Twin City Fire Insurance Company v. Hartman, Simon & Wood, LLPTwin City Fire Insurance Company v. Hartman, Simon & Wood, LLP
AFFIRMED.
Shattuck Ely, Christina Michelle Baugh, Fellows Labriola, LLP, Atlanta, GA, for Defendants-Appellees.
Before MARCUS and ROSENBAUM, Circuit Judges, and FRIEDMAN,* District Judge.
PER CURIAM:
Twin City Fire Insurance Company (“Twin City“) seeks recoupment of some or all of a $10 million settlement that it paid on behalf of its insured, the law firm of Hartman, Simons & Wood, LLP (“Hartman Simons“). The district court dismissed Twin City‘s complaint and then denied Twin City‘s motion for reconsideration of the dismissal. Twin City appeals
I.
The complaint sets forth the following factual allegations. Twin City issued two professional liability insurance policies to Hartman Simons, the first covering the period from December 31, 2008, to December 31, 2009, and the second covering December 31, 2009, to December 31, 2010. The policies insured the law firm against malpractice liabilities in excess of a $100,000 per claim deductible, up to $10 million. Under the policies, Twin City‘s duty to provide coverage depended in part on the law firm‘s having provided timely notice to Twin City of any claim or reasonably foreseeable claim. In addition, Twin City had no duty to provide coverage if, at the inception date of a policy, Hartman Simons had knowledge of facts that reasonably could form the basis for a malpractice claim against it.
In September of 2009, the Bank of North Georgia (“the Bank“) retained Hartman Simons in connection with a real estate transaction with Northside Guaranty, LLC (“Northside“). The Bank planned to release Northside from its guaranty on a loan related to a property called Lost Creek, in exchange for the release of a second mortgage held by Northside‘s principal, John Williams, on a separate piece of real property. Two Hartman Simons attorneys—partner Gil Burstiner and associate Stephanie Skidmore—sent a draft release to counsel for Northside and Mr. Williams. Northside returned the draft with a new paragraph added to it, and Mr. Burstiner and Ms. Skidmore approved the change. The Bank signed the release on October 23, 2009, and the deal closed.
On November 11, 2009, the Bank informed Mr. Burstiner and Ms. Skidmore of Mr. Williams’ contention that the agreement, as amended, released him and his affiliated companies not only from Northside‘s guaranty related to Lost Creek, but from all of their financial obligations to the Bank. One month later, Mr. Burstiner and Ms. Skidmore were further notified that the Bank had received a letter from a representative of Mr. Williams, taking the position that the agreement released at least 58 affiliated individuals and entities of their obligations to the Bank and the Bank‘s corporate parent.
About six months later, Northside and its associated entities brought an action in Georgia state court, seeking a declaration that the October 23 agreement fully relieved them of their obligations to the Bank. A week later, on June 24, 2010, the Bank demanded indemnification from Hartman Simons for any losses it might sustain as a result of the Northside entities’ claims. Three weeks after that, on July 14, 2010, Hartman Simons notified Twin City of the Bank‘s indemnification claim.1
Nearly three years later, in April of 2013, the Bank offered to settle its claim against Hartman Simons and tendered a
Before the close of business on May 10—and shortly before making the settlement payment to the Bank—Twin City filed its complaint in the present action, seeking a declaratory judgment that it has no coverage obligations under either insurance policy because Hartman Simons allegedly failed to timely notify Twin City of the likelihood that the Bank would assert a claim against the law firm.2 Twin City also asserted claims for “allocation” and for “recoupment.” The allocation claim sought “a declaration of the appropriate allocation,” as between Twin City and Hartman Simons, of the defense and indemnity costs related to the Bank‘s claim. Under its claim for recoupment, Twin City contended that “[t]o the extent Twin City has no coverage obligations for [the Bank‘s claim], [Hartman Simons] will be unjustly enriched by Twin City‘s payment of the Bank of North Georgia‘s settlement demand, and Twin City is entitled to recoup some or all of that payment from [Hartman Simons].” Federal jurisdiction was predicated on diversity of citizenship, and Georgia law governed all of the claims.
Hartman Simons moved to dismiss Twin City‘s complaint. With respect to the claim for a declaratory judgment of non-coverage, the law firm argued that Twin City lacked standing because it faced no imminent threat of future harm. As for allocation and recoupment, Hartman Simons maintained that these claims should be dismissed for failure to state a claim because: (1) Twin City failed to properly reserve its right to seek recoupment and that right therefore had been waived; (2) Twin City‘s settlement with the Bank was a “voluntary payment“; and (3) Twin City had no contractual right to seek allocation or recoupment of the settlement payment.
The district court granted Hartman Simons’ motion and dismissed Twin City‘s complaint with prejudice. Twin City Fire Ins. Co. v. Hartman, Simons & Wood, LLP, Civil Action No. 1:13-cv-1608-MHS, 2013 WL 8368744 (N.D.Ga. Nov. 25, 2013). The court first agreed that Twin City lacked standing to pursue declaratory relief. Id. at *3. With respect to the allocation and recoupment claims, the district court concluded that Twin City had “waived these claims by failing to properly reserve its rights before agreeing to pay out its policy limits.” Id. at *4. The court declined to address Hartman Simons’ other two arguments for dismissal. Id. at *4 n. 2. Twin City then filed a motion for reconsideration of the court‘s decision. The district court denied the motion, reaffirming its conclusion that Twin City had waived any claim to recoup from Hartman Simons some or all of the settlement pay-
Although the district court purported to dispose of the case under
II.
“We review de novo the dismissal of a complaint for failure to state a claim.” Rosenberg v. Gould, 554 F.3d 962, 965 (11th Cir. 2009). “[W]e review for an abuse of discretion the denial of a motion to reconsider, reviewing any attendant question of law de novo.” Smith v. Casey, 741 F.3d 1236, 1241 (11th Cir. 2014) (citations omitted). Likewise, “[w]e review de novo whether plaintiffs have Article III standing.” Kawa Orthodontics, LLP v. Sec‘y, U.S. Dep‘t of the Treasury, 773 F.3d 243, 245 (11th Cir. 2014).
III.
A.
The district court concluded that Twin City had waived any right it held to recoup some or all of the settlement payment made to the Bank. Waiver is listed as an affirmative defense under
In the district court‘s view, waiver was evident because Twin City‘s complaint showed that it had been notified in 2010 of the Bank‘s indemnification claim against Hartman Simons, but then supposedly waited nearly three years to reserve its rights and to seek declaratory relief regarding whether the claim was covered by the insurance policies, Twin City Fire Ins. Co., 2013 WL 8368744, at *5-7, despite having had “ample time to investigate any coverage issues and seek declaratory relief before being presented with the Bank‘s settlement demand.” Id. at *5 n. 5. In deciding Twin City‘s motion for reconsideration, the district court reaffirmed “its ruling that Twin City was dilatory in reserving its rights and seeking declaratory relief” because Twin City “could have unilaterally reserved its rights and sought immediate declaratory relief” no later than July 2011, “but it chose not to do so.” Twin City Fire Ins. Co., 2014 WL 1800868, at *3. By finding that Twin City was “dilatory” in responding to the Bank‘s claim against Hartman Simons, however, the district court necessarily relied on factual conclusions and inferences, and, at least on the motion for reconsideration, extra-complaint documents; this was inappropriate in deciding a motion to dismiss.
The complaint includes no factual allegations regarding what might have occurred in the nearly three years between July 2010, when the Bank asserted its claim, and April 2013 when it made its time-limited settlement demand. Notwith-standing3 this silence, the district court concluded that Twin City had failed to reserve its rights or to seek declaratory relief at any point prior to the day of settlement, and the court therefore determined that Twin City‘s conduct during the three-year period was “dilatory.” The district court‘s determination that “Twin City waited nearly three years” to reserve its rights and to seek declaratory relief, Twin City Fire Ins. Co., 2013 WL 8368744, at *5, rests on inferences as to what did not occur during the period from 2010 to 2013—in particular, an inference that at no other time did Twin City attempt a reservation of rights that was rejected by Hartman Simons.3
In ruling on a motion to dismiss under
The district court also placed reliance on Facility Investments, LP v. Homeland Ins. Co. of N.Y., 321 Ga.App. 103, 741 S.E.2d 228 (2013) (physical precedent only), a case with no precedential weight under Georgia law and which has not yet been cited by any Georgia court. Although the district court found this decision persuasive, here we need not take a position on whether the Supreme Court of Georgia would endorse it. Our vacatur of the district court‘s orders is warranted by that court‘s reliance on factual conclusions that should not have been reached in evaluating Twin City‘s complaint. For the same reason, this appeal presents no occasion to determine whether, or to what extent, existing Georgia law regarding an insurer‘s waiver of rights—including the doctrine established in Richmond v. Georgia Farm Bureau Mut. Ins. Co., 140 Ga. App. 215, 231 S.E.2d 245 (1976)—might bear on the time-limited settlement context. The district court may, upon remand and after the development of a full record, have occasion to address these questions. At the present moment, we conclude only that the district court erred in finding waiver based on determinations of fact that did not flow inevitably from the allegations of Twin City‘s complaint.
B.
The district court‘s alternative rationale—that the complaint was subject to dismissal under Georgia‘s voluntary payment doctrine—likewise implicated factual findings that have no mooring in the bare face of the complaint. The district court recognized that the voluntary payment doctrine, like waiver, is considered an affirmative defense that can justify a complaint‘s dismissal under
In addition, Georgia law provides two recognized exceptions to the voluntary payment doctrine. The court‘s decision addressed one of these exceptions—involving payments made under “urgent and immediate” necessity—but its discussion shows that Twin City was burdened with demonstrating affirmatively that the exception applied under the circumstances of this case. As we already have explained, a plaintiff‘s complaint need not anticipate and counter affirmative defenses. Twin City was improperly put to the task at the motion to dismiss stage of proving the applicability of the exception, where the question should have been whether, looking only at the face of the complaint, it was plain that the exception could not be invoked. Moreover, the question whether a payment was made under an urgent and immediate necessity is one of fact. And while Twin City also might have tenable policy-based arguments as to why the voluntary payment doctrine should not apply in the circumstances presented by this
C.
Finally, we address Twin City‘s claim for declaratory relief, which the district court dismissed for lack of standing. Although Twin City arguably possessed standing during the brief period following the filing of its complaint in this action, its declaratory judgment claim plainly became moot as soon as Twin City paid the $10 million settlement to the Bank later that same day. At that point, a declaration could not have had any bearing on the parties’ future conduct; rather, Twin City‘s aim from that point forward was to recoup what it already had paid. For the same reason, to the extent that the second count of Twin City‘s complaint seeks merely “a declaration of the appropriate allocation” of defense and indemnity costs, that claim likewise is moot. Of course, the justiciability of any claims for declaratory relief ultimately is not of practical significance, as Twin City itself acknowledges. The relief that Twin City seeks is recoupment of some or all of the $10 million it paid to the Bank, and any ultimate determination of its entitlement to recoupment would entail a determination of coverage and, if appropriate, allocation. We affirm the district court‘s dismissal of Twin City‘s declaratory judgment claim.
IV.
For the foregoing reasons, we vacate in part the district court‘s two orders, affirm the district court‘s dismissal of the claim for a declaratory judgment, and remand so that Hartman Simons may answer Twin City‘s complaint and the parties may proceed to discovery.
VACATED IN PART, AFFIRMED IN PART, AND REMANDED.
Christine STONE, Plaintiff-Appellant, v. BANK OF NEW YORK MELLON, N.A., f.k.a. Bank of New York Trust Company, N.A., JPMorgan Chase Bank, NA, Mortgage Electronic Registration Systems, Inc., Prommis Solutions, LLC, Litton Loan Servicing, LP, et al., Defendants-Appellees.
No. 13-15433
Non-Argument Calendar.
United States Court of Appeals, Eleventh Circuit.
April 20, 2015.