Michael Sean
Quinn, Ph.D, J.D., Etc.

1300 West Lynn #208
Austin, Texas
78703

(o) 512-296-2594

(c) 512-656-9759

(Resumes at  www.michaelseanquinn.com)

Coen v. Aptean, et al (Ga. Dist Ct., 12A42185-6)

         

There were sanctions imposed. There
were (legal fees (maybe extras) awarded. Or maybe there were  both.  The quickie description of the problem would
be “obviously unjustified war of attrition litigation” tactics

A Georgia District Court make this
decision in  a wrongful discharge
case.  The background involved a complex
business with a parent company, a subsidiary, 
where the subsidiary of the parent, the bankruptcy of the parent, the
sub being its huge creditor, what to do with—how to treat–the sub’s assets,
and various complex transactions.

            The
sub had hired a new general counsel. There was a contract specifying a time period
of employment, a formula for payment if there was termination, a schedule of payment,
and the specification of a substantial bonus. 

            The
new General Counsel was terminated. He was not paid. He sued. According to my
source, the defendant was a likely loser. 
The defense went forward, however.

In the process of defending, defense
counsel appears to have sent a letter to plaintiff’s counsel saying the
following, or something close to it: “the costs of [Plaintiff] Coen’s
suit[—both defense and indemnity–]was being covered by the company’s insurer,
a development that ‘remov[ed] the only
material litigation risk for the company in pursuing its defense of this case
through trial and, if necessary, appeal, which the company fully intends to
do.’”

            The defense was aggressive in
standard ways of aggression, e.g., it pled 20 affirmative defense when only a
fraction of them—probably a small fraction, in my experience—though it reduced
them substantially upon the filing of an

objection.  Other than being over done, this is standard.

            In
any case, the district judge said he found the letter “revealing,” and wrote
that the “’[d]efendants gambled on a bad faith strategy and lost.’” “’This
strategy constitutes the very, [i.e., exact] bad faith [that  Georgia law] exists to prevent, and the very
bad faith that warrants an award of attorneys’ fees and expenses.” (Of course,
this language suggests that there were sanctions and not just fees.)

            Maybe
so. . .maybe the conduct of the defense really was outrageous on the
whole.  And the letter upon which the
judge apparently focused strikes me as in poor taste—what used to be called
“ungentlemanly” and now must be called “ungentlepersonly,” or something like
it. The question is whether the letter was itself actually revealing, as the
judge said, of a defense conduct contrary to laws forbidding such performances.

            The
letter by itself, if I have seen all the important part of it on the Law360
news blog is not revealing at all.  One
of the lawyers involved says that he has never seen anything like it in his 35
years of practice.  I’m not sure I have
either—when coming from a defendant–but I can easily imagine circumstances
where such a letter might be thought appropriate and not indicate an invalid
and unsound pursuit of a defense.

            What
that letter does not do is to say, “We have no defense in this. We know we will
lose it, if you pursue it to the end. But keep in mind that, although our
client is at the vortex of the financial difficulties surrounding it, there is
plenty of money to defend this case, since we have applicable insurance. It has
coverage, so we have no real risk in never giving up—something we have no
intent of doing.” Part of the message would that the surrounding Chapter 11,
“or whatever,” problems are not an impediment to a prolonged struggle.

            One
might want to do this if plaintiff’s counsel was saying the same sort of thing:
“We will never give up, and we have the money to pursue the matter.” Remember:
If you lose, you may well have to pay my attorney fees, and I don’t lose cases.
Ask around and find out what my fees usually are.”  That kind of statement is often said in
contingency fee cases, for example, by—and only by–prideful, hubristic, “loud
and  rambunctious,” ill-educated
plaintiff lawyers.

            The
word “only” is perhaps the most important in letter from junior (?) defense counsel.  It does not say that the use of our insurance
is the only reason we have to pursue the case. 
It says that “our only risk, i.e., having to pay a lot of money for a
defense as we go along, isn’t really a risk for us. It’s insured. That fact
means that we won’t  ourselves have to
pay the damages.”

            All
of these statements may be absolutely true or thought to be true.  Still, it’s tacky.  How should it have been done?  First, the insurer should have been
informed.  If it had been informed, and
had permitted this, the adjuster as well as defense counsel should be replaced.
Second, all messages like this one, if sent at all—a bad idea– should happen
in conversation not in writing. Third, if the plaintiff did not know about the
insurance, and had not asked about it in discovery s/he should be told. Fourth,
if opposing counsel is told, the next event in the law suit will be a Request
for the Production of Documents focusing on the policy, the insured’s
correspondence with the insurer, reservation of rights letters,  and maybe even a coded or clandestine offer
from the plaintiff to restructure the case to make sure that the defendant had
plenty of coverage to pay the loss. Conceivably, the defendant trying to put
the plaintiff on the kind of notice just mentioned in an effort to make sure
that got all the insurance information he “needed.”

            I
am not licensed in Georgia, so what I am about to write is general and
theoretical only.  There is no indication
in Law360 as to the procedure that was employed in the Coen case as to the procedure leading up to what happened.  If there were sanctions involved, and not just
fees, it seems to me there would have to be a separate hearing. There would
have to be independent testimony regarding the extent to which the defendant
deviated from accepted practice and in what ways.  Probably there would have to be expert
witness testimony regarding standard litigation practice.  In the absence of this, in many
jurisdictions, there could be an application for a writ of mandamus, and not
just an appeal when the case in the district court was completely over and done
with.

            It
is interesting to reflect upon other law suits. We know that Coen has sued at
least one of the other participants in the farrago that lead to this suit for
defamation. It seems to me that the defendant may wish to sue it s carrier, if
was providing a defense and what happened here increases its insurance
premiums. The defendant may want to sue its lawyers it increases the damages
that have to be paid.

In any case, was still tacky. And my
analysis focuses on the letter. All sorts of other things may also be true, and
they may affect the correct evaluation of the letter. The district judge may be
right; then again, maybe he’s not.

Originally posted on 09/19/2014 @ 7:28 pm

Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

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