Court Opinion

ID: 9396236
Source: CourtListenerOpinion
Date Created: 2023-05-19 21:00:51.235959+00
Date Added: 2024-06-11T17:19:15.339602
License: Public Domain

USCA4 Appeal: 22-1023     Doc: 44         Filed: 05/18/2023    Pg: 1 of 14

                                             PUBLISHED

                              UNITED STATES COURT OF APPEALS
                                  FOR THE FOURTH CIRCUIT

                                              No. 22-1023

        BROWN GOLDSTEIN LEVY LLP; JOSHUA TREEM,

                            Plaintiffs - Appellants,

                     v.

        FEDERAL INSURANCE COMPANY,

                            Defendant - Appellee.

        Appeal from the United States District Court for the District of Maryland, at Baltimore.
        Thomas E. Johnston, Chief District Judge. (1:20-cv-01313-TEJ)

        Argued: March 8, 2023                                           Decided: May 18, 2023

        Before WILKINSON and THACKER, Circuit Judges, and KEENAN, Senior Circuit
        Judge.

        Affirmed by published opinion. Judge Thacker wrote the opinion in which Judge
        Wilkinson and Judge Keenan joined.

        ARGUED: John Thorpe Richards, Jr., BOGORAD & RICHARDS PLLC, for Appellants.
        Katherine Booth Wellington, HOGAN LOVELLS US LLP, Boston, Massachusetts, for
        Appellee. ON BRIEF: David Newmann, Alexander B. Bowerman, Philadelphia,
        Pennsylvania, Marc A. Marinaccio, HOGAN LOVELLS US LLP, Baltimore, Maryland,
        for Appellee.
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        THACKER, Circuit Judge:

               The law firm of Brown Goldstein Levy LLP (“BGL”) and one of its partners, Joshua

        Treem, (collectively, “Appellants”) filed suit against their insurer, Federal Insurance

        Company (“Appellee”), when it refused to provide coverage for costs Appellants incurred

        after the Government investigated Treem, executed a search warrant at BGL’s office, and

        notified Treem that his representation of certain clients may present a conflict of interest.

        The district court dismissed Appellants’ complaint, holding that there was no “Claim,” as

        that term is defined in the insurance policy, and alternatively that any costs Appellants

        incurred were excluded from the policy’s definition of “loss.” Because we conclude that

        there is no “Claim,” we affirm.

                                                      I.

                                                      A.

               In 2014, the Government began investigating attorney Kenneth Ravenell

        (“Ravenell”) in connection with a federal racketeering investigation. Ravenell engaged

        Appellants to represent him in the investigation. On January 11, 2019, the Government

        sent Treem a letter (the “Ravenell Conflict Letter”) informing him that he was “now a

        subject of the investigation and [his] conduct [was] within the scope of the grand jury’s

        investigation.” J.A. 51. 1 In the Ravenell Conflict Letter, the Government “advise[d]

        [Treem] that there are multiple nonwaivable conflicts of interest that prevent [Treem] from

                  1
                      Citations to the “J.A.” refer to the Joint Appendix filed by the parties in this
        appeal.

                                                       2
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        continuing to represent Kenneth Ravenell in connection with the ongoing grand jury

        investigation.” Id. The Government concluded the letter by stating, “[w]e trust that you

        understand that these conflicts warrant your recusal and disqualification from further

        representation of Mr. Ravenell. Please advise us promptly if you do not intend to withdraw

        from your representation of Mr. Ravenell.” Id.

               Upon receipt of the Ravenell Conflict Letter, Treem obtained counsel to represent

        him in connection with the Government’s investigation, including the Government’s

        position that he could no longer represent Ravenell. Appellants also “retained ethics

        counsel to advise them with respect to the effect, if any, the Government investigation and

        the [Ravenell Conflict Letter] might have on [BGL’s] other clients.” J.A. 157.

               On June 13, 2019, the Government obtained a search and seizure warrant for BGL’s

        offices, which it executed on June 18, 2019. In executing the warrant, the Government

        seized tens of thousands of documents, including “all of Treem’s emails, regardless of their

        relation to Ravenell or relevance to the ongoing investigation.” J.A. 244–45. That same

        day, the Government sent Treem’s counsel a letter (the “Target Letter”) to advise that

        Treem was “a target of the ongoing criminal investigation and the Grand Jury has

        substantial evidence linking Mr. Treem to the commission of crimes.” Id. at 55. The Target

        Letter also informed Treem that “search warrants were executed at two law firms – [BGL]

        and Ravenell Law” and that there was “a filter review protocol in place for the items seized

        pursuant to the search warrants.” Id.

               In response to the seizure, Appellants sought relief in the district court, arguing that

        the seizure was beyond the scope of the investigation into Treem and Ravenell, and further

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        objected to the Government’s use of a “Filter Team” to inspect the documents seized for

        attorney client privilege.    Specifically, Appellants filed a motion for a temporary

        restraining order and a preliminary injection pursuant to Rule 65 of the Federal Rules of

        Civil Procedure, and a motion for the return of property pursuant to Rule 41(g) of the

        Federal Rules of Criminal Procedure. Appellants ultimately litigated that case to this court,

        where they prevailed. See In Re Search Warrant, 942 F.3d 159 (4th Cir. 2019). Appellants

        maintain that they incurred over $230,000 in defense costs related to the search warrant

        litigation.

               On June 28, 2019, the Government sent Treem another letter (the “Target Conflict

        Letter”) indicating that it believed that his “representation of [a] defendant in [a] related

        civil case . . . present[ed] a possible conflict of interest with [Treem’s] personal interests

        as a target of a federal grand jury investigation” because Treem’s client was cooperating

        with the Government in a criminal case. J.A. 57. The Government further informed Treem

        of its belief that Treem’s client “should be advised of the possible conflict so that he may

        waive the conflict or find new counsel. If [the client] elects to waive the possible conflict,

        we believe that the waiver should be confirmed in court or on the record.” Id. Finally, the

        letter asked Treem to “notify [the Government] as soon as practicable whether [the client]

        wishes to obtain new counsel or waive the possible conflict. If the latter, we will schedule

        the proceeding at a mutually convenient time with the Court.” Id. at 57–58.

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                                                    B.

               Appellants obtained a professional liability insurance policy from Appellee

        covering claims made between November 21, 2018, and November 21, 2019 (the

        “Policy”).

               In relevant part, the insuring clause of the Policy provides “[t]he [Appellee] shall

        pay Loss on behalf of an Insured on account of any Claim first made against such Insured

        during the Policy Period . . . for a Wrongful Act committed by the Insured.” Id. at 25

        (emphases in original). The Policy defines a “Claim” as any of the following:

                      (a) a written demand or written request for monetary damages
                      or non-monetary relief;
                      (b) a written demand for arbitration;
                      (c) a civil proceeding commenced by the service of a complaint
                      or similar pleading; or
                      (d) a formal civil administrative or civil regulatory proceeding
                      (including a disciplinary or grievance proceeding before a
                      court or bar association) commenced by the filing of a notice
                      of charges or similar document or by the entry of a formal order
                      of investigation or similar document

                      against an Insured for a Wrongful Act, including any appeal
                      therefrom.

        Id. (emphases in original). The term “loss” includes “defense costs,” which the Policy

        defines as “that part of Loss consisting of reasonable costs, charges, fees (including

        attorneys’ fees and experts’ fees) and expenses . . . incurred in defending any Claim.” Id.

        at 26 (emphasis in original). Loss does not include “any costs incurred by an Insured to

        comply with any order for injunctive or other non-monetary relief, or to comply with an

        agreement to provide such relief,” or to “any amount incurred by an Insured in the defense

        or investigation of any action, proceeding, demand or request that is not then a Claim even

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        if such matter subsequently gives rise to a Claim.” Id. at 27 (emphases in original). Lastly,

        the Policy defines a “wrongful act” as “any actual or alleged act, error or omission

        committed, attempted, or allegedly committed or attempted, solely in the performance of

        or failure to perform Professional Services by the Firm or by an Insured Person acting

        in his or her capacity as such on behalf of the Firm.” Id. at 28 (emphases in original).

               On June 19, 2019, Appellants gave notice to Appellee of their intent to seek

        insurance coverage pursuant to the Policy for the losses incurred in the search warrant

        litigation (the “Search Warrant Claim”) and the defense costs associated with defending

        Treem in connection with the criminal investigation (the “Partner Claim”). According to

        the Complaint, the Search Warrant Claim was based on “the Government’s application for

        a search warrant, and subsequent” execution of that warrant, and the Partner Claim was

        based on “(a) the target letter the Government issued to [Treem]; (b) the search warrant the

        Government executed; (c) the Government’s demand that [Treem] withdraw as counsel for

        [Ravenell]; and (d) the Government’s demands that [Treem] notify other clients of

        potential conflicts arising out of the Government’s ongoing criminal investigation of

        [Treem].” J.A. 158. The Search Warrant Claim sought coverage for the legal fees and

        expenses related to the search warrant litigation. The Partner Claim sought coverage for

        the costs Appellants incurred in connection with the Government’s investigation of Treem

        and for the costs Appellants incurred in connection with engaging ethics counsel. Appellee

        denied Appellants’ request for coverage pursuant to the policy on March 6, 2020.

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                                                      C.

               On May 27, 2020, Appellants filed the instant action asking the court to declare the

        parties’ rights and obligations pursuant to the Policy and seeking damages for breach of

        contract. 2 Specifically, counts one and two of the Complaint seek coverage for Appellants’

        losses associated with the Search Warrant Claim, and counts three and four seek coverage

        for their losses associated with the Partner Claim.

               In July 2020, Appellee filed a motion to dismiss pursuant to Rule 12(b)(6) of the

        Federal Rules of Civil Procedure. The parties also filed cross motions for summary

        judgment. On December 2, 2021, the district court issued an order granting Appellee’s

        motion to dismiss and denying the motions for summary judgment as moot. In doing so,

        the district court held that the Search Warrant Claim was not entitled to coverage pursuant

        to the Policy because it did not fall within the Policy’s definition of a “Claim,” and even if

        it did, the costs associated with the search warrant litigation do not constitute “defense

        costs” under the Policy. As for the Partner Claim, the district court was “skeptical” that

        the conflict letters the Government sent Treem constituted “Claims,” but even assuming

               2
                 Appellants’ Complaint asserted complete diversity of citizenship as the basis for
        federal subject matter jurisdiction. Because BGL is a limited liability partnership, the
        Complaint should have alleged the citizenship of each of BGL’s members. See Gen. Tech.
        Applications, Inc. v. Exro Ltda, 388 F.3d 114, 121 (4th Cir. 2004) (explaining that a
        partnership’s citizenship “is that of its members”). The Complaint did not do so but instead
        alleged BGL’s place of registration and principal place of business. Therefore, as pled, the
        Complaint failed to satisfy us of our jurisdiction. Nevertheless, at the direction of the court,
        the parties filed a joint letter pursuant to Federal Rule of Appellate Procedure 28(j) setting
        forth the facts necessary to establish that complete diversity does exist. Treating the letter
        as a constructive amendment of the Complaint pursuant to 28 U.S.C. § 1653, we are
        satisfied that we have jurisdiction to consider this appeal.

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        they did, the court held that the costs incurred by Appellants related to the Partner Claim

        were not covered losses pursuant to the Policy.

               Appellants timely filed this appeal.

                                                       II.

               “We review de novo the district court’s dismissal of the complaint under Rule

        12(b)(6).” Uncork & Create LLC v. Cincinnati Ins. Co., 27 F.4th 926, 930 (4th Cir. 2022).

        “To survive a motion to dismiss, a complaint must contain sufficient factual matter,

        accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,

        556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007));

        see also Fed. R. Civ. P. 12(b)(6).

               As a general rule, “extrinsic evidence should not be considered at the 12(b)(6)

        stage.” American Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th

        Cir. 2004). Nevertheless, “we have held that when a defendant attaches a document to

        its motion to dismiss, a court may consider it in determining whether to dismiss the

        complaint if it was integral to and explicitly relied on in the complaint and if the plaintiffs

        do not challenge its authenticity.” Id. (alterations adopted) (internal quotation marks

        omitted) (citations omitted).

               Because this case is in federal court based on diversity jurisdiction, we follow state

        law in interpreting the insurance contract at issue. See Erie R.R. Co. v. Tompkins, 304 U.S.

        64 (1938). The parties agree the relevant state law is Maryland. In Maryland, “the

        foremost rule of construction is to apply the terms of the insurance contract itself.”

        Springer v. Erie Ins. Exch., 94 A.3d 75, 85 (Md. 2014) (internal quotation marks omitted)

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        (citations omitted). Courts must “accord a word its usual, ordinary and accepted meaning

        unless there is evidence that the parties intended to employ it in a special or technical

        sense.” Megonnell v. United Servs. Auto Ass’n, 796 A.2d 758, 771 (Md. 2002) (citations

        omitted). “In that vein, insurance contracts are construed as ordinary contracts.” Id. at 771

        (citations omitted).

               Maryland courts do “not construe insurance policies as a matter of course against

        the insurer.” MAMSI Life & Health Ins. Co. v. Callaway, 825 A.2d 995, 1005 (Md. 2003).

        Rather, only when a policy term is “ambiguous” will a Maryland court “construe that term

        against the drafter of the contract which is usually the insurer.” Id. at 1006. “A policy

        term is considered ambiguous if, to a reasonably prudent person, the term is susceptible to

        more than one meaning.” Connors v. Gov’t Emps. Ins. Co., 113 A.3d 595, 603 (Md. 2015)

        (internal quotation marks omitted) (citation omitted). If “no ambiguity in the terms of the

        insurance contract exist[s], a court has no alternative but to enforce those terms.”

        Megonnell, 796 A.2d at 772.

                                                     III.

               As discussed above, Appellants submitted requests for insurance coverage for both

        the Search Warrant Claim and the Partner Claim. The Policy provides for coverage only

        for “Claims,” as that term is defined in the policy. All parties agree here that the only

        arguably applicable definition of a covered Claim is “a written demand or written request

        for . . . nonmonetary relief . . . against an Insured for a Wrongful Act.” J.A. 25. As this

        court has previously held when interpreting nearly identical language, “[t]here is no

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        ambiguity in this policy language.” SNL Fin., LC v. Philadelphia Indem. Ins. Co., 455 Fed.

        App’x 363, 368 (4th Cir. 2011).

                                                    A.

               We begin with the Search Warrant Claim. Appellants argue that the

        “[G]overnment’s application for and execution of the search and seizure warrant on the

        BGL offices was clearly” a written demand or request for nonmonetary relief as required

        by the Policy. Appellants’ Opening Br. at 19. In Appellants’ view, “an application for a

        search warrant expressly ‘request[s]’ relief against BGL, and the issued warrant demands

        compliance.” Id. The district court concluded, “[s]earch warrants are not forms of ‘relief,’

        but rather constitute judicial authorization—based upon a finding of probable cause—to

        conduct searches of places and things.” Id. at 257. The district court further held that

        because “[t]he Government did not seek to redress any diminution of its legal rights, nor

        did it seek remedy for any harm brought upon it by [Appellants] in its pursuit of the Search

        Warrant,” the warrant application was not a demand or request for relief against the insured.

        Id. at 261. We agree with the district court.

               The Government’s application for the search warrant was not a written request for

        non-monetary relief against Appellant. To be sure, the warrant application asked the court

        to grant law enforcement authorization to search and seize BGL’s files.             But that

        authorization is not relief “against an Insured” as required by the Policy. J.A. 25. The

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        ordinary meaning of relief in the legal sense 3 is “[t]he redress or benefit, esp. equitable in

        nature (such as an injunction or specific performance), that a party asks of a court.” Black’s

        Law Dictionary (11th ed. 2019). Relief “against the insured,” then, is the redress or benefit

        one party seeks, via court order, from another party. When the Government asked the court

        for authorization to search and seize BGL’s files, it was not seeking redress or a benefit

        from BGL. Indeed, the warrant was issued and directed to law enforcement -- not to BGL.

        And while the resulting warrant may have been adverse to BGL, it was not “against an

        Insured.” That is, the target of a warrant is “not asked to say or to do anything” in response

        to the warrant. Andresen v. Maryland, 427 U.S. 463, 473 (1976). Therefore, the warrant

        application is not a “Claim,” as defined in the Policy.

               Similarly, the search warrant itself is not a “Claim” because it is not a written

        demand or request.       Contrary to Appellants’ assertion that a warrant “demands

        compliance,” the target of a warrant is “not asked to say or to do anything” in response to

        the warrant. Andresen, 427 U.S. at 472. Instead, the warrant authorizes law enforcement

        to carry out the search and seizure without regard to any response by the target of the

        warrant.

               In support of their argument that the search warrant is a “Claim,” Appellants cite

        several cases which hold that subpoenas are written demands or requests for relief. But a

        subpoena differs from a search and seizure warrant in that it does command the recipient

               3
                  The context of the Policy language makes clear that the parties intended to use
        “relief” in the legal sense. Therefore, we apply that ordinary meaning. Megonnell, 796
        A.2d at 771.

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        to comply. 4    Further, we are not persuaded by Appellants’ reliance on Protection

        Strategies, Inc. v. Starr Indem. And Liability Co., No. 1:13-CV-00793, 2013 WL

        10724338, at *1–2 (E.D. Va. Sept. 10, 2013) and Agilis Benefit Servs. LLC v. Travelers

        Cas. & Sur. Co. of Am., No. 5:08-CV-213, 2010 WL 11595321, at *11 (E.D. Tex. Feb. 24,

        2010). Neither case is binding upon this court, and neither provides the type of reasoned

        analysis offered by the district court in this case.

               Neither the search warrant application nor the resulting search warrant are “written

        demand[s] or written request[s] for . . . nonmonetary relief . . . against an Insured” as

        required by the Policy. J.A. 25. Therefore, the Search Warrant Claim fails because

        Appellants cannot state a claim for relief.

                                                      B.

               Turning to the Partner Claim, Appellants argue that “[t]here could not be a clearer

        example of a written demand for nonmonetary relief” than the Ravenell Conflict Letter and

        the Target Conflict Letter (collectively, the “Conflict Letters”). Appellants’ Opening Br.

        at 38–39. We disagree.

               Each of the letters at issue was sent by the Government to “advise” Treem of his

        status and inform him of potential conflicts of interest. J.A. 51, 57–58. 5 Contrary to

               4
                 We need not determine here whether compliance with a subpoena would constitute
        “relief,” and so we decline to do so.
               5
                 Though the Conflict Letters were not attached to the Complaint, they were
        furnished to the district court when Appellee moved to dismiss. Because the Conflict
        Letters are integral to and explicitly relied upon in the Complaint, and Appellants did not
        challenge their authenticity, the district court considered them in ruling on the motion to
        (Continued)

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        Appellants’ assertions, the Conflict Letters neither “demanded” nor “requested” Treem’s

        withdrawal from representation. The Ravenell Conflict Letter merely advised Treem of

        the nonwaivable conflict and stated, “[w]e trust that you understand that these conflicts

        warrant your recusal and disqualification from further representation of Mr. Ravenell.

        Please advise us promptly if you do not intend to withdraw from your representation of

        Mr. Ravenell.”    J.A. 51.    This letter makes no demand that Treem withdraw from

        representation -- it only informs him of his ethical obligations. The only “request” at all is

        the Government’s request that Treem “advise us promptly” if he did not intend to withdraw.

        There is no doubt that this is not a demand or request for relief against an Insured.

               Likewise, the Target Conflict Letter advised Treem that a different client of his had

        entered into a cooperation agreement with the Government such that Treem had a potential

        but waivable conflict of interest with the client. The letter stated the Government’s

        “belie[f] that [the client] should be advised of the possible conflict so that he may waive

        the conflict or find new counsel.” J.A. 57. The Government then cited a case in support

        of its belief and again asked that Treem “[p]lease notify us as soon as practicable whether

        [the client] wishes to obtain new counsel or waive the possible conflict.” Id. at 57–58.

               Like the Ravenell Conflict Letter, the Target Conflict Letter makes no demand or

        request for relief against an Insured. The Government’s request to be notified promptly as

        to how Treem intends to proceed is not a request for “[t]he redress or benefit, esp. equitable

        dismiss. American Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th
        Cir. 2004). Appellants do not claim this was in error, so we too consider the Conflict
        Letters in our analysis.

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        in nature (such as an injunction or specific performance), that a party asks of a court.”

        Black’s Law Dictionary (11th ed. 2019).

              The Conflict Letters are not “Claims.” Despite Appellants’ attempts to characterize

        them as “demands,” they are not. Therefore, Appellants cannot state a claim as to the

        Partner Claim.

                                                   IV.

           For the foregoing reasons, the district court’s dismissal of Appellants’ Complaint is

                                                                                     AFFIRMED.

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