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Star Insurance Co. v. Irvington Board of Education

United States District Court, D. New Jersey

December 6, 2019

STAR INSURANCE COMPANY, Plaintiff,
v.
IRVINGTON BOARD OF EDUCATION; HUNT, HAMLIN & RIDLEY; AND RONALD HUNT, ESQ., Defendants.

          OPINION

          Kevin McNulty United States District Judge.

         Now before the Court is the motion of defendants Hunt, Hamlin & Ridley and Ronald Hunt to dismiss of the complaint filed by plaintiff, Star Insurance Company ("Star"). The complaint seeks to recover funds Star expended to settle a personal injury lawsuit. That underlying lawsuit was Destiny Dickens, an infant, by her guardian ad litem Yvone Smith, and Yvone Smith, individually v. Irvington Board of Education, et al, docket No. ESX-L-4698-13 ( N.J.Super. Ct. Essex Co.) (the "Dickens Action").[1] In the Dickens Action, the plaintiffs sued the Irvington Board of Education (the "Board") for damages based on injuries Destiny Dickens sustained while attending Union Avenue Middle School in Irvington Township. Defendant Hunt, Hamlin & Ridley, by Defendant Ronald Hunt, Esq., represented the Board in the Dickens Action.

         The complaint filed by Star Insurance in this action asserts one cause of action against Mr. Hunt and Hunt, Hamlin 85 Ridley (the "Hunt Defendants") for legal malpractice. The allegation is essentially that these attorneys did not competently represent the Board in the state-court Dickens Action.

         Defendants now move pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss for failure to state a claim. (DE 7). Defendants also move to recover their attorney's fees and costs pursuant to N.J. Court Rule 4:42-9(a)(6). Plaintiff has filed a response in opposition to the motion. (DE 14).

         For the reasons explained herein, I will grant the Hunt Defendants' motion to dismiss without prejudice. I will deny defendants' motion for attorney fees and costs.

         I. Summary[2]

         The allegations of the complaint are assumed to be true for purposes of this motion only.

         Star issued a policy to the Board as the named insured, policy number CP 0641890, effective from 7/1/11 - 7/1/12 (the "Star Policy"). (Compl. ¶ 1).

         The Star Policy, which is not attached to the complaint, allegedly

contained a self-insured retention (the "SIR") in the amount of $250, 000. The SIR endorsement in the Star Policy required the Board to, inter alia: (i) accept any reasonable settlement offer within the SIR; and (ii) adequately defend any claims brought against the Board.

(Compl. ¶ 15). The Star Policy also required the Board to keep Star apprised of developments in the litigation and to cooperate with Star, something the Board allegedly failed to do. (Id. ¶¶ 16, 17).

         The complaint alleges that Star, as insurer, expended funds to settle the Dickens Action. The claim in that action was that Ms. Dickens, a minor at the time, was attending Union Avenue Middle School when she fell and broke her elbow. (Id. ¶ 10). The Star policy was in effect on the date of Ms. Dickens's fall. (Id. ¶ 13).

         Ms. Dickens sued the Board to recover damages arising from that mishap. In June 2017, the parties to the Dickens Action held an arbitration and Ms. Dickens was awarded $180, 000. (Id. ¶ 12). The Board however rejected that award and proceeded to trial, without notifying Star.[3] (Id.). At trial, the jury returned a verdict in favor of Ms. Dickens, awarding her $6 million. (Id. ¶ 17). The Board appealed. (Id. ¶ 18). Star participated in that appeal, subject to a reservation of rights. (Id. ¶ 19). While the appeal was pending, the parties held a mediation on October 30, 2018. (Id. ¶ 20). At the mediation, representatives of the Board directed the mediator to offer plaintiffs a single settlement offer: $1 million to resolve all claims. (Id.).

         Just before the mediator conveyed the $ 1 million offer, Star reached a separate agreement with the Board in which the insurer limited its contribution to the settlement to "25% of the amount of the $1 million settlement offer in excess of the unimpaired portion of the Board's SIR under the Star Policy." (Id. ¶ 21). Thus, Star's contribution was fixed at $212, 500 under what the complaint deems a "Settlement Funding Agreement." (Id. ¶ 22; see also ¶ 25). Ultimately, Ms. Dickens accepted the Board's $1 million settlement offer.'[4]

         Star asserts that it contributed $882, 562.10 to the settlement. The result was that Star paid $670, 062 in excess of what it agreed to pay under the Settlement Funding Agreement. (Id. ¶ 28).

         Only Count IV of the complaint-a claim of legal malpractice-is asserted against the Hunt Defendants. Count IV alleges that the Hunt Defendants, as attorneys, owed Star a duty when they represented the Board in the Dickens Action. That duty, Star asserts, was then breached when the Hunt Defendants (1) failed to move for summary judgment; (2) failed to make a motion for judgment as a matter of law under New Jersey Rule of Court 4:40-1 at the close of the plaintiffs' case; and (3) conceded a permanent injury at the time of trial. (Id. ¶¶ 11, 44, 45). Star asserts that these failures impaired any prospect of negotiating a reasonable settlement after entry of judgment, as well as the prospects for appeal. (Id. ¶ 46). Therefore, Star seeks to recover the entirety of what it paid to settle the Dickens Action: $882, 562.10, plus its legal fees.

         The Hunt Defendants now move to dismiss Count IV for failure to state a legal malpractice claim. See Fed.R.Civ.P. 12(b)(6). (DBr at 19-31). Defendants also contend that Star failed to comply with the notice requirements of the New Jersey Tort Claims Act. (Id. at 31-36). Finally, the Hunt Defendants move for an award of attorney fees and costs should they prevail on their motion to dismiss. (Id. at 36-37).

         II. Legal Standard on Motion to Dismiss

         Federal Rule of Civil Procedure 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, "a plaintiffs obligation to provide the 'grounds' of his 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell AtL Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (Rule 8 "requires a 'showing' rather than a blanket assertion of an entitlement to relief." (citation omitted)). Thus, the complaint's factual allegations must be sufficient to raise a plaintiffs right to relief above a speculative level, so that a claim is "plausible on its face." Twombly, 550 U.S. at 570; see also West Run Student Hous. Assocs., LLC v. Huntington Nat. Bank, 712 F.3d 165, 169 (3d Cir. 2013).

         That facial-plausibility standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a 'probability requirement'... it asks for more than a sheer possibility." Id.

         Rule 12(b)(6) provides for the dismissal of a complaint if it fails to state a claim upon which relief can be granted. The defendant, as the moving party, bears the burden of showing that no claim has been stated. Animal Science Products, Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011). For the purposes of a motion to dismiss, the facts alleged in the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. New Jersey Carpenters & the Trustees Thereof v. Tishman Const, Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).

         When deciding a motion to dismiss, a court typically does not consider matters outside the pleadings. However, a court may consider documents that are "integral to or explicitly relied upon in the complaint" or any "undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiffs claims are based on the document[.]" In re Rockefeller Ctr. Props., Inc. Sec. Litig., 184 F.3d 280, 287 (3d Cir. 1999) (emphasis and citations omitted); accord In re Asbestos Prods. Liab. Litig. (No. VI), 822 F.3d 125, 133 n.7 (3d Cir. 2016); Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) ("To decide a motion to dismiss, courts generally consider only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record"); Arcand v. Brother Int'l Corp., 673 F.Supp.2d 282, 292 (D.N.J. 2009) (court may consider documents referenced in complaint that are essential to plaintiffs claim). The rationale for that exception is apparent: "When a complaint relies on a document. . . the plaintiff obviously is on notice of the contents the document, and the need for a chance to refute evidence is greatly diminished." Pension Benefit Guar. Corp. v. White Consol Indus., Inc., 998 F.2d 1192, 1196-97 (3d Cir. 1993). Thus reliance on such documents does not convert a motion to dismiss into a motion for summary judgment.

         III. Discussion

         a. Legal Malpractice Claim (Count IV)

         i. Standard

         "Legal malpractice is a variation on the tort of negligence." Garcia v. Kozlov, Seaton, Romanini & Brooks, P.C., 845 A.2d 602, 611 (2004). "Like most professionals, lawyers owe a duty to their clients to provide their services with reasonable knowledge, skill, and diligence .... *What constitutes a reasonable degree of care is not to be considered in a vacuum but with reference to the type of service the attorney undertakes to perform."' Ziegelheim v. Apollo, 607 A.2d 1298, 1303 (1992) (citing St. Pius X House of Retreats v. Diocese of Camden, 443 A.2d 1052 (1982)).

         To present a prima facie legal malpractice claim, a plaintiff must establish the following elements: "(1) the existence of an attorney-client relationship creating a duty of care by the defendant attorney, (2) the breach of that duty by the defendant, and (3) proximate causation of the damages claimed by the plaintiff." Jerista v. Murray, 883 A.2d 350, 359 (2005) (internal quotation omitted). In general, an attorney owes a duty to his client to perform diligently and with a high degree of "fidelity and good faith." Gilles v. Wiley, Malehorn & Sirota, 783 A.2d 756, 760 ( N.J.Super.Ct.App.Div. 2001). The scope of an attorney's duty is to exercise "'that degree of reasonable knowledge and skill that lawyers of ordinary ability and skill possess and exercise."' Id. (quoting St. Pius X, 443 A.2d at 1060-61).

         New Jersey courts are generally reluctant to allow those not in privity of contract with an attorney to maintain a malpractice action against that attorney. See Banco Popular N. Am. v. Gandi,876 A.2d 253, 264 (2005) (citation omitted). In limited circumstances, however, attorneys may owe a duty of care to non-clients. Petrillo v. Bachenberg,655 A.2d 1354, 1359-60 (1995). A lawyer may thus be liable to a third party "where an independent duty is owed." Estateof Fitzgerald v. Linnus,765 ...


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