2008 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 5-19-2008 

# W olk v . W es tp or t Ins C orp P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 07-1486

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2008

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2008 D e c i sion s b y an author i z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " W o l k v . W e s tpor t In s C orp " (2008). 2008 D e cisio n s . P ape r 1209. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2008/1209T he H onor abl e A r t hurL . A l ar cón, U ni t ed St at es C i r cui tJ udge forthe N i nth J udi ci al * C i r cui t , s i t t i ng bydes i gnat i on. NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT N o. 07- 1486

AR T HUR AL AN WOL K; A RT H U R A LA N W O LK A SSO CI A TES, d /b / a /Th e W o l k La w Fi r m,

A p p e llan ts v . WES T P OR T I NS UR ANC E CO RP OR AT I ON O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e E a ste rn D istric t o f P e n n y slv a n ia D . C . C i vi l A ct i on N o. 06- cv- 05346 ( Ho n o r a b l e J o h n P . F u l l a m) A r gued A pr i l 15, 2008 B e f o re : S L O V IT E R , J O R D A N a n d A L A R C Ó N , C i r cui tJudges . * ( Fi l ed: M ay7, 2008) Da v i d B. P i c k e r[ AR GUE D] P a u l R. Ro s e n [ AR GUE D] A ndr ew J . D eFal co S p e c t o rGa d o n & Ro s e n , P . C. 1635 M arketSt r eet , 7t h Fl oor Phi l adel phi a, PA 191032

C o u n se l fo r Ap

p e lla n ts J eff r eyJ . W ar d [A r gued] Th o mps o n , Lo s s & J u d g e , LLP T w o L af ay ett e C en tr e 1 1 3 3 2 1 s tS t r e e t , NW Sui t e 4500 W as hi ngt on, D C 20036 M i chae l N . O nufr ak W h i t e & W i l l i a ms 1800 O ne Li ber t yPl ace Phi l adel phi a, PA 19103 C ouns el f orAppel l ee

AM ENDED OP I NI ON O F THE COURT A L A R C Ó N , C i r cui tJudge . A rth u r A lan W o lk a n d h is la w f irm , A rth u r A lan W o lk A ss o c iate s d /b /a T h e W o lk L aw Fi r m , appea l fr om t he di s t r i ctcour t ’ s or dergr ant i ng s um m aryj udgm enti n favorof t he W es tpor tI ns ur ance C orpor at i on ( “W es tpor t ”) , and di s m i s s i ng w i t h pr ej udi ce the p lai n ti ff s’ ac ti o n fo r bre ac h o f a p rof essio n al l iabili tyinsu ran ce co n tr ac t, the s tat e law tort of bad f ai t h r efus al t o coverand def end i n vi ol at i on of 42 Penns y l vani a C ons ol i dat ed S tatu tes sec ti o n 8 3 7 1 , an d rec o v eryu n d er q u an tum m eru it . W o lk an d h is l aw firm c o n ten d th a t th e d istric t co u rt e rre d in c o n c lu d in g th a t W e stp o rt w a s n o t re q u ire d to p ro v id e c o v e ra g e o r a d e f e n se b e c a u se W e stp o rt n e v e r re c e iv e d w ritten n o tice th a t a c l a i m h a d b e e n ma d e a g a i n s tt h e m.3

W e w i l l vaca t e the or dergr ant i ng s um m aryj udgm entand di s m i s s i ng thi s act i on w i t h pr ej udi ce. I B e c a u se th e f

a c ts s e t f o rth in th e c o m p lain t an d th e a ttac h e d e x h ib its a re k n o w n to t he part i es , w e onl yr eci t e thes e fa ct s thatar e r el evantt o deci di ng w hetherthe di s t r i ct cour terr ed i n gr ant i ng s um m aryj udgm entand di s m i s s i ng thi s act i on w i t h pr ej udi ce. A A r t hurA l an W ol k ( “W ol k”) fi l ed a pr oduct s l i abi l i t yact i on agai ns tPr eci s i on A i r m ot i ve C orpor at i on ( “Pr eci s i on”) , and otherdefe ndant s i n t he C our tof C om m on Pl eas , on behal f of A l ber tD . E i gen ( “Ei gen”) , the per s onal r epr es ent at i ve of thr ee pe r s ons ki l l ed i n an ai rpl ane c r as h. M i dw aythr ough t r i al , the ca s e s et t l ed. E i gen fi l ed a pe t i t i on t o enfor ce the s et t l ementagr eement . Pr eci s i on fi l ed an a ns w ert o t he pet i t i on t o enfor ce th e se ttl e m e n t ag re e m e n t, an d a p e tit io n f o r re lief f ro m th e se ttl e m e n t ag re e m e n t. Pr eci s i on al l eged i n i t s pet i t i on forr el i ef thatE i gen fa l s el yas s ert ed dur i ng di s coverypr ocee di ngs t hatM ar t i n E i gen, the pi l otof the ai rpl ane thatcr as hed, di d not have a per s onal i ns ur ance pol i cycover i ng anycl ai m r es ul t i ng fr om hi s oper at i on of the a irp lan e . P re c isio n a lso a ss e rte d th a t E ig e n a n d W o lk “ f a lse lyre p re se n ted to P re c isio n in sw o rn w ritten d isc o v e ryre sp o n se s th a t: T h e re w a s n o liab ili typ o licyc o v e rin g M a rtin E ig e n ’s p ilo tin g f

o r t h is a c c id e n t [ s ic ] . . . .”4

Pr eci s i on fur t heral l eged that“M r . W ol k and A l ber tE i gen conc eal ed the i ns ur ance pol i cyfr om Pr eci s i on s o t hatt he es t at es of J oan and M ol l i e Ei gen coul d getthe maxi m um s et t l ementi n t hi s cas e . . . . ” Pr eci s i on m ai nt ai ns thati tw as ent i t l ed t o r el i ef “ forthe conce al m entand mi s conductbyt he es t at es , thei rat t orney s , and the i ns ur er . T he fl agr ant d isco v eryab u ses in this case d ese rve h arsh san cti o n s. ” P rec isi o n req u ested that the c o u rt ent er“an or deri m pos i ng puni s hm entforcont empt . ” The C our tof C om m on Pl eas deni ed th e p e tit io n f

o r re lief , an d g ra n ted E ig e n ’s p e tit io n to e n f o rc e th e se ttl e m e n t. B Pr eci s i on appea l ed t o t he Super i orC our tof Penns y l vani a fr om the or dergr ant i ng t he pet i t i on t o enfor ce the s et t l ement . T he Super i orC our taff i r m ed the or dergr ant i ng t he pet i t i on t o enfor ce the s et t l ement , r ever s ed the or derdeny i ng the pet i t i on forr el i ef, and r emanded foran evi dent i aryhear i ng. T h e S u p e rio r C o u rt c o n c lu d e d th a t P re c isio n h a d p re se n ted stro n g p rim a f a c ie evi dence t hatE i gen pr ovi ded fa l s e di s coveryr es pons es r egar di ng w hetherthe pi l otof the ai rpl ane w as i ns ur ed forl i abi l i t yfori nj urys uffe r ed byhi s pas s enger s . I n an obvi ous re f e re n c e to W o lk , the S u p e rio r C o u rt sta ted : “A d v o c a tes o f o u r le g a l sy ste m o w e a d u ty of ca ndort o t he tr i bunal , and a dutyof fa i r nes s t o oppos i ng par t i es and oppos i ng cou nsel . ” In a l at er pass age, the S up eri or C ou rtst at ed that“t his C ou rtw i shes t o ex press i t s deep c oncern t hatE i gen and/ orhi s couns el m aybe pl ay i ng fas tand l oos e w i t h ourW e no t e t hat, on rem and , up on adjudi cat i ng P reci si on ’s cl ai m s of m i scond uct agai nst 1 W ol k, hi s l aw fi r m , and Ei gen as di r ect ed bythe Super i orC our t , the C our tof C om m on Pl eas of Phi l adel phi a C ount yfound thos e cl ai m s t o be uns uppor t ed and di s m i s s ed al l of P re c is io n ’s c la im s o f

f ra u d a g a in s t th e m . See Eigen v. Textr on Lycom i ng R eci pr ocat i ng E ngi ne D i v. , M ayT erm , 2001, N o. 3079, 2006 Phi l a. C t . C om . Pl . L E X I S 60 ( C . P. Phi l a. C o . , Jan . 3 1 , 2 0 0 6 ). 5 leg a l sy ste m . O n re m a n d , w e re sp e c tf u llyu rg e th e trial c o u rt to b e se n sitiv e to th is p o s s ib ility.” In its c o n c lu sio n , the S u p e rio r C o u rt a lso sta ted : “W e d o n o t d e c lar e a t th is ju n c tio n th a t E ig e n o r h is c o u n se l co m m itt e d f ra u d in th e in d u c e m e n t. R a th e r, w e m e re ly hol d t hatPr eci s i on has pr es ent ed s uch s t r ong p rim a fa c ie ev iden ce o f f rau d that the c o u rt sh o u ld h av e h eld a n ev iden ti aryh ea ri n g . ” O n A p ri l 20 , 2 0 0 5 , the S u p erior C o u rt r emanded t he mat t erforfur t herpr ocee di ngs cons i s t entw i t h i t s opi ni on. 1 II O n A pri l 21 , 20 05 , W olk w rot e a l et t er t o a W estpo rtcl ai m s r epresent at i ve as a claim an t un d er P o li cyN u m b er P L L 3 4 4 5 9 9 , an d en clos ed a c o p yo f th e S u p erior C o u rt ’s deci s i on i n t he Ei gen ac t i on. W ol k s t at ed: “I w i l l be happyt o di s cus s thi s w i t h y ou f u r t h e r , b u tI t h i n k we a r e g o i n g t o n e e d c o u n s e l . ” On M a y1 1 , 2 0 0 5 , a W e s tp o r tc l a i ms s peci al i s ti nform ed W ol k t hat“i ti s m yunder s t andi ng thatthi s pot ent i al cl ai m ar i s es fr om y o u r r e p re s e n ta tio n o f

th e E ig e n f

a m ily a s p la in tif

f s a s a re s u lt o f

a n a irp la n e c ra s h .” In a let ter da ted S ep tem b er 2 9 , 2 0 0 5 , W o lk stated : “T h e f ac t th at P rec isi o n ’s law y e r h a s c laim e d f

ra u d d o e s n o t, i n m yv iew , m iti g a te [ W e stp o rt’s] o b lig a tio n to6

pr ovi de me w i t h a def

ens e, w hi ch [W es tpor t ] has y ett o do. ” W ol k al s o i nform ed W e stp o rt th a t h e h a d re tain e d tw o a tto rn e y s, a n d w o u ld h ire a n o th e r “ to d e f e n d m y se lf

in th is c a s e .” W o lk a lso a lleg e d in h is c o m p lain t ag a in st W e stp o rt th a t E ig e n ’s a tto rn e yo ra lly i nform ed W ol k t hatE i gen i nt ended t o hol d W ol k l i abl e forPr eci s i on’ s ful l s har e of the s et t l ementi f he w as uns ucce s s ful i n the r emand pr ocee di ngs . I n a l et t erdat ed N ovember 7 , 2 0 0 5 , a W e stp o rt c laim s s p e c ialist in f o rm e d W o lk th a t itw a s u n d e r n o o b lig a tio n to defe nd him becau se “there are no pleadi ng s or pr oceed i ng s di rect ed spec i fi cal l yagainst y o u o r yo u r f

ir m .” III A O n N ovember16, 2006, W ol k and hi s l aw fi r m fi l ed thi s act i on i n t he C our tof C om m on Pl eas agai ns tW es tpor t . H e al l eged thati thad br eac hed i t s i ns ur ance contr act and ac t ed i n bad fa i t h byr efus i ng t o defe nd W ol k agai ns tPr eci s i on’ s cl ai m thatW ol k had f ra u d u le n tly in d u c e d it to s e ttle th e c la im s f ile d b yE ig e n a ri s in g f

ro m th e a irp la n e c ra s h . W e stp o rt re m o v e d th is a c tio n to th e d istric t co u rt. O n D e c e m b e r 1 3 , 2 0 0 6 , W e stp o rt f iled a m o tio n to d ism iss p u rsu a n t to R u le 12( b) ( 6) of the Feder al R ul es of C i vi l Pr ocedur e forfai l ur e t o s t at e a c l ai m upon w hi ch rel i ef m aybe g rant ed. W estpo rtassert ed that“P reci si on A i rm oti ve’s com plai nt agai nst E igen d o es n o t tri g g er W estp o rt ’s du tyto d ef en d b ec au se E igen is no t W estp o rt ’s7

i ns ur ed. ” W es tpor tal s o as s er t ed thatthe or al thr eatbyE i gen’ s per s onal couns el that E i gen w oul d hol d W ol k r es pons i bl e “i f the s et t l ementof the E igen a c tio n w a s v o id d u e to its a lleg e d lyf

ra u d u len t p ro c u re m e n t” d id n o t in v o k e W e stp o rt’s d u tyto d e f e n d b e c a u se it w as a mer e pot ent i al cl ai m , and w as notr epor t ed i n w r i t i ng. B O n J a n u a ry 2 9 , 2 0 0 7 , th e d is tr ic t c o u rt e n te re d th e f o llo w in g o rd e r: “ 1 . Def e n d a n t ’ s mot i o n f

o rs u mma r yj u d g me n ti s GR AN TED. 2 . Th i s a c t i o n i s DI SM I SS ED w i t h pr ej udi ce. 3. T he C l erk i s di r ect ed t o cl os e the fi l e. ” The di s t r i ctcour tdi d not expl ai n w hyi tconvert ed W es tpor t ’ s m ot i on t o di s m i s s pur s uantt o R ul e 12( b) ( 6) i nt o a m ot i on fors um m aryj udgm ent . I tal s o ent er ed thi s or derw i t houtpr i ornot i ce t o t he p arti es th at i t w o u ld tr ea t W estp o rt ’s R u le 12 (b)(6 ) m o ti o n as a m o ti o n fo r sum m ary ju d g m e n t. In a d d iti o n , the d istric t co u rt f a iled to in d ica te th e sta n d a rd o f re v iew th a t it app l i ed in r eaching it s deci si on , no r di d itci t e anyauthori t yt o sup po rti t s conclusi on s. IV

“ W e h a v e p re v io u slysta ted th a t th e lab e l a d istric t co u rt p lac e s o n its di s pos i t i on i s notbi ndi ng on an appe l l at e court . ” R o se v . B a rtle , 871 F. 2d 331, 339- 40 (3 d C ir. 1 9 8 9 ). H o w e v e r, “[ w ]e h a v e h e ld th a t itis re v e rsib le e rro r f o r a d istric t co u rt to converta mot i on underR ul e 12( b) ( 6) orR ul e 12( c) i nt o a mot i on fors um m aryj udgm ent unl es s t he courtpr ovi des not i ce of i t s i nt ent i on t o convertthe mot i on and al l ow s an8

op po rtun i t yt o sub m i tm at eri al s adm i ssi ble i n a sum m aryj ud gm ent pr oceed i ng or al l ow s a hear i ng. ” I

d. a t 3 4 2 . R ule 12(d) i f t he F ederal R ules of C i vil P rocedu re pr ov i des: I f, on a mot i on underR ul e 12( b) ( 6) or12( c) , m att er s out s i de th e p lea d in g s a re p re se n ted to a n d n o t ex c lu d e d b yth e c o u rt, t he mot i on m us tbe tr eat ed as one fors um m aryj udgm ent u n d e r R u le 5 6 . A ll p a rties m u st b e g iv e n a re a so n a b le oppor tuni t yt o pr es ental l the mat er i al thati s pert i nentt o t he m o tio n . R u le 56 (c) req u ir es th at th e p arti es h av e a t l ea st t en d ay s n o ti ce b ef o re the co u rt m aycon si der the m oti on for sum m aryj ud gm ent, and an o pp ortun i t yt o sub m i t“pleadi ng s, t he di s coveryand di s cl os ur e mat er i al s on fi l e, and anyaff i davi t s [t o] s how thatther e i s no gen uine i ssue as t o an ym at eri al factand that the m ov ant i s ent i t l ed to j ud gm ent as a m at t erof l aw . ” T he di s t r i ctcour tnevergave not i ce t o t he part i es thati tw as convert i ng the mot i on t o di s m i s s i nt o a mot i on fors um m aryj udgm ent . M or eover , the di s t r i ctcour tdi d not c o n d u c t a h e a rin g c o n c e rn in g W e stp o rt’s m o tio n . T h is C o u rt h a s h e ld th a t itis undes i r abl e fora di s t r i ctcour tt o ent ers um m aryj udgm entw i t houta hea r i ng, unl es s t he d istric t co u rt m a k e s it “ cl earbeyond al ldoubtth a t th e p a rties m u st p re se n t th e ir a f f id a v its and cou nter -affi dav i t s i n ad dit i on t o w hatever fact s appea r i n the pl eadings, dep osi t i on s, ans w er s t o i nt err ogat or i es , and admi s s i ons on fi l e. ” R ose , 8 7 1 F .2 d a t 3 4 1 (e m p h a sis ad d ed ). F u rth erm o re, th e d istri ct co u rtn ev er g av e the p arti es ti m e to c o n d u ct disco v ery9

related to W o lk’s claim s. T h ere fo re, th e d istri ct co u rterred in en teri n g su m m ary j udgm entw i t houtgi vi ng t he part i es not i ce. I n i t s R ul e 12( b) ( 6) m ot i on, W es tpor tar gued thatW ol k i s s eeki ng at t orney ’ s fee s s ol el yforr epr es ent i ng E i gen att he evi dent i aryhear i ng fol l ow i ng the r emand of t he pet i t i on forr evi ew . I n hi s r es pons e, W ol k m ai nt ai ned thathe w as s eeki ng at t orney ’ s fee s p u rsua n t t o the p o li cyissue d b yW estp o rtb ec au se th e S u p erior C o u rtd ir ec ted th e C o u rt of C om m on Pl eas t o det erm i ne w hetherE i gen and W ol k had comm i t t ed fr aud t o i nduce a s et t l ement . T hus , W ol k as s er t s he w as ent i t l ed t o r epr es ent at i on atthe evi dent i aryhear i ng t o d e f e n d a g a i n s tP r e c i s i o n ’ s f r a u d c l a i m a g a i n s th i m a n d h i s f i r m. T h e d istri ct co u rtfo u n d that “[ n ]o c lai m h as e v er b ee n ac tuallym ad e a g ains t M r. W ol k. T he mostt hatcan be s ai d i s thatther e w as not i ce of a pos s i bi l i t yof a c l ai m bei ng asse rt ed lat er. T h is do es n o t am o u n t t o a c lai m . ” In m ak ing this find ing , the d istri ct co u rt m ayhave ove r l ooked the fa ctt hatt he Super i orC our thad vac at ed the tr i al cour t ’ s deni al of the pet i t i on forr evi ew and r emanded foran evi dent i aryhear i ng t o det erm i ne w hether W ol k and Ei gen had c om m i t t ed fr aud i n t he i nducementt o eff ecta s ett l ement . T he Super i orC our tdi d s o bas ed on i t s concl us i on thatPr eci s i on had pr es ent ed “s t r ong p r i ma fa c ie e v id e n c e ” th a t f

a ls e d is c o v e ry re s p o n s e s h a d b e e n p ro f f e re d b yE ig e n a n d W o lk . W ol k s ubm i t t ed the Super i orC our t ’ s opi ni on t o Pr eci s i on the dayaft eri tw as i s s ued and in f o rm e d h is in s u re r t h a t “ I t h in k w e a re g o in g to n e e d c o u n s e l.”10

V i e w i n g t h e f

a c t s i n t h e l i g h tm o s tf

a v o r a b l e t o W o l k , a s th e n o n - m o v i n g p a r t y, Pr eci s i on’ s pet i t i on forr evi ew , as cons t rued bythe Super i orC our t , demonstr at es that t her e maybe a ge nui ne i s s ue of f acti n di s put e aboutw hetherW ol k w as ent i t l ed t o a defe ns e undert he pol i cyagai ns tPr eci s i on’ s cl ai m thathe w as gui l t yof fr aud i n t he in d u c e m e n t. W e c a n n o t co n c lu d e f ro m th is re c o rd th a t n o ra tio n a l f a c t-f in d e r c o u ld determ i ne thatW olk fai l ed to gi ve W estpo rtw ri t t en n oti ce of P reci si on ’s cl ai m against hi m . T he di s t r i ctcour terr ed i n det erm i ni ng the truth of thi s fac tual di s put e. T hus , the di s t r i ctcour t ’ s err ori n notpr ovi di ng the part i es not i ce thati tw as convert i ng the mot i on to d ism iss in to a m o tio n f o r su m m a ryju d g m e n t w a s n o t h a rm les s. A c c o rd in g ly , w e w ill vaca t e the or dergr ant i ng s um m aryj udgm entand di r ectthe di s t r i ctcour tt o conduct fur t herpr ocee di ngs cons i s t entw i t h thi s opi ni on. T he part i es s hal l bearthei row n cos t s on th is a p p e a l.