1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-8-1999

Seibert v. Nusbaum Stein

Precedential or Non-Precedential:

Docket 98-5074,98-5128

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Recommended Citation

"Seibert v. Nusbaum Stein" (1999). 1999 Decisions. Paper 32.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/32
Filed February 8, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

Nos. 98-5074 and 98-5128 

JOEL M. SEIBERT; 

STACEY J. SEIBERT 

v. 

NUSBAUM, STEIN, GOLDSTEIN, BRONSTEIN & 

COMPEAU, P.A., f/k/a Nusbaum, Stein, Goldstein & 

Bronstein, P.A.; LEWIS STEIN, 

 Appellants in No. 98-5074 

JOEL M. SEIBERT; 

STACEY J. SEIBERT, 

 Appellants in No. 98-5128 

v. 

NUSBAUM, STEIN, GOLDSTEIN, BRONSTEIN & 

COMPEAU, P.A., f/k/a Nusbaum, Stein, Goldstein & 

Bronstein, P.A.; LEWIS STEIN 

On Appeal from the United States District Court 

for the District of New Jersey 

(D.C. Civ. No. 92-04645) 

District Judge: Honorable John W. Bissell 

Argued January 15, 1999 

BEFORE: GREENBERG and RENDELL, Circuit Judges, 

and POLLAK,* District Judge 

_________________________________________________________________ 

*Honorable Louis H. Pollak, Senior Judge of the United States District 

court for the Eastern District of Pennsylvania, sitting by designation. 
(Filed February 8, 1999) 

 Clifford M. Solomon (argued) 

 Corwin, Solomon & Tanenbaum 

 501 Fifth Avenue 

 New York, NY 10017 

 Attorneys for Appellants in 

 No. 98-5128 

 Thomas A. Egan (argued) 

 Flemming, Zulack & Williamson 

 One Liberty Plaza 

 35th Floor 

 New York, NY 10006 

 Attorneys for Appellants in 

 No. 98-5074, Cross-Appellees 

OPINION OF THE COURT 

GREENBERG, Circuit Judge. 

This matter comes on before this court on appeal and 

cross-appeal from the final judgment entered in the district 

court in this case on January 7, 1998. The case arose from 

the most commonplace of events, an intersection 

automobile accident on September 4, 1985. Nevertheless, 

the litigation which has ensued in the aftermath of the 

accident for more than 12 years has been truly 

extraordinary. While it would be desirable somehow to 

bring this litigation to an end, we are constrained to reverse 

in part and to require further proceedings. On certain 

issues, however, we will affirm and, as we explain, we do 

not reach other issues. 

The following historical and procedural events have taken 

the case to its present posture. The plaintiffs, Joel M. 

Seibert and Stacey J. Seibert, are husband and wife and at 

all material times have been citizens of New York State. On 

September 4, 1985, Joel M. Seibert, who, as a matter of 

convenience we singularly shall call Seibert, was operating 

a motor vehicle in Burlington County, New Jersey, owned 

by his employer, Caldor Inc., when he was involved in an 

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accident at a controlled intersection with a vehicle owned 

and operated by Ruth Sexton, a New Jersey citizen. Seibert 

was injured in the accident. Sexton's vehicle was insured 

by CIGNA Insurance Company in a policy with $50,000

liability limit. National Union Fire Insurance Company 

insured the Caldor vehicle in a policy which included 

underinsured motorist coverage. 

Seibert individually had an automobile liability policy 

issued in New York on his own vehicle by Travelers 

Insurance Company which also included underinsured 

motorist coverage. The Travelers policy provided that the 

underinsured motorist coverage would not apply if Seibert 

"shall, without written consent of [Travelers], make any 

settlement with or prosecute to judgment any action

against any person or organization who may be legally 

liable therefor." 

Seibert engaged the New Jersey law firm of Nusbaum,

Stein, Goldstein, and Bronstein and, in particular, Lewis 

Stein of that firm, to seek damages for his injuries. We refer 

to the firm and Stein individually simply as Stein. Stein 

then, on September 3, 1986, brought a diversity action in 

the District of New Jersey against Sexton but by December 

1987 Stein settled the case on behalf of Seibert with CIGNA 

for the $50,000 policy limits. With that settlement, Seibert's 

district court action against Sexton was dismissed and 

thus, as far as we can ascertain, Sexton has had no further 

involvement in this matter. 

Thereafter Stein, on behalf of Seibert, demanded that 

Travelers pay the $250,000 underinsured motorist coverage 

to Seibert. Travelers, however, rejected the demand by a 

letter of September 1, 1988, addressed to Stein, on the sole 

ground that Seibert had settled the Sexton claim without 

its consent. On September 14, 1989, Stein brought an 

action in the district court in New Jersey on behalf of 

Seibert against Travelers seeking to establish that it was 

responsible for the underinsured motorist coverage.

Travelers filed an answer admitting that it had issued a 

policy insuring Seibert but disclaiming any knowledge of 

the remaining allegations in Seibert's complaint. In 

addition, Travelers set forth eight separate defenses of a 

general nature which, except for a defense that it reserved 

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its right to seek to apply New York law, seem not 

particularly addressed to the circumstances of Seibert's 

complaint. 

Thereafter, Travelers moved for summary judgment on

the ground that Seibert had settled the Sexton action 

without its consent. The district court in that action, 

Seibert v. Travelers, Civ. No. 89-3966 (D.N.J. Jan. 8, 1991), 

by opinion dated January 8, 1991, granted Travelers' 

motion. While the court recognized that consent to settle 

clauses are against New Jersey public policy, see Longworth 

v. Van Houten, 538 A.2d 414 (N.J. Super. Ct. App. Div. 

1988), the court held that New York law was controlling on 

the basis of New Jersey choice of law principles which it 

applied in that diversity of citizenship case. See Shuder v. 

McDonald's Corp., 859 F.2d 266, 269 (3d Cir. 1988). The 

court found that the consent to settle clause did not violate 

New York law as that state recognizes the use of such 

clauses to facilitate the subrogation rights of the insurance 

company. On appeal, we affirmed by judgment order on 

October 23, 1991. Seibert v. Travelers Indem. Co., 947 F.2d 

936 (3d Cir. 1991). Upon our affirming the district court's 

summary judgment, any possibility that Seibert could 

recover from Travelers was gone. 

Between the time of the district court's order granting 

summary judgment in the Travelers action and our 

judgment order affirming the summary judgment, Stein, on 

behalf of Seibert, instituted the third case arising out of the 

accident, i.e., Seibert v. National Union Fire Ins. Co., MRS-L4298-91, in the Superior Court of New Jersey, Law 

Division, Morris County. In that action, Seibert sought, 

inter alia, to recover under the underinsured motorist 

coverage provisions of the National Union policy. 

Subsequently, other counsel was substituted for Stein and 

ultimately the National Union action was dismissed when 

National Union agreed to arbitrate Seibert's claim. The case 

eventually was settled for $140,000 which National Union 

paid on its underinsured motorist coverage. 

While the National Union action was pending, Seibert 

started this New Jersey district court action, the fourth 

case arising from the accident, against Stein. It is this case 

which now is on appeal before us. While there were 

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numerous allegations in the complaint, its principal theory 

is that Stein wrongfully settled the Sexton action without 

Travelers' consent, thus forfeiting Travelers' underinsured 

motorist coverage. 

Following protracted proceedings in the district court, the 

parties filed cross motions for summary judgment which 

resulted in the district court issuing opinions on August 20, 

1997, and December 31, 1997, which we describe in some 

detail. In its initial opinion, the district court set forth the 

background of the case and then pointed out that this 

action was for legal malpractice. The court recognized that 

a legal malpractice case could require a "trial within a 

trial," but that the matter was before the court on motions 

for summary judgment. The court indicated that Stein 

sought summary judgment on the alternative theories that 

(1) he did not deviate from accepted standards of legal 

practice; and (2) even if he did, Seibert suffered no damages 

so Stein could not be liable. On the other hand, Seibert 

sought a summary judgment that Stein was liable for legal 

malpractice. 

The district court indicated that in New Jersey a plaintiff 

in a legal malpractice action must demonstrate: (1) the 

existence of an attorney-client relationship creating a duty 

of care upon the attorney; (2) breach of that duty; and (3) 

proximate causation of damages. See Lovett v. Estate of 

Lovett, 593 A.2d 382, 386 (N.J. Super. Ct. Ch. Div. 1991). 

The court said that Seibert based his claim on the district 

court's opinion in the Travelers action because Stein's 

"failure to notify Travelers under the consent to settle 

provision of its policy [fell] far below the minimal standard 

and duty of care which [Stein] owed to [Seibert]." The court 

then indicated that Stein's "default was the proximate 

cause of Travelers' successful refusal to pay any part of the 

potentially available underinsured coverage." Thus, to that 

extent, it granted Seibert's motion for summary judgment. 

The court indicated, however, that it had not been 

established in Seibert's action against Travelers that he in 

fact would have recovered on the Travelers policy. All that 

was established was that Travelers had a defense to

Seibert's claim. 

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The court then indicated that while the declarations page 

of Seibert's policy with Travelers listed certain 

endorsements, i.e., 33122 and 33150, as being part of the 

policy, "it is unclear whether these endorsements, either in 

whole or in part, were ever physically attached to the policy 

or otherwise specifically brought to Mr. Seibert's attention." 

The significance of endorsement 33122 is that it limited 

underinsured motorist coverage to accidents which occur in 

the State of New York. In any event, the court held that 

New York Insurance Law S 3420(f)(2) requires that 

underinsured motorist coverage in New York apply "in any 

state or Canadian province." Consequently, the court 

believed that the limitation in endorsement 33122 to New 

York accidents was ineffective. Thus, the court held that 

the $250,000 underinsured motorist coverage was available 

to Seibert who, because of "Stein's malpractice in failing to 

seek Travelers' consent to settle the Sexton suit" was denied 

access to the funds. The court then indicated that the 

parties recognized that the reasonable settlement value of 

Seibert's claim far exceeded $50,000. Thus, Stein's

malpractice injured Seibert. 

The court recognized that Stein argued "that the only 

right which [Seibert] lost because Travelers effectively 

denied coverage . . . was the right to arbitrate any claim or 

dispute against that company." The court, however, 

indicated that "it is by no means certain that Travelers 

would have pushed Mr. Seibert to arbitration had [Stein] 

sought Travelers' consent-to-settle in a timely fashion." 

Indeed, the court thought that it was "unlikely" that 

Travelers would have contended that the underinsured 

motorist coverage was not applicable to the New Jersey 

accident and that, in any event it was applicable, and 

arbitration would not have produced a different result. 

In its December 31, 1997 opinion, the court considered 

damages. The court pointed out that in the National Union 

case Seibert recovered $140,000 in a settlement. 1 The court 

_________________________________________________________________ 

1. The National Union action also was against Caldor. Although the 

district court referred to the case as the Caldor action, we understand 

that National Union actually paid the settlement. For our purposes, it 

does not matter whether Caldor or National Union paid the $140,000. 

 6 
recognized that while Seibert might have recovered more or 

less from Travelers, "the $140,000 settlement sum is a 

reasonable and just figure to use as a base for calculations 

of interest due from [Stein] to [Seibert]." This base figure 

was important inasmuch as the court intended to fix

damages on an interest theory to compensate Seibert for 

the loss of the use of the money because of the delay in 

making the settlement as the coverage sought from 

Travelers had been lost. Ultimately, the court found that 

damages would be calculated on the basis of prejudgment 

interest for nine years. The court also awarded damages on 

the basis of Seibert's attorney's fees and costs in this 

action. The court, however, refused to award punitive 

damages against Stein, to allow Seibert to amend his 

complaint to seek such damages, or to require Stein to 

disgorge the fees he collected from negotiating the Sexton 

settlement. The parties then filed this appeal and crossappeal. 

On this appeal, Stein raises three points. First, he 

contends that the Travelers policy would not have given 

Seibert coverage in this action even if Stein complied with 

the consent to settle clause. Second, he contends that even 

if the Travelers policy provided for underinsured motorist 

coverage, the court erred in granting summary judgment to 

Seibert because he made a full recovery from National 

Union and there is no proof that he would have recovered 

on the Travelers policy. Third, he contends that there was 

no basis for damages for the loss of use of money by reason 

of delay in recovering from National Union instead of 

Travelers, and for counsel and expert fees. As far as we can 

ascertain, however, Stein does not contend that he was not 

negligent in settling the claim against Sexton without 

complying with the consent to settle clause, although he 

does contend that without damage (and he contends there 

was none) he cannot be liable for malpractice. 

Seibert cross-appeals with respect to damages. He 

contends that the district court should have fixed a higher 

rate of interest, allowed him to amend his pleadings to 

claim punitive damages, and compelled Stein to disgorge 

his fees from the Sexton action. 

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In view of the circumstance that the district court

decided this case on cross motions for summary judgment, 

we are exercising plenary review on this appeal. Petruzzi's 

IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 

1224, 1230 (3d Cir. 1993). We can affirm only if we

conclude that the pleadings, depositions, answer to

interrogatories and admissions on file, together with the 

affidavits, show that the party who obtained summary 

judgment on a point was entitled to that judgment as a 

matter of law and that there was no genuine dispute of 

material fact standing in his way. Fed. R. Civ. P. 56(c). 

At the outset of our discussion, we must acknowledge 

that the district court had a most difficult task. Moreover, 

it is evident that the court was striving to reach a just and 

equitable result and, indeed, may have done so. That said, 

we are convinced that the court engaged in fact finding 

inappropriate in the procedural posture of the case and 

thus in large part we must reverse. 

To start with, the court surely erred when it predicated 

its disposition on the theory that Seibert would have 

recovered $140,000 from Travelers if Stein had not erred 

with respect to the consent to settle clause. While we do not 

doubt that the $140,000 figure could have been a 

reasonable settlement of a claim against Travelers, neither 

we nor the district court can usurp the fact finding function 

of the jury and find that Seibert could have recovered that 

sum from Travelers. In fact, for all we know, Travelers 

would not have settled and ultimately would have prevailed 

at arbitration on the theory that Sexton was not liable. 

Moreover, contrary to the district court, we are not 

confident that if Travelers had taken the position that as a 

matter of law its coverage was inapplicable had it not 

prevailed on the consent to settle clause (a possibility on 

which we only can speculate), it would not have been 

successful. In this regard, we point out that the court 

indicated that it was unclear whether the disputed 

endorsements were attached to Seibert's policy. Such a 

situation hardly is a springboard to a summary judgment 

order. 

The situation before us involves reviewing a judgment 

predicated on facts which we cannot know at this time. For 

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example, how can anyone know on the basis of the record 

before us what position Travelers would have taken on the 

legal issues if it had not prevailed originally on its summary 

judgment motion? We only know for sure that Travelers did 

not raise some of the issues in the litigation against it that 

Stein raises on this appeal. But, as Stein pointed out at 

oral argument, how do we know what Travelers would have 

done had it lost its motion for summary judgment? 

Perhaps, as Stein suggested, it would have raised other 

defenses. On the other hand, it might have agreed to 

arbitrate, as did National Union, and at arbitration only 

argued that Sexton was not liable on negligence principles. 

In that event, Stein's argument that Travelers did not 

provide applicable underinsured motorist coverage would 

be irrelevant. Yet Travelers might have prevailed on the 

theory that Sexton was not liable. In the circumstances, we 

have concluded that, except to the extent that the orders of 

August 20, 1997, and December 31, 1997, are predicated 

on a finding that Stein committed malpractice by settling 

the Sexton action without notice to Travelers, those orders, 

insofar as they impose liability on Stein, must be reversed 

as must the judgment of January 7, 1998. 

We make three further points with respect to Stein's 

appeal. First, we reject Seibert's contentions that Stein is 

barred by estoppel and waiver principles by reason of 

having brought the action against Travelers from 

contending that Travelers' policy did not afford Seibert 

underinsured motorist coverage. Naturally, a plaintiff's 

attorney in filing an action takes the position that the 

action is justified. If the attorney through some error 

precludes the case from being litigated on the merits, then 

the concept of a trial within a trial is not consistent with 

estopping the attorney from contending that if he had not 

made an error in any event he could not have been 

successful. 

Second, we reject Seibert's contention that the district 

court in the Travelers action established that Seibert would 

have recovered from Travelers but for Stein's error. It is 

true that in the Travelers action the court said that because 

of Seibert's failure through Stein to comply with the 

consent to settle clause he is "not now entitled to the 

 9 
underinsurance coverage [he] could have otherwise 

received." Yet clearly what it meant by this statement was 

that Seibert lost the possibility of recovering. After all, the 

court obviously did not consider the other insurance issues 

Stein advances nor did it consider Sexton's liability to 

Seibert. 

Third, we recognize that we might as a matter of law 

adjudicate at this time whether, as Stein contends, the 

Travelers policy did not provide underinsured motorist 

coverage to Seibert for the Sexton accident or, if it did, the 

Travelers coverage was, as Stein contends, excess to the 

National Union policy. We, however, resist the temptation to 

do so as that determination may rest on disputed facts and 

in any event it may appear conclusively on the remand that 

Travelers would not have made those contentions had it not 

prevailed on its summary judgment motion. Moreover, we 

simply cannot grant Stein summary judgment at this time 

on a theory that the Travelers policy did not afford 

coverage, because viewing the matter on the record most 

favorably to Seibert with respect to Stein's motion,"we 

cannot say that the evidence thus far submitted so clearly 

established [noncoverage] such that no reasonable juror 

could conclude otherwise." Albee Assocs. v. Orloff,

Lowenbach, Stifelman, and Siegal, 1999 WL 6537, at *7 

(N.J. Super. Ct. App. Div. Jan. 11, 1999). 

While we largely reverse on the appeal, we reach a 

different result on the cross-appeal. After a careful review of 

this case, we have concluded that Stein is entitled to a 

judgment as a matter of law with respect to Seibert's claim 

for punitive damages and for disgorgement of his fee for 

settling the Sexton case. A plaintiff cannot pursue a claim 

for punitive damages where, as here, no hint of such a 

claim was contained in the pleadings or the pretrial order. 

Furthermore, the undisputed facts of this case simply 

cannot support a punitive damages award. 

In view of the aforesaid, we will reverse the orders of 

August 22, 1997, and December 31, 1997, and the 

judgment of January 7, 1998, except to the extent that they 

establish that Stein was guilty of malpractice by settling the 

Sexton claim without Travelers' consent (which is not to say 

that he is liable for malpractice), and except to the extent 

 10 
that Seibert's punitive damages and disgorgement claims 

have been foreclosed. The punitive damages and 

disgorgement claims are out of this case. In view of our 

disposition, we do not reach the damages issues raised on 

this appeal. The parties will bear their own costs on this 

appeal. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 11