McMurtry v. Wiseman

445 F.Supp.2d 756

Cecil McMURTRY, M.D., Plaintiff v. Thomas A. WISEMAN, III, Edward A. Hadley and Gideon & Wiseman, a Tennessee partnership, Defendants.

Civil Action No. 1:04CV-81-R.

United States District Court, W.D. Kentucky, Bowling Green Division.

August 16, 2006.

COPYRIGHT MATERIAL OMITTED

Michael A. Breen, Breen & Morgan, Bowling Green, KY, for Plaintiff.

Edward H. Stopher, Tiara B. Silverblatt, Boehl Stopher & Graves, LLP, Louisville, KY, for Defendants.

MEMORANDUM OPINION

RUSSELL, District Judge.

This matter comes before the Court on Defendants' Second Motion for Summary Judgment (Docket # 89). The Plaintiff has responded (Docket # 91), and the Defendants have replied to that response (Docket # 106). This matter is now ripe for adjudication. For the following rea sons, Defendants' Motion for Summary Judgment is DENIED.

BACKGROUND

This case arises out of a disability insurance policy purchased by Emergicare, Inc. on behalf of its then-employee, Plaintiff Cecil McMurtry, M.D. ("Dr.McMurtry"). Emergicare purchased the plan in 1985 from Paul Revere Insurance Company ("Paul Revere"), a company for which defendant Steven F. Botts ("Botts") worked. At the time, both Dr. McMurtry and Mr. Botts were living and working in Tennessee; Mr. Botts obtained a license to sell insurance in Kentucky a few months after the transaction, in October of 1985. The policy provided disability insurance at various levels to Dr. McMurtry for the rest of his life, including a rider specifically geared toward providing compensation should Dr. McMurtry become totally disabled and thereby unable to perform his occupation—emergency room physician. Initially, the "own occupation" rider limited those payments to situations in which Dr. McMurtry was both not employed as an emergency room doctor and not otherwise employed. Dr. McMurtry sustained a back injury in October of 1987 for which he underwent surgery; after a brief recovery, he returned to full-time work as an emergency room physician. In 1989, Dr. McMurtry purchased from Mr. Botts a "rider" to his disability insurance policy which essentially allowed him to recover under the "own occupation" provision while continuing to work at a different job. However, the rider explicitly stated that the rider would cease when the policy ends or after the Plaintiff turns 65 years old (which ever happens first). Between 1987 and 1991, Dr. McMurtry suffered from recurring back problems, and in March 1991 he submitted a claim under the Paul Revere policy for total disability benefits going forward and partial disability benefits for the previous three months. He also notified Paul Revere that he was working part time as a physician at various clinics.

Paul Revere paid benefits under the policy from that point forward until November, 1994, when it determined that Dr. McMurtry was only entitled to residual disability, as opposed to total disability, under the policy, apparently because he was working as a physician at the time. Dr. McMurtry disputed this change, and eventually filed suit in Kentucky state court against Paul Revere, presenting claims of violations of Kentucky contract law. Defendants Wiseman, Hadley, and Gideon & Wiseman represented Dr. McMurtry in that case, which Paul Revere removed to the United States District Court for the Western District of Kentucky. Ultimately, the contract law claims were dismissed, but Dr. McMurtry was allowed to proceed with the ERISA claims. The District Court found in Dr. McMurtry's favor and awarded him total disability benefits payments for life.

In an opinion issued on June 12, 2000, the Sixth Circuit Court of Appeals overturned this portion of the District Court's ruling, holding that Dr. McMurtry was not entitled to total disability benefits after age 65 under the plain language of the policy. The Court of Appeals also remanded the case for the District Court to make a determination of attorney's fees in a manner consistent with the appeals court's opinion. The Court of Appeals did not explicitly address Dr. McMurtry's claim for estoppel, as authorized by ERISA's civil enforcement provisions, 29 U.S.C. § 1132(a)(3)(B). Dr. McMurtry petitioned for rehearing, raising this issue and arguing that the panel's remand order was too limited in that it authorized district court action on the issue of attorney's fees only. The petition was denied, and on remand, the District Court granted McMurtry part of his requested attorney fees and then granted the defendants' summary judgment motion on the estoppel claim. Dr. McMurtry appealed the summary judgment, and the Sixth Circuit Court of Appeals upheld the denial on law of the case grounds; i.e., on the grounds that the earlier Sixth Circuit opinion did not grant the District Court authority to entertain Dr. McMurtry's estoppel claim in its limited remand. McMurtry v. Paul Revere Life Ins. Co., 67 Fed.Appx. 290 (6th Cir.2003). That unpublished opinion was issued on May 28, 2003.

On May 6, 2004, Dr. McMurtry, having obtained new counsel, filed the instant lawsuit in this Court. The Complaint contains claims against Mr. Botts as well as against Dr. McMurtry's attorneys in the abovedescribed case, Mr. Wiseman, Mr. Hadley, and the law firm of Gideon & Wiseman, a Tennessee partnership (collectively, the "Defendants"). (Complaint, Dkt. # 2, at 10-12). The claim against Mr. Botts was dismissed by this Court in a Memorandum Opinion upon Mr. Botts' Motion for Summary Judgment (Docket # 59).

On January 17, 2006, this Court granted in part and denied in part the Defendants' Motion for Summary Judgment, finding that all the claims Dr. McMurtry alleges should have been filed against Botts in his individual capacity would have failed as a matter of law, except for the state law claims of fraud and negligent misrepresentation. In their Second Motion for Summary Judgment, the Defendants now contend: 1) that ERISA laws would have preempted the state law claims of fraud and negligent misrepresentation against Botts in his individual capacity because they were related to the recovery of benefits under the original ERISA litigation; 2) that Botts was not an appropriate party in the underlying litigation; and 3) Hadley made no decisions and had no authority in dealing with the Plaintiff's case, and therefore should be dismissed from the claim as a matter of law. The Plaintiff asserts that ERISA would not have preempted the state law claims because a suit against Botts would not have been directly related to recovery under ERISA, and that Hadley had a duty under law and the Code of Professional Responsibility to bring suit against Botts regardless of the fact that Wiseman was his supervisor, and therefore, he should remain a defendant in this litigation.

STANDARD

Summary judgment is available under Fed.R.Civ.P. 56(c) if the moving party can establish that the "pleadings, depositions, answer 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." In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

[N]ot every issue of fact or conflicting inference presents a genuine issue of material fact. Street v. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir.1989). The test is "whether the party bearing the burden of proof has presented a jury question as to each element in the case." Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir.1996). The plaintiff must present more than a mere scintilla of the evidence. To support his position, he must present evidence on which the trier of fact could find for the plaintiff. See id. (citing Anderson v. Liberty Lobby, 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Mere speculation will not suffice to defeat a motion for summary judgment: "[t]he mere existence of a colorable factual dispute will not defeat a properly supported motion for summary judgment. A genuine dispute between the parties on an issue of material fact must exist to render summary judgment inappropriate." Monette v. Electronic Data Systems Corp., 90 F.3d 1173, 1177 (6th Cir.1996). Finally, while Kentucky state law is applicable to this case pursuant to Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), a federal court in a diversity action applies the standards of Fed.R.Civ.P. 56, not "Kentucky's summary judgment standard as expressed in Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (1991)." Gafford v. General Electric Co., 997 F.2d 150, 165 (6th Cir.1993).

DISCUSSION

In Kentucky, in order for a plaintiff to prevail on a legal malpractice claim, the plaintiff must prove: 1) that there was an employment relationship with the defendant/attorney; 2) that the attorney neglected his duty to exercise the ordinary care of a reasonably competent attorney acting in the same or similar circumstances; and 3) that the attorney's negligence was the proximate cause of damage to the client. Marrs v. Kelly, 95 S.W.3d 856, 860 (Ky.2003) citing Stephens v. Denison, 64 S.W.3d 297, 298-99 (Ky.App.2001). Essentially, a legal malpractice claim is a "suit within a suit" because the plaintiff must "show that he/she would have fared better in the underlying claim; that is, but for the attorney's negligence, the plaintiff would have been more likely successful." Marrs, 95 S.W.3d at 860, citing RONALD E. MALLEN & JEFFREY M. SMITH, LEGAL MALPRACTICE, § 33.8 (5th ed.2000). As such, the Court will address the state law claims for fraud and negligent misrepresentation that the Defendants argue would have been preempted by ERISA, whether Botts would have been a proper party in the underlying litigation, and whether Defendant Hadley should...