Richard L. Toomey v. Wachovia Insurance Services, (11th Cir. 2006)

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[P U B L IS H ]

IN THE UNITED STATES COURT OF APPEALS

F O R THE ELEVENTH CIRCUIT FILED

U .S . COURT OF APPEALS

E L E V E N T H CIRCUIT

M a y 30, 2006

N o . 05-13242 T H O M A S K. KAHN

CLERK

D . C. Docket No. 03-01688-CV-T-26-TGW

R IC H A R D L. TOOMEY,

Resident of Montgomery County, As an

individual and as an assignee of IMC Mortgage

Company,

BRIAN D. HOLMAN,

Resident of Baltimore County, As an

individual and as an assignee of IMC Mortgage

Company,

Plaintiffs-Appellees

Cross-Appellants,

versus

WACHOVIA INSURANCE SERVICES, INC.,

JOEL G. WILLIAMS,

DAVID BALDWIN, INC.,

A Division of Wachovia Insurance Services, Inc.,

Defendants-Appellants

Cross-Appellees.

A p p e al from the United States District Court fo r the Middle District of Florida (M a y 30, 2006) B efo re TJOFLAT, BARKETT and GOODWIN *, Circuit Judges.

P E R CURIAM.

In this diversity action, Wachovia Insurance Services, Inc., Davis Baldwin, I n c ., a division of Wachovia Insurance Services, Inc., and Joel Williams, an o f f ic er /e m p lo y e e of Wachovia Insurance Services, Inc. (together "Wachovia"), a p p e a l the $1,069,200 jury verdict in favor of Brian Holman and Richard Toomey fo r breach of a fiduciary duty owed by Wachovia to IMC Mortgage Company ("IM C "). In a previous settlement agreement between IMC and Holman and T o o m ey, IMC assigned its right to sue Wachovia and to receive damages to H o lm an and Toomey.

H o lm an and Toomey cross-appeal,1 arguing that the district court erred in g r a n tin g judgment as a matter of law to Wachovia and dismissing their claims that (1 ) Wachovia was negligent; (2) Wachovia tortiously interfered with Holman and * Honorable Alfred T. Goodwin, United States Circuit Judge for the Ninth Circuit, sitting by designation.

1 Because the questions to be certified are essential to the resolution of this case, the issues on cross-appeal cannot be decided without the answers to the certified questions.

T o o m e y's business relationship with IMC; (3) Holman and Toomey were entitled to punitive damages; and (4) Wachovia breached its fiduciary duty to Holman and T o o m ey. Holman and Toomey also appeal the district court's dismissal of their M o tio n to Alter or Amend the Judgment taking into account pre-judgment interest an d the alleged range of compensatory damages. After review of Wachovia's ap p eal, we certify questions to the Florida Supreme Court.

BA CK GRO UN D H o lm an and Toomey were employees and officers of IMC, a mortgage b u sin ess based in Tampa, Florida. Wachovia was the insurance broker for IMC.

In 1997, IMC purchased Holman and Toomey's mortgage business, Central Money M o rtg ag e ("CMM"), and Holman and Toomey were appointed officers and em p lo yees of IMC's subsidiary. Each had a five-year employment contract with an annual salary of $300,000 and a severance clause requiring IMC to pay their full salary for the years remaining on the contract if IMC terminated Toomey or H o lm an without cause. Also in 1997, Joel Williams sold to IMC an Employment P r ac tic es Liability Insurance Policy (the "Policy") that covered claims for breaches o f written employment contracts.

Under financial pressure, IMC decided to cease operations of its subsidiary an d notified Holman and Toomey that it planned to terminate their employment co n tracts. Holman and Toomey sued IMC in the United States District Court for th e District of Maryland, alleging that they had been formally terminated without c au s e . This litigation resulted in a judgment of $1.8 million in favor of Holman an d Toomey against IMC.

IMC was unable to satisfy the judgment and initiated settlement n eg o tiatio n s. During these negotiations, IMC discovered that it had lost the P o lic y's coverage for breach of employment contract claims. Because the Policy h ad been due to expire during litigation, IMC had extended its coverage with W ach o v ia for several months to cover any potential claims, such as Holman and T o o m ey's breach of employment contract claims. However, in extending the P o licy, Wachovia is alleged to have summarily removed coverage for breach of w r itte n employment contract claims without IMC's knowledge.

T o satisfy the outstanding $1.8 million judgment, IMC executed a settlement a g r ee m e n t with Holman and Toomey. Under the terms of the agreement, Holman an d Toomey, for consideration of $1.5 million, dismissed all their causes of action a g a in s t IMC except the counts for breach of their employment contracts. Holman a n d Toomey, however, expressly reserved claims against Wachovia: P r o v id e d however, that nothing contained herein shall operate to release or waive any claims the Releasors might have or herein a c q u ire against the insurance companies specified in Sections 3(d) and ( e) below, Wachovia, Davis Baldwin, or any partner, shareholder, asso ciate, employee, servant, agent or broker of Federal/Chubb I n s u r an c e Company or Wachovia Davis Baldwin for claims which arise out of the claims referenced in Sections 3(d)-(e) below, in clu d in g , but not limited to, any claims which may be made directly o r indirectly to satisfy the $1.8 million judgment awarded by the C o u r t in the Litigation, and further provided that nothing contained h erein shall operate to release any obligations of the parties to this A g reem en t arising under this Agreement.

A d d itio n ally, IMC agreed to assign Holman and Toomey "all its rights, including its causes of action, which rights IMC may have under or because of the existence o f [the Policy] . . . to secure indemnification sufficient to satisfy" the $1.8 million ju d g m e n t.

H o lm an and Toomey subsequently brought suit against Wachovia. Pursuant to IMC's assignment of potential claims to them, they allege (1) that Wachovia b reach ed fiduciary duties owed to IMC, and (2) that Wachovia was negligent in its d ealin g s with IMC. They also allege direct claims against Wachovia alleging (3) in ten tio n al interference with their rights under their employment contracts; and (4) b reach of fiduciary duties allegedly owed by Wachovia directly to them.

A f te r trial, the district court granted Wachovia judgment as a matter of law o n all claims except the count for breach of fiduciary duties owed by Wachovia to IM C , which was submitted to the jury. The jury returned a verdict of $1,069,200 in favor of Holman and Toomey on that claim. Wachovia now appeals, and H o lm an and Toomey cross-appeal.

O n appeal, Wachovia argues that the district court erred because: (1) H o lm an and Toomey's underlying claims against IMC had been unconditionally released and thus, because IMC had no liability, Wachovia could not be liable; (2) a breach of fiduciary duty is a personal claim that cannot be assigned; and (3) H o lm an and Toomey should not be allowed to receive attorney's fees on behalf of IM C where IMC failed to assign attorney's fees to Holman and Toomey, and w h e r e Holman and Toomey failed to prove the specific amount of attorney's fees in cu rred by IMC.

O n cross-appeal, Holman and Toomey argue that the district court erred in g ran tin g judgment as a matter of law to Wachovia on their claims.

D IS C U S S IO N W e note initially that the issues raised by Wachovia on appeal are properly b efo re us for review.1 In this diversity action, neither party contests the 1 Holman and Toomey argue that Wachovia failed to preserve any of its issues for our review because Wachovia's notice of appeal mentions only the final judgment and the Bill of Costs. This argument lacks merit. Indeed, as we have previously stated, an "`appeal from a final judgment draws in question all prior non-final orders and rulings which produced the judgment.'" Club Car, Inc. v. Club Car (Quebec) Import, Inc., 362 F.3d 775, 785 n.5 (11th Cir. 2004) (quoting Barfield v. Brierton, 883 F.2d 923, 930 (11th Cir. 1989). Wachovia's notice of appeal mentions the April 8, 2005 judgment, and the April 9 Bill of Costs. On April 1, 2005, after full briefing, the district court issued an order setting out "the issues to be tried in this case." This order explicitly states that other issues, such as the effect of IMC's release and the issue of attorney's fees "should not be presented to the jury in this case." These issues were therefore not brought up again during the trial. To hold that they were therefore waived or abandoned for appellate review, as Holman and Toomey urge us to, would be contrary to our own precedent, see Club Car, 362 F.3d at 785 n.5, and undermine the authority of district court judges to administer their cases in an orderly manner. See Inter Medical Supplies, Ltd. v. EBI ap p licab ility of Florida law. Because we find that dispositive questions regarding b o th (1) Holman and Toomey's release of IMC and (2) the assignability of a claim fo r breach of fiduciary duty are unsettled under Florida law, we certify two q u e stio n s to the Supreme Court of Florida pursuant to Fla. Stat. § 25.031 2 and Fla.

R . App. P. 9.150(a).3 A . Simultaneous release of IMC and assignment of IMC's causes of action against W a ch o v ia to Holman and Toomey Medical Sys. Inc., 181 F.3d 446, 455 (3d Cir. 1999) (holding that, under similar circumstances involving the meaning of a contract clause, once the district court had issued "a definitive ruling after full briefing on the disputed contract provision, there was little purpose in repeatedly raising the issue at trial because there was little likelihood that the court would revisit its decision" and therefore the issue was preserved for appellate review by the definitive pretrial ruling).

2 The statute provides, in pertinent part: The Supreme Court of this state may, by rule of court, provide that, when it shall appear to . . . any circuit court of appeals of the United States . . . that there are involved in any proceeding before it questions or propositions of the laws of this state, which are determinative of the said cause, and there are no clear controlling precedents in the decisions of the Supreme Court of this state, such federal appellate court may certify such questions or propositions of the laws of this state to the Supreme Court of this state for instructions concerning such questions or propositions of state law, which certificate the Supreme Court of this state, by written opinion, may answer.

Fla. Stat. § 25.031 (2002).

3 The rule provides: On either its own motion or that of a party . . . a United States court of appeals may certify a question of law to the Supreme Court of Florida if the answer is determinative of the cause and there is no controlling precedent of the Supreme Court of Florida.

Fla. R. App. P. 9.150(a).

A central issue in this appeal is whether the district court was correct in a llo w in g Holman and Toomey's claim against Wachovia for breach of fiduciary d u ty to survive Holman and Toomey's release of IMC. Wachovia argues that the co u rt erred because "the very Settlement Agreement by which Holman and T o o m e y acquired this claim also extinguished it, by releasing IMC from liability." Holman and Toomey respond that the same settlement agreement, by sim u ltan eo u sly reserving their rights to pursue Wachovia and others for their u n p aid judgment against IMC, expressly did not release Wachovia from suit.4 W h ile both parties point us to relevant Florida case law, we have found no p reced en tial authority on this particular issue in this context. In Fidelity & C asu alty Co. of New York v. Cope, 462 So. 2d 459 (Fla. 1985), for example, the F lo r id a Supreme Court held, in the context of a personal injury tort case, that "a b s en t a prior assignment of the cause of action, once an injured party has released the tortfeasor from all liability, or has satisfied the underlying judgment, n o such action may be maintained." Id. at 459 (emphasis added). In Cope, the in ju red party in a vehicle accident secured a $100,000 judgment against two in su ran ce companies, Hartford and Fidelity, who insured the driver and owner of th e vehicle, respectively. Each company paid its policy limit of $10,000. Id. at 4 6 0 . Cope then brought an excess judgment action against Hartford, based on its b ad faith failure to settle. Id. Hartford settled this action for $50,000 in return for C o p e's execution of a release and a satisfaction of judgment in its favor and in fav o r of both the owner and driver of the vehicle. Id. Fidelity was not named in th is release. Cope then filed another suit for bad faith failure to settle against F id e lity , for the $30,000 which remained unpaid on the final judgment. Id. After a bench trial, the trial court found Fidelity liable for $30,000 and rejected Fidelity's arg u m en t that Cope's release in favor of Fidelity's insured barred any subsequent b a d faith action. Id. The Supreme Court of Florida reversed, noting that "if an ex cess judgment has been satisfied, absent an assignment of that cause of action p rio r to satisfaction, a third party cannot maintain action for a breach of duty b e tw e en an insurer and its insured." Id. at 461 (emphasis added).

I n Rosen v. Florida Insurance Guaranty Ass'n, 802 So. 2d 291 (Fla. 2001), th e Supreme Court of Florida addressed a similar factual situation as that at issue h e r e. In Rosen, the plaintiff, Rosen, sued a law firm that had represented her for, in te r alia, negligent supervision, breach of contract, fraud, and breach of fiduciary d u ty. Id. at 292-93. The firm was defended by the Florida Guaranty Association ("F IG A "), which argued that its liability was limited by statute to $300,000, in clu d in g defense costs. Id. Rosen and the firm ultimately entered into a settlem en t agreement upon learning that FIGA had determined that $39,000 rem ain ed available after defense costs. Id. Under the terms of the agreement, the f ir m consented to a judgment of $261,000 against it and FIGA paid Rosen $ 3 9 ,0 0 0 . Id. In return, Rosen agreed not to record or execute the judgment ag ain st the firm, and to try and collect the judgment against FIGA in a separate actio n . Rosen agreed that after that litigation was resolved, she would release the firm or file a notice of satisfaction of the judgment. Id. After the settlement a g r ee m e n t was executed, FIGA paid Rosen $39,000 without obtaining a release, an d Rosen subsequently filed a declaratory judgment against FIGA to have it d eclared liable for the judgment. Id. at 293-94. The trial court ruled that the settlem en t agreement had released the law firm and thereby extinguished any liab ility FIGA had as an insurer. Id. at 294. The Florida Supreme Court reversed, fo cu sin g on the language of the settlement agreement and noting that "the settlem en t agreement clearly demonstrates the intent of the parties not to release F I G A from liability and the underlying claim against the insured was not released." Id. at 297-98. The Florida Supreme Court characterized the settlement agreement at issue there as a covenant not to sue the law firm rather than a release of FIGA, b ecau se the settlement agreement expressly reserved Rosen's claims against FIGA.

Id. at 298.

As is evident, neither of these cases, nor the others cited by the parties, ad d ress the same legal issue we have before us. Cope addressed the question of w h eth er a release or satisfaction of judgment without an assignment could n o n eth eless allow a third party to maintain a derivative bad faith action based on a b r e ac h of duty between the insurer and its insured, and Rosen dealt with whether a settlem en t agreement between two parties that reserved the right to bring suit ag ain st a third party insurer could also extinguish the claim against the third party b y including a release of the insured party after the litigation had been resolved.

By contrast, in the present case the question is whether a settlement agreement b etw een two parties that explicitly contains both an assignment of causes of action ag ain st a third party (from IMC to Holman and Toomey) and an immediate release (b y Holman and Toomey of IMC) allows the assignee to bring a cause of action for b reach of fiduciary duty against the third party.

B ecau se we maintain more than "substantial doubt" as to how the issue b efo re us would be resolved under Florida law, we certify this question to the F lo r id a Supreme Court. Jones v. Dillard's, Inc., 331 F.3d 1259, 1268 (11th Cir. 2 0 0 3 ) ("Substantial doubt about a question of state law upon which a particular case turns should be resolved by certifying the question to the state supreme c o u r t." ) .

B. Assignability of a claim for breach of fiduciary duty T h e second, and related, question that we consider unsettled under Florida law relates to the assignability of claims for breach of fiduciary duty. Specifically, W a ch o v ia argues that the recent Florida Supreme Court decision in Cowan L ie b o w itz & Latman, P.C. v. Kaplan, 902 So. 2d 755 (Fla. 2005), makes clear that c la im s for breaches of fiduciary duties are non-assignable. Holman and Toomey resp o n d that the Florida Supreme Court, in Forgione v. Dennis Pirtle Agency, Inc., 7 0 1 So. 2d 557 (Fla. 1997), had previously made clear that relationships between an insured and an insurance agent are not so personal as to preclude assignment of a tort claim against an insurance agent. Neither decision, however, addresses the q u e stio n before us here. Cowan involved the assignability of legal malpractice claim s involving the preparation of private placement memoranda, and Forgione d e a lt with whether an insured could assign a claim for negligence against an in su ran ce agent for failure to obtain proper coverage. Neither the holdings nor the r ea so n in g in these cases instruct us as to whether claims for breach of fiduciary d u ties may be assigned. Accordingly, we certify the following questions to the F lo rid a Supreme Court: Q U E S T IO N S CERTIFIED I. WHAT IS THE EFFECT OF A SETTLEMENT AGREEMENT BETWEEN T W O PARTIES THAT EXPLICITLY CONTAINS BOTH AN ASSIGNMENT O F CAUSES OF ACTION AGAINST A THIRD PARTY INSURER AND AN IM M E D IA T E RELEASE OF THE INSURED ON THE SAME CAUSES OF A C T IO N ? II. CAN A CLAIM FOR BREACH OF FIDUCIARY DUTY AGAINST AN IN S U R A N C E BROKER BE ASSIGNED? T h e phrasing of these two questions is not intended to limit the Florida S u p rem e Court's consideration of the issues involved or the manner in which it g iv es its answers. "This latitude extends to the Supreme Court's restatement of the issu e or issues . . . ." Washburn v. Rabun, 755 F.2d 1404, 1406 (11th Cir. 1985).

The record in this case and the briefs of the parties shall be transmitted to the F lo rid a Supreme Court for assistance in answering these questions.

Q U E S T IO N S CERTIFIED.

4 As noted above, the relevant portion of the settlement agreement between Holman and Toomey and IMC reads as follows: Provided however, that nothing contained herein shall operate to release or waive any claims the Releasors might have or herein acquire against the insurance companies specified in Sections 3(d) and (e) below, Wachovia, Davis Baldwin, or any partner, shareholder, associate, employee, servant, agent or broker of Federal/Chubb Insurance Company or Wachovia Davis Baldwin for claims which arise out of the claims referenced in Sections 3(d)-(e) below, including, but not limited to, any claims which may be made directly or indirectly to satisfy the $1.8 million judgment awarded by the Court in the Litigation, and further provided that nothing contained herein shall operate to release any obligations of the parties to this Agreement arising under this Agreement.

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