Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
5-7-2008
Wolk v. Westport Ins Corp
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-1486
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-1486
ARTHUR ALAN WOLK;
ARTHUR ALAN WOLK ASSOCIATES,
d/b/a/ The Wolk Law Firm,
Appellants
v.
WESTPORT INSURANCE CORPORATION
On Appeal from the United States District Court
for the Eastern District of Pennyslvania
D.C. Civil Action No. 06-cv-05346
(Honorable John P. Fullam)
Argued April 15, 2008
Before: SLOVITER, JORDAN and ALARCÓN * , Circuit Judges.
(Filed: May 7, 2008)
David B. Picker [ARGUED]
Paul R. Rosen [ARGUED]
Andrew J. DeFalco
Spector Gadon & Rosen, P.C.
1635 Market Street, 7th Floor
Philadelphia, PA 19103
*
The Honorable Arthur L. Alarcón, United States Circuit Judge for the Ninth Judicial
Circuit, sitting by designation.
Counsel for Appellants
Jeffrey J. Ward [Argued]
Thompson, Loss & Judge, LLP
Two Lafayette Centre
1133 21st Street, NW
Suite 4500
Washington, DC 20036
Michael N. Onufrak
White & Williams
1800 One Liberty Place
Philadelphia, PA 19103
Counsel for Appellee
OPINION OF THE COURT
ALARCÓN, Circuit Judge.
Arthur Alan Wolk and his law firm, Arthur Alan Wolk Associates d/b/a The Wolk
Law Firm, appeal from the district court’s order granting summary judgment in favor of
the Westport Insurance Corporation (“Westport”), and dismissing with prejudice the
plaintiffs’ action for breach of a professional liability insurance contract, the state law tort
of bad faith refusal to cover and defend in violation of 42 Pennsylvania Consolidated
Statutes section 8371, and recovery under quantum meruit. Wolk and his law firm
contend that the district court erred in concluding that Westport was not required to
provide coverage or a defense because Westport never received written notice that a
claim had been made against them.
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We will vacate the order granting summary judgment and dismissing this action
with prejudice.
I
Because the facts set forth in the complaint and the attached exhibits are known to
the parties, we only recite these facts that are relevant to deciding whether the district
court erred in granting summary judgment and dismissing this action with prejudice.
A
Arthur Alan Wolk (“Wolk”) filed a products liability action against Precision
Airmotive Corporation (“Precision”), and other defendants in the Court of Common
Pleas, on behalf of Albert D. Eigen (“Eigen”), the personal representative of three persons
killed in an airplane crash. Midway through trial, the case settled. Eigen filed a petition
to enforce the settlement agreement. Precision filed an answer to the petition to enforce
the settlement agreement, and a petition for relief from the settlement agreement.
Precision alleged in its petition for relief that Eigen falsely asserted during
discovery proceedings that Martin Eigen, the pilot of the airplane that crashed, did not
have a personal insurance policy covering any claim resulting from his operation of the
airplane. Precision also asserted that Eigen and Wolk “falsely represented to Precision in
sworn written discovery responses that: There was no liability policy covering Martin
Eigen’s piloting for this accident [sic] . . . .”
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Precision further alleged that “Mr. Wolk and Albert Eigen concealed the insurance
policy from Precision so that the estates of Joan and Mollie Eigen could get the maximum
settlement in this case . . . .” Precision maintains that it was entitled to relief “for the
concealment and misconduct by the estates, their attorneys, and the insurer. The flagrant
discovery abuses in this case deserve harsh sanctions.” Precision requested that the court
enter “an order imposing punishment for contempt.” The Court of Common Pleas denied
the petition for relief, and granted Eigen’s petition to enforce the settlement.
B
Precision appealed to the Superior Court of Pennsylvania from the order granting
the petition to enforce the settlement. The Superior Court affirmed the order granting the
petition to enforce the settlement, reversed the order denying the petition for relief, and
remanded for an evidentiary hearing.
The Superior Court concluded that Precision had presented strong prima facie
evidence that Eigen provided false discovery responses regarding whether the pilot of the
airplane was insured for liability for injury suffered by his passengers. In an obvious
reference to Wolk, the Superior Court stated: “Advocates of our legal system owe a duty
of candor to the tribunal, and a duty of fairness to opposing parties and opposing
counsel.” In a later passage, the Superior Court stated that “this Court wishes to express
its deep concern that Eigen and/or his counsel may be playing fast and loose with our
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legal system. On remand, we respectfully urge the trial court to be sensitive to this
possibility.”
In its conclusion, the Superior Court also stated: “We do not declare at this
junction that Eigen or his counsel committed fraud in the inducement. Rather, we merely
hold that Precision has presented such strong prima facie evidence of fraud that the court
should have held an evidentiary hearing.” On April 20, 2005, the Superior Court
remanded the matter for further proceedings consistent with its opinion.
II
On April 21, 2005, Wolk wrote a letter to a Westport claims representative as a
claimant under Policy Number PLL 344599, and enclosed a copy of the Superior Court’s
decision in the Eigen action. Wolk stated: “I will be happy to discuss this with you
further, but I think we are going to need counsel.” On May 11, 2005, a Westport claims
specialist informed Wolk that “it is my understanding that this potential claim arises from
your representation of the Eigen family as plaintiffs as a result of an airplane crash.”
In a letter dated September 29, 2005, Wolk stated: “The fact that Precision’s
lawyer has claimed fraud does not, in my view, mitigate [Westport’s] obligation to
provide me with a defense, which [Westport] has yet to do.” Wolk also informed
Westport that he had retained two attorneys, and would hire another “to defend myself in
this case.”
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Wolk also alleged in his complaint against Westport that Eigen’s attorney orally
informed Wolk that Eigen intended to hold Wolk liable for Precision’s full share of the
settlement if he was unsuccessful in the remand proceedings. In a letter dated November
7, 2005, a Westport claims specialist informed Wolk that it was under no obligation to
defend him because “there are no pleadings or proceedings directed specifically against
you or your firm.”
III
A
On November 16, 2006, Wolk and his law firm filed this action in the Court of
Common Pleas against Westport. He alleged that it had breached its insurance contract
and acted in bad faith by refusing to defend Wolk against Precision’s claim that Wolk had
fraudulently induced it to settle the claims filed by Eigen arising from the airplane crash.
Westport removed this action to the district court.
On December 13, 2006, Westport filed a motion to dismiss pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which
relief may be granted. Westport asserted that “Precision Airmotive’s complaint against
Eigen does not trigger Westport’s duty to defend because Eigen is not Westport’s
insured.” Westport also asserted that the oral threat by Eigen’s personal counsel that
Eigen would hold Wolk responsible “if the settlement of the Eigen action was void due to
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its allegedly fraudulent procurement” did not invoke Westport’s duty to defend because it
was a mere potential claim, and was not reported in writing.
B
On January 29, 2007, the district court entered the following order: “1.
Defendant’s motion for summary judgment is GRANTED. 2. This action is DISMISSED
with prejudice. 3. The Clerk is directed to close the file.” The district court did not
explain why it converted Westport’s motion to dismiss pursuant to Rule 12(b)(6) into a
motion for summary judgment. It also entered this order without prior notice to the
parties that it would treat Westport’s Rule 12(b)(6) motion as a motion for summary
judgment. In addition, the district court failed to indicate the standard of review that it
applied in reaching its decision, nor did it cite any authority to support its conclusions.
IV
“We have previously stated that the label a district court places on its
disposition is not binding on an appellate court.” Rose v. Bartle, 871 F.2d 331, 339-40
(3d Cir. 1989). However, “[w]e have held that it is reversible error for a district court to
convert a motion under Rule 12(b)(6) or Rule 12(c) into a motion for summary judgment
unless the court provides notice of its intention to convert the motion and allows an
opportunity to submit materials admissible in a summary judgment proceeding or allows a
hearing.” Id. at 342.
Rule 12(d) if the Federal Rules of Civil Procedure provides:
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If, on a motion under Rule 12(b)(6) or 12(c), matters outside
the pleadings are presented to and not excluded by the court,
the motion must be treated as one for summary judgment
under Rule 56. All parties must be given a reasonable
opportunity to present all the material that is pertinent to the
motion.
Rule 56(c) requires that the parties have at least ten days notice before the court
may consider the motion for summary judgment, and an opportunity to submit “pleadings,
the discovery and disclosure materials on file, and any affidavits [to] show that there is no
genuine issue as to any material fact and that the movant is entitled to judgment as a
matter of law.”
The district court never gave notice to the parties that it was converting the motion
to dismiss into a motion for summary judgment. Moreover, the district court did not
conduct a hearing concerning Westport’s motion. This Court has held that it is
undesirable for a district court to enter summary judgment without a hearing, unless the
district court makes it “clear beyond all doubt that the parties must present their affidavits
and counter-affidavits in addition to whatever facts appear in the pleadings, depositions,
answers to interrogatories, and admissions on file.” Rose, 871 F.2d at 341 (emphasis
added). Furthermore, the district court never gave the parties time to conduct discovery
related to Wolk’s claims. Therefore, the district court erred in entering summary
judgment without giving the parties notice.
In its Rule 12(b)(6) motion, Westport argued that Wolk is seeking attorney’s fees
solely for representing Eigen at the evidentiary hearing following the remand of the
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petition for review. In his response, Wolk maintained that he was seeking attorney’s fees
pursuant to the policy issued by Westport because the Superior Court directed the Court
of Common Pleas to determine whether Eigen and Wolk had committed fraud to induce a
settlement. Thus, Wolk asserts he was entitled to representation at the evidentiary hearing
to defend against Precision’s fraud claim against him and his firm.
The district court found that “[n]o claim has ever been actually made against Mr.
Wolk. The most that can be said is that there was notice of a possibility of a claim being
asserted later. This does not amount to a claim.” In making this finding, the district court
may have overlooked the fact that the Superior Court had vacated the trial court’s denial
of the petition for review and remanded for an evidentiary hearing to determine whether
Wolk and Eigen had committed fraud in the inducement to effect a settlement. The
Superior Court did so based on its conclusion that Precision had presented “strong prima
facie evidence” that false discovery responses had been proffered by Eigen and Wolk.
Wolk submitted the Superior Court’s opinion to Precision the day after it was issued and
informed his insurer that “I think we are going to need counsel.”
Viewing the facts in the light most favorable to Wolk, as the non-moving party,
Precision’s petition for review, as construed by the Superior Court, demonstrates that
there may be a genuine issue of fact in dispute about whether Wolk was entitled to a
defense under the policy against Precision’s claim that he was guilty of fraud in the
inducement. We cannot conclude from this record that no rational fact-finder could
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determine that Wolk failed to give Westport written notice of Precision’s claim against
him. The district court erred in determining the truth of this factual dispute. Thus, the
district court’s error in not providing the parties notice that it was converting the motion
to dismiss into a motion for summary judgment was not harmless. Accordingly, we will
vacate the order granting summary judgment and direct the district court to conduct
further proceedings consistent with this opinion. The parties shall bear their own costs on
this appeal.
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