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Hill Fulwider PC v. Swindell-Dressler International Company

United States District Court, S.D. Indiana, Indianapolis Division

February 2, 2017

HILL FULWIDER PC, Plaintiff,
v.
SWINDELL-DRESSLER INTERNATIONAL COMPANY, TRAVELERS INDEMNITY COMPANY, Defendants. TRAVELERS FNDEMNITY COMPANY, SWINDELL-DRESSLER INTERNATIONAL COMPANY, TRAVELERS FNDEMNITY COMPANY, SWINDELL-DRESSLER INTERNATIONAL COMPANY, Counter-Claimants,
v.
HILL FULWIDER PC, KEITH HAYS, Counter-Defendants.

          ORDER DENYING MOTION TO DISMISS

          Hon. Jane Magnus-Stinson, Chief Judge United States District Court

         Plaintiff/Counter-Defendant Hill Fulwider, P.C. ("Hill Fulwider"), initiated this litigation against Defendants/Counter-Claimants Swindell-Dressier International Company and Travelers Indemnity Company (collectively, "SDIC"), alleging various legal claims seeking to recover almost $300, 000 in attorney's fees that Hill Fulwider claims to be owed. [Filing No. 1.] In response, SDIC asserted counterclaims against Hill Fulwider for legal malpractice and breach of fiduciary duty. [Filing No. 55.] Hill Fulwider has filed a Motion to Dismiss SDIC's breach of fiduciary duty claim, arguing that it is duplicative of the legal malpractice claim based on the facts alleged. [Filing No. 38.] For the reasons that follow, the Court denies Hill Fulwider's Motion to Dismiss. [Filing No. 55.]

         I.

         Standard of Review

         Federal Rule of Civil Procedure 8(a)(2) "requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Fed. R. Civ. Pro. 8(a)(2)). "Specific facts are not necessary, the statement need only 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Erickson, 551 U.S. at 93 (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)).

         A motion to dismiss asks whether the complaint "contain[s] sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In reviewing the sufficiency of a complaint, the Court must accept all well-pled facts as true and draw all permissible inferences in favor of the plaintiff. See Active Disposal, Inc. v. City of Darien, 635 F.3d 883, 886 (7th Cir. 2011). The Court will not accept legal conclusions or conclusory allegations as sufficient to state a claim for relief. See McCauley v. City of Chicago, 671 F.3d 611, 617 (7th Cir. 2011). Factual allegations must plausibly state an entitlement to relief "to a degree that rises above the speculative level." Munson v. Gaetz, 673 F.3d 630, 633 (7th Cir. 2012). This plausibility determination is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.

         II.

         Relevant Background

         The relevant background is set forth from the allegations of SDIC and Travelers' Amended Counterclaim, [Filing No. 55], which the Court must accept as true pursuant to the applicable standard of review at this stage of the proceedings.[1] The Court emphasizes that these allegations are considered to be true only for purposes of deciding the pending motion.

         Hill Fulwider initiated this litigation in October 2015, seeking to recover almost $300, 000 in attorney's fees that it claims to be owed for previous legal representation of SDIC. [Filing No. L] In response, SDIC asserted counterclaims against Hill Fulwider based on the alleged actions of a Hill Fulwider attorney-Keith Hays-who represented SDIC in asbestos litigation in Indiana and Illinois.[2] [Filing No. 55 at 11.] Mr. Hays settled at least three cases against SDIC without SDIC's knowledge or consent. [Filing No. 55 at 11-12.] Mr. Hays also failed to advise SDIC that he had entered into those settlements. [Filing No. 55 at 12.] SDIC incurred sanctions as a result of Mr. Hays' misconduct, was forced to pay settlements to which it did not agree, and incurred attorney's fees it otherwise would not have incurred. [Filing No. 55 at 13.] Hill Fulwider knew that Mr. Hays had settled at least one unrelated case for another client without authority to do so, but it did not supervise, monitor, or otherwise prevent Mr. Hays' misconduct with regard to SDIC. [Filing No. 55 at 13.] Hill Fulwider was also aware that Mr. Hays was the subject of a disciplinary complaint. [Filing No. 55 at 14.] Despite this, Mr. Hays and Hill Fulwider continued to represent SDIC in multiple asbestos cases without disclosing the prior settled cases. [Filing No. 55 at 14.] SDIC "should have been dismissed from most or all of the cases because it did not manufacture or sell the product which allegedly caused plaintiffs' damages." [Filing No. 55 at 14-15.] SDIC asserts counterclaims for legal malpractice and breach of fiduciary duty against Hill Fulwider. [Filing No. 55 at 11-15.] Hill Fulwider has moved to dismiss the breach of fiduciary duty claim as duplicative of the legal malpractice claim. [Filing No. 38; Filing No. 59.] SDIC opposes that motion, [Filing No. 44; Filing No. 60], and the Court will now address the merits of the pending motion.

         III.

         Discussion

         Hill Fulwider asks this Court to dismiss SDIC's breach of fiduciary duty counterclaim against it because that counterclaim allegedly relies on the same substantive allegations as the legal malpractice counterclaim. [Filing No. 39 at 4-7.] Hill Fulwider emphasizes that the breach of fiduciary duty claim relies on the "case within a case" analysis that also must be done for the legal malpractice claim. [Filing No. 39 at 8-9.] Hill Fulwider argues that it does not matter if SDIC seeks different relief for each claim. [Filing No. 39 at 9-11.] Although Hill Fulwider concedes that SDIC "slightly modified the factual allegations" in response to the pending motion after being granted leave to do so, it still contends that the amended breach of fiduciary duty counterclaim is legally deficient because it relies on the same example of alleged malpractice as the legal malpractice claim. [Filing No. 59.]

         In response to the pending motion, SDIC argues that the breach of fiduciary duty counterclaim is not duplicative of the legal malpractice claim. [Filing No. 44.] It emphasizes that under Indiana law, it can seek disgorgement as a remedy for the equitable breach of fiduciary claim and it cannot seek that remedy under the legal malpractice claim. [Filing No. 44 at 2-3.] Additionally, in contrast to a legal malpractice claim, a breach of fiduciary duty claim does not require the plaintiff to prove financial harm from the agent's misconduct. [Filing No. 44 at 2.] SDIC emphasizes that the breach of fiduciary duty claim is based on additional allegations that go beyond what is necessary for legal malpractice, specifically that Mr. Hays, while employed by Hill Fulwider, continued to represent SDIC in the settled cases and other asbestos cases while continuing to conceal the settlements from SDIC. [Filing No. 60 at 4.] Finally, SDIC emphasizes that this case is still in its early stages and that it should be allowed to conduct discovery on the pending claims. [Filing No. 44 at 5-6; Filing No. 60 at 5.] The Court is exercising diversity jurisdiction over this action. 28 U.S.C. ยง 1332. Federal courts deciding state law claims ...


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