Minnesota Lawyers Mutual Insur v. Terrence Batzli
Filing
UNPUBLISHED AUTHORED OPINION filed. Originating case number: 3:09-cv-00432-HEH. Copies to all parties and the district court/agency. [998647243].. [10-1684, 10-1839, 10-1910]
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Date Filed: 08/04/2011
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-1684
MINNESOTA LAWYERS MUTUAL INSURANCE COMPANY,
Plaintiff - Appellant,
v.
TERRENCE RAYMOND BATZLI; BATZLI WOOD & STILES, PC,
Defendants - Appellees.
No. 10-1839
MINNESOTA LAWYERS MUTUAL INSURANCE COMPANY,
Plaintiff - Appellant,
v.
TERRENCE RAYMOND BATZLI; BATZLI WOOD & STILES, PC,
Defendants - Appellees.
No. 10-1910
MINNESOTA LAWYERS MUTUAL INSURANCE COMPANY,
Plaintiff - Appellee,
v.
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TERRENCE RAYMOND BATZLI; BATZLI WOOD & STILES, PC,
Defendants - Appellants.
Appeals from the United States District Court for the Eastern
District of Virginia, at Richmond.
Henry E. Hudson, District
Judge. (3:09-cv-00432-HEH)
Argued:
May 12, 2011
Decided:
August 4, 2011
Before KING, SHEDD, and WYNN, Circuit Judges.
Affirmed by unpublished opinion. Judge Wynn wrote the majority
opinion, in which Judge King joined.
Judge Shedd wrote a
dissenting opinion.
ARGUED: Danny Mark Howell, SANDS ANDERSON, PC, McLean, Virginia,
for Minnesota Lawyers Mutual Insurance Company.
William F. D.
Gallalee, WILLIAMS MULLEN, Richmond, Virginia, for Terrence
Raymond Batzli and Batzli Wood & Stiles, PC. ON BRIEF: Michael
T. Marr, Jeffrey H. Geiger, Mikhael D. Charnoff, Douglas A.
Winegardner, SANDS ANDERSON, PC, McLean, Virginia, for Minnesota
Lawyers Mutual Insurance Company.
Harold E. Johnson, WILLIAMS
MULLEN, Richmond, Virginia, for Terrence Raymond Batzli and
Batzli Wood & Stiles, PC.
Unpublished opinions are not binding precedent in this circuit.
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WYNN, Circuit Judge:
When
reviewing
the
denial
of
a
post-verdict
motion
for
judgment as a matter of law, we view the evidence in the light
most favorable to the party that prevailed at trial and will
affirm the denial of the motion “unless we conclude that the
jury lacked ‘a legally sufficient evidentiary basis’” to render
the challenged verdict.
Sloas v. CSX Transp. Inc., 616 F.3d
380, 392 (4th Cir. 2010) (quoting King v. McMillan, 594 F.3d
301, 312 (4th Cir. 2010)).
denied
a
motion
for
In this case, the district court
judgment
as
a
matter
of
law,
made
by
Minnesota Lawyers Mutual Insurance Company (“Minnesota Mutual”),
that
challenged
breached
its
the
jury’s
professional
verdict
liability
that
Minnesota
insurance
Mutual
contract
by
refusing to defend Terrence Batzli, a lawyer, and Batzli Wood &
Stiles,
P.C.,
his
law
firm
(collectively
“the
insureds”),
against a malpractice suit brought by one of Batzli’s former
clients.
Because there was sufficient evidence in the record
for a reasonable jury to conclude that Minnesota Mutual breached
the contract, we affirm.
I.
A.
In
November
2004,
Richard
J.
Chasen
(“Richard
Chasen”)
hired Terrence Batzli (“Batzli”) of the law firm Batzli Wood &
3
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Stiles, P.C., (“Batzli Wood”) to represent him in his divorce
from
Karen
Chasen.
As
part
of
that
representation,
Batzli
engaged in property settlement negotiations with Karen Chasen’s
attorney, Murray Janus (“Janus”).
Richard Chasen had various degrees of ownership in a number
of
businesses,
including
Chasen
Properties,
LLC,
(“Chasen
Properties”), a family business in which Richard Chasen, Karen
Chasen, and their three children each owned a 20% interest.
In
their answers to interrogatories, both Richard and Karen Chasen
indicated
Properties
a
belief
was
that
marital
Karen
Chasen’s
property.
interest
Richard
in
Chasen
Chasen
was
uncomfortable with Karen Chasen’s continued ownership of 20% of
Chasen Properties, particularly because that entity owned the
building housing N. Chasen & Son, Inc., Richard Chasen’s largest
business.
Accordingly, Richard Chasen advised Batzli that he
wanted to obtain Karen Chasen’s interest in Chasen Properties
during the settlement negotiations.
On October 27, 2005, Batzli sent Janus a letter with a
settlement proposal.
of
certain
assets
After proposing Karen Chasen’s retention
such
as
the
marital
home
and
her
current
automobile, the document proposed the transfer to Richard Chasen
of Karen Chasen’s interests in “JACKAN, Chasen Properties, the
Chasen Family Limited Partnership, and her interest in all other
4
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Date Filed: 08/04/2011
J.A. 487. 1
marital assets.”
Page: 5 of 41
The letter also proposed that
Richard Chasen would pay Karen Chasen a $345,000 lump sum in
addition to a series of installment payments totaling $657,000.
In response, Janus sent Batzli a letter on December 29,
2005,
stating
points
counterproposals.
of
transferring
of
agreement
as
well
as
certain
Importantly, the letter proposed that instead
her
interests
in
the
Chasen
Family
Limited
Partnership and JACKAN to Richard Chasen, Karen Chasen would
transfer
those
percentages.
interests
to
the
couple’s
children
in
equal
Karen Chasen also rejected the proposed payment
structure and suggested that Richard Chasen instead pay her a
lump sum of $500,000.
of
Karen
Chasen’s
The letter did not mention the transfer
interest
in
Chasen
Properties,
and
in
its
conclusion Janus wrote, “I believe this would resolve all issues
between the parties.”
J.A. 491.
Batzli responded via letter on January 4, 2006, suggesting
that Richard Chasen would buy Karen Chasen’s interests in the
Chasen
mention
Family
of
Limited
Chasen
Partnership
Properties.
and
JACKAN,
Ultimately,
but
making
Richard
no
Chasen
decided not to buy those interests and, on January 9, 2006,
Batzli sent a letter to Janus stating, “[Richard] will agree,
1
Citations herein to “J.A. __” refer to the contents of the
Joint Appendix filed by the parties in this appeal.
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with regard to Karen’s interest in the Chasen Family Limited
Partnership and JACKAN, that Karen’s interest will simply be
transferred to the children.”
J.A. 109.
Batzli did not mention
Chasen Properties in this correspondence either.
Notwithstanding, Batzli believed he had negotiated a deal
under which Karen Chasen would transfer her interest in Chasen
Properties
to
Richard
Chasen.
However,
Batzli
drafted
an
Agreement and Stipulation (“the Agreement”) which called for the
transfer of Karen Chasen’s interests in JACKAN and the Chasen
Family Limited Partnership to the children.
Despite Batzli’s
intention to draft the Agreement so that Karen Chasen’s interest
in Chasen Properties would be transferred to Richard Chasen, he
failed
to
Richard
do
so.
Chasen
As
would
drafted,
retain
the
Agreement
“[h]is
indicated
interest
in
that
Chasen
Properties, LLC” instead of “their interest” in the business.
J.A. 119.
Batzli and Richard Chasen both reviewed the document,
and neither noticed the omission before Richard Chasen and Karen
Chasen signed the Agreement on January 11, 2006. 2
2
Richard Chasen would later testify that when he signed the
document, he believed that Karen Chasen’s interest in Chasen
Properties was supposed to transfer to him under the Agreement.
He based this belief on the “initial instructions” given to
Batzli upon his retention as counsel “as well as the previous
negotiations that had gone back and forth between Mr. Batzli and
Mr. Janus.” J.A. 358.
6
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Thereafter,
Date Filed: 08/04/2011
Batzli
sent
Janus
Page: 7 of 41
a
follow-up
document
for
Karen Chasen to sign to affect the transfer of her 20% ownership
in Chasen Properties to Richard Chasen.
Agreement
did
not
address
Karen
Recognizing that the
Chasen’s
interest
in
Chasen
Properties, Janus responded that his client had not agreed to
such a transfer.
Nonetheless, Janus stated that Karen Chasen
would be willing to transfer her interest in Chasen Properties
to
the
couple’s
Agreement,
children
with
respect
as
to
she
her
had
interests
Chasen Family Limited Partnership.
Janus,
who
reiterated
that
done,
pursuant
in
to
the
JACKAN
and
the
Thereafter, Batzli called
Karen
Chasen
never
intended
to
transfer her interest in Chasen Properties to Richard Chasen.
Janus further asserted that Karen Chasen’s interest was separate
property, as it had been gifted to her individually by Richard
Chasen’s parents.
Having
realized
his
drafting
omission,
various options with Richard Chasen.
Batzli
discussed
Richard Chasen indicated
that he was unwilling to accept Karen Chasen’s offer to transfer
her interest in Chasen Properties to the children.
Batzli and
Richard Chasen also discussed the option of moving to set aside
the Agreement on the theory that there was not a meeting of the
minds.
Richard Chasen declined to pursue that option because he
considered
the
Agreement
favorable
7
to
him
even
without
the
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transfer of Karen Chasen’s 20% interest in Chasen Properties. 3
A
third option was to move for correction of the Agreement on the
grounds that Batzli had made a scrivener’s error when he drafted
the Agreement.
Richard Chasen chose the third option.
On August 24, 2006, at his client’s direction, Batzli filed
a motion 4 in the Circuit Court of the City of Richmond, Virginia,
seeking
correction
of
a
scrivener’s
error
“[p]ursuant
to
3
Under the Agreement, Richard Chasen received all of his
interest in N. Chasen & Son, Inc., the value of which had
appreciated by some $2 million during the marriage.
Janus had
expressed to Batzli Karen Chasen’s position that the business
was therefore “hybrid property” and she was entitled to a
portion of the appreciation.
See Va. Code Ann. § 20107.3(A)(3)(a) (2008) (“In the case of the increase in value of
separate property during the marriage, such increase in value
shall be marital property . . . to the extent that marital
property
or
the
personal
efforts
of
either
party
have
contributed to such increases, provided that any such personal
efforts
must
be
significant
and
result
in
substantial
appreciation of the separate property.”).
Richard Chasen told
Batzli he did not want to risk the possibility that a divorce
court, identifying this increase as marital property, might give
a portion to Karen Chasen. By keeping the Agreement in effect,
Richard Chasen hoped to avoid this possibility.
See id. § 20107.3(I) (“Nothing in this section shall be construed to prevent
the affirmation, ratification and incorporation in a decree of
an agreement between the parties pursuant to §§ 20-109 and 20109.1.”).
4
Batzli initially did not charge Richard Chasen for the
work done in preparing, drafting, or arguing the motion; Batzli
claimed that he gave Richard Chasen “courtesy discounts” for the
purpose of client relations.
J.A. 289.
Later, Batzli sent a
bill for a month’s worth of work, asking Chasen if he would pay
half the amount on the theory that the error was a “joint
mistake,” but Batzli ultimately accepted no money for that work
either. J.A. 292.
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Virginia Code § 8.01-428(B).” 5
Page: 9 of 41
J.A. 462.
The motion asked the
court to change the Agreement to say that Richard Chasen would
receive “their interest” in Chasen Properties instead of only
“his interest.”
Essentially, the motion asserted that Karen
Chasen’s silence with respect to the portion of the October 27,
2005 proposal that mentioned Chasen Properties constituted her
assent
to
the
transfer
Richard Chasen.
evidence
that
of
her
in
the
business
to
However, the court found that there was no
Karen
Chasen
ever
interest in Chasen Properties.
Karen
interest
Chasen’s
silence
was
agreed
to
transfer
her
20%
Moreover, the court held that
insufficient
agreement to the proposed transfer.
to
indicate
her
See Va. Farm Bureau Mut.
Ins. Co. v. Hodges, 238 Va. 692, 695, 385 S.E.2d 612, 613 (1989)
(“A
binding
contract
is
not
formed
until
communicates an acceptance to the offeror.”).
court
denied
the
motion
to
correct
the
the
offeree
Accordingly, the
alleged
scrivener’s
error.
Thereafter, the Court of Appeals of Virginia affirmed the
Circuit
Court’s
denial
of
motion,
stating
“[t]here
Richard
is
no
5
Chasen’s
evidence
scrivener’s
in
this
error
record
to
This statute permits a court to correct “[c]lerical
mistakes in all judgments or other parts of the record and
errors therein arising from oversight or from an inadvertent
omission . . . .” Va. Code Ann. § 8.01-428(B) (2008).
9
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suggest
Document: 42
a
meeting
Date Filed: 08/04/2011
of
the
minds
Page: 10 of 41
(i.e.,
a
contract—offer
and
acceptance) over wife’s relinquishment of her interest in Chasen
Properties.
As the trial court properly noted, wife’s silence
on this issue cannot be found to be an acceptance of husband’s
offer.”
Chasen v. Chasen, No. 0004-07-2, 2008 WL 2092260 at *4
(Va. Ct. App. May 20, 2008). 6
B.
Months
after
the
decision
by
the
Court
of
Appeals
of
Virginia, Batzli Wood renewed its Professional Liability Policy,
which was issued by Minnesota Mutual. 7
The renewed policy ran
from October 1, 2008 to October 1, 2009.
The policy provided
coverage for any “act, error, or omission of the INSURED or a
person for whose acts the INSURED is legally responsible” 8 that
occurred “(1) during the POLICY PERIOD; or (2) prior to the
POLICY PERIOD and on or after the PRIOR ACTS RETROACTIVE DATE,
if the INSURED had no knowledge of facts which could reasonably
6
There were two arguments on appeal.
One concerned the
denial of the scrivener’s error motion. The other asserted that
the trial court erred in awarding Karen Chasen $10,000 per month
in spousal support; the latter issue has no bearing on this
appeal. Chasen, 2008 WL 2092260 at *1.
7
Minnesota Mutual had insured
against malpractice since 2005.
8
Batzli
Wood
and
Batzli
While Batzli Wood was the “named insured,” the policy made
clear that Batzli was himself, as an employee acting on behalf
of Batzli Wood, an “insured” as well.
10
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support a CLAIM at the effective date of this policy.” 9
563.
Under
the
policy,
the
insured
was
required
to
J.A.
“give
immediate written notice” to Minnesota Mutual “in the event of a
CLAIM.”
J.A. 568.
The policy stated that a “claim” is made
whenever “an act, error or omission by any INSURED occurs which
has not resulted in a demand for DAMAGES but which an INSURED
knows or reasonably should know, would support such a demand.”
J.A. 563.
Coverage under the policy was explicitly conditioned
on compliance with the notice requirement.
On January 8, 2009, Richard Chasen filed a malpractice suit
against Batzli and Batzli Wood in the Circuit Court of Henrico
County, Virginia, based on Batzli’s omission in drafting the
Agreement.
After receiving a “courtesy copy” of the complaint
on or about January 9, 2009, Batzli gave notice of the claim to
Minnesota
Mutual
via
letter
on
January
14,
2009.
Minnesota
Mutual responded by denying coverage because Batzli failed to
comply
with
the
policy’s
notice
requirement. 10
Batzli
was
9
Here,
all
relevant
conduct
related
to
Batzli’s
representation of Richard Chasen took place prior October 1,
2008 but after the prior acts retroactive date which, in the
case of Batzli, was the date on which he “first entered the
private practice of law.” J.A. 559.
10
Because both Batzli Wood and Batzli fell under the
policy’s definition of an “insured,” the notice requirement
could have been triggered by knowledge possessed by either
entity.
However, there is no evidence that Batzli Wood had
knowledge of any facts, other than those known to Batzli, which
(Continued)
11
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formally
served
Date Filed: 08/04/2011
with
the
Chasen
Page: 12 of 41
complaint
on
June
29,
2009.
Batzli again notified Minnesota Mutual of the claim, but the
insurance company once again denied coverage.
On
federal
July
9,
court
declaratory
in
2009,
the
judgment
Minnesota
Eastern
that
District
it
Chasen malpractice action.
Mutual
was
not
filed
of
an
action
Virginia
required
to
in
seeking
defend
a
the
Minnesota Mutual asserted that, at
the latest, when Batzli filed the scrivener’s error motion he
was aware of facts that he knew, or should have known, would
support a demand for damages.
an
answer
sought
a
obligated
and
counterclaim.
declaratory
to
On August 5, 2009, Batzli filed
defend
Under
judgment
against
the
the
that
Chasen
counterclaim
Minnesota
Batzli
Mutual
malpractice
suit
was
and
indemnify the insured in the event of an unfavorable judgment in
the malpractice case.
Moreover, Batzli asserted a legal claim
for breach of contract based on Minnesota Mutual’s denial of
coverage.
The parties filed cross-motions for summary judgment.
The
district court denied the cross-motions, reasoning that there
was “a genuine factual dispute between the parties as to whether
it
was
reasonable
for
Batzli
to
anticipate
a
claim
by
Mr.
would be relevant to a demand for damages based on Batzli’s
representation of Richard Chasen.
12
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Chasen.”
Date Filed: 08/04/2011
J.A. 170.
Page: 13 of 41
The district court granted Batzli’s request
for a jury trial on the breach of contract counterclaim and
stated that the declaratory judgment claims would be decided
after that trial.
Trial
whether
began
Batzli’s
on
March
notice
1,
to
2010,
and
Minnesota
a
central
Mutual
comply with the policy’s notice provision.
was
issue
too
late
was
to
Batzli argued that
he complied with the notice provision by notifying Minnesota
Mutual when
receipt
of
he
first
formal
received
service,
the
so
complaint
Minnesota
that
Batzli
had
sufficient
again
Mutual’s
coverage constituted a breach of contract.
argued
and
after
denial
of
Minnesota Mutual
knowledge
to
trigger
the
contract’s notification requirement well before receipt of the
complaint and Batzli’s failure to notify Minnesota Mutual under
those circumstances constituted a failure to satisfy a condition
placed on coverage.
During the trial, Minnesota Mutual made two
motions for judgment as a matter of law (one after Batzli rested
his case and another at the close of all evidence); the district
court denied both.
Ultimately, the jury found for Batzli and
awarded damages of $8,400.
Thereafter,
Minnesota
Mutual
filed
a
renewed
motion
for
judgment as a matter of law under Rule 50(b) of the Federal
Rules of Civil Procedure.
First, Minnesota Mutual contended
that Batzli failed to present sufficient evidence to establish
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that the attorney’s fees sought were reasonable and necessary,
so Batzli could not state a prima facie case for breach of
contract
based
on
actual
damages.
Second,
Minnesota
Mutual
argued that Batzli’s failure to plead nominal damages barred any
attempt to establish a prima facie case by reliance thereon.
Finally, Minnesota Mutual argued that Batzli failed to prove
that he was entitled to coverage because there was insufficient
evidence
that
the
policy’s
notice
requirement
had
been
Mutual’s
first
satisfied.
The
district
court
agreed
with
Minnesota
argument, reasoning that “Batzli’s failure to provide evidence
of the reasonableness of the fees, such as the nature of the
services
performed,
the
length
of
such
services,
and
the
applicable rates for such representation, left the jury with
insufficient evidence to justify the damages awarded.”
Lawyers
Mut.
Ins.
Co.
v.
Batzli,
No.
2024487 at *4 (E.D. Va. May 19, 2010).
set
aside
Minnesota
the
award
Mutual
of
failed
attorney’s
to
3:09CV432-HEH,
2010
WL
Accordingly, the court
fees.
convince
Minn.
the
However,
court
that
because
“nominal
damages must be specifically plead or that a court is foreclosed
from inferring such damages under the facts at hand,” the court
rejected Minnesota Mutual’s second argument.
court
awarded
nominal
damages
and
14
deemed
Id. at *5.
this
sufficient
The
to
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satisfy
the
Date Filed: 08/04/2011
damage
element
of
Page: 15 of 41
Batzli’s
prima
facie
case
for
breach of contract.
Next,
the
district
court
considered
Minnesota
Mutual’s
argument that Batzli’s notice of a claim by Richard Chasen was
untimely as a matter of law.
It was uncontested that Karen
Chasen would not have agreed to transfer her interest in Chasen
Properties to Richard Chasen.
combined
with
Richard
The court opined that this fact,
Chasen’s
apparent
overall
satisfaction
with the Agreement, was enough to support the jury’s conclusion
that a reasonable person in Batzli’s position would not have
thought that his drafting omission would support a demand for
damages.
Additionally,
the
court
noted
that
Richard
Chasen
never indicated an intention to sue, promptly paid attorney’s
fees,
and
maintained
a
positive
attorney-client
with Batzli during the divorce proceedings.
relationship
Ultimately, the
court determined that there was sufficient evidence to permit a
reasonable
Minnesota
jury
to
Mutual’s
find
in
Batzli’s
Rule
50(b)
favor,
motion.
so
it
denied
Minnesota
Mutual
appealed. 11
11
Minnesota Mutual filed its notice of appeal of the denial
of its 50(b) motion on June 18, 2010.
On July 12, 2010, the
district court entered a Final Order declaring that Minnesota
Mutual has “an obligation to provide a defense and to indemnify
against all claims asserted” in the Chasen malpractice suit.
J.A. 767.
Minnesota Mutual filed a notice of appeal of the
(Continued)
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Page: 16 of 41
On appeal, Minnesota Mutual argues that the district court
considered improper evidence when concluding that a jury could
find in favor of Batzli on the notice issue.
Minnesota Mutual
also contends that Batzli failed to establish the element of
damages necessary for a prima facie case of breach of contract
and that the court erred when determining that nominal damages
satisfied that element.
Batzli filed a cross-appeal, arguing
that the district court erred in reducing the damage award from
$8,400 to a nominal award of $1 because there was sufficient
evidence to support the jury’s award of actual damages.
II.
We review the denial of a renewed motion for judgment as a
matter of law de novo.
Sloas, 616 F.3d at 392.
“On appeal, we
view the evidence in the light most favorable to the prevailing
party and will affirm the denial of a Rule 50(b) motion unless
we
conclude
that
the
jury
lacked
‘a
legally
evidentiary basis’ to find in that party’s favor.”
McMillan, 594 F.3d at 312).
sufficient
Id. (quoting
“[W]e are not permitted to retry
factual findings or credibility determinations reached by the
jury.
Rather, we are to assume that testimony in favor of the
Final Order on July 21, 2010.
Both of Minnesota
appeals were consolidated into the instant case.
16
Mutual’s
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Date Filed: 08/04/2011
Page: 17 of 41
non-moving party is credible, ‘unless totally incredible on its
face,’
and
ignore
the
substantive
supporting the moving party.”
weight
of
any
evidence
Cline v. Wal-Mart Stores, Inc.,
144 F.3d 294, 301 (4th Cir. 1998) (quoting Duke v. Uniroyal,
Inc., 928 F.2d 1413, 1419 (4th Cir. 1991)).
Ultimately, “[i]f
reasonable minds could differ about the verdict, we are obliged
to affirm.”
ABT Bldg. Prods. Corp. v. Nat’l Union Fire Ins. Co.
of Pittsburgh, 472 F.3d 99, 113 (4th Cir. 2006).
Mindful of this deferential standard of review, we must
determine
whether
there
trial
allow
reasonable
to
a
Mutual breached
denying coverage.
its
was
contract
sufficient
evidence
jury
to
conclude
with
Batzli
Wood
presented
that
and
at
Minnesota
Batzli
by
To establish a claim for breach of contract
under Virginia law, 12 a plaintiff must demonstrate: “(1) ‘a legal
obligation of a defendant to the plaintiff,’ (2) ‘a violation or
breach of that right or duty,’ and (3) ‘a consequential injury
or damage to the plaintiff.’”
Westminster Investing Corp. v.
12
Because this case commenced in the Eastern District of
Virginia, was based on diversity jurisdiction, and concerned a
dispute over the coverage provided by an insurance policy issued
in Virginia, we apply Virginia law.
See Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941) (holding that a
federal court sitting in diversity jurisdiction must apply the
choice-of-law principles of the State in which the federal court
is located); Buchanan v. Doe, 246 Va. 67, 70, 431 S.E.2d 289,
291 (1993) (“[T]he law of the place where an insurance contract
is written and delivered controls issues as to its coverage.”).
17
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Date Filed: 08/04/2011
Page: 18 of 41
Lamps Unlimited, Inc., 237 Va. 543, 546, 379 S.E.2d 316, 317
(1989) (quoting Caudill v. Wise Rambler, 210 Va. 11, 13, 168
S.E.2d 257, 259 (1969)); cf. Filak v. George, 267 Va. 612, 619,
594
S.E.2d
610,
614
(2004)
(“The
elements
of
a
breach
of
contract action are (1) a legally enforceable obligation of a
defendant
to
a
plaintiff;
(2)
the
defendant’s
breach
that
obligation;
and
(3)
injury
of
or
violation
damage
to
or
the
plaintiff caused by the breach of obligation.”).
Here, the “obligation” in question was Minnesota Mutual’s
duty to defend against the malpractice suit brought by Richard
Chasen.
However, because the notice requirement in the policy
operated as a condition to coverage, Minnesota Mutual argues
that it owed no legally enforceable duty to defend.
A. Proof of Minnesota Mutual’s Breach
To address Minnesota Mutual’s contention, we must determine
whether a reasonable jury could have concluded that the insured
satisfied the policy’s notice requirement.
Under the insurance
contract, Batzli was required to “give immediate written notice”
to Minnesota Mutual whenever “an act, error or omission by any
INSURED
occurr[ed]
which
ha[d]
not
resulted
in
a
demand
for
DAMAGES but which an INSURED [knew] or reasonably should [have
known], would support such a demand.”
have
consistently
held
that,
to
18
be
J.A. 563
entitled
Virginia courts
to
coverage,
an
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insured must “substantially comply” with such notice provisions.
See, e.g., Craig v. Dye, 259 Va. 533, 537, 526 S.E.2d 9, 12
(2000). 13
Of course, in this case, notice was eventually supplied to
Minnesota Mutual.
However, under the policy, the duty to notify
Minnesota Mutual arose whenever the insured did something that
he knew, or reasonably should have known, would support a demand
for
damages.
sufficient
Thus,
evidence
we
in
must
the
consider
record
whether
to
there
was
a
jury
support
determination that, prior to learning that he was a defendant in
the malpractice suit, Batzli neither knew, nor reasonably should
have known, that deficiencies in his representation of Richard
Chasen would support a claim for damages.
Minnesota
that
there
Mutual
was
attacks
sufficient
the
district
evidence
13
to
court’s
support
conclusion
the
jury’s
As stated in Atlas Ins. Co. v. Chapman, 888 F.Supp. 742
(E.D. Va. 1995),
[t]he rationale behind the rule requiring compliance with
the notice provision is compelling.
Absent the requirement of
prompt notice by the insured of all accidents and occurrences
which could implicate the policy, the insurer is at the mercy of
its insured’s willingness to reveal such potential claims.
As
the Virginia Supreme Court has made plain, notice provisions are
designed to afford the insurer the opportunity to make a timely
investigation of all circumstances surrounding the accident and
to prepare an adequate defense if necessary on behalf of the
insured.
Id. at 745 (citing North River Ins. Co. v. Gourdine, 205
Va. 57, 62, 135 S.E.2d 120, 123 (1964)).
19
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determination, arguing that the court erred as a matter of law
by
improperly
basing
its
bearing on the issue.
that
the
Richard
district
Chasen’s
subjective
Batzli’s
belief
belief
decision
on
evidence
that
had
no
Specifically, Minnesota Mutual asserts
court
erred
failure
to
that
by
threaten
Richard
that
he
basing
Chasen
enjoyed
its
suit
and/or
would
a
decision
not
on
1)
Batzli’s
sue
him;
good-attorney
2)
client
relationship with Richard Chasen; and 3) whether a claim brought
by Richard Chasen would be meritorious.
To
the
extent
that
Minnesota
Mutual
argues
that
the
district court erred by relying on Richard Chasen’s subjective
impressions of the circumstances, Minnesota Mutual misreads the
court’s opinion.
that
the
test
To begin, the district court was well aware
employed
is
an
objective
one,
and
quoted
the
following from Dan River, Inc. v. Commercial Union Ins. Co., 227
Va. 485, 317 S.E.2d 485 (1984):
Failure to give timely notice will not be excused when
the insured only subjectively concludes that coverage
under the policy will not be implicated. Such a policy
provision
requires
the
insurer
to
be
notified
whenever, from an objective standpoint, it should
reasonably appear to the insured that the policy may
be involved.
Id.
at
489,
317
S.E.2d
at
487.
Moreover,
Minnesota
Mutual
misinterprets the basis of the district court’s decision.
court
noted
would
not
that
have
the
agreed
evidence
to
established
transfer
20
her
that
Karen
interest
in
The
Chasen
Chasen
Appeal: 10-1684
Document: 42
Date Filed: 08/04/2011
Properties to Richard Chasen.
uncontested
fact,
satisfaction
with
coupled
the
The court stated that “[t]his
with
other
Page: 21 of 41
Chasen’s
favorable
apparent
terms
of
the
overall
property
settlement Agreement, provided a legally sufficient basis for
the jury to conclude that Batzli did not reasonably believe that
his drafting error could support a claim for damages.”
2010 WL 2024487 at *6.
Batzli,
In short, Minnesota Mutual is correct
that a court cannot rely on an insured’s subjective belief that
his client will not sue, but is incorrect in asserting that
subjective beliefs formed the foundation of the district court’s
judgment.
Minnesota
Mutual
also
contends
that
the
district
court
erred by considering the likelihood of Richard Chasen’s success
on the merits in the event that a claim were brought.
again, Minnesota
analysis.
Mutual
mischaracterizes
the
district
Once
court’s
The court did not opine that Batzli did not need to
notify Minnesota Mutual because any foreseeable potential claim
would
lack
reasonably
perhaps
result
merit;
instead,
foreseeable
confusing
from
the
it
potential
because
both
determination
damage to his client.
determined
claim.
that
conclusions
that
Batzli’s
was
no
distinction
The
there
is
could
error
potentially
caused
no
See Campbell v. Bettius, 244 Va. 347,
352, 421 S.E.2d 433, 436 (1992) (“In a legal malpractice action,
the
fact
of
negligence
alone
is
21
insufficient
to
support
a
Appeal: 10-1684
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recovery of damages.
Date Filed: 08/04/2011
Page: 22 of 41
The client must prove that the attorney’s
negligence proximately caused the damages claimed.”).
Like
the
district
court,
we
are
ultimate merits of a potential claim.
unconcerned
with
the
However, we also conclude
that a reasonable belief that an insured’s error caused no harm
to the insured’s client is relevant to whether an objectively
reasonable person in the insured’s position would expect his
error to give rise to a claim for damages.
See Commercial
Underwriters Ins. Co. v. Hunt & Calderone, P.C., 261 Va. 38, 540
S.E.2d 491 (2001).
In Hunt & Calderone, an accountant missed a
filing deadline for one of her clients and knew the error
could potentially result in a loss of a $125,000 tax
credit for the client, but she did not think that a
claim would result because she was told by an
administrator of the government tax credit program
that sufficient funds would likely be available after
all the timely applications had been processed.
Id. at 38, 540 S.E.2d at 492.
Further, when told of the error,
the client said he was satisfied with the assurances made by the
government
administrator.
Id.
However,
when
funds
proved
unavailable, the client sued the accountant, who then sought a
defense from her professional liability insurer.
denied
coverage
because
the
accountant
insurer when the initial error occurred.
had
not
The insurer
notified
the
The Supreme Court of
Virginia ruled that, on these facts, the accountant was entitled
22
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to a defense under the insurance contract.
Id. at 44, 540
S.E.2d at 494.
This case is analogous.
The evidence demonstrates that
shortly after realizing his drafting error, Batzli learned of
facts supporting a reasonable belief that no harm had been done
to his client by the error.
To begin, a reasonable jury could
conclude
Richard
that
no
damage
to
Chasen
payment of fees for Batzli’s services.
resulted
from
his
See Rutter v. Jones,
Blechman, Woltz & Kelly, P.C., 264 Va. 310, 314, 568 S.E.2d 693,
695 (2002) (stating in a malpractice suit arising from lawyer’s
alleged
drafting
error
that
“the
fee
[the
client]
paid
the
defendants for their services was not an injury resulting from
legal malpractice.
It was merely the agreed-upon cost of the
service, the consideration given for the contract, and not the
damage or injury arising from the breach of the contract.”). 14
14
Notably, there was no evidence that Richard Chasen’s
payment of Batzli’s legal fees was contingent on Batzli
negotiating the transfer of Karen Chasen’s interest in Chasen
Properties.
In any event, a contingent fee arrangement would
arguably have been unenforceable on public policy grounds absent
extenuating circumstances.
See Smith v. Ramey, No. 8511, 1988
WL 619384 at *2 (Va. Cir. Ct. 1988) (recognizing prohibition of
“contingent fee contracts in domestic relations cases except in
extraordinary circumstances”); see also 7 Am. Jur. 2d Attorneys
at Law § 260 (2007) (“A fee contract contingent on procuring a
divorce, or contingent in amount on the amount of alimony,
support, or property settlement to be obtained, is against
public policy and void.”).
23
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More
Date Filed: 08/04/2011
importantly,
Janus
told
Page: 24 of 41
Batzli
that
Karen
Chasen’s
interest in Chasen Properties was separate property that she was
unwilling to transfer to Richard Chasen.
Indeed, Karen Chasen
testified that she would not have signed an agreement to such a
transfer. 15
A reasonable jury therefore could have determined
that Batzli could not have anticipated a demand for damages for
failing to procure that which was unprocurable. 16
15
The following excerpt from Karen Chasen’s deposition
testimony, which was presented to the jury, clarifies that Karen
Chasen would not have agreed to transfer her interest in Chasen
Properties to Richard Chasen:
Q:
. . . . Prior to signing the agreement—or at any time—
did you ever agree to give your interest in Chasen Properties,
LLC to [Richard] Chasen?
A:
No.
. . . .
Q:
If you had read this agreement and it had stated that
you had transferred your interest in Chasen Properties, LLC to
[Richard Chasen], would you have signed that agreement?
A:
I would not have signed it.
J.A. 391.
16
Additionally, we find no support for the contention that
Batzli’s error harmed Richard Chasen by causing him to pay for
more than he received under the Agreement. Stated differently,
there is no support for the argument that Richard Chasen might
not have been willing to pay as much if he had known that he was
not getting Karen Chasen’s interest in Chasen Properties as part
of the deal. However, the $500,000 that Richard Chasen paid was
first proposed by Karen Chasen, who obviously did not consider
it consideration for her transfer of her interest in Chasen
Properties.
Also, the jury heard evidence that “there was no
document or spreadsheet that showed how the 500k [figure] was
arrived at.”
J.A. 307.
Moreover, Batzli testified that “the
$500,000 was paid to get her to agree to what she ultimately
agreed to.” J.A. 308.
24
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Minnesota Mutual argues that evidence of other harm would
have led a reasonable lawyer in Batzli’s position to notify his
insurer.
First, Minnesota Mutual contends that Batzli should
have known that his failure to recognize the drafting error kept
him from arguing during the spousal support hearing that Karen
Chasen
had
additional
income-producing
separate
property.
However, a reasonable jury could instead have focused on Karen
Chasen’s testimony that she never received any money or income
from her 20% interest in Chasen Properties.
Minnesota Mutual
also argues that Batzli should have known that his conflict of
interest in pursuing the scrivener’s error motion instead of
seeking to have the Agreement set aside constituted actionable
malpractice.
evidence
But
showing
a
reasonable
that
Richard
jury
Chasen,
could
relied
on
Batzli,
not
have
made
the
decision to pursue the scrivener’s error motion.
In addition to evidence supporting a reasonable belief that
there was no loss to the client, there was evidence, as in Hunt
& Calderone, that the client was comfortable with the result,
notwithstanding the professional error.
The jury heard evidence
that Richard Chasen rejected the idea of seeking to set aside
the Agreement and renegotiate.
written,
Richard
Chasen
Indeed, under the Agreement as
received
the
full
interest
in
an
arguably joint asset that had appreciated by $2 million during
the
marriage.
The
jury
heard
25
testimony
that
it
was
more
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important to Richard Chasen to keep that aspect of the deal
intact
than
to
pursue
Properties.
Further,
notwithstanding
the
Karen
the
error,
Chasen’s
jury
Batzli
interest
secured
for
Chasen
evidence
heard
in
that,
his
client
$4
million of a $6 million estate.
Under
these
circumstances,
viewing
the
evidence
in
the
light most favorable to Batzli, as we must, we conclude that the
jury had a sufficient evidentiary basis to conclude that Batzli
reasonably
thought
his
drafting
error
would
not
result
in
a
claim until he learned from Richard Chasen that a claim would in
fact be filed, at which point he promptly notified Minnesota
Mutual.
Likewise there was sufficient evidence to support the
jury’s conclusion that prior to October 1, 2008, the effective
date of the policy, Batzli had no knowledge of facts that could
reasonably support a demand for damages.
therefore
obligated
insurance contract.
to
provide
insurance
Minnesota Mutual was
coverage
under
the
Because there is no dispute that Minnesota
Mutual subsequently denied coverage, there was also sufficient
evidence in the record to support the jury’s conclusion that
Minnesota Mutual breached that obligation.
B.
Next,
Proof of Damage to Batzli
Minnesota
Mutual
maintains
that
there
was
insufficient evidence presented at trial to permit a reasonable
26
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Page: 27 of 41
jury to conclude that the damage element of a breach of contract
claim
had
been
satisfied.
Minnesota
Mutual
agrees
with
the
trial court’s determination that actual damages were not proven
to a reasonable degree of certainty.
However, Minnesota Mutual
challenges the district court’s determination that an award of
“nominal
damages”
sufficient
to
contract.
It
make
out
a
by
the
prima
evidence
facie
case
at
for
trial
was
breach
of
We find no merit to Minnesota Mutual’s argument.
stands
defend
supported
the
counsel.
to
reason
malpractice
that
suit
Minnesota
forced
Mutual’s
Batzli
to
refusal
retain
to
legal
Moreover, there was evidence that the cost of those
legal services was billed to Batzli.
In other words, there was
sufficient evidence to support a determination that there was
“injury
or
damage
obligation.”
district
the
plaintiff
caused
by
the
breach
Filak, 267 Va. at 619, 594 S.E.2d at 614.
court
Significantly,
to
awarded
the
nominal
Virginia
damages
Supreme
Court
for
has
that
of
The
breach.
explained
that
“[n]ominal damages are those recoverable where a legal right is
to be vindicated against an invasion that has produced no actual
present loss of any kind or where, from the nature of the case,
some injury has been done the amount of which the proofs fail to
show.”
News Leader Co. v. Kocen, 173 Va. 95, 107-08, 3 S.E.2d
385, 390 (1939) (quotation omitted); see also 22 Am. Jur. 2d
Damages § 8 (2003) (“The term ‘nominal damages’ describes two
27
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types of awards: (1) those damages recoverable where a legal
right is to be vindicated against an invasion that has produced
no actual, present loss of any kind; and (2) the very different
allowance made when actual loss or injury is shown, but the
plaintiff fails to prove the amount of damages.”).
The district court relied on the inferred nominal damages
that result from the violation of the legal rights created by
the
contract.
Minnesota
Mutual
correctly
argues
that
such
damages are insufficient to satisfy the third prong of a prima
facie case for breach of contract.
cases
on
which
Minnesota
However, neither of the
Mutual
relies
stands
for
the
proposition that nominal damages can never satisfy the third
element in a Virginia breach of contract claim.
In
(1950),
Orebaugh
the
v.
court
Antonious,
considered
190
an
Va.
action
829,
by
a
58
S.E.2d
property
873
owner
alleging that a contractor hired to install a heating system
breached
his
contract
operate properly.
because
the
heating
system
Id. at 830, 58 S.E.2d at 873.
failed
to
However, the
evidence also showed that the property owner had since sold the
property
with
the
heater
still
inoperable.
There
was
no
evidence of the sale price or evidence that the property owner
took less for the property because of the faulty heating system.
The
court
stated
that
the
plaintiff
did
not
“introduce
any
evidence from which it could be determined that she suffered any
28
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Date Filed: 08/04/2011
Page: 29 of 41
loss or damage” other than the nominal damages inferred from the
violation of her legal rights under the contract.
Id. at 833.
As such, the court held that judgment in favor of the plaintiff
was in error.
Id. at 834.
In Bailey v. Potter, No. 1:05c936(JCC), 2006 WL 1582410
(E.D. Va. June 5, 2006), the court considered an action brought
by an employee alleging that her employer breached a contractual
duty to review the employee’s leave requests to ensure they were
“properly coded.” 17
Plaintiff alleged that the employer breached
the contract by improperly coding some of her leave time as
“Leave Without Pay” instead of “Office of Worker Compensation
Program Leave Without Pay.” Id. at *3.
The court concluded that
“there was no meaningful difference between” the two time codes
and
that,
plaintiff
consequently,
desired,
whatsoever.”
Id.
if
the
“Plaintiff
The
court
leave
would
then
time
was
coded
receive
rejected
the
no
as
the
benefit
plaintiff’s
assertion that nominal damages inferred from the inconsequential
violation of her legal rights would satisfy the third element of
a breach of contract suit.
Id. at *4 (“Essentially, Plaintiff
seeks to eviscerate the “consequential injury or damage” element
17
Although we distinguish Bailey, we also note that, as an
unpublished opinion, it bears no precedential weight that would
necessarily alter our analysis. United States v. Ruhe, 191 F.3d
376, 392 (4th Cir. 1999) (“[U]npublished opinions are not
binding precedent in this circuit.”); see also Local Rule 36(c).
29
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of a claim for breach of contract, as nominal damages would
always be inferred upon the allegation of a breach of a binding
agreement.”).
This
case
is
distinguishable
from
Orebaugh
and
Bailey
because here, “actual loss or injury is shown, but the plaintiff
fails to prove the amount of damages.”
Damages § 8 (2003).
See 22 Am. Jur. 2d
Batzli demonstrated that he had to pay
attorney’s fees as a result of Minnesota Mutual’s breach, but
failed to prove that the amount claimed was reasonable. 18
such,
nominal
damages
were
appropriate. 19
Both
Orebaugh
As
and
Bailey involved circumstances where there was no evidence that
any damage (other than the abstract damage caused by violation
of legal rights created by a contract) resulted from the breach
of
contract.
In
other
words,
both
cases
held
that
nominal
damages of the first sort discussed in Kocen cannot support a
18
See infra, Section III.
19
We reject Minnesota Mutual’s contention that Batzli’s
failure to specifically plead nominal damages barred the award
thereof, particularly when the counterclaim asked the court to
award, in addition to the costs and fees incurred in prosecuting
the counterclaim and defending the Chasen malpractice suit,
“such other and further relief as the Court deems just.” [J.A.
76]
See Yniguez v. State, 975 F.2d 646, 647 n.1 (9th Cir.
1992)(per curiam)(“Although the plaintiff’s complaint does not
expressly request nominal damages, it did request ‘all other
relief that the Court deems just and proper under the
circumstances.’
That is sufficient to permit the plaintiff to
pursue nominal damages.”).
30
Appeal: 10-1684
Document: 42
breach
Date Filed: 08/04/2011
of
action.
support
contract
for
the
Page: 31 of 41
However,
contention
that
those
nominal
cases
provide
damages
can
no
never
satisfy the damage element of a prima facie case for breach of
contract under Virginia law.
Indeed, in Crist v. Metropolitan Mortg. Fund, Inc., 231 Va.
190,
343
S.E.2d
308
(1986),
the
court
reviewed
a
breach
of
contract action in which the trial court awarded nominal damages
but denied compensatory damages.
“[b]ecause
damages,
reasonable
certainty,
Accordingly,
denying
$100.”
we
contradicts
at
no
will
compensatory
Id.
if
any,
cannot
actual
be
established
damages
affirm
the
judgment
damages
but
can
awarding
195,
Minnesota
The court affirmed, stating
343
S.E.2d
Mutual’s
at
of
the
recovered.
trial
nominal
311.
contention
be
a
court
damages
Crist
that
with
of
therefore
breach
of
contract cannot be established absent proof of actual damages,
as well as the contention that nominal damages are insufficient
to satisfy the damage prong of the prima facie case.
In
sum,
we
conclude
that
there
was
sufficient
evidence
presented to the jury to permit its conclusion that Minnesota
Mutual owed a duty to its insured and that the breach of that
duty caused the insured to suffer damage.
Consequently, the
jury had a legally sufficient evidentiary basis to find for the
insured on the breach of contract counterclaim.
Va. at 619, 594 S.E.2d at 614.
31
See Filak, 267
Accordingly, we affirm the
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Page: 32 of 41
denial of Minnesota Mutual’s renewed motion for judgment as a
matter of law.
III.
In
his
cross
Batzli’s Cross Appeal
appeal,
Batzli
contends
that
the
district
court erred when reducing the damage award from $8400 to $1 and
argues
that
the
evidence
compensatory damages.
would
require
evidence
to
our
supported
jury’s
award
a
that
reasonable
he
jury
presented
to
sufficient
determine
attorney’s fees sought were reasonable and necessary.
v.
Friedberg,
(“[W]here
a
201
Va.
breach
of
Batzli concedes that ruling in his favor
determination
permit
the
of
572,
577,
contract
112
has
S.E.2d
forced
871,
the
that
the
See Hiss
876
(1960)
plaintiff
to
maintain or defend a suit with a third person, he may recover
the counsel fees incurred by him in the former suit provided
they
are
reasonable
in
amount
and
reasonably
incurred.”)
(emphasis added); accord Fidelity Nat’l Title Ins. Co. of N.Y.
v. S. Heritage Title Ins. Agency, 257 Va. 246, 254, 512 S.E.2d
553, 558 (1999).
Minnesota Mutual does not contest the fact that its refusal
to
provide
independent
coverage
under
retention
of
the
legal
policy
counsel
necessitated
to
complaint—i.e. that Batzli incurred damages.
defend
Batzli’s
the
Chasen
To support the
contention that the damage award was reasonable, Batzli points
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Date Filed: 08/04/2011
Page: 33 of 41
to the malpractice complaint which he argues demonstrates the
complexity
and
high
stakes
of
the
case,
the
fact
that
the
complaint had been “pending” for a year, 20 and Batzli’s testimony
that he had incurred $8,400 in legal fees for the defense of the
malpractice action.
showing
was
determination
We conclude that such a paltry evidentiary
insufficient
that
the
as
a
matter
amount
of
law
awarded
as
to
support
damages
a
was
“reasonable.”
In Chawla v. BurgerBusters, Inc., 255 Va. 616, 499 S.E.2d
829 (1998), the Supreme Court of Virginia stated:
In determining whether a party [seeking recovery of
attorney’s fees] has established a prima facie case of
reasonableness, a fact finder may consider, inter
alia, the time and effort expended by the attorney,
the nature of the services rendered, the complexity of
the services, the value of the services to the client,
the results obtained, whether the fees incurred were
consistent with those generally charged for similar
services, and whether the services were necessary and
appropriate.
Id. at 623, 499 S.E.2d at 833.
In Mullins v. Richlands Nat’l
Bank, 241 Va. 447, 403 S.E.2d 334 (1991), the court said: “In
determining a reasonable fee, the fact finder should consider
such circumstances as the time consumed, the effort expended,
20
Notwithstanding Batzli’s argument to the contrary, the
amount of time that had elapsed since the complaint was filed is
irrelevant to our inquiry given the absence of any evidence
regarding what, if any, actions were taken by Batzli’s lawyers
to defend against the Chasen complaint during that time.
33
Appeal: 10-1684
the
Document: 42
nature
of
Date Filed: 08/04/2011
the
circumstances.
services
rendered,
and
other
attending
Ordinarily, expert testimony will be required to
Id. at 449, 403 S.E.2d at 335. 21
assist the fact finder.”
Here,
Page: 34 of 41
there
was
no
testimony
regarding
how
much
time
Batzli’s lawyers spent on the defense of the Chasen complaint,
no
indication
of
what
services
they
performed
in
their
representation of Batzli, and no testimony, expert or otherwise,
regarding
the
rates
suits in Virginia.
that
Batzli’s
charged
by
lawyers
defending
malpractice
In light of Chawla and Mullins, we conclude
argument—that
$8,400
was
per
se
reasonable
in
light of the amount sought in the “complex” malpractice action—
See Crist, 231 Va. at 195, 343 S.E.2d at 311.
is meritless.
short,
Batzli
attorney’s
fees
had
the
paid
to
burden
of
demonstrating
the
lawyers
defending
that
the
In
the
Chasen
complaint were reasonable, and he failed to satisfy that burden.
This allocation of the burden of proof is also dispositive
of
Batzli’s
second
argument.
Batzli
21
maintains
that
because
Expert testimony is not necessarily required if lay
testimony can establish the reasonableness of the fee award.
For instance, when a party seeking attorney’s fees submitted
“almost 300 pages of contemporaneous time records detailing the
activities for which fees were sought” and “affidavits of its
attorneys upon the reasonableness of the hourly rates charged
and the accuracy of the time billed,” the court ruled that
expert testimony was not necessary.
Tazewell Oil Co., Inc. v.
United Va. Bank, 243 Va. 94, 111-12, 413 S.E.2d 611, 620-21
(1992).
No such time records or affidavits were presented in
this case.
34
Appeal: 10-1684
Document: 42
Minnesota
Mutual
Date Filed: 08/04/2011
did
not
object
Page: 35 of 41
to
the
evidence
entered
in
support of the reasonableness determination, he is foreclosed
from arguing that the amount awarded was unreasonable.
However,
applying such a rule would relieve the plaintiff of the burden
of making a prima facie case simply because his opponent was
silent.
We decline Batzli’s invitation to so dramatically shift
the burden of proof.
Ultimately, to decide the cross appeal in Batzli’s favor
would require the absurd conclusion that a party establishes the
“reasonableness” of attorney’s fees if (when viewed in the light
most favorable to that party), the evidence shows that the fees
were assessed in a difficult case.
However, following Chawla
and Mullins, we conclude that more is required to support a
determination
that
reasonable. 22
Because
the
attorney’s
Batzli
failed
fees
to
assessed
present
were
evidence
to
establish the reasonableness of the attorney’s fees for which he
22
As discussed above, the district court did not rely on
the actual compensatory damages award of $8,400 to confirm
Batzli’s satisfaction of the damage element of a prima face
breach of contract claim.
Instead, the court imposed nominal
damages.
Indeed, if precisely quantifiable actual damages were
the only basis for finding a breach of contract in this case,
the court would have been compelled to grant Minnesota Mutual’s
motion.
See Bennett v. Fairfax Cnty., Va., 432 F.Supp.2d 596,
600 (E.D. Va. 2006) (stating that a court “must enter judgment
as a matter of law if . . . the verdict in favor of the nonmoving party would necessarily be based on speculation and
conjecture.”)(quotation omitted).
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was to be compensated through the jury’s award of damages, the
district court did not err by setting aside that damage award.
IV.
In
whether
sum,
while
Batzli
reasonable
should
have
minds
notified
may
disagree
Minnesota
regarding
Mutual
earlier
than he did, even when faced with reasonable disagreement about
the propriety of the verdict, we must affirm the denial of a
renewed motion for judgment as a matter of law.
Prods. Corp, 472 F.3d at 113.
sufficient
evidentiary
basis
ABT Bldg.
We conclude that the jury had a
to
support
its
conclusion
that
Minnesota Mutual breached its insurance contract by refusing to
defend
Batzli
and
Batzli
Wood
against
the
Chasen
complaint.
Accordingly, we affirm the district court’s denial of Minnesota
Mutual’s motion for judgment as a matter of law.
Also, because
the factual determinations necessarily made by the jury in the
trial
as
to
Batzli’s
counterclaim
are
dispositive,
we
also
affirm the grant of declaratory judgment to Batzli.
AFFIRMED
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SHEDD, Circuit Judge, dissenting:
Terrence Batzli’s Professional Liability Insurance Policy
with Minnesota Lawyers Mutual does not cover an error made prior
to
the
liability
policy’s
date,
“which
an
insured
knows
or
reasonably should know, would support” a demand for damages.
(J.A.
25.)
The
majority
holds
that
there
was
sufficient
evidence for the jury to find that Batzli lacked, or that any
reasonable
person
in
his
position
would
knowledge under the facts of this case.
have
lacked,
such
In my view, Batzli
reasonably should have known, as a matter of law, that he faced
a potential demand for damages from Mr. Chasen.
Therefore, with
due respect, I dissent.
As the majority correctly notes, when determining whether
sufficient evidence exists to support a jury verdict, “we may
not substitute our judgment for that of the jury.”
Price v.
City of Charlotte, N.C., 93 F.3d 1241, 1249 (4th Cir. 1996).
However, “[w]hile we are compelled to accord the utmost respect
to jury verdicts . . . [we] have a duty to reverse the jury
verdict[] if the evidence cannot support it.”
Id. at 1249-1250
(internal citations omitted).
The evidence presented in this case cannot support the jury
verdict.
The record clearly establishes that Batzli knew he had
committed a significant error and that his error could support a
claim for damages.
Batzli believed that there was an agreement
37
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Date Filed: 08/04/2011
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between Mr. and Ms. Chasen, pursuant to which Ms. Chasen would
give her 20% interest in Chasen Properties, LLC to Mr. Chasen.
Batzli drafted a property settlement agreement (“the Agreement”)
between
Mr.
and
Ms.
Chasen
with
the
intent
of
Chasen would receive Ms. Chasen’s 20% interest.
ensuring
Mr.
However, Batzli
admittedly made an error in drafting the Agreement and testified
to this fact before the jury, stating:
And that’s where I made the error.
I said “his
interest.”
It should have said “their interest” in
Chasen Properties, LLC.
(J.A. 258.)
Batzli also admitted his error to Mr. Chasen in a
letter
consequently,
and,
offered
to
bear
the
action in state court to correct the error.
costs
of
the
Moreover, upon
realizing his error, Batzli said that he felt sick about it and
had lost sleep over it.
Finally,
Batzli
knew
this
error
resulted
financial and personal costs for Mr. Chasen.
Chasen
believed
the
20%
interest
was
in
significant
Batzli knew Mr.
worth
$440,000.
In
addition to the monetary value, Batzli also knew how important
it was to Mr. Chasen’s business that he receive Ms. Chasen’s 20%
interest.
control
of
Without that 20% interest, Mr. Chasen stood to lose
Chasen
Properties,
LLC.
Mr.
Chasen
explicitly
expressed this concern to Batzli in a letter, writing:
[W]ith only a 20% ownership on my part, it would be
easy
for
her
and
the
kids
to
remove
me
as
director/manager of chasen properties [sic]. If I own
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Date Filed: 08/04/2011
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at least 34% . . . it is more difficult for them to
remove me form [sic] that roll [sic] and Karen [Ms.
Chasen] can have no part of the process.
I just can
not [sic] have Karen owning part of any entity that I
am part of . . . much less part of my business
location!
(J.A. 461.)
Furthermore, in a letter to Batzli’s law partner,
who worked on the case with Batzli, Mr. Chasen wrote that he was
“still in shock that the appeal [to correct the error] failed on
all
fronts,”
(J.A.
551)
and
Mr.
Chasen
did
not
respond
to
Batzli’s request for payment of the attorneys’ fees incurred in
the state court action.
Against this factual backdrop, Batzli
should have known that his error would support a demand for
damages. *
Despite
sufficient
these
support
facts,
for
the
the
majority
jury
concludes
verdict
based
there
is
largely
on
evidence that addresses the merits of Mr. Chasen’s malpractice
claim.
Such evidence is irrelevant as to whether a reasonable
lawyer could expect a demand for damages.
The liability policy
requires only that the insured report an act, error, or omission
*
The majority asserts that Batzli could not reasonably
expect a claim for damages because Mr. Chasen had suffered no
damages.
To the contrary, Mr. Chasen was damaged.
Mr. Chasen
agreed to the settlement with the understanding that he would be
receiving Ms. Chasen’s 20% interest in Chasen Properties, LLC.
Therefore, Mr. Chasen’s damages are – at a minimum – the
difference between what Mr. Chasen paid for the Agreement and
what he would have paid for a settlement that did not contain
Ms. Chasen’s 20% interest.
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that would support a demand for damages, not that such a demand
would ultimately be successful.
The majority believes that testimony by Ms. Chasen that she
would never have relinquished her 20% interest supports the jury
verdict.
The majority reasons that Mr. Chasen was not damaged
because in a divorce action, Mr. Chasen was not legally entitled
to
have
However,
this
non-marital
Ms.
Chasen’s
asset
included
testimony
in
actually
materiality of Batzli’s admitted error.
a
settlement.
underscores
the
Because the divorce
court did not have jurisdiction over and could not award Ms.
Chasen’s 20% interest through a court order, the only way Mr.
Chasen
could
have
received
her
20%
interest
was
through
the
Agreement, which Batzli failed to properly draft.
Additionally, as support for the jury verdict, the majority
relies upon the fact that Mr. Chasen did not want to set aside
the Agreement.
This fact, as well, is irrelevant as to whether
Batzli should have known if Mr. Chasen would have a claim for
damages.
Mr.
Chasen
negotiated
the
Agreement
to
receive
a
number of assets, including Ms. Chasen’s 20% interest in Chasen
Properties, LLC.
The fact that Mr. Chasen wanted to keep what
he actually received in the otherwise favorable Agreement is
irrelevant in determining whether he was entitled to what he
thought
he
had
also
received
--
Ms.
Chasen’s
20%
interest.
Therefore, Batzli should have known that his error would support
40
Appeal: 10-1684
a
Document: 42
claim
for
Date Filed: 08/04/2011
damages
despite
the
Page: 41 of 41
fact
that
Mr.
overall, satisfied with the Property Settlement.
Chasen
was,
See 17A Am.
Jur. 2d Contracts § 708 (“As a general rule, upon the breach of
a
contract,
the
injured
party
may,
by
election,
rescind
and
recover the value of any performance, or stand by the contract
and recover damages for the breach.”); Richmond v. Hall, 466
S.E.2d 103, 107 (Va. 1996) (recognizing that rescission and a
suit for damages are alternate contractual remedies).
In sum, the evidence in this case clearly establishes that
Batzli
should
have
known
that
he
made
an
error
that
would
support a demand for damages and failed to report this error to
the insurance company.
Pursuant to the plain language of the
liability policy, this claim was not covered and, therefore, the
insurance company did not have a duty to defend or indemnify
Batzli against Mr. Chasen’s malpractice claim.
For this reason,
I would reverse the judgment of the district court and enter
judgment in favor of Minnesota Lawyers Mutual.
41
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