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Evanston Insurance Company v. Van Syoc Chartered

March 12, 2012

EVANSTON INSURANCE COMPANY, PLAINTIFF,
v.
VAN SYOC CHARTERED, ET AL. DEFENDANTS.



The opinion of the court was delivered by: Hon. Jerome B. Simandle

OPINION

SIMANDLE, Chief Judge:

I. INTRODUCTION

This action is before the Court on the motion of Defendant Richard Press, Esq., joined by all co-defendants, to dismiss the Amended Complaint. [Docket Items 22, 23, 25, 28 & 29.] Plaintiff Evanston Insurance Company seeks a declaratory judgment that it owes no duty to defend or indemnify Defendants Van Syoc Chartered, Clifford Van Syoc, Esq., James E. Burden, Esq., and Sebastian Ionno, Esq. ("the Van Syoc Defendants") in an underlying malpractice action currently pending before the New Jersey Superior Court. Defendant Press, who is a plaintiff in the underlying action, argues that the Court should abstain from hearing this declaratory judgment action under the abstention doctrine articulated in Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942) and Wilton v. Seven Falls Co., 515 U.S. 277 (1995). Plaintiff opposes the motion, arguing that the Brillhart-Wilton doctrine does not apply in this circumstance for a number of reasons, including that the underlying malpractice action is not sufficiently parallel to the federal declaratory judgment action. For the reasons discussed below, the Court will grant Defendant's motion to dismiss without prejudice to refiling in the New Jersey Superior Court.

II. BACKGROUND

For the purposes of this motion, the parties do not dispute the essential relevant facts, which the Court has largely taken from Plaintiff's Amended Complaint. In brief, the instant declaratory judgment action seeks a declaration that Plaintiff Evanston Insurance Company does not owe a duty under a professional malpractice insurance policy to defend or indemnify certain attorney parties (the Van Syoc Defendants) in an underlying state malpractice action. The underlying malpractice action involves the representation of Defendant Cheryl Erhart by the Van Syoc Defendants in an appeal before the Third Circuit Court of Appeals in 2006-2008.

In November of 2000, Erhart sued the City of Atlantic City, New Jersey, and other defendants for damages related to claims of employment discrimination, which was shortly thereafter removed to the United States District Court for the District of New Jersey. See Erhart v. City of Atlantic City, Civ. No. 00-06209, 2006 WL 2385061 *1 (D.N.J. Aug., 17, 2006). In that action, Richard Press, Esq. (moving Defendant in the instant motion) acted as Erhart's attorney before the District Court. On October 12, 2004, Erhart won a jury verdict including a general damages award of $208,800 against Atlantic City. Id. A few days later, at a punitive damages trial, the jury awarded an additional $500,000 in punitive damages. Id. Atlantic City thereafter moved for a new trial, which the court granted as to damages only, and on March 22, 2006, the jury at the new trial returned a compensatory damages award in favor of Erhart in the amount of $50,000, and the jury awarded no punitive damages. Id.; Am. Compl. ¶ 16 [Docket Item 1.] Following further motion practice, the district court entered final judgment which included various additional awards of counsel fees and costs. Id. at *4-23; Am. Compl. ¶ 18.

Erhart thereafter allegedly decided to appeal the court's order granting a new trial and the lesser damages award; to that end she retained Defendant Clifford Van Syoc, Esq. and Defendant Van Syoc Chartered to represent her in her appeal to the Third Circuit. Am. Compl. ¶ 19. On August 24, 2007, the Third Circuit dismissed Erhart's appeal for failure to timely prosecute, allegedly due to Van Syoc's failure to file an appellate brief. Am. Compl. ¶¶ 22-23. On August 29, 2007, Press allegedly notified Van Syoc by letter of his and Erhart's intent to bring a claim against Van Syoc, apparently for malpractice, unless Van Syoc managed to vacate the dismissal, and requested that Van Syoc forward the letter to his insurance carrier, Evanston Insurance Company. Id. ¶ 24. Van Syoc allegedly did not forward the August 29, 2007, letter. Id. ¶ 39.

On October 2, 2007, Van Syoc submitted an application to renew the Van Syoc Firm's existing Lawyer's Professional Liability Policy with Evanston. Id. ¶ 32. The application allegedly contained a representation by Van Syoc that he was unaware of any "fact, error, omission, circumstances or situation that might provide grounds for any claim under the proposed insurance." Id. ¶¶ 33-34. Evanston renewed Van Syoc's policy on October 4, 2007, allegedly based in part on its reliance on Van Syoc's representation regarding the absence of any known claims. Id. ¶ 35. The renewed policy includes various exclusions for any claim made against an insured party under the policy of which the insured was aware prior to the effective date of the policy. Id. ¶¶ 36-38.

Meanwhile, Van Syoc, continuing to represent Erhart before the Third Circuit, filed various motions attempting to vacate the Circuit's order dismissing the appeal, the last of which was denied on July 2, 2008. Id. ¶ 29. On June 30, 2008, Press again advised Van Syoc to notify Evanston of his and Erhart's impending malpractice action. Id. ¶ 30. Van Syoc allegedly first notified Evanston of the claim on October 8, 2008. Id. ¶¶ 31, 39.

Erhart and Press filed their malpractice complaint against, inter alia, the Van Syoc Defendants on October 4, 2010 in the Superior Court of New Jersey, Camden County Law Division ("the underlying action"). See Docket Number CAM-L-005005-10.*fn1 Van Syoc notified Evanston of the existence of the summons and complaint by letter dated October 15, 2010. Am. Compl. ¶ 42. On November 17, 2010, Evanston notified the Van Syoc Defendants "that no coverage was available under the policy" for the malpractice action. Id. ¶ 45. Van Syoc appealed this denial of coverage, which Evanston affirmed on December 23, 2010. Id. ¶¶ 46-47.

Evanston then filed its declaratory judgment Complaint in the instant matter in this Court on December 28, 2010, and filed its Amended Complaint on December 31, 2010. [Docket Items 1 & 4.] The instant motion to dismiss was initially filed by Defendant Richard Press [Docket Item 22], though over the course of the following month, prior to Plaintiff's filing opposition, the other Defendants joined in the motion. [Docket Items 23, 25, 28, & 29.] In other words, all Defendants favor this Court's exercise of Brillhart-Wilton abstention so that this declaratory judgment action may proceed in state court in coordination with the related legal malpractice action.

III. DISCUSSION

A. Brillhart-Wilton Abstention Doctrine

This Court exercises diversity jurisdiction, 28 U.S.C. § 1332, solely pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a), as the sole relief sought in the Amended Complaint is the declaration of the parties' rights under an insurance policy. No monetary relief is sought, although it ...


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