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Attorneys Liability Protection Society, Inc. v. Whittington Law Associates, Pllc

United States District Court, First Circuit

June 28, 2013

Attorneys Liability Protection Society, Inc.
v.
Whittington Law Associates, PLLC, W.E.

MEMORANDUM ORDER

JOSEPH N. LAPLANTE, District Judge.

This dispute over the scope of a professional liability insurance policy arises from a somewhat unusual set of facts, at least as far as professional liability insurance policies are concerned. Whittington Law Associates, PLLC and W.E. Whittington (collectively, the "Whittington defendants") were evidently the victims of what has become known as a "Nigerian Check Scam." In the typical embodiment of that confidence game, "the victim is asked to accept what appears to be a legitimate check on behalf of a foreign corporation, deposit the funds, then wire some or all of the proceeds to a foreign account before the victim's bank realizes the check is, in fact, counterfeit." Branch Banking & Trust Co. v. Witmeyer, No. 10-cv-55, 2011 WL 3297682, at *1 (E.D. Va. Jan. 6, 2011).

That is precisely what happened here. The Whittington defendants were induced, by a "client" that did not actually exist, to deposit a sizeable check into their account at Ledyard National Bank and promptly wire the bulk of the funds to a bank account in Japan. By the time Ledyard discovered that the check was invalid, the funds had already been withdrawn from the Japanese account.

Finding itself more than $150, 000 short, Ledyard commenced a state-court action against the Whittington defendants to recover that amount. The Whittington defendants, in turn, sought coverage against that action from their professional liability insurer, Attorneys Liability Protection Society, Inc. ("ALPS"), which responded by filing this action seeking a declaratory judgment that it need not provide coverage. The Whittington defendants have counterclaimed, seeking a declaratory judgment to the contrary, and alleging that ALPS breached the insurance contract by declining to provide coverage. This court has jurisdiction of this action under 28 U.S.C. ยง 1332 (diversity).

ALPS has moved for summary judgment on both its claim and the Whittington defendants' counterclaims. Its arguments are twofold. First, pointing out that the Whittington defendants' insurance policy provides coverage only for damages arising from "an act, error or omission in professional services that were or should have been rendered, " it argues that the events underlying Ledyard's claim do not meet that definition. Second, it argues that even if Ledyard's claim falls within the general scope of the policy, that claim is specifically excluded by the policy's exclusion for the "conversion, misappropriation or improper commingling" of funds controlled by the Whittington defendants. The Whittington defendants have cross-moved for summary judgment, unsurprisingly taking a contrary position as to both the scope of the policy and the applicability of the exclusion.

Having carefully considered the parties' submissions and heard oral argument, the court concludes that Ledyard's claim against the Whittington defendants arises from the conversion or misappropriation of funds under the Whittington defendants' control, and is therefore excluded under the unambiguous policy language. The court accordingly grants ALPS's motion for summary judgment, and denies the Whittington defendants' cross-motion.

I. Applicable legal standard

Summary judgment is appropriate where "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). A dispute is "genuine" if it could reasonably be resolved in either party's favor at trial. See Estrada v. Rhode Island , 594 F.3d 56, 62 (1st Cir. 2010) (citing Meuser v. Fed. Express Corp. , 564 F.3d 507, 515 (1st Cir. 2009)). A fact is "material" if it could sway the outcome under applicable law. Id . (citing Vineberg v. Bissonnette , 548 F.3d 50, 56 (1st Cir. 2008)). In analyzing a summary judgment motion, the court "views all facts and draws all reasonable inferences in the light most favorable to the non-moving party." Id . On cross-motions for summary judgment, the court applies this standard to each party's motion separately. See, e.g., Am. Home Assurance Co. v. AGM Marine Contractors, Inc. , 467 F.3d 810, 812 (1st Cir. 2006).

II. Background

Defendant W.E. Whittington is a New Hampshire attorney who practices law under the name Whittington Law Associates, PLLC. Late on the evening of July 24, 2011, he received an e-mail from a person claiming to be Richard Downey, an attorney with the Law Offices of Richard L. Downey & Associates in Fairfax, Virginia. "Downey" wrote that he would be "sending a client over for a business litigation matter, " and asked Whittington to "[a]dvise of [his] availability." Once Whittington had done so, the e-mail continued, "Downey" would "have [his] client contact [Whittington] directly with pertinent information." Whittington did not promptly respond to the e-mail, and late the following night, "Downey" wrote a second, identical e-mail to Whittington, sent from a different e-mail address.

The next morning, Whittington responded to the original email, advising "Downey" that he was "completely available"; the morning after that, he responded to "Downey's" second e-mail, again advising of his availability. Several days later, "Downey" wrote back, informing Whittington that he had "forwarded your contact to my client to establish direct contact and provide pertinent information for your review." Shortly thereafter, Whittington received an e-mail from a person claiming to be Martin Joachim, a representative of Bendtsteel A/S in Frederiksvaerk, Denmark. "Joachim" advised that he had been referred by Richard Downey, and indicated that he would be forwarding additional information about "our legal matter."

In an e-mail to Whittington several days later, "Joachim" outlined the contours of this "legal matter." According to the e-mail, Mill Steel Supply of Manchester, New Hampshire had made only a part payment for "goods" supplied by Bendtsteel, with over $500, 000 still outstanding. Bendtsteel wished to maintain its otherwise good relationship with Mill Steel Supply, but believed that the retention of the Whittington defendants "and the introduction of legal pressure may initiate immediate payment." "Joachim" continued:

Our expectation of your services for now will be within the scenario of a phone call or demand letter to our customer. This approach will trigger the much needed response from our customer towards payment.
When all available options have been exhausted, litigation may be introduced as a last resort. We will forward the ...

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