Gallagher Sharp, L.L.P. v. Miller Goler Faeges Lapine, L.L.P.

[Cite as Gallagher Sharp,
L.L.P. v. Miller Goler Faeges Lapine, L.L.P., 2019-Ohio-3508.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
GALLAGHER SHARP, L.L.P., :
Plaintiff-Appellant, :
No. 107493
v. :
MILLER GOLER FAEGES LAPINE :
L.L.P., ET AL.,
Defendants-Appellees. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: August 29, 2019
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-16-869606
Appearances:
Gallagher Sharp, L.L.P., Richard C.O. Rezie, and
Theresa A. Richthammer, for appellant.
Robert D. Schwartz, pro se.
RAYMOND C. HEADEN, J.:
Plaintiff-appellant Gallagher Sharp L.L.P. (“Gallagher”) appeals from
the trial court’s order denying Gallagher’s motion for summary judgment against
defendant-appellee Robert D. Schwartz (“Schwartz”) because the claims against
Schwartz were moot.1 For the reasons that follow, we affirm, albeit on other
grounds.
Statement of the Facts
Schwartz was “of counsel” with the law firm Miller Goler Faeges
Lapine (“MGFL”).2 As part of his employment package, MGFL provided
professional liability insurance to Schwartz.
During his employment with MGFL, Quirino DiPaolo (“DiPaolo”) was
a client of Schwartz. In February 2009, DiPaolo brought suit against Schwartz and
a “Doe” legal firm alleging legal malpractice, subsequently amending the complaint
in April 2010 to identify MGFL as the “Doe” legal firm. MGFL held professional
liability insurance with Chubb Group of Insurance Companies (“Chubb”) and
Schwartz was an insured under the Chubb policy. Pursuant to the terms of the
insurance policy, Chubb retained Gallagher to defend Schwartz in the legal
malpractice claim while MGFL opted to provide its own defense. Gallagher’s legal
services to Schwartz resulted in a bill totaling $39,117. To date, Schwartz has not
paid the bill.
On September 26, 2016, Gallagher filed suit under breach of contract
and unjust enrichment seeking compensation from Schwartz and MGFL. Following
1This appeal is a companion case to the appeal in Gallagher Sharp, L.L.P. v. Miller Goler
Faeges Lapine, L.L.P., 8th Dist. Cuyahoga No. 107483, 2019-Ohio-2113.
2In its brief, MGFL states that “[w]hen Schwartz first affiliated with the firm, the firm
name was Miller Goler Faeges LLP[,] * * * [but] was subsequently changed to” its current
name of Miller Goler Faeges Lapine.
discovery, Gallagher and MGFL filed motions for summary judgment. The trial
court granted Gallagher’s motion for summary judgment against MGFL on breach
of contract. The trial court denied Gallagher’s motion for summary judgment
against Schwartz because Schwartz was not the policyholder, but only an included
insured under the Chubb policy, and the issue was rendered moot when summary
judgment was granted against MGFL.
Gallagher filed this timely appeal on July 30, 2018. MGFL also
appealed the granting of Gallagher’s motion for summary judgment against MGFL.
On August 1, 2018, this court sua sponte ordered that the appeals filed by Gallagher
against Schwartz and MGFL be treated as companion appeals. Specifically, the
court ordered that the cases share the trial court record, but be briefed, argued, and
disposed of separately by the same merit panel.3
For the following reasons, we affirm the decision of the trial court.
Law and Analysis
Gallagher appeals the trial court’s decision denying its motion for
summary judgment against Schwartz and finding all issues moot based upon the
court’s granting summary judgment against MGFL. Appellate review of summary
judgments is de novo. Grafton v. Ohio Edison Co., 77 Ohio St. 3d 102, 105, 671
N.E.2d 241 (1996). Summary judgment is appropriate “when (1) there is no genuine
issue of material fact, (2) the moving party is entitled to judgment as a matter of law,
3In the companion case, Gallagher Sharp, L.L.P., 8th Dist. Cuyahoga No. 107483, 2019-
Ohio-2113, we affirmed the lower court’s judgment granting Gallagher’s motion for
summary judgment against MGFL.
and, (3) viewing the evidence most strongly in favor of the nonmoving party,
reasonable minds can come to but one conclusion and that conclusion is adverse to
the nonmoving party.” Marusa v. Erie Ins. Co., 136 Ohio St. 3d 118, 2013-Ohio-1957,
991 N.E.2d 232, ¶ 7. The party moving for summary judgment bears the burden of
showing that there is no genuine issue of material fact and that it is entitled to
judgment as a matter of law. Dresher v. Burt, 75 Ohio St. 3d 280, 292-293, 662
N.E.2d 264 (1996). Doubts must be resolved in favor of the nonmoving party.
Murphy v. Reynoldsburg, 65 Ohio St. 3d 356, 359, 604 N.E.2d 138 (1992).
Gallagher filed a complaint against MGFL and Schwartz seeking to
recover their costs for the legal services provided by Gallagher to Schwartz. This
appeal considers only the action against Schwartz; the action against MGFL has
been decided in our companion case. Chubb retained Gallagher to provide legal
services for Schwartz in the DiPaolo legal malpractice case. Gallagher now argues
that Schwartz is responsible for its outstanding legal fees incurred while defending
Schwartz. We must look to the insurance policy to determine whether Schwartz is
responsible for payment of Gallagher’s invoice.
The interpretation of an insurance policy is a question of law
appropriate for summary judgment. If the insurance policy is clear and
unambiguous, it should be given its plain and ordinary meaning. Sarmiento v.
Grange Mut. Cas. Co., 106 Ohio St. 3d 403, 2005-Ohio-5410, 835 N.E.2d 692, ¶ 9,
citing Gomolka v. State Auto Mut. Ins. Co., 70 Ohio St. 2d 166, 167-168, 436 N.E.2d
1347 (1982). Relevant portions of the Chubb policy read as follows:
Insured means the Firm and any Insured Person.
Claim means:
(1) Any of the following:
a. A written demand or written request for monetary damages or
non-monetary relief;
b. A written demand for arbitration;
c. A civil proceeding commenced by the service of a complaint or
similar pleading; or
d. A formal civil administrative or civil regulatory proceeding
(including a disciplinary or grievance proceeding before a court
or bar association) commenced by the filing of a notice of charges
or similar document or by the entry of a formal order of
investigation or similar document,
against an Insured for a Wrongful Act, including any appeal
therefrom; * * *
***
Loss means the amount that an Insured becomes legally obligated to
pay as a result of any covered Claim, including but not limited to
damages (including punitive or exemplary damages if and to the extent
that such punitive or exemplary damages are insurable under the law
of the jurisdiction most favorable to the insurability of such damages,
provided such jurisdiction has a substantial relationship to the relevant
Insured, to the Company, or to the Claim giving rise to the damages),
judgments, settlements, pre-judgment and post-judgment interest and
Defense Costs.
Defense Costs mean that part of Loss consisting of reasonable costs,
charges, fees (including attorneys’ fees and experts’ fees) and expenses
(other than regular or overtime wages, salaries, fees, overhead or
benefits of any Insured) incurred in defending any Claim and the
premium for appeal, attachment or similar bonds; provided that the
Company will have no obligation to procure or provide any bonds.
RETENTION AMOUNT
The Company’s liability under this Policy shall apply only to that part
of covered Loss on account of each Claim (other than a disciplinary
or grievance proceeding) which is excess of the applicable Retention
Amount set forth in ITEM 5 of the Declarations. Such Retention
Amount shall be depleted only by Loss otherwise covered under this
Policy and shall be borne by the Insured uninsured and at their own
risk. In the event that any Insured Person is unwilling or unable to
bear the Retention Amount it shall be the obligation of the Firm to
bear such Retention Amount uninsured and at its own risk. No
Retention Amount shall be applicable to a disciplinary or grievance
proceeding.
Ohio Small Law firm Endorsement: Section XII, DEFENSE AND
SETTLEMENT, is amended by deleting paragraph[ ] (A) and * * *
replacing [it] with the following:
(A) The Company shall have the right and duty to defend any Claim
covered by this Policy. Coverage shall apply even if any of the
allegations are groundless, false or fraudulent. The Company shall
assign counsel to defend the Insured. It shall not be unreasonable
for the Company to withhold its consent to the representation of any
Insured by another Insured or, if more than one Insured is
involved in a Claim, to withhold its consent to separate counsel for
one or more of such Insureds, unless there is a material actual or
potential conflict of interest among such Insureds.
Gallagher alleges Schwartz is liable for its legal fees under a breach of
contract theory. “To establish a claim for breach of contract, a plaintiff must prove:
(1) the existence of a contract, (2) performance by the plaintiff, (3) breach by the
defendant, and (4) damages or loss resulting from the breach.” Claris, Ltd. v. Hotel
Dev. Servs., L.L.C., 2018-Ohio-2602, 104 N.E.3d 1076, ¶ 28 (10th Dist.), citing
Lucarell v. Nationwide Mut. Ins. Co., 152 Ohio St. 3d 453, 2018-Ohio-15, 97 N.E.3d
458, ¶ 41.
We must first determine whether Schwartz is a party to the insurance
contract so that Gallagher can maintain a claim for breach of contract against him.
While Schwartz was not a signatory to the Chubb policy, he was an intended third-
party beneficiary. To be an intended third-party beneficiary under a contract, “there
must be evidence that the contract was intended to directly benefit that third party.”
Huff v. FirstEnergy Corp., 130 Ohio St. 3d 196, 2011-Ohio-5083, 957 N.E.2d 3, ¶ 12.
An intended third-party beneficiary has enforceable rights under the contract. Id.
at ¶ 11. The Chubb policy provided insured persons, which included Schwartz, a
benefit, specifically, malpractice insurance and legal representation. Schwartz
possessed enforceable rights under the Chubb policy and actually received those
benefits because Gallagher Sharp represented him in the DiPaolo legal malpractice
action. Therefore, as an insured under the Chubb policy, Schwartz is also an
intended third-party beneficiary of the Chubb insurance contract with MGFL. 4
With the understanding that Schwartz is an insured and MGFL is the
Firm as defined in the Chubb policy, we review the terms of the policy. Under the
Chubb policy, a claim was filed in regard to the DiPaolo legal malpractice claim
against MGFL and Schwartz. Gallagher was retained to defend Schwartz, and
defense costs payable to Gallagher were incurred. Gallagher now seeks payment of
those legal fees.
Defense costs are considered a “Loss” and their payment is addressed
under the clause entitled “Retention Amount.” The insurance policy has a $50,000
Retention Amount requiring an insured under the policy to pay the first $50,000 of
legal fees and related costs. The Retention Amount is to be paid in full before Chubb
has any liability. The third sentence in “Retention Amount” reads: “In the event
that any Insured Person is unwilling or unable to bear the Retention Amount it
4This court found in Gallagher Sharp, L.L.P., 8th Dist. Cuyahoga No. 107483, 2019-
Ohio-2113, at ¶ 38, that Schwartz was an “insured” under the policy.
shall be the obligation of the Firm to bear such Retention Amount uninsured and
at its own risk.” In other words, if Schwartz is unwilling or unable to bear the
Retention Amount, it is the Firm’s responsibility, here MGFL’s responsibility, to pay
any outstanding amounts.
The evidence reviewed in compliance with Civ.R. 56 supports the trial
court’s decision regarding Gallagher’s motion for summary judgment against
Schwartz. In Schwartz’s answer to plaintiff’s complaint, Schwartz denies there is a
deductible amount and/or retention amount he must pay under the Chubb policy
and denies he owes Gallagher for provided legal services. Schwartz raises as
affirmative defenses recoupment, setoff, and/or indemnification and asserts that
any monies owed to Gallagher must be paid by MGFL. Schwartz believes MGFL is
responsible for Gallagher’s legal fees. Schwartz has not paid Gallagher’s legal fees
during the pendency of this lawsuit and continues to defend himself against
Gallagher’s claims of breach of contract and unjust enrichment. Schwartz’s answer
as well as the absence of his payment for the outstanding legal fees and his ongoing
defense demonstrate Schwartz is unable, or unwilling, to pay the legal fees owed
Gallagher.5
As a result of his unwillingness or inability to pay the outstanding
legal fees, Schwartz is not obligated to satisfy Gallagher’s defense costs and has not
breached any contract with Gallagher. The terms of the Chubb policy state where
5As noted in our companion case, MGFL did not argue Schwartz was able or willing to
pay Gallagher’s legal fees. Gallagher Sharp, L.L.P., 8th Dist. Cuyahoga No. 107483, 2019-
Ohio-2113, at ¶ 42, fn. 5.
an insured is unwilling or unable to pay, the Firm is required to satisfy the
outstanding debt. Just as we found in our companion case, the Firm, or MGFL, is
required to pay the retention amount, including the outstanding balance due to
Gallagher. Gallagher Sharp, L.L.P. at ¶ 46.
We do not limit our analysis to whether Schwartz is an insured under
the Chubb policy. We adopt a similar approach to that presented in our companion
case where we stated, “The central issue, therefore, is who is responsible for paying
Gallagher Sharp.” Id. at ¶ 42.
The Chubb policy’s language is clear and unambiguous and states if
an insured is unwilling or unable to pay the full Retention Amount, it is the firm’s
obligation to pay the outstanding amount. In its motion for summary judgment,
Gallagher argues Schwartz is responsible for its outstanding legal fees under the
terms of the Chubb policy. Simply finding Schwartz is an insured does not fully
address the presented issue.
We found in our companion case that MGFL was obligated to pay
Gallagher’s legal fees because Schwartz was unable or unwilling to pay: “By refusing
to pay Gallagher Sharp’s invoice for its representation of Schwartz, which Gallagher
Sharp was retained to do pursuant to the insurance contract, MGFL breached its
duty to pay for the retention amount that Schwartz was unable or unwilling to pay.”
Gallagher Sharp, L.L.P., 8th Dist. Cuyahoga No. 107483, 2019-Ohio-2113, at ¶ 46.
In conformity with that decision, we find the record supports the position that
Schwartz was unwilling or unable to pay Gallagher’s legal fees. The Retention
Amount requires only the insured, Schwartz, or the Firm, MGFL, to be liable for the
outstanding amount. Where the insured, Schwartz, is unable or unwilling to pay,
the contract shifts the obligation to pay the Retention Amount to MGFL to satisfy
the outstanding payment. Because Schwartz is unable or unwilling to pay, his lack
of payment was not a breach of contract with Gallagher, but an act that shifted the
responsibility for payment to MGFL.
In addition to alleging a breach of contract, Gallagher sought payment
from Schwartz under an unjust enrichment theory. “Unjust enrichment is an
alternative theory of recovery, which ‘operates in the absence of an express contract
or a contract implied in fact to prevent a party from retaining money or benefits
that in justice and equity belong to another.’” Cantlin v. Smythe Cramer Co., 2018-
Ohio-4607, 114 N.E.3d 1260, ¶ 41 (8th Dist.), citing Gallo v. Westfield Natl. Ins. Co.,
8th Dist. Cuyahoga No. 91893, 2009-Ohio-1094, ¶ 19. Unjust enrichment is not
applicable where an express contract exists. Cantlin at ¶ 42. Because the parties’
responsibilities stem from the Chubb insurance contract, unjust enrichment does
not apply.
In denying Gallagher’s motion for summary judgment against
Schwartz, the trial court found Schwartz was “not the policy holder but only an
included insured” and the motion for summary judgment against Schwartz was
moot based upon the trial court’s granting Gallagher’s motion for summary
judgment against MGFL. We agree with the trial court’s denial of Gallagher’s
motion for summary judgment against Schwartz, but on other grounds. We find
that Schwartz is a third-party beneficiary and an insured under the Chubb policy.
Because Schwartz, as an insured, was unwilling, or unable, to pay the outstanding
legal fees, the terms of the Chubb policy obligated MGFL to satisfy Gallagher’s
outstanding legal fees. The trial court’s granting of Gallagher’s motion for summary
judgment against MGFL identified MGFL as the liable party and rendered the
motion for summary judgment against Schwartz moot.6
No genuine issues of material fact exist. There is no merit to
Gallagher’s assignment of error and, as a result, it is overruled.
Judgment affirmed.
It is ordered that appellees recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
6 Under Civ.R. 54(B), a judgment on less than all of the claims presented in an action is a
final appealable order so long as the court order includes an express statement that “there
is no just reason for delay.” The trial court’s decision included the required language and
presented a final, appealable order resolving all claims between the parties. Hence, there
was no error when the trial court denied Gallagher’s motion for summary judgment against
Schwartz and found the claim against Schwartz rendered moot by its decision granting
summary judgment against MGFL.
A certified copy of this entry shall constitute the mandate pursuant to Rule
27 of the Rules of Appellate Procedure.
RAYMOND C. HEADEN, JUDGE
KATHLEEN ANN KEOUGH, J., CONCURS;
MARY J. BOYLE, P.J., CONCURS IN JUDGMENT ONLY