Marsh Inc., Marsh USA, Inc. and each of its and their parents, subsidiaries, affiliates, predecessors, successors and assigns, and its and their current and former directors, insurers, officers, employees, attorneys and agents, and their successors and assigns (the "Marsh Released Parties"). Rutledge represents he has no current authority to act on behalf of McBurnie.
McBurnie brings causes of action for breach of contract and conversion against Marsh and Rutledge, and he alleges a breach of fiduciary duty against Rutledge alone. Rutledge and Marsh move ...