ALPS Prop. v. Kalicki Collier, LLP

526 F.Supp.3d 805

ALPS PROPERTY & CASUALTY INSURANCE COMPANY, Plaintiff,

v.KALICKI COLLIER, LLP, et al., Defendants.and All Related Actions

Case No. 3:19-cv-00709-MMD-CLB

United States District Court, D. Nevada.

Signed March 17, 2021

Brooke H. McCarthy, Pro Hac Vice, Kevin D. Hartzell, Pro Hac Vice, Kutak Rock LLP, Omaha, NE, Douglas R. Brown, Lemons, Grundy & Eisenberg, Reno, NV, for Plaintiff.

William Ginn, Patrick R. Leverty, Leverty & Associates, Chtd., Reno, NV, for Defendants Kalicki Collier, LLP, John A. Collier, James A. Kalicki.

Michael D. Hoy, Hoy Chrissinger Kimmel, Reno, NV, for Defendant Robin Rumbaugh.

ORDER

MIRANDA M. DU, CHIEF UNITED STATES DISTRICT JUDGE

I. SUMMARY

Plaintiff Alps Property & Casualty Insurance Company sues for a declaration that Lawyers Professional Liability Insurance Policy No. ALPS18622-4 for the policy period January 9, 2019 to January 9, 2020 (the "Policy") does not cover Defendants Kalicki Collier LLP, John A. Collier, and James A. Kalicki (collectively, the "Lawyer Defendants") in Defendant Robin Rumbaugh's suit against them for legal malpractice, along with a declaration of no duty to defend or indemnify, and a declaration that Plaintiff is entitled to reimbursement from the Lawyer Defendants for money Plaintiff expended in defending the Lawyer Defendants in Rumbaugh's suit against them. (ECF No. 2.) While the Court previously dismissed Rumbaugh's cross-claims against the Lawyer Defendants (ECF No. 63), Rumbaugh also asserted a counterclaim against Plaintiff seeking a declaration of her direct or indirect rights in the Policy (ECF No. 10 at 22-25). Before the Court are: (1) Plaintiff's motion for summary judgment on both of its asserted claims (ECF No. 77 ("Motion"));¹ (2) Defendant Collier's motion for leave to file a counter complaint against Plaintiff (ECF No. 80 ("Counter Complaint Motion"));² and (3) Plaintiff's motion for leave to file supplemental authorities in support of its Motion (ECF No. 100). As further explained below, the Court will grant the Motion in full primarily because an objectively reasonable lawyer would have known that dismissal with prejudice of a client's case on statute of repose grounds may lead to a malpractice claim, and deny the Counter Complaint Motion because Collier has not shown sufficient diligence. The Court will also grant the motion for leave to file supplemental authorities.

II. BACKGROUND³

This case arises out of the Lawyer Defendants’ representation of Rumbaugh in her capacity as Trustee of the Harley Trusts. (ECF No. 2 at 5.) Rumbaugh was—and is—seeking to recover money that her deceased brother allegedly took from the Harley Trusts before he died, when he was serving as Trustee. (Id. at 5-6.) To this end, Rumbaugh retained Kalicki Collier LLP, specifically Kalicki, in February 2015 to have Rumbaugh confirmed as the Trustee, and to recover assets she believed had been taken from the Harley Trusts. (Id. at 6.) Rumbaugh met again with Kalicki in March 2015, exchanged correspondence with him, and dropped off several boxes of documents regarding the Harley Trusts. (Id. at 6-7.)

On August 31, 2015, Kalicki Collier LLP filed a petition in state court, in Washoe County, Nevada, to have Rumbaugh confirmed as the trustee of the Harley Trusts. (Id. at 7.)

In October 2015, Kalicki Collier LLP filed a notice to withdraw the petition filed in August because they filed it in the wrong county, and filed a new petition in Nevada state court in Carson City to have Rumbaugh confirmed as the trustee of the Harley Trusts. (Id. at 7-8.)

The state court in Carson City confirmed Rumbaugh as trustee of the Harley Trusts in November 2015. (Id. at 8.)

In October 2016, or nearly a year later, Kalicki began circulating a draft settlement agreement with Cynthia Harley (Rumbaugh's deceased brother's wife) under which Cynthia Harley would return a house and cash worth approximately a million dollars to the Harley Trusts that Rumbaugh's deceased brother had taken from the Harley Trusts. (Id. at 8.)

In November 2016, Kalicki wrote Rumbaugh an email in which he explained that he was too busy to continue working on her matters, and informed her that his law partner Collier would work with her and Cynthia Harley's counsel to finalize the proposed settlement agreement. (Id. at 8.)

On February 16, 2017, Collier told Rumbaugh that Cynthia Harley was advised by her counsel not to sign the proposed settlement agreement because the applicable statute of repose, California Code of Civil Procedure § 366.2(a) (" Section 366.2(a)") barred any claim for recovery of Harley Trusts’ assets. (Id. at 9.) Rumbaugh alleges the Section 366.2(a) repose period ran on October 15, 2015, or about eight months after Kalicki began representing her. (Id. at 8-9.) Rumbaugh also alleges the February 16, 2017 phone call with Collier is the first time anyone from Kalicki Collier LLP told her there may be a statute of repose issue preventing her from recovering trust assets. (Id. at 9.)

In emails sent in March 2017, Collier confirmed to Rumbaugh that Cynthia Harley would not sign the proposed settlement agreement, and stated that Section 366.2(a) may be a complete bar to her claims against her deceased brother, though he still thought it was possible to bring claims against Cynthia Harley. (Id. at 10.)

In April 2017, Collier filed a petition in the state court case already pending in Carson City in an attempt to recover Harley Trusts’ assets from Cynthia Harley. (Id. )

In June 2017, Cynthia Harley filed a motion to dismiss the petition for lack of subject matter and personal jurisdiction, and filed a motion to continue trial in which she asserted Section 366.2(a) barred Rumbaugh's claims. (Id. at 11-12.)

In July 2017, the state court in Carson City dismissed Rumbaugh's petition against Cynthia Harley for lack of personal jurisdiction over Cynthia Harley and subject matter jurisdiction over the Harley Trusts, both of which are based in California. (Id. at 12.)

In September 2017, Collier filed a new case against Cynthia Harley to recover Harley Trusts’ assets in federal court, in the Eastern District of California. (Id. )

In December 2017, Cynthia Harley filed a motion to dismiss the federal case, arguing Rumbaugh's claims against her were barred by Section 366.2(a). (Id. at 13.)

In August 2018, the Eastern District of California granted Cynthia Harley's motion to dismiss Rumbaugh's claims, agreeing they were barred by Section 366.2(a).

The Eastern District of California dismissed some of Rumbaugh's claims with prejudice, and others without prejudice, though it noted in its dismissal order that the court was skeptical Rumbaugh could sufficiently amend her claims to survive another motion to dismiss based on Section 366.2(a). (Id. at 13-14.)

In September 2018, Collier filed an amended complaint on Rumbaugh's behalf in the federal case. (Id. at 14.)

In October 2018, Cynthia Harley filed another motion to dismiss Rumbaugh's claims in her amended complaint based on Section 366.2(a). (Id. )

In July 2019, the Eastern District of California dismissed Rumbaugh's amended complaint with prejudice, finding that all of her claims against Cynthia Harley were barred by Section 366.2(a). (Id. at 15.)

In August 2019, another attorney, Michael D. Hoy, sent a letter to the Lawyer Defendants on Rumbaugh's behalf, announcing Rumbaugh's intention to sue them for malpractice if they could not come to an agreement. (Id. at 15-16.) Within two days of receiving that letter, the Lawyer Defendants sent Plaintiff notice of Rumbaugh's malpractice claim against them. (Id. at 16.)

While all of the above was occurring, the Lawyer Defendants completed two applications for malpractice insurance with Plaintiff, where the second application, completed in approximately December 2018, led to the Policy. (Id. at 20-23.) Both Kalicki and Collier are listed as named insureds on the Policy. (Id. at 23.) In the application that led to the Policy, the Lawyer Defendants responded ‘no’ to questions asking them whether they were aware of any errors or omissions that could reasonably be expected to be the basis of a claim against any member of Kalicki Collier LLP. (Id. at 21-23.) The application leading to the Policy also stated that any claim arising from an error or omission that should have been disclosed in response to the claim history section of the application will be excluded from coverage under the Policy. (Id. at 23.) The Policy is a claims made and reported policy covering the period January 9, 2019 to January 9, 2020. (Id. ) The provisions of the Policy particularly important to this case (id. at 23-26) are discussed in more detail infra in Section IV.3.

Beginning in the fall of 2019, and continuing to the present, Plaintiff provided representation to the Lawyer Defendants regarding Rumbaugh's malpractice claims against them under a full reservation of rights. (Id. at 26-27.)

III. DISCUSSION

The Court first addresses Plaintiff's Motion, then Collier's Counter Complaint Motion, and then the impact of this order on the claims in this case, concluding this order resolves this case in Plaintiff's favor.

A. Plaintiff's Motion

As to Plaintiff's Motion, the Court first addresses Plaintiff's motion for leave to file supplemental authority in support of its Motion, then describes the legal standard governing its review of Plaintiff's Motion, and then addresses the Motion's merits, with the Court's analysis organized to map to Plaintiff's two claims in this case.

1. Motion for Leave to File Supplemental Authority

Six months after filing its Motion, Plaintiff filed a motion for leave to file supplemental authority in support of that Motion, specifically, two recent orders from federal district courts in North Dakota and Nebraska where Plaintiff prevailed at summary judgment on similar arguments to those it makes here. (ECF No. 100; see also 101 (refiling the same motion with the exhibits).) No Defendants filed responses to Plaintiff's motion for leave to file...