United States District Court, E.D. Missouri, Eastern Division
KILROY WAS HERE, LLC., a Missouri Limited Liability Company, et al, Plaintiffs,
STARR INDEMNITY AND LIABILITY COMPANY, et al., Defendants.
MEMORANDUM AND ORDER
STEPHEN N. LIMBAUGH, JR. UNITED STATES DISTRICT JUDGE
matter comes before the Court on plaintiffs' motion to
remand (#14). The motion has been fully briefed. For the
following reasons, this Court will GRANT
plaintiffs' motion to remand, the matter is
REMANDED to the Circuit Court for the City
of St. Louis, Missouri.
eleven plaintiffs in this case have joined together to seek
remand. They make up two distinct groups with differing
claims. Plaintiffs Kilroy Was Here, LLC. and its principals,
Arthur and Brenda Randall, have filed claims against
defendant Brian McBrearty based on negligent legal
malpractice (Count IV) and breach of fiduciary duty (Count
V), and against Starr for vicarious liability as to
McBrearty's wrongdoing (Count VI). The remaining eight
plaintiffs-Janet Martinez, Kurt Volk, Kelly Volk, John
DeSousa, Barbara Estivo, Jeffrey Maxvill, Tammy Hinds, and
Shelly Goodman-have filed claims solely against defendant
Starr Indemnity and Liability Company for bad faith failure
to settle (Count I), negligent claims handling / failure to
settle (Count II), and breach of fiduciary duty (Count III).
state court action preceding this one, the eight plaintiffs
had originally asserted claims against Kilroy, who was
Starr's insured at the time. Those claims arose after a
wind-related incident occurred at a restaurant owned by
Kilroy, which produced a number of serious injuries and, in
one case, death. Starr retained McBrearty to represent
Kilroy. At some point, the eight plaintiffs offered to settle
the case with Kilroy for $720, 100.00, which was under the
policy limits of $1, 000, 000.00. Kilroy then demanded that
Starr settle the case for that amount, but Starr declined.
The case proceeded to trial and the eight plaintiffs were
awarded a net verdict (after set-offs for prior settlements)
of $3, 419, 454.60-well in excess of the policy limits.
Shortly thereafter, the eight plaintiffs and Kilroy entered
into an “assignment of claims contract, ” in
which the eight plaintiffs agreed to enforce their judgment
solely against insurance proceeds or “directly from any
assets of Starr.” In consideration, Kilroy assigned any
claims it may have against Starr to the eight plaintiffs.
Though the verdict was appealed, it was later affirmed by the
Missouri Court of Appeals in April 2018. See Martinez v.
Kilroy Was Here, LLC. 551 S.W.3d 491 (Mo. App. E.D.
in the immediate case, the claims by both groupings of
plaintiffs pertain to the events of the preceding case.
Kilroy and the Randalls narrowly target McBrearty's
purported malpractice and breach of fiduciary obligations.
Whereas, the eight plaintiffs, who were assigned Kilroy's
rights, continue to pursue the insurance-related claims
Kilroy and Randalls' claims against McBrearty involve
allegations that McBrearty failed to appropriately respond to
a conflict of interest that arose between himself, Starr, and
Kilroy. They state McBrearty ultimately “placed his own
interest and/or the interests of Starr” above Kilroy
when “refusing to demand Starr protect Kilroy by
settling the underlying plaintiffs' claim.” Among
other things, it is alleged that McBrearty is liable for
having “[made] the decision to reject the underlying
plaintiffs' offer, ” in “failing to properly
defend the claims against Kilroy, ” in “failing
and refusing to advise Kilroy that a conflict of interest
existed, ” and “in allowing the entire policy
limits to be expended without obtaining a release from
anyone[.]” The eight plaintiffs, meanwhile, assert that
Starr had a duty to put Kilroy's interests above its own
and that, by refusing to settle, Starr was both negligent in
handling claims against Kilroy and acted in bad faith. They
explain that “Starr had the power to settle the
underlying action, ” but “refused to settle
within the policy limits” in order to put its own
interests above that of its insured.
narrow issue presently before this Court-whether to remand
this case back to state court-focuses on the appropriateness
of McBrearty being named a party-defendant. His inclusion, if
allowed, destroys diversity, as both he and several
plaintiffs are Missouri citizens. See 28 U.S.C.
§ 1332(a). Starr notes the two groupings of plaintiffs
are “strange bedfellows, ” having at one point
opposed each other and now electing to join together in an
apparent effort to defeat federal jurisdiction. Starr goes on
to argue that Kilroy and Randalls' claims against
McBrearty have been fraudulently joined. In support, Starr
argues Kilroy and the Randalls cannot maintain a legal
malpractice claim against McBrearty because “the
asserted claims are grounded in the wholly untenable
proposition that defense counsel retained by an insurance
company … can force the insurance company to accede to
[a] settlement demand[.]” Starr also argues Kilroy and
the Randalls “suffered no damages regarding the claims
against McBrearty, which is an essential element of any
claim.” Finally, Starr argues the breach of fiduciary
duty claim against McBrearty must fail because Missouri law
permits an action for breach of fiduciary duty “only
where the alleged breach is independent of any legal
joinder is defined as “the filing of a frivolous or
otherwise illegitimate claim against a non-diverse defendant
solely to prevent removal.” Filla v. Norfolk
Southern Ry. Co., 336 F.3d 806, 809 (8th Cir. 2003).
“Joinder is fraudulent when there exists no reasonable
basis in fact and law supporting a claim against the resident
defendants.” Id. at 810 (quoting Wiles v.
Capitol Indemnity Corp., 280 F.3d 868, 871 (8th Cir.
2002)). A plaintiff “cannot defeat a defendant's
right of removal by joining a defendant who has ‘no
real connection to the controversy.' ”
Herkenhoff v. Supervalu Stores, Inc., 2014 WL
3894642 at *2 (E.D. Mo. Aug. 8, 2014) (quoting Donner v.
Alcoa, Inc., 709 F.3d 694, 697 (8th Cir. 2013)).
“[I]t is well established that if it is clear
under governing state law that the complaint does not state a
cause of action against the non-diverse defendant, the
joinder is fraudulent and federal jurisdiction of the case
should be retained.” Filla, 336 F.3d at 810
(citing Iowa Public Service Co. v. Medicine Bow Coal
Co., 556 F.2d 400, 406 (8th Cir. 1977) (emphasis in
original)). However, if there is a “colorable”
cause of action against the defendant, “that is, if the
state law might impose liability on the resident defendant
under the facts alleged” then there is no fraudulent
issue of McBrearty's partial liability, Starr's main
argument is that McBrearty could not “force” it
to accept the underlying settlement demand. But, that issue
is simply one small factor in the total scheme of Kilroy and
Randalls' theory of liability. As mentioned, it is also
claimed that McBrearty could have done more in his
representation-among other things, to avoid conflicts of
interests as they became apparent and to engage in more
diligent (and/or competent) advocacy in trying to persuade
Starr of the necessity for a settlement. In fact, the claims
against McBrearty go so far as to suggest he, himself, made
the decision not to settle. Thus, even if the decision is
ultimately Starr's as a matter of law, that does not mean
that McBrearty factually had no hand in helping to sway that
decision or was not otherwise delegated the responsibility of
deciding. This Court sees no reason why such claims cannot
potentially survive under the current framework of Missouri
law, which tests diligence and competency in a myriad of ways
to include giving bad advice or simply failing to take
necessary actions. See generally Klemme v. Best, 941
S.W.2d 493, 495-496 (Mo. banc. 1997).
this Court turns to the issue of damages. Starr says
matter-of-factly that Kilroy has suffered no damages because
it was able to limit its exposure by entering into the
assignment contract with the eight underlying plaintiffs,
which “insulated [Kilroy] from enforcement of the
judgment against [it.]” Once again, this argument is
too myopic. It ignores the possibility that injuries for
legal malpractice might include more than the direct
litigation exposure a client faced as a result of an
attorney's malpractice. Mallen and Smith's treatise
on legal malpractice, the same treatise the Missouri Supreme
Court relied on in Klemme, identified a number of
potential categories of damages flowing from these claims, to
include reputational harm, lost profits, expenses of
mitigation, expenses of collateral litigation, emotional
distress, economic loss, and expenses of the malpractice
action itself. See Ronald E. Mallen and Jeffrey M.
Smith, Legal Malpractice, §§ 21:10-21:24 (2019);
see also Klemme, 941 S.W.2d at 495-496. And, though
not all of these categories appear to have been considered by
Missouri courts, there are at least a few that have-with the
overall conclusion being that the concept of damage in a
legal malpractice claim is broader than merely what the
result of the underlying litigation was. See, e.g., Meyer
v. Purcell, 405 S.W.3d 572, 578 (Mo. App. E.D. 2013)
(permitting claim against defendant-attorney for attorney
fees incurred in collateral litigation); EnerJex
Resources, Inc. v. Haughey, 453 S.W.3d 830, 835 (Mo.
App. W.D. 2014) (entertaining, but denying, former
client's claimed lost profits as damages flowing from
defendant firm's alleged malpractice related to a failed
public stock officering where there was no showing of past
profitability, thus causing the damages to be too
speculative). Accordingly, Filla-which asks only
whether “state law might impose
liability”-would counsel that plaintiffs be given the
benefit of the doubt in attempting to obtain these categories
of damages against McBrearty, should they be provable.
See Filla, 336 F.3d at 810.
found that there is no fraudulent joinder, there is no need
for this Court to decide Starr's final argument that
Kilroy and Randall's constructive fraud / breach of
fiduciary duty count (Count V) cannot survive in conjunction
with their negligence count (Count IV) under Missouri law.