Court Opinion

ID: 800035
Source: CourtListenerOpinion
Date Created: 2012-05-17 17:17:54+00
Date Added: 2024-06-11T09:52:46.296550
License: Public Domain

11-1153-cv (L)
         Westport Ins. Co. v. The Hamilton Wharton Group, Inc., et al.

                                 UNITED STATES COURT OF APPEALS
                                     FOR THE SECOND CIRCUIT

                                              SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1,
2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Daniel Patrick Moynihan
 3       United States Courthouse, 500 Pearl Street, in the City of
 4       New York, on the 17th day of May, two thousand twelve.
 5
 6       PRESENT: RICHARD C. WESLEY,
 7                RAYMOND J. LOHIER, JR.,
 8                CHRISTOPHER F. DRONEY,
 9                         Circuit Judges.
10
11       WESTPORT INSURANCE CORPORATION,
12
13                                     Plaintiff-Counter-Defendant-Appellant-
14                                     Cross-Appellee,
15
16                      v.                                           11-1153-cv (Lead)
17                                                                   11-1493-cv (XAP)
18
19       THE HAMILTON WHARTON GROUP INC., WALTER B. TAYLOR,
20       INDIVIDUALLY
21
22                                     Defendants-Counter-Claimants-Third Party
23                                     Plaintiffs-Appellees-Cross-Appellants,
24
25       INTER-COMMUNITY MEMORIAL HOSPITAL OF NEWFANE, INC.,
26       INTERGRATED CARE SYSTEMS, LLC, ATHEALTHCARE, LLC, AARON
27       SELIGSON, MARTIN S. ROTHMAN, ABRAHAM V. FRIEDMAN, ESTATE OF
28       HERBERT A. ROTHMAN, ESTATE OF BERNARD FEUER PARTNERS, DBA
29       BROOKHAVEN BEACH HEALTH RELATED FACILITY, ESTATE OF BERNARD
30       FEUER, PARTNERS, DBA ROCKVILLE RESIDENCE MANOR, AMERICAN
31       GERI-CARE, INC., BEZALEL NURSING HOME COMPANY, INC.,
32       CREATIVE LIFESTYLES, INC., PREFERRED HEALTH CARE SERVICES
33       INC., NOW KNOWN AS COTTAGE HOMECARE SERVICES, INC., EAST NEW
34       YORK URBAN YOUTH CORPS, E.R.N.H., AKA EAST ROCKAWAY NURSING
35       HOME, ELMHURST CARE CENTER, INC., GEORGE KATZ, DBA THE NEW
 1   BRIGHTON MANOR OF LONG BEACH HOME FOR ADULTS, SUZIE KLEIN,
 2   DBA THE NEW BRIGHTON MANOR OF LONG BEACH HOME FOR ADULTS,
 3   GREATER NEW YORK HOME CARE SYSTEMS, INC., HIGHLAND CARE
 4   CENTER, INC., HUDSON VALLEY HOME CARE, INC., KESER NURSING &
 5   REHABILITATION CENTER, INC., LOGAN & LOGAN, INC., FKA CEDAR
 6   LODGE NURSING HOME, NEW SOUTH SHORE MANOR, NEW YORK COUNTY
 7   SERVICES REVIEW ORGANIZATION, NYACK MANOR NURSING HOME,
 8   OYSTER BAY MANOR SENIOR RESIDENCE, INC., PERSONNEL
 9   MANAGEMENT SERVICES, LLC, QUALITY HEALTHCARE, INC., ROYAL
10   HEALTH CARE SERVICES, INC., ST. MICHAEL'S HOME, THE
11   DENNELISSE CORPORATION, THE ESTATE OF PAUL C. MAGGIO, DBA
12   PATCHOGUE NURSING CENTER, UNIQUE PEOPLE SERVICES, INC.,
13   UNITED PRESBYTERIAN AND REFORM ADULT MINISTRIES, DBA
14   FLUSHING HOUSE, PRAXIS HOUSING INITIATIVES, INC., DBA THE
15   BARBOUR HOTEL, ALTERNATIVE STAFFING, INC., BHHEALTHCARE
16   SERVICES, INC., DBA NURSING PERSONNEL, BARKSDALE MANAGEMENT,
17   CORP., BRIARWOOD MANOR, INC., BRONXWOOD HOME FOR THE AGED,
18   INC., CARING PROFESSIONALS, INC., CEDAR MANOR, INC., COHME,
19   INC., CROWN NURSING HOME ASSOCIATES, INC., DENTSERV DENTAL
20   SERVICES, P.C., DESMOND MCMANUS, DBA BAYSHORE HOME FOR
21   ADULTS, TELFORD HOME ASSISTANCE, INC., DBA EXTENDED CARE
22   HEALTH SERVICES, EXTENDED NURSING PERSONNEL CHHA, INC., GEM
23   HEALTHCARE EMPLOYMENT AGENCY, INC., HOLLISWOOD CARE CENTER,
24   INC., INTERIM HOUSING, INC., MEADOWBROOK CARE CENTER, INC.,
25   NASSAU-SUFFOLD HOME CARE AND AIDES, INC., RECREATIONAL
26   SERVICES, INC., UNION PLAZA NURSING HOME, INC., VISITING
27   NURSE REGIONAL HEALTH CARE SYSTEM, INC., WEST SIDE
28   FEDERATION FOR SENIOR AND SUPPORTIVE HOUSING, INC.,
29
30                     Defendants-Appellees,
31
32   IAAC, INC., INDEPENDENT INSURANCE AGENTS & BROKERS OF NEW
33   YORK, INC.
34
35                     Third-Party Defendants-Appellees.
36
37
38
39                JOYCE F. NOYES (Robert P. Conlon, James W.
40                     Kienzle, on the brief), Walker Wilcox
41                     Matousek LLP, Chicago, IL, for Plaintiff-
42                     Counter-Defendant-Appellant-Cross-
43                     Appellee Westport Insurance Corporation.
44
45

                                  2
 1   KEVIN L. SMITH (Derek I.A. Silverman, on the
 2        brief), Stroock & Stroock & Lavan LLP,
 3        New York, NY, for Defendants-Counter-
 4        Claimants-Third Party Plaintiffs-
 5        Appellees-Cross-Appellants The Hamilton
 6        Wharton Group, Inc., Walter B. Taylor,
 7        individually.
 8
 9   Joseph E. Zdarsky, Sr. (David E. Gutowski, on
10        the brief), Zdarsky Sawicki & Agostinelli
11        LLP, Buffalo, NY, for Defendants-
12        Appellees Inter-Community Memorial
13        Hospital of Newfane, Inc. Eastern Niagara
14        Hospital, Inc. and Intergrated Care
15        Systems, LLC.
16
17   Steven J. Ahmuty, Jr., Timothy R. Capowski,
18        Gerard S. Rath, Shaub, Ahmuty, Citrin &
19        Spratt LLP, Lake Success, NY, for
20        Defendants-Appellees A & T HealthCare,
21        LLC; Bezalel Nursing Home Company, Inc.;
22        Creative Lifestyles, Inc.; E.R.N.H.
23        Corporation, Inc. d/b/a East Rockaway
24        Nursing Home; Elmhurst Care Center, Inc.;
25        George Katz d/b/a The New Brighton Manor
26        of Long Beach Home for Adults; Suzie
27        Klein d/b/a The New Brighton Manor of
28        Long Beach Home for Adults; Highland Care
29        Center, Inc.; Hudson Valley Home Care,
30        Inc.; New South Shore Manor; Nyack Manor
31        Nursing Home; Royal Health Care Services,
32        Inc.; The Dennelisse Corporation; The
33        Estate of Paul C. Maggio d/b/a Patchogue
34        Nursing Center; Unique People Services,
35        Inc.; United Presbyterian and Reformed
36        Adult Ministries, Inc. d/b/a Flushing
37        House; and New York County Health
38        Services Review Organization.
39
40   Richard Scott Atwater, Gross, Shuman, Brizdle
41        & Gilfillan, P.C., Buffalo, NY, for
42        Defendants-Appellees Alternative
43        Staffing, Inc.; B & H HealthCare
44        Services, Inc. d/b/a Nursing Personnel;
45        Barksdale Management, Corp.; Briarwood

                    3
 1                     Manor, Inc.; Bronxwood Home for the Aged,
 2                     Inc.; Caring Professionals, Inc.; Cedar
 3                     Manor, Inc.; COHME, Inc.; Crown Nursing
 4                     Home Associates, Inc.; Dentserv Dental
 5                     Services, P.C.; Desmond McManus d/b/a
 6                     Bayshore Home for Adults; Telford Home
 7                     Assistance, Inc., d/b/a Extended Care
 8                     Health Services, Extended Nursing
 9                     Personnel CHHA, Inc.; GEM Health Care
10                     Employment Agency, Inc.; Holliswood Care
11                     Center, Inc.; Interim Housing, Inc.;
12                     Meadowbrook Care Center, Inc.; Nassau-
13                     Suffolk Home Care & Aides, Inc.;
14                     Recreational Services, Inc.; Union Plaza
15                     Nursing Home, Inc.; Visiting Nurse
16                     Regional Health Care System, Inc.; and
17                     West Side Federation for Senior and
18                     Supportive Housing, Inc.
19
20                Robert J. Grande, Keidel, Weldon & Cunningham,
21                     LLP, White Plains, NY, for Third-Party
22                     Defendants-Appellees IAAC, Inc. and
23                     Independent Insurance Agents & Brokers of
24                     New York, Inc.
25
26                Robert Leonard Schonfeld, Moritt Hock &
27                     Hamroff LLP, Garden City, NY, for Praxis
28                     Housing Initiatives, Inc. d/b/a Barbour
29                     Hotel.
30
31        Appeal from the United States District Court for the
32   Southern District of New York (Berman, J.).
33
34       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED

35   AND DECREED that the judgment of the United States District

36   Court for the Southern District of New York is AFFIRMED.

37       Appellant Westport Insurance Corporation (“Westport”)

38   appeals from the February 23, 2011 Decision and Order of the

39   United States District Court for the Southern District of

                                  4
1    New York (Berman, J.), granting summary judgment to the

2    appellees and dismissing Westport’s declaratory judgment

3    action (the “DJ Order”).     Westport sought a declaratory

4    judgment that a professional liability insurance policy (the

5    "Policy") issued by Westport to Appellee Hamilton Wharton

6    Group, Inc. ("Hamilton Wharton") does not impose upon

7    Westport either a duty to defend or a duty to indemnify

8    Hamilton Wharton in four lawsuits filed in New York State

9    Supreme Court (the "State Actions") against Hamilton Wharton

10   and its owner, Walter B. Taylor ("Taylor," together with

11   Hamilton Wharton, the "Defendants").     In the DJ Order, the

12   district court found that (i) Westport had a duty to defend

13   the Defendants and (ii) the complaint should be dismissed as

14   "premature" with respect to the Defendants’ duty to

15   indemnify because "issues of fact on which the insurance

16   coverage depends" have yet to be adjudicated in the State

17   Actions.   On March 31, 2011, the district court awarded the

18   Defendants' counsel attorneys' fees in the amount of

19   $159,477.50 and costs of $26,317.91 (the “Attorneys’ Fees

20   Award”).   Both Westport and the Defendants also appeal from

21   the Attorneys’ Fees Award.     We assume the parties’

22   familiarity with the facts, procedural history, and issues

23   presented for review.

                                     5
1        We review de novo the district court’s grant of summary

2    judgment, “construing the evidence in the light most

3    favorable to the non-moving party and drawing all reasonable

4    inferences in its favor.”   Costello v. City of Burlington,

5    632 F.3d 41, 45 (2d Cir. 2011); see Fed. R. Civ. P. 56(a).

6        The district court did not err in concluding that the

7    State Actions trigger Westport's duty to defend.    Under New

8    York law—which the parties agree applies in this case—an

9    insurer's duty to defend is broader than its duty to

10   indemnify and has been described by the New York Court of

11   Appeals as "exceedingly broad."    Colon v. Aetna Life & Cas.

12   Ins. Co., 66 N.Y.2d 6, 8 (1985).   Indeed, “[s]o long as the

13   claims [asserted against the insured] may rationally be said

14   to fall within policy coverage, whatever may later prove to

15   be the limits of the insurer's responsibility to pay, there

16   is no doubt that it is obligated to defend.”    Seaboard Sur.

17   Co. v. Gillette Co., 64 N.Y.2d 304, 310-11 (1984)

18   (alterations in original) (internal quotation marks

19   omitted).

20       Here, the claims asserted against Westport may

21   rationally be said to fall within the Policy’s coverage.

22   The “professional services” contemplated by the Policy

23   encompass at least some of the activities alleged in the

                                   6
1    State Actions, which included, inter alia, allegations that

2    the Defendants were negligent in handling their funds by:

3    continuing to sign up new participants to join the trust;

4    failing to hire an accountant; offering unwarranted

5    discounts to trust members; failing to implement safety

6    audits; and failing to conduct payroll audits.

7        Westport contends that the Policy’s Insolvency

8    Exclusion bars coverage for the underlying complaints and

9    that the district court erred because it failed to analyze

10   this exclusion.   The district court did not address the

11   applicability of the Insolvency Exclusion for good reason.

12   To the extent the issue was raised below at all, Westport

13   offered only conclusory assertions that the Insolvency

14   Exclusion barred coverage even though Westport bore the

15   “heavy burden” of establishing the applicability of the

16   exclusion.   Commercial Union Assurance Co. v. Oak Park

17   Marina, Inc., 198 F.3d 55, 61 (2d Cir. 1999).    Westport’s

18   conclusory assertions, rather than argument, were

19   insufficient to preserve this issue for appellate review.

20   See Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d

21   151, 154 (2d Cir. 1999).   “‘It is a well-established general

22   rule that an appellate court will not consider an issue

23   raised for the first time on appeal.’”   Allianz Ins. Co. v.

                                   7
1    Lerner, 416 F.3d 109, 114 (2d Cir. 2005) (quoting Greene v.

2    United States, 13 F.3d 577, 586 (2d Cir. 1994)).    While we

3    have the discretion to relax this rule to consider a purely

4    legal issue or to avoid manifest injustice, we see no reason

5    to exercise such discretion under the circumstances of this

6    case.   Id.   Moreover, we are not persuaded that all of the

7    claims against Hamilton Wharton and Taylor in the underlying

8    complaints would fall within the scope of the Insolvency

9    Exclusion.    Notably, the Niagara complaint lacks any

10   allegations referring to the trust’s insolvency or financial

11   inability to pay.

12       Next, Westport contends that the district court erred

13   in dismissing as premature Westport's action as to its duty

14   to indemnify.    We review a district court's decision to

15   refuse to exercise jurisdiction over a declaratory judgment

16   action “deferentially, for abuse of discretion.”    Dow Jones

17   & Co. v. Harrods Ltd., 346 F.3d 357, 359 (2d Cir. 2003).

18   Where, as here, "another suit is pending in a state court

19   presenting the same issues, not governed by federal law,

20   between the same parties," it is entirely appropriate for a

21   district court to dismiss a declaratory judgment action.

22   Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995)

23   (internal quotation marks omitted).    As the district court

                                    8
1    noted, the declaratory judgment action and the State Actions

2    have numerous unresolved issues in common, including whether

3    the Defendants were negligent or breached fiduciary or

4    contractual obligations.     As a result, the district court

5    did not abuse its discretion in dismissing as premature the

6    indemnification portion of Westport’s declaratory judgment

7    action.

8        We also reject Westport’s contention that it was

9    prejudiced because the district court denied its request for

10   discovery in response to the Defendants' motion for summary

11   judgment.   See Fed. R. Civ. P. 56(d); see also Gualandi v.

12   Adams, 385 F.3d 236, 244-45 (2d Cir. 2004).     In assessing

13   whether Westport had a duty to defend and indemnify, the

14   district court was required to "compare the allegations of

15   the complaint to the terms of the policy."     A. Meyers & Sons

16   Corp. v. Zurich Am. Ins. Grp., 74 N.Y.2d 298, 302 (1989).

17   It was not required to consider the additional materials

18   submitted by the Defendants, and there is no evidence that

19   it actually did so.     Accordingly, the district court did not

20   abuse its discretion in precluding Westport from conducting

21   additional discovery.

22       Next, we address the parties’ objections to the

23   Attorneys’ Fees Award.     The scope of our review in this

                                     9
1    regard is "circumscribed."     Chambless v. Masters, Mates &

2    Pilots Pension Plan, 885 F.2d 1053, 1057 (2d Cir. 1989).

3    The district court has "the best vantage point from which to

4    assess the skill of the attorneys and the amount of time

5    reasonably needed to litigate a case."     Id. at 1057-58.

6    Moreover, "attorney's fees are to be awarded with an eye to

7    moderation, seeking to avoid either the reality or the

8    appearance of awarding windfall fees."     N.Y. State Ass'n for

9    Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1139 (2d

10   Cir. 1983)(citation and internal quotation marks omitted).

11   Thus, the district court's calculation of attorneys' fees

12   will not be disturbed absent a clear abuse of discretion.

13   Chambless, 885 F.2d at 1058.

14       The district court did not abuse its discretion by

15   reducing the Defendants’ counsel’s hourly rates.     The

16   district court relied on several valid considerations in

17   making its determination, including: the limited time and

18   labor required, the relatively straightforward nature of the

19   case, the absence of severe time demands, and the rates

20   awarded in similar cases.    See, e.g., U.S. Football League

21   v. Nat’l Football League, 887 F.2d 408, 415 (2d Cir. 1989)

22   (citing Johnson v. Georgia Highway Express, Inc., 488 F.2d

23   714, 717-19 (5th Cir. 1974)).

                                     10
1        The Defendants counter that the district court relied

2    on "historic rates that no longer apply, as well as the

3    rates of opposing counsel."    We disagree.   The Defendants

4    have not demonstrated that any of the rates relied on by the

5    district court no longer prevail in the Southern District of

6    New York.   It was also not error for the district court to

7    consider the rates charged to Westport's counsel.     This was

8    one of several factors relied on by the district court, and

9    it was certainly not an unreasonable consideration given

10   that the Defendants’ counsel requested fees were

11   approximately four times greater than the fees Westport paid

12   to its own counsel for the same work.

13       We also decline Westport’s invitation to further reduce

14   the Attorneys’ Fees Award.    Westport's reliance on the

15   hourly rates of other appellees, as well as the hourly rates

16   awarded in GuideOne Specialty Mutual Insurance Co. v.

17   Congregation Adas Yereim, No. 1:04-cv-5300 (ENV)(JO), 2009

18   WL 3241757, at *3 (E.D.N.Y. Sept. 30, 2009), is misplaced.

19   Counsel for the other appellees are located in Buffalo or in

20   Lake Success, New York and thus, do not represent the

21   "prevailing community a district court should consider to

22   determine” the reasonable hourly rate.    Reiter v. MTA N.Y.

23   City Transit Auth., 457 F.3d 224, 232 (2d Cir. 2006).

                                    11
1    Similarly, GuideOne involved an award to attorneys in the

2    Eastern District of New York, and the GuideOne court noted

3    that Manhattan attorneys' rates are higher than those in

4    Brooklyn.    Id. at *3.

5        In addition, Westport's contention that the proposed

6    time entries were unreasonable is unavailing.        The district

7    court reduced the number of hours credited to the

8    Defendants’ counsel by 35% from 772.8 hours to approximately

9    502.3 hours.    Westport admitted that its own counsel devoted

10   just over 400 hours to this litigation.        The district court

11   did not abuse its discretion in reducing the number of hours

12   by 35%.

13       Finally, the district court did not abuse its

14   discretion in awarding costs.        The costs sought by the

15   Defendants’ counsel reflected, among other things, in-house

16   duplication costs, telephone charges, meals, overtime, local

17   transportation, postage, electronic legal research, and

18   messenger service.    All of these categories of costs are

19   "the sort of expenses that may ordinarily be recovered" as

20   part of a fee award, and are not treated as "overhead

21   expenses."     LeBlanc-Sternberg v. Fletcher, 143 F.3d 748, 763

22   (2d Cir. 1998); see also Kuzma v. Internal Revenue Serv.,

23   821 F.2d 930, 933-34 (2d Cir. 1987); Aston v. Sec. of Health

                                     12
1    and Human Servs., 808 F.2d 9, 12 (2d Cir. 1986).

2    Accordingly, it was not error for the district court to

3    compensate the Defendants’ counsel for a portion of these

4    costs.

5        We have considered all of the parties’ remaining

6    arguments and, after a thorough review of the record, find

7    them to be without merit.

8        For the foregoing reasons, the judgment of the district

9    court is hereby AFFIRMED.   As a result, the Third-Party

10   Defendants’ motion to strike the Defendants' request for

11   leave to re-file the Third-Party Complaint is denied as

12   MOOT.

13                               FOR THE COURT:
14                               Catherine O’Hagan Wolfe, Clerk
15
16

                                   13