Cox-Ott v. Barnes & Thornburg

898 S.E.2d 619

COX-OTT et al.

v.BARNES & THORNBURG, LLP, et al.

A23A1733

Court of Appeals of Georgia.

February 20, 2024

David John Hungeling, Adam S. Ruben-field, Atlanta, for Appellant.

Keith Robert Blackwell, Steven M. Collins, Meredith Jones Kingsley, Atlanta, for Appellee.

Markle, Judge.

After Cynthia Cox-Ott ("Cynthia"), individually and as trustee of her family trust, was defrauded when she purchased a life insurance policy, she hired attorney James J. Leonard and the law firm of Barnes & Thornburg, LLP (collectively "Leonard"), to file suit against the insurance company. The federal district court dismissed the complaint, and Cynthia then filed suit against Leonard, asserting claims for legal malpractice and breach of contract. The trial court granted summary judgment in Leonard’s favor, and Cynthia now appeals, arguing the trial court erred by finding that (1) there was no attorney-client relationship between Leonard and Cynthia, individually; (2) Leonard’s decisions regarding the suit were protected by judgmental immunity; (3) Leonard was not negligent in conceding delivery of the insurance policy, and by not considering Leonard’s failure to plead facts showing the insurance company’s ongoing fraud and concealment in regard to delivery of the policy; and (4) by failing to consider Leonard’s decision not to amend the complaint in light of the insurance company’s motion to dismiss. After a thorough review of the record, we affirm.

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. OCGA § 9-11-56 (c). In our de novo review of the grant of a motion for summary judgment, we must view the evidence, and all reasonable inferences drawn therefrom, in the light most favorable to the nonmovant.

(Citation and punctuation omitted.) Unique Auto Sales v. Dunwady Ins. Agency, 369 Ga. App. 50, 50-51, 891 S.E.2d 534 (2023).

So viewed, the record shows that Cynthia and Claude Ott ("Claude") divorced in 2005. As part of the divorce settlement, Cynthia obtained a $4 million dollar life insurance policy on Claude’s life, which she purchased through Armen Hovakimian, an agent with AXA Equitable Life Insurance Company and AXA Advisors, Inc. (collectively "AXA"), both based in New York. Cynthia hired an attorney in New York, Lawrence Peck, to draft the C & C Family Trust 04/04/05 (the "Trust") to hold the life insurance policy, and she listed herself and her mother, Patricia Cox, as trustees.

Claude had disclosed on the insurance application policy that he was a smoker. However, AXA presented to Cynthia an illustration for a non-smoker policy, reflecting an initial premium of $165,800 and guaranteed annual premiums of $88,000. The illustration indicated that it was "not part of the life insurance policy or contract"; however, Cynthia believed it was the actual policy and that her premiums would remain the same until Ott reached the age of 90. AXA ultimately issued Cynthia a flexible premium universal life insurance policy for tobacco users at a much higher premium.

The policy was delivered to Peck’s home address in New Jersey. Peck averred he did not know why his home address would have been given to AXA for delivery; he did not recall signing the delivery receipt; and he further admitted he was not authorized to receive the policy on the Trust’s behalf. Cynthia claimed that she did not receive the policy.¹ Meanwhile, AXA sent annual notices to the Trust concerning the premiums, indicating that the policy was a flexible premium universal life insurance policy.

Cynthia paid the initial $165,000 premium on the policy, and she made annual premium payments of $88,000 in compliance with the notices AXA sent. The insurance agent, how- ever, failed to inform Cynthia that her payments did not cover the premiums actually charged, and, in 2008, AXA sent her a premium notice of $165,000. Cynthia contacted the agent concerning the premium notice and was advised that the notice was in error, that the proper premium was $88,000, and AXA sent her a new invoice.

In 2012, Cynthia contacted AXA to request a copy of the policy, and was referred to Mike Roth, who replaced Hovakimian after he was terminated, and who provided her with a copy. At that time, Cynthia discovered discrepancies in the policies.

Due to her concerns regarding the different policies, Cynthia consulted with New York attorneys and a financial adviser in Georgia, who referred her to Leonard. When Cynthia met with Leonard to discuss the case, Leonard had her sign an engagement letter for Leonard and Barnes & Thornburg, LLP to represent the Trust. Leonard advised Cynthia that he had previously represented AXA in a lawsuit, but that there was no conflict of interest, and that his familiarity with AXA would be helpful to her case. Leonard then began requesting information from AXA concerning the policy, and ultimately learned that AXA’s position was that the policy was a flexible premium-paying contract with no guaranteed consistent premiums and no age by which the policy would be paid up.

In late 2013, Leonard sent Cynthia a letter describing two possible ways to proceed: she could either attempt to negotiate with AXA for a different life insurance product, or file suit. He also discussed the possibility of AXA agreeing to rescind the policy and return all her premium payments with interest. In subsequent emails to Cynthia, Leonard again reiterated the plan to seek reformation of the policy, and he also recommended that the claims be pursued under Georgia law rather than New York law because New York courts are not as favorable to policyholders.

In March 2014, Leonard filed suit against AXA on behalf of the Trust, asserting claims for fraud, negligent misrepresentation, and reformation of the insurance policy.² AXA removed the case to federal district court, and moved to dismiss the complaint, arguing, inter alia, that the Trust had not pled actionable fraud, and that the policy’s merger clause barred the Trust’s claims. In response, the Trust argued its claims were not affected by the merger clause, and that it pled fraud with sufficient particularity to withstand AXA’s motion to dismiss, but that, if the Court should determine it had not met the heightened pleading standard under Federal Rule of Civil Procedure Rule 9 (b),³ the Trust sought leave to amend its complaint rather than dismissal of its claims. The district court granted AXA’s motion.⁴ The district court specifically held that the merger doctrine barred any attempt to assert a fraud claim against AXA, and that the Trust pled no facts suggesting that discovery would allow it to show justifiable reliance; neither the complaint nor other pleadings suggested the Trust was precluded from reading the policy; and the Trust’s reliance on AXA’s representations that the annual premium would remain a flat rate was unreasonable because the policy unambiguously contradicts these statements. It further held that, by seeking reformation, the Trust affirmed the policy and was thus bound by the policy’s terms, subject to any contract-based defenses.

The 11th Circuit Court of Appeals affirmed the dismissal, concluding that the district court did not abuse its discretion by denying the Trust leave to amend its complaint because the Trust failed to properly raise the issue, failed to attach a copy of its proposed amendment to its brief in opposition to AXA’s motion to dismiss, or to describe the substance of its amendment.

In June 2019, Cynthia obtained new counsel and filed suit, individually and on behalf of the Trust, against Leonard for professional negligence, breach of contract, and litigation expenses under OCGA § 13-6-11. In the complaint, Cynthia alleged that Leonard violated the standard of care, and she submitted the expert affidavit of William Brent Ney pursuant to OCGA § 9-11-9.1, setting forth the violations of the standard of care for attorneys in Georgia. Cynthia also obtained the deposition testimony of another attorney, Ed Garland, who testified as a fact witness and averred that it is the attorney’s responsibility, not the client’s, to discern what claims to assert, and that Leonard could have pled, in the alternative, to rescind the policy rather than to affirm it. Cynthia also provided the expert testimony of attorney Bruce Brown, who averred that he believed there to have been an attorney-client relationship between Cynthia and Leonard because Cynthia reasonably believed that her individual interests were being represented.

Leonard subsequently moved to dismiss Cynthia’s breach of contract claim, which the trial court denied. Following discovery, Leonard then moved for summary judgment, arguing that Cynthia’s legal malpractice claims fail as a matter of law because Cynthia cannot prove negligence as Leonard’s actions were based on his professional judgment; Leonard did not represent Cynthia individually in the underlying suit; Leonard breached no standard of care which was the proximate cause of Cynthia’s or the Trust’s injuries; Cynthia has not established damages; and the breach of contract claim is duplicative of the professional malpractice claim. Following a hearing, the trial court granted Leonard’s motion, and this appeal followed.

[1–5] Before addressing Cynthia’s arguments, we must first set forth the relevant law for professional malpractice claims.

To prevail on a legal malpractice claim, a client must prove that (1) she employed the defendant attorney; (2) the attorney failed to exercise ordinary care, skill, and diligence; and (3) this failure was the proximate cause of damages to the client. With respect to the ‘ordinary care, skill and diligence’ element, the law imposes upon persons performing professional services the duty to exercise a reasonable degree of skill and

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