Yaquinto v. Employers Fire Ins ( 2004 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT March 30, 2001
Charles R. Fulbruge III
Clerk
No. 00-10216
In the Matter of: KAYLA SEGERSTROM,
Debtor
--------------------
ROBERT YAQUINTO, JR. As Trustee for the Estate of Kayla
Segerstrom
Appellant,
versus
KAYLA SEGERSTROM; EMPLOYERS FIRE INSURANCE COMPANY;
TOUCHSTONE, BERNAYS, JOHNSTON, BEALL & SMITH LIMITED
LIABILITY PARTNERSHIP,
Appellees.
--------------------
Appeal from the United States District Court
for the Northern District of Texas
--------------------
Before JOLLY, MAGILL* and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
Robert Yaquinto, Jr., as trustee of Kayla Segerstrom’s
Chapter 7 bankruptcy estate, appeals from a summary judgment in
favor of defendants Touchstone, Bernays, Johnston, Beall & Smith
L.L.P. and Employers Fire Insurance Company on the estate’s legal
malpractice, breach of fiduciary duty and breach of contract
*
Circuit Judge of the Eighth Circuit, sitting by
designation.
claims. Yaquinto also appeals the district court’s denial of the
estate’s motion to compel discovery of certain communications
between Kayla Segerstrom and her attorneys. We AFFIRM.
FACTUAL AND PROCEDURAL BACKGROUND
In 1995, Kayla Segerstrom, then 17 years old, drove a van
across the center line and struck head on a 1986 Honda Civic
carrying the Colvin family.1 Just over a year after the
accident, the Colvins sued Segerstrom, her parents, and her
parents’ sole proprietorship D&R Enterprises (D&R) in Texas state
court for negligence, negligent entrustment, and failure to
train/vicarious liability respectively (the Colvin litigation).
The van Segerstrom drove was covered by a $75,000 motor
vehicle insurance policy issued by Employers Fire Insurance
Company (Employers) to D&R. D&R also had a $1 million
comprehensive general liability policy issued by Commercial Union
Insurance, Employers’ parent company. Employers hired
Touchstone, Bernays, Johnston, Beall & Smith, L.L.P. (Touchstone)
to defend Segerstrom, her parents, and D&R.
Segerstrom has acknowledged responsibility for the accident,
which occurred after she turned her attention from the road to a
ringing cell phone. At trial, she testified that at the time of
1
The collision had tragic consequences. Three-year old
Cole Colvin died instantly. James Bradley Colvin, Cole’s father,
suffered severe and permanent brain damage. Two-year old Breana
Colvin suffered a broken neck. Her mother, Terri Colvin, endured
serious facial and body lacerations.
2
the accident she was driving the van without her parents’
permission, and that she was not using the van in connection with
any D&R business.2 The Colvins argued that D&R shared liability
for the accident because the company failed to train Segerstrom
not to answer a ringing cell phone while driving the company van.
The jury returned a verdict in excess of $6.5 million in favor of
the Colvins, but found only Kayla Segerstrom liable. The state
court eventually entered judgment against Segerstrom in excess of
$8.5 million. Employers immediately tendered its $75,000 policy
limits.
On February 6, 1998, the Colvins filed an involuntary
bankruptcy petition against Segerstrom. See 11 U.S.C.A. § 303
(West 1993). Segerstrom consented to the entry of an order for
relief.3 The bankruptcy court granted a motion by Robert
Yaquinto to hire Bellinger & DeWolf (Bellinger), the firm that
had represented the Colvins, as special counsel to pursue claims
against Touchstone and Employers on a contingency basis.
With Bellinger’s assistance, the estate filed a complaint
2
Segerstrom’s parents were out of town at the time of the
accident; they had left her under the care of her grandmother.
Segerstrom testified that both of her parents independently told
her not to drive the van. At the time of the accident,
Segerstrom said that she was driving to a friend’s house.
3
The only creditors that filed claims against Segerstrom’s
estate were the Colvins, an attorney and law firm that had
represented the Colvins in the Colvin litigation, and a car
leasing company. The stay was lifted to allow the leasing
company to recover its car, leaving only the Colvins and their
lawyers as claimants.
3
against Touchstone and Employers on behalf of Segerstrom’s estate
alleging negligence, gross negligence and breach of fiduciary
duty in connection with the Colvin litigation (the malpractice
suit). The complaint alleged that Touchstone had an inherent
conflict of interest in representing Segerstrom, her parents, and
D&R as defendants in the same litigation. According to the
estate, this conflict caused Segerstrom to absorb 100% of the
liability for the accident when that liability should have been
shared with D&R. As to Employers, the estate alleged that the
insurer violated the general duty of reasonableness Texas imposes
on insurers by hiring only Touchstone to represent Segerstrom,
her parents, and D&R. This breach rendered Employers directly
liable for Touchstone’s conflict of interest and the harm it
caused Segerstrom. The complaint sought to recover for
Segerstrom’s estate $8.5 million - the value of the judgment
assessed against Segerstrom in the Colvin litigation.
After the initiation of the malpractice suit, Segerstrom
signed an affidavit stating that Touchstone “did an excellent
job” during the state court litigation and that she had no basis
for dissatisfaction with the firm’s work. She also reported that
Touchstone advised her of all litigation risks associated with
the state court trial. As to the alleged conflict between
Segerstrom and her parents, Segerstrom testified “[t]here was no
conflict between my position and interest and those of my
parents. My parents and I knew that they were not at fault and I
4
was not willing to lie or instruct my attorney to mislead others
or try to shift blame to my parents.”
In October 1998, Segerstrom’s personal liability to the
Colvins was discharged.
In the winter of 1999, Yaquinto filed motions to compel
discovery of communications between Segerstrom and Touchstone
that had been claimed by both parties as protected by attorney-
client privilege. Yaquinto argued that he, as trustee,
controlled Segerstrom’s attorney-client privilege to the extent
that it could be waived by filing a legal malpractice action.
The district court referred the motions to compel to the
bankruptcy court, which recommended they be granted. The
district court rejected the bankruptcy court’s recommendation,
however, concluding that allowing the attorney-client privilege
to transfer would inhibit its primary purpose: the facilitation
of full and honest communications between attorneys and their
clients. Yaquinto v. Touchstone, Bernays, Johnston, Beall &
Smith, L.L.P., 1999 WL 354228, *2 (N.D.Tex. 1999).
Following denial of the trustee’s motions to compel,
Touchstone and the estate filed cross motions for summary
judgment on the pending legal malpractice claims, and Employers
filed a motion for summary judgment on all claims pending against
it. Adopting the Report and Recommendation of a magistrate
judge, the district court granted summary judgment against the
5
estate on all claims. Yaquinto now appeals those judgments, as
well as the district court’s denial of the motions to compel.
DISCUSSION
This case presents claims raised in an adversary proceeding
over which the district court exercised jurisdiction pursuant to
28 U.S.C. § 1334. Yaquinto timely provided notice of appeal, and
this Court exercises jurisdiction pursuant to 28 U.S.C. § 1291.
I. The Summary Judgment Rulings
We review grants of summary judgment de novo, guided by the
same standard as the district court: Federal Rule of Civil
Procedure 56. Stults v. Conoco, Inc., 76 F.3d 651, 654 (5th Cir.
1996). Pursuant to Rule 56, a party may obtain summary judgment
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 judgment as a matter of law."
FED.R.CIV.P. 56(c). In determining whether a genuine issue of
material fact exists, we view the evidence and inferences in the
light most favorable to the nonmoving party. Taylor v. Gregg, 36
F.3d 453, 455 (5th Cir. 1994). Dispute about a material fact is
"genuine" if the evidence could lead a reasonable jury to find
for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477
6
U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986).
A. The Estate’s Legal Malpractice Claim Against Touchstone
Touchstone urged the district court to grant summary
judgment on the following grounds: (1) Segerstrom’s bankruptcy
estate did not include a legal malpractice claim against
Touchstone because any such claim had been denied by Segerstrom,
(2) any negligence by Touchstone did not cause Segerstrom injury
because her personal liability on the state court judgment had
been discharged, and (3) the estate could not prove that any
negligence by Touchstone caused harm to Segerstrom in the Colvin
litigation by demonstrating an alternative meritorious defense
that would have led to a more favorable result for her. The
magistrate and district courts addressed only the first two
grounds, finding in favor of Touchstone on both. The estate’s
briefing and oral argument in this appeal focus on reversing the
district court on these two issues. Although the estate’s
arguments raise significant questions as to the propriety of the
district court’s analysis, it is well-settled that we may affirm
a district court’s grant of summary judgment on any ground
articulated before that court. See Chriceol v. Phillips, 169
F.3d 313, 315 (5th Cir. 1999). Because we conclude that the
estate has not offered sufficient proof that Segerstrom suffered
injury as consequence of Touchstone’s representation during the
Colvin litigation, we affirm the district court’s summary
judgment in favor of Touchstone.
7
At the outset, we briefly review the district court’s
holding with respect to whether Segerstrom’s estate includes a
legal malpractice claim against Touchstone. Relying on Texas
law, the district court determined that Segerstrom, and hence her
estate, had no interest in an “unasserted, denied” legal
malpractice claim against Touchstone. See Dauter-Clouse v.
Robinson, 936 S.W.2d 329, 332 (Tex. App. 1996, no writ)(holding
that Texas law does not grant debtors a property interest in “an
unasserted, denied legal malpractice claim.”). As a consequence,
the court concluded that no cause of action became part of the
bankruptcy estate.
It has long been established that federal bankruptcy law
determines the scope of a debtor’s bankruptcy estate. See United
States v. Whiting Pools, Inc., 462 U.S. 198, 204-5 (1983).
Pursuant to section 541(a) of the Bankruptcy Act of 1986 (the
Code), a debtor’s bankruptcy estate consists of all “legal or
equitable interests . . . in property as of the commencement of
the case.” 11 U.S.C. § 541(a) (1993). The reference to all
“legal or equitable interests” includes any “causes of action
belonging to the debtor at the time the case is commenced.”
Louisiana World Exposition v. Federal Ins. Co., 858 F.2d 233, 245
(5th Cir. 1988) (citations omitted). A debtor’s pre-petition
rights in property, such as a cause of action, are determined
according to state law. Butner v. United States, 440 U.S. 48,
8
55, 99 S. Ct. 914, 918 (1979) (explaining that “[p]roperty
interests are created and defined by state law” and, “[u]nless
some federal interest requires a different result,” should not be
analyzed differently “simply because an interested party is
involved in a bankruptcy proceeding.”); Louisiana World, 858 F.2d
at 252. This Circuit has relied on state law to determine (1)
whether the debtor, as opposed to someone else, had a property
interest in a right of action as of the commencement date, and
(2) whether a right of action accrued pre-petition, and hence
belonged to the estate, or post-petition. See, e.g., Matter of
Wheeler, 137 F.3d 299, 300-01 (5th Cir. 1998); Matter of
Educators Group Health Trust, 25 F.3d 1281, 1283 (5th Cir. 1994).
The district court’s reliance on state law to define a
debtor’s rights in property based on the debtor’s post-petition
conduct is inconsistent with these organizing principles of
bankruptcy estate law. Butner does not empower states to alter
their property rights holdings in the bankruptcy context. To the
contrary, Butner espouses the principle that property rights
within a state should remain the same within and outside of
bankruptcy. See Louisiana World, 858 F.2d at 252 (“Butner . . .
stresses that federal bankruptcy law should not be used to work a
substantive change in the ordering of property interests under
state law.”). For that reason, state law determines only whether
a cause of action accrued to the debtor as of the commencement of
9
the bankruptcy case. Once that determination has been made,
federal law controls whether a trustee can maintain the cause of
action on behalf of the bankruptcy estate. Federal law provides
that when a legal malpractice cause of action has accrued to a
debtor as of the commencement of the bankruptcy case, it becomes
part of the debtor’s bankruptcy estate. Educators’ Group Health,
25 F.3d at 1284.
As of the commencement of Segerstrom’s bankruptcy case, a
legal malpractice claim against Touchstone had accrued to
Segerstrom according to Texas law. See In re Swift, 129 F.3d
792, 795-96 (5th Cir. 1997) (collecting Texas law on accrual of
legal malpractice actions). Segerstrom never denied or waived
that malpractice action prior to the commencement of her
bankruptcy. Since Touchstone has provided no tenable basis in
federal law for withholding Segerstrom’s legal malpractice claim
from her bankruptcy estate, we conclude that the estate can
pursue that claim.
We now proceed to analyze whether the estate has presented
sufficient evidence to survive Touchstone’s motion for summary
judgment on the legal malpractice claim. When a trustee
prosecutes a right of action derived from the debtor, the trustee
stands in the shoes of the debtor. See 5 Lawrence P. King,
Collier on Bankruptcy ¶ 541.08 (15th ed. 1996). The trustee is
subject to all defenses available against the debtor, and must
10
prove all elements that the debtor herself would be required to
prove. Stumph v. Albracht, 982 F.2d 275, 277 (8th Cir. 1992); In
re Giorgio, 862 F.2d 933, 936 (1st Cir. 1988). See also Wiley v.
Public Investors Life Ins. Co., 498 F.2d 101, 104 (5th Cir.
1974). To successfully prosecute Segerstrom’s legal malpractice
claim against Touchstone, Texas law requires that Yaquinto prove
four elements: (1) Touchstone owed Segerstrom a duty; (2)
Touchstone breached that duty; (3) the breach proximately caused
injury to Segerstrom; and (4) damages resulted.4 See Streber v.
4
In an alternative holding, the district court determined
that Yaquinto would be unable to prove any damages because
Segerstrom’s personal liability to the Colvins had been
discharged. See McClarty v. Gudenau,176 B.R. 788, 790 (E.D. Mich.
1995) (holding that a chapter 7 trustee could not recover an
excess judgment against the debtor’s former attorney through a
legal malpractice action because the debtor’s personal liability
had been discharged). We do not adopt the district court’s
holding. In In re Edgeworth, this Court held that a discharged
debt “continues to exist” and judgment creditors “may collect
from any other source that may be liable.” In re Edgeworth, 993
F.2d 51, 53 (5th Cir. 1993); 11 U.S.C. § 524(e) (2000)
(“[D]ischarge of a debt of the debtor does not affect the
liability of any other entity on, or the property of any other
entity for, such debt.”). We noted in Edgeworth that the
bankruptcy code’s fresh start policy was not intended to allow
insurers to escape obligations simply based on the “financial
misfortunes of the insured.” Id. Though Edgeworth does not
control the present case because it involved a nominal suit
against the debtor for the debtor’s negligence and an insurance
company’s liability for that negligence, its rationale could be
extended to include cases like this one. As we explained in
Edgeworth, it makes little sense to allow those who have
committed torts to escape liability because of the financial
misfortunes of their victims. Moreover, allowing a cause of
action to go forward on the facts of this case would not threaten
financial harm to the debtor, thus the primary purpose behind the
discharge would be protected. Because we are able to affirm the
district court’s judgment based on the issues of injury and
11
Hunter, 221 F.3d 701, 722 (5th Cir. 2000)(citations omitted);
Federal Deposit Insurance Corp. v. Shrader & York, 991 F.2d 216,
221 (5th Cir. 1993)(citing Lucas v. Texas Industries, Inc., 696
S.W.2d 372, 376 (Tex. 1984)).
The duty element is not at issue in this case. See Zidell
v. Bird, 692 S.W.2d 550, 553 (Tex. App. 1985, no writ)
(recognizing that attorneys owe their clients a duty to perform
in accordance with the standards of the profession); Longaker v.
Evans, 32 S.W.3d 725, 733 (Tex. App. 2000, n.w.h.) (recognizing
that attorneys owe their clients a fiduciary’s duty of loyalty).
Whether Touchstone breached either its duty of care or fiduciary
duty has been contested; based solely on conflicting affidavit
testimony, we assume that the estate has raised a material fact
question as to whether Touchstone breached its duty of care by
jointly representing all defendants in the Colvin litigation
and/or failing to deflect responsibility for the accident from
Kayla Segerstrom onto D&R. To avoid summary judgment, the estate
must still provide evidence that Segerstrom suffered injury as a
consequence of these alleged breaches.5 In this regard, the
causation under Texas law, however, we need not resolve this
issue.
5
The estate’s complaint alleged breach of fiduciary duty in
addition to negligence and gross negligence. The estate
maintains that it need not show injury or causation with respect
to its breach of fiduciary duty claims. While the Texas Supreme
Court has dispensed with the need to prove an actual injury and
causation when a plaintiff seeks to forfeit some portion of an
12
estate must prove “a suit within a suit” - it must demonstrate
that but for the manner in which Touchstone conducted her
defense, Segerstrom would have obtained a better result in the
Colvin litigation. See Mackie v. McKenzie, 900 S.W.2d 445, 449
(Tex. App. 1995, writ denied); Heath v. Herron, 732 S.W.2d 748,
753 (Tex. App. 1987, writ denied). While Segerstrom’s post-
petition affidavit testimony denying the existence of a legal
malpractice claim is irrelevant to whether the claim becomes part
of her bankruptcy estate in accordance with federal law, her
testimony carries considerable weight in determining whether the
estate has met its burden of establishing injury and causation in
accordance with Texas law.
Initially, we examine whether the estate has offered
sufficient evidence that Segerstrom, as opposed to her creditors,
suffered injury in the Colvin litigation. According to the
estate, Segerstrom suffered an injury because the jury awarded a
large verdict against her when that verdict could have been
attorney’s fees in connection with a breach of fiduciary duty,
see Burrow v. Arce, 997 S.W.2d 229, 240 (Tex. 1999), injury and
causation are still required when a plaintiff seeks to recover
damages for a breach of fiduciary duty. See Longaker, 32 S.W.3d
at 733 n. 2 (“The holding [of Burrow] has no application . . .
where the client/estate does not seek fee forfeiture, but rather
seeks actual damages caused by the fiduciary's misconduct.”).
The estate’s complaint does not seek a forfeiture of the fees
Touchstone received for representing Segerstrom, rather the
complaint alleges that “[a]s a direct and proximate result of
Touchstone breaching its fiduciary duties, [Segerstrom] and her
estate have suffered damages in excess of $8.5 million.”
13
reduced if different litigation tactics had been employed.
Segerstrom’s affidavit testimony rejects the notion that she has
suffered any injury. Segerstrom’s independent appellate attorney
points out that the strategic decision to accept responsibility
for the accident during the Colvin litigation protected
Segerstrom’s own financial interests. At the time of the trial,
Segerstrom lived with her parents and was dependent on them for
financial (as well as moral) support. Any liability allocated to
D&R would have damaged Segerstrom as well as her parents.
Indeed, liability placed on D&R would have damaged Segerstrom far
more than liability allocated to her, since she had no
unencumbered personal assets.
The estate presumes that a conflict between Segerstrom’s
subjective views of her representation and the estate’s
conclusory analysis of that representation is sufficient to
create an issue of fact as to injury. We disagree. Texas courts
have recognized that legal malpractice actions are “intrinsically
personal,” and that the satisfaction of the client in a legal
malpractice case is “paramount.” Charles v. Tamez, 878 S.W.2d
201, 207 (Tex. App. 1994, writ denied); see also Zuniga v. Gross,
Locke & Hebdon, 878 S.W.2d 313, 318 (Tex. App. 1994, writ
ref’d.). “Unless [the client] is proved incompetent, he alone
can determine if he believes that his counsel misrepresented
him.” Charles, 878 S.W.2d at 207. The estate has produced no
14
evidence suggesting either that Segerstrom did not receive the
precise goal she sought in the Colvin litigation, or that she was
not competent to protect her interests during the Colvin
litigation. As a consequence, we conclude that the estate has
failed to prove that Segerstrom suffered “injury,” in the legal
malpractice sense, in the Colvin litigation.
Beyond its failure to establish an injury to Segerstrom, the
estate has failed to provide sufficient evidence that any
malpractice by Touchstone caused Segerstrom to suffer an adverse
judgment. The estate must prove not only that an alternative
trial strategy was available to Segerstrom, but that Segerstrom
would have pursued that strategy with independent representation.
See Trinity Universal Ins. Co. v. Bleeker, 966 S.W.2d 489, 491
(Tex. 1998) (requiring that plaintiff produce evidence that had
he been informed of settlement offer, he would have accepted it,
to satisfy causation element of a Texas deceptive trade practices
claim). Segerstrom’s affidavit testimony states clearly that
she did not wish to cast blame for the accident on her parents or
their business. The estate has produced no evidence to rebut
this testimony or otherwise suggest that Segerstrom would have
pursued the estate’s proposed trial strategy under any
circumstances. This deficiency alone causes the estate’s claim
to fail on causation grounds.
Additionally, the estate has produced insufficient evidence
that its proposed strategy would have been meritorious. At
15
trial, Segerstrom testified that (1) she was driving the van in
contravention of her parents’ express orders, (2) independently
of any D&R business, and that (3) she alone was responsible for
the accident. In its “suit within a suit,” the estate must
demonstrate either that its alternative trial strategy would have
overcome this testimony, or that Segerstrom perjured herself in
the Colvin litigation. The estate has offered no evidence
suggesting perjury. As to the possibility that Touchstone could
have somehow overcome Segerstrom’s trial testimony by actively
attempting to cast blame onto D&R, the jury’s verdict from the
Colvin litigation indicates how meritorious that strategy would
have been. The only evidence that Touchstone’s alleged breaches
caused Segerstrom to suffer an adverse judgment are conclusory
statements in the affidavits of the estate’s expert witnesses.6
These conclusory statements are wholly unsupported by evidence in
the record and therefore fail to create a genuine issue of
material fact. See Orthopedic & Sports Injury Clinic v. Wang
Lab., Inc., 922 F.2d 220, 225 (5th Cir. 1991) (noting that
"affidavits setting forth 'ultimate or conclusory facts . . .'
are insufficient to either support or defeat a motion for summary
judgment[,]" and that "[w]ithout more than credentials and a
6
Both experts state: “It is . . . my opinion that the
failure to provide a defense and simultaneous representation of
all defendants proximately caused Kayla Segerstrom to have
entered against her a judgment in the amount of $6,895,000 in the
Colvin litigation.”.
16
subjective opinion, an expert's testimony that 'it is so' is not
admissible.") (citations omitted).
In sum, we are persuaded that the estate has not satisfied
its burden of proving that negligence by Touchstone caused injury
to Segerstrom. The estate has failed to present sufficient
evidence that (1) Segerstrom suffered injury, in the legal
malpractice sense, (2) Segerstrom would have ever elected to
pursue the estate’s alternative trial strategy, or (3) the
alternative trial strategy could have prevented Segerstrom from
suffering an adverse judgment in the Colvin litigation.
Consequently, the district court properly granted summary
judgment for Touchstone.
B. The Estate’s Claims Against Employers
Yaquinto’s action against Employers is also predicated on
Touchstone’s alleged conflict of interest in representing all
three defendants. The district court granted summary judgment in
favor of Employers because Employers had no independent duty to
look into a conflict of interest and no reason to know of a
conflict on the facts of this case. On appeal, the estate argues
that it has offered sufficient evidence that Employers acted
unreasonably in failing to hire an independent attorney for
Segerstrom to survive a motion for summary judgment. This
argument is based on Yaquinto’s belief that “for Employers to
fulfill its duty of reasonable care to [Segerstrom], it was
obligated to hire a separate attorney to represent and advise the
17
debtor of her rights, options and exposure.” We find no basis to
disturb the district court’s judgment.7
Texas requires that insurance companies act with reasonable
care in fulfilling their duty to defend under insurance
contracts. See Meridian Oil Production, Inc. v. Hartford
Accident & Indemn. Co., 27 F.3d 150, 153 (5th Cir. 1994); Ranger
County Mut. Ins. Co. v. Guin, 723 S.W.2d 656, 659 (Tex. 1987).
Generally, tort claims alleging breach of this duty have focused
on an insurance company’s failure to settle claims or
interference with possibilities for settlement. See, e.g., G.A.
Stowers Furniture Co. v. American Indemn. Co., 15 S.W.2d 544, 547
(Tex. Comm’n App. 1929, holding approved). Even assuming that
Touchstone’s representation of all three defendants in the Colvin
litigation created a conflict of interests, Yaquinto points to no
authority in Texas law suggesting that an insurer’s duty of
reasonable care requires the insurer to independently identify
conflicts and take steps to address them prior to or at the same
7
Yaquinto does not address the district court’s holdings
with respect to the breach of fiduciary duty and breach of
contract claims in either its initial or reply brief. On this
basis, we conclude that these claims have been waived. See DSC
Communications Corp. v. Next Level Communications, 107 F.3d 322,
326 n. 2 (5th Cir. 1997). At any rate, the district court
properly resolved the fiduciary duty claim because Texas does not
recognize a fiduciary duty between insurers and their insureds,
only a duty of reasonable care. See Caserotti v. State Farm Ins.
Co., 791 S.W.2d 561, 565 (Tex. App. 1990, writ denied).
Moreover, Yaquinto provided no evidence that Employers’ insurance
contract required independent counsel for Segerstrom, or that
Employers otherwise failed fulfill its contractual obligations.
18
time as appointing legal counsel.8 Therefore, unless Employers
disregarded notice from Touchstone of a conflict, a fact that
Yaquinto has no evidence of,9 any liability imposed on Employers
would be vicarious and hence not recognized by Texas law. See
State Farm Mut. Ins. Co. v. Traver, 980 S.W.2d 625, 628-29 (Tex.
1998). Moreover, even assuming that Employers had a duty to
prevent the conflict and breached that duty, the estate has
provided insufficient evidence linking the judgment against
Segerstrom to that breach. Absent such evidence, the estate has
no basis on which to claim damages from Employers.
8
While the Texas Supreme Court’s decision in Ranger
contains language suggesting that insurers have a broad
independent duty to investigate, litigate and settle cases on
behalf of insureds, Ranger, 723 S.W.2d at 659 (affirming jury
finding that insurer’s failure to notify insured of settlement
offers constituted direct negligence), the Texas Supreme Court
has consistently limited Ranger, reinforcing that the Stowers
doctrine provides the primary measure of insurer reasonableness
under its duty to defend. See, e.g., American Physicians Ins.
Exchange v. Garcia,, 876 S.W.2d 842, 849 (Tex. 1994) (“[E]vidence
concerning claims investigation, trial defense, and conduct of
settlement negotiations is necessarily subsidiary to the [Stowers
doctrine].”). We will not extend a doctrine that Texas law has
consistently retracted.
9
Yaquinto argues that the district court improperly denied
his motion for a Rule 56(f) extension, since the existence of
such a communication is a fact question. However, Yaquinto
points to no additional discovery that might provide evidence of
such a communication. From the record, it is clear that Yaquinto
has already deposed the Employers representative that handled
this case. Moreover, district courts have considerable
discretion in ruling on motions to suspend summary judgment
pending discovery. See Stearns Airport Equipment Co., Inc. v.
FMC Corp., 170 F.3d 518, 534-35 (5th Cir. 1999).
19
II. Denial of the Estate’s Motions to Compel Discovery
Yaquinto also appeals the district court’s denial of the
estate’s motion to compel discovery of communications between
Segerstrom and Touchstone. Having concluded that Yaquinto cannot
successfully maintain a legal malpractice claim against
Touchstone for the reasons stated previously, we need not reach
this issue. Even assuming we were to rule in Yaquinto’s favor,
remand would not be necessary because Yaquinto could not discover
evidence that would support a finding of harm or causation on the
facts of this case.
CONCLUSION
Yaquinto, on behalf of Segerstrom’s bankruptcy estate, has
failed to offer sufficient evidence that Segerstrom (1) suffered
injury in the Colvin litigation, (2) as a consequence of
Touchstone’s representation. The estate’s claims against
Employers fail because the insurer had no duty to investigate
potential conflicts when fulfilling its obligation to defend
Segerstrom and had no independent knowledge of a conflict that
could support a finding of direct negligence. Consequently, we
AFFIRM the district court’s grant of summary judgment.
20