United States District Court, M.D. Pennsylvania
RICHARD CAPUTO, UNITED STATES DISTRICT JUDGE
before the Court is a Motion for Partial Summary Judgment
(Doc. 18) filed by Plaintiff New Jersey Manufacturers
Insurance Company (“NJM”), and a Motion to Compel
Production of Documents (Doc. 31) filed by Defendants J.
Scott Brady, Esquire (“Brady”) and Brady &
Grabowski, P.C. (collectively, “Defendants”).
NJM's Complaint (Doc. 1) alleges that Brady committed
legal malpractice when he represented NJM with respect to an
Underinsured Motorist (UIM) claim brought by nonparty Gary
Wells (“Wells”) against his insurer, NJM (the
“Wells claim”). Defendants' Answer (Doc. 10)
raises multiple affirmative defenses, including a
contributory negligence defense based on NJM's alleged
bad faith handling of the Wells claim. In response, NJM filed
the instant Motion for Partial Summary Judgment, seeking to
strike this affirmative defense and preclude further
discovery related to its alleged bad faith handling of the
Wells claim. Defendants subsequently filed the instant Motion
to Compel, seeking production of documents and communications
related to the Wells claim that NJM contends are privileged.
NJM's Motion for Partial Summary Judgment will be granted
in part and denied in part. Because the Court finds that
NJM's exposure to bad faith liability is relevant to the
issue of damages, NJM will not be precluded from pursuing
discovery on NJM's bad faith handling of the Wells claim.
However, as explained below, the Court will strike
Defendants' contributory negligence defense only to the
extent that the defense is based on conduct that is not
causally related to the arbitration award. Additionally,
after conducting an in camera review of the NJM
file, the Court finds that, with the few exceptions noted
below, the documents are properly withheld from discovery on
the basis of the privilege claimed. Moreover, the Court finds
that NJM has not waived its attorney-client privilege or
work-product protection with respect to the withheld
documents in the NJM file. However, NJM's privilege log
entries for the Curtin & Heefner file are insufficiently
detailed for the Court to determine whether the documents
withheld on the basis of attorney-client privilege and/or
work-product protection are actually privileged from
discovery. NJM therefore must supplement its privilege log as
detailed below. Defendants' Motion to Compel thus will be
granted in part and denied in part.
Relevant Factual Background
facts presented in the record, viewed in the light most
favorable to Defendants, are as follows:
NJM is a New Jersey corporation authorized to issue
automobile insurance policies in Pennsylvania. (Compl. ¶
1, Doc. 1.) Defendant J. Scott Brady is a licensed
Pennsylvania attorney who practiced at the law firm Defendant
Brady & Grabowski, P.C. when he represented NJM.
(Id. ¶¶ 2-3.) The instant dispute arises
out of Brady's representation of NJM with respect to a
UIM claim brought by one of its insureds, Gary Wells.
Specifically, NJM contends that Brady negligently handled the
arbitration between NJM and Wells (the "Wells
arbitration") and continued to act negligently in the
steps he took after the arbitration panel issued its award.
(See Id. ¶¶ 61-63, 74-76.) NJM also claims
that Brady breached his fiduciary duties in his handling of
the Wells claim, including his handling of the Wells
arbitration. (Id. Count II.)
Gary Wells was injured in a car accident on February 20,
2012. (Pl.'s Statement of Undisputed Facts
("PSUF") ¶ 1, Doc. 19.) NJM provided
automobile insurance to Mr. Wells, including Underinsured
Motorist (UIM) coverage. (Id. ¶ 2.) Under the
policy, UIM coverage was limited to $2 million. (Id.
¶ 3.) Mr. Wells was represented by the law offices of
Lenahan & Dempsey, who submitted a claim on behalf of Mr.
Wells to NJM under the UIM provisions of his policy.
(Id. ¶ 5.) On March 11, 2014, Defendant J.
Scott Brady and his firm, Defendant Brady & Grabowski,
P.C., were retained to represent NJM with respect to the
Wells claim. (Id. ¶ 7.) The parties agreed to a
common law arbitration before a three-person arbitration
panel. (Id. ¶ 8; see Ex. F, at 4:2-6,
Doc. 19.) The arbitration was scheduled to take place on
August 19, 2014 in Lackawanna County, Pennsylvania. (PSUF
¶ 8.) On August 14, 2014, John Lenahan, Mr. Wells's
attorney, sent Brady a letter that stated: "Enclosed you
will find a submission I propose we give the arbitrators in a
sealed envelope, to be opened after their deliberations have
been completed." (Ex. G, Doc. 19.) The letter further
stated that Lenahan was "including the UIM policy limit
disclosure” in the proposed sealed envelope
“without waiving [plaintiffs'] argument that the
arbitrators should be advised of the UIM limits in advance of
the arbitration proceedings. . . ." (Id.)
However the arbitrators were not made aware of the UIM policy
limits prior to issuing their decision. (PSUF ¶ 13.)
purposes of the arbitration, NJM stipulated that the driver
who caused Wells's injuries was negligent. (PSUF ¶
10.) The only issues before the arbitration panel were the
scope and extent of Wells's injuries. (Id.
¶ 11.) The issue of NJM's alleged bad faith handling
of Wells's UIM claim was not at issue in the arbitration.
(Id. ¶ 12.) Brady never requested the
arbitration panel to mold an award in excess of the $2
million policy limit to match that limit. (Id.
¶ 14.) On August 20, 2014, the arbitration panel issued
an award in favor of Mr. Wells for $5, 921, 117.
(Id. ¶ 15; Ex. J, Doc. 19.) This award was for
compensatory damages only, and exceeded the $2 million policy
limit by $3, 921, 117. (PSUF ¶ 16.) The award did not
encompass extra-contractual damages, including damages
related to any bad faith on the part of NJM. (Id.)
September 2, 2014, Brady filed a Petition with the
arbitration panel seeking reconsideration, correction,
modification, and/or clarification of the award pursuant to
42 Pa. Cons. Stat. Ann. § 7311. (Id. ¶ 17;
see Ex. K, Doc. 19.) The Petition sought to modify
the award, arguing that the amount was arbitrary. (PSUF
¶ 17.) The Petition did not provide the UIM policy
limits or expressly request the arbitration panel to mold the
award to the policy limits. (See Ex. K, Doc. 19.) On
September 15, 2014, Brady sent a letter to NJM in which he
opined that, because he had “no doubt” that a
court would interpret Wells's policy language as calling
for a common law arbitration rather than a statutory
arbitration, NJM had very narrow grounds on which to appeal
the arbitration award, none of which he believed applied to
the Wells arbitration. (Ex. V, Doc. 25-1.) Brady thereafter
withdrew the Petition on September 16, 2014 (Ex. L, Doc. 19)
and filed an appeal of the award in the Court of Common Pleas
of Monroe County, Pennsylvania on September 19, 2014. (PSUF
¶¶ 19-20.) The appeal did not explicitly use the
term “molding” in its request for modification of
the Wells arbitration award. (See Ex. M, Doc. 19.)
On September 23, 2014, Lenahan filed a Petition to Confirm
Common Law Arbitration Award and Enter Judgment in the Court
of Common Pleas of Lackawanna County-the same county where
the arbitration took place. (PSUF ¶ 22.) Around this
time, NJM discharged Brady and retained new counsel, Curtin
& Heefner, to handle the challenge to the Wells
arbitration award. (See Stein Aff. ¶ 3, Doc.
36-1.) On October 14, 2014, Curtin & Heefner on behalf of
NJM filed an Amended Petition in Monroe County requesting the
award be molded to the $2 million policy limits, as well as a
Motion to Transfer Venue from Monroe County to Lackawanna
County. (Ex. 7, p. 3598, Doc. 23.)
had also drafted a complaint that alleged NJM acted in bad
faith in handling the Wells claim. (PSUF ¶ 23; Ex. O,
Doc. 19.) Lenahan sent the draft bad faith complaint to
Bonnie Stein of Curtin & Heefner on October 23, 2014.
(Ex. 13, Doc. 23.) In this email Lenahan informed Stein that
he was “likely” to file the complaint before the
end of the following day (October 24, 2014). (Id.)
On October 26, 2014, Stein emailed Nathan Buurma and Jeffrey
Bartolino, members of NJM's in house legal team, a copy
of the bad faith complaint. (Ex. 3, Doc. 23.) In that email,
Stein stated that she wanted to meet “ASAP" to
"speak about some significant developments" and
"go over major concerns and the possible benefits of
this going [to] the October 30, 2014 Mediation."
(Id.) Additionally, an email from Buurma concerning
the Wells claim sent on October 27, 2014 demonstrates that
NJM's legal team was actively strategizing over its
ability to mold the arbitration panel's award to the
policy limits, as well as its potential exposure to bad faith
liability. (Ex. 4, Doc. 23.) On October 28, 2014, Buurma sent
a notice to Brady informing him that NJM planned to file a
malpractice suit against him in connection with his handling
of the Wells arbitration. (Ex. 5, Doc. 23.) A mediation
between NJM and Wells was scheduled for October 30, 2014.
(Id. Exs. 6-7.) Both parties' mediation
memoranda dealt extensively with the issue of NJM's bad
faith handling of the Wells claim before and after the
arbitration. (See id.)
November 10, 2014, NJM and Wells executed a release and
settlement agreement. (Ex. P, Doc. 19.) NJM contends that it
reasonably believed Brady's failure to submit the policy
limits to the arbitration panel or otherwise request a
molding of the award would have resulted in the full amount
of the arbitration award being confirmed in court, and that
its pending motions seeking to reduce the award would have
been futile. (See PSUF ¶ 24.) NJM therefore
agreed to pay Wells the full arbitration award plus interest
in exchange for the release of all claims against NJM
relating to this matter, including any claims for bad faith.
(Ex. P ¶ 1, Doc. 19.) The agreement also states:
"[T]he Payment referenced in this Agreement is made by
NJM solely for the purposes of avoiding the uncertainty,
nuisance and expense of litigation, and  no part of the
Payment is for bad faith or extra-contractual
liability." (Id. ¶ 5.)
subsequently filed its malpractice suit on November 20, 2015.
The Complaint alleges that Brady handled the Wells
arbitration negligently, and committed legal malpractice by
failing to present the arbitration panel with the UIM policy
limits and failing to raise the issue of molding the award to
the policy limits before the arbitration panel or any
subsequent court. NJM seeks damages totaling the difference
between its policy limits ($2 million) and the Wells
arbitration award ($5, 921, 117). Defendants filed their
Answer on February 1, 2016, in which they raised multiple
affirmative defenses, including:
NJM acted in Bad Faith in violation of 42 Pa.C.S. section
8371 and knew that it had significant bad faith exposure for
it's [sic] conduct, some of which is outlined in
Lineman's [sic] 125 page draft Bad Faith Complaint
submitted to NJM on October 26ththrough NJM's
counsel before the mediation that settled the UIM and Bad
Faith cases on or about October 30, 2014. As specifically
outlined in the draft Bad Faith Complaint, NJM repeatedly
ignored demands for the policy limits before Brady was
retained, after Brady was retained (but prior to Arbitration)
and after Arbitration in spite of repeated demands that the
policy limit and only the policy limit be paid.
(Answer ¶ 3; see also Id. ¶ 1 (“The
Plaintiff's claims are barred by NJM's fault or their
contributory negligence . . . .”).) NJM argues that a
“bad faith contributory negligence defense”
should be stricken because NJM's alleged bad faith
“bears no causal nexus to the claims and damages
asserted by NJM against Brady. . . .” (See
Pl.'s Br. in Supp. 7, Doc. 20.) A hearing was held on
December 22, 2016, and the motions are now ripe for
Motion for Partial Summary Judgment on an Affirmative Defense
judgment shall be granted “if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). As such, summary judgment is appropriate
when “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.” Wright v.
Corning, 679 F.3d 101, 105 (3d Cir 2012) (quoting
Orsatti v. N.J. State Police, 71 F.3d 480, 482 (3d
Cir. 1995)). A fact is material if proof of its existence or
nonexistence might affect the outcome of the suit under the
applicable substantive law. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986).
there is no material fact in dispute, the moving party need
only establish that it is entitled to judgment as a matter of
law. See Edelman v. Comm'r of Soc. Sec., 83 F.3d
68, 70 (3d Cir. 1996). Where, however, there is a disputed
issue of material fact, summary judgment is appropriate only
if the factual dispute is not a genuine one.
Anderson, 477 U.S. at 247-48. An issue of material
fact is genuine if “a reasonable jury could return a
verdict for the nonmoving party.” Id. at 248.
Where there is a material fact in dispute, the moving party
has the initial burden of proving that: (1) there is no
genuine issue of material fact; and (2) the moving party is
entitled to judgment as a matter of law. See Howard Hess
Dental Labs., Inc. v. Dentsply Int'l, Inc., 602 F.3d
237, 251 (3d Cir. 2010). The moving party may present its own
evidence or, where the nonmoving party has the burden of
proof, simply point out to the court that “the
nonmoving party has failed to make a sufficient showing on an
essentia element of her case.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). In deciding a motion
for summary judgment, the Court must view the evidence in the
light most favorable to the nonmoving party. See
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986).
differ as to whether a motion for summary judgment under Rule
56 or a motion to strike under Rule 12(f) “is the
appropriate procedure by which to challenge an affirmative
defense.” Prof'l Buyer's Guild, LLC v. Ace
Fire Underwriter Ins. Co., No. 06-2127 (GEB) 2007 WL
3227183, at *1 n.1 (D.N.J. Oct. 30, 2007). Here, because both
parties refer to matters outside of the pleadings, it is
appropriate for the Court to treat NJM's Motion as one
for partial summary judgment rather than a motion to strike.
See United States v. Manzo, 182 F.Supp.2d 385, 395
n.6 (D.N.J. 2000). “The effect of a grant of partial
summary judgment in this situation is that the affirmative
defense [is] stricken.” Kantner v. Sears &
Roebuck, Inc., 5:15-CV-01039, 2016 WL 739187, at *2
(E.D. Pa. Feb. 25, 2016) (citation omitted).
Legal Malpractice Claim
legal malpractice lawsuit arising out of the conduct of
underlying litigation involves a ‘case within a
case.'” Scaramuzza v. Sciolla, No.
Civ.A.04-1270, 2006 WL 557716, at *7 (E.D. Pa. Mar. 3, 2006).
Under Pennsylvania law,  “an allegedly aggrieved client
must establish three elements in order to recover for legal
malpractice”: (1) the employment of the attorney or
other basis for duty; (2) the failure of the attorney to
exercise ordinary skill and knowledge; and (3) the
attorney's negligence was the proximate cause of damage
to the plaintiff. Rizzo v. Haines, 555 A.2d 58, 65
(Pa. 1989). This requires "proof of actual loss rather
than a breach of a professional duty causing only nominal
damages, speculative harm or the threat of future harm."
Kituskie v. Corbman, 714 A.2d 1027, 1030 (Pa. 1998).
Stated differently, a plaintiff may recover as damages only
the actual losses he suffered as a result of the
attorney's misconduct. Duke & Co. v.
Anderson, 418 A.2d 613, 617 (Pa. Super. Ct. 1980);
see Ammon v. McCloskey, 655 A.2d 549, 552 (Pa.
Super. Ct. 1995) (“Hence, until the client suffers
appreciable harm as a consequence of his attorney's
negligence, the client cannot establish a cause of action for
malpractice.”) (citation omitted). “Damages are
speculative only if the uncertainty concerns the
fact of damages rather than the amount.”
Liberty Bank v. Ruder, 587 A.2d 761, 765 (Pa. Super.
Ct. 1991) (citation omitted) (emphasis in original); see
Ammon, 655 A.2d at 553 (holding that the entry of a
negligently-obtained judgment constitutes an actual loss
giving rise to a cognizable malpractice claim, even if
execution of the judgment does not occur, so long as the
aggrieved client is able to demonstrate it incurred other
legal malpractice case in which the underlying action
involved litigation, actual losses are usually
“measured by the judgment the plaintiff lost in the
underlying action[, ] and the attorney who negligently
handled the underlying action is the party held responsible
for the lost judgment.” Kituskie, 714 A.2d at
1030. However, it is inequitable for an aggrieved client to
obtain a judgment against his attorney for an amount that is
greater than what the client could have obtained from the
third party in the underlying action. Id. Such a
scenario would allow the client to “receiv[e] a
windfall at the attorney's expense.” Id.
plaintiff bears the burden of proving damages and
establishing that it would have succeeded on its defense in
the underlying action but for its attorney's negligence.
Duke, 418 A.2d at 618.
Contributory Negligence in Legal Malpractice Cases
negligence of a client may be raised as an affirmative
defense by an attorney in a legal malpractice action that is
based on a theory of negligence.” Gorski v.
Smith, 812 A.2d 683, 700 (Pa. Super. Ct. 2002). Because
legal malpractice actions “do not involve bodily injury
or damage to property, ” they fall outside the scope of
Pennsylvania's Comparative Negligence Act, and the
doctrine of contributory negligence therefore applies.
Id. at 702. “Contributory negligence is
conduct on the part of a plaintiff which falls below the
standard [of care] to which he should conform for his own
protection and which is a legally contributing cause,
cooperating with the negligence of the defendant, in bringing
about the plaintiff's harm.” Id. at 703
(citation omitted). Under the doctrine of contributory
negligence, “[i]t does not matter how slight the
evidence of plaintiffs' contributory negligence is. . . .
Any contributory negligence by the plaintiffs would be a
complete bar to recovery.” Rizzo v. Michener,
584 A.2d 973, 978 (Pa. Super. Ct. 1990). However, a plaintiff
“may not be found contributorily negligent unless it
appears that he engaged in conduct that was both negligent
and a legal cause of his injury.” Fahringer v.
Rinehimer, 423 A.2d 731, 733 (Pa. Super. Ct. 1980);
see Angelo v. Diamontoni, 871 A.2d 1276, 1280 (Pa.
Super. Ct. 2005) (“[T]he burden to establish the
plaintiff's conduct as a contributing factor in his
injury rests with the defendant, who must show both the
negligence of the conduct alleged and the causal relationship
of that conduct to the injuries for which damages are
NJM's Motion for Partial Summary Judgment
Motion for Partial Summary Judgment is premised on the notion
that there is no causal relationship between NJM's
purported contributorily negligent conduct-NJM's bad
faith handling of the Wells claim-and the damages that NJM
seeks from the Defendants-the delta between the arbitration
award and the policy limits. (See Pl.'s Br. in
Supp. 9-10, Doc 20.) The reasoning underlying NJM's
position proceeds as follows: First, NJM correctly argues
that the arbitration award issued in favor of Wells was for
compensatory damages only and in no way predicated on
NJM's bad faith conduct. As such, NJM's bad faith
conduct was not factored into the amount of the arbitration
award. Second, NJM correctly advances that the arbitration
award exceeded the $2 million limit in Wells's UIM policy
by approximately $3.9 million. Third, NJM argues that, at the
time Lenahan filed the Petition to Confirm the arbitration
award in the court of common pleas, NJM had no legal recourse
to avoid paying the arbitration award in full. Thus, the
entire arbitration award was going to be confirmed by the
court and on appeal as a matter of law. NJM therefore elected
to settle with Wells instead of engaging in a futile legal
challenge. Furthermore, NJM specifically enumerates a clause
in the settlement agreement that states “no part of the
Payment is for bad faith or extra-contractual
liability” as evidence that the settlement payment was
contemplated to extinguish NJM's liability with respect
to Wells's UIM claim only. (See Pl.'s Br. in
Supp. 10-11, Doc. 20.) Fourth, NJM contends that it now
simply seeks liquidated damages-the difference between the
arbitration award that it was bound to pay in full and the
policy limits. Based on this foundation, NJM posits that the
Court will ultimately have to decide whether NJM would have
lost its challenge to the Petition to Confirm the arbitration
award and on any subsequent appeal, and therefore have been
bound to pay the full amount of the award as a matter of law
due to Brady's negligence. (Pl.'s Reply Br. 3, Doc.
25.) Because NJM's bad faith handling of the Wells claim
does not affect this inquiry, NJM argues that partial summary
judgment on this affirmative defense is warranted.
Court concludes that NJM's exposure to bad faith
liability is relevant to the issue of the damages it seeks in
this case. As such, for the reasons that follow, the Court
will not preclude discovery on NJM's bad faith conduct.
However, NJM's Motion for Partial Summary Judgment will
be granted in part, and the Court will strike Defendants'
bad faith contributory negligence defense only to ...