Travelers Indemnity Company of Connecticut et al v. Attorney's Title Insurance Fund, Inc. et al

Filing 217

ORDER denying 198 Defendants, Attorneys' Title Insurance Fund, Inc. and Florida Title Company's Motion for Summary Judgment. Signed by Judge Sheri Polster Chappell on 7/15/2015. (LMF)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
TRAVELERS INDEMNITY COMPANY
OF CONNECTICUT and ST. PAUL FIRE
& MARINE INSURANCE COMPANY,
Plaintiffs,
v.

Case No: 2:13-cv-670-FtM-38CM

ATTORNEY’S TITLE INSURANCE
FUND, INC., FLORIDA TITLE CO.,
SECTION 10 JOINT VENTURE, LLP,
SKY PROPERTY VENTURE, LLC,
CAS GROUP, INC.,
Defendants,
and
RSUI INDEMNITY COMPANY,
Intervening Plaintiff,
vs.
ATTORNEY’S TITLE INSURANCE
FUND, INC., FLORIDA TITLE CO.,
SECTION 10 JOINT VENTURE, LLP,
SKY PROPERTY VENTURE, LLC,
CAS GROUP, INC.,
Defendants in Intervention.
/
ORDER1

1

Disclaimer: Documents filed in CM/ECF may contain hyperlinks to other documents or Web sites. These
hyperlinks are provided only for users’ convenience. Users are cautioned that hyperlinked documents in
CM/ECF are subject to PACER fees. By allowing hyperlinks to other Web sites, this Court does not
endorse, recommend, approve, or guarantee any third parties or the services or products they provide on
their Web sites. Likewise, the Court has no agreements with any of these third parties or their Web sites.
The Court accepts no responsibility for the availability or functionality of any hyperlink. Thus, the fact that
a hyperlink ceases to work or directs the user to some other site does not affect the opinion of the Court.

This matter comes before the Court on Defendants Attorneys' Title Insurance
Fund, Inc. and Florida Title Company's (“ATIF”) Motion for Summary Judgment (Doc.
#198) filed on May 8, 2015. Plaintiffs Travelers Indemnity Company of Connecticut and
St. Paul Fire & Marine Insurance Company (“Travelers”) and Intervening Plaintiff RSUI
Indemnity Company (“RSUI”) filed Responses in Opposition on June 19, 2015. (Docs.
##207, 208). Thereafter, ATIF requested, and the Court granted, leave to file a Reply.
(Doc. #209). ATIF filed its Reply on June 29, 2015. (Doc. #211). The matter is now ripe
for review.
Background
This action derives from a real estate fraud scheme that resulted in years of
litigation between the Defendants to this action in Florida state court. Eventually, all of
the parties involved in that litigation entered into a settlement agreement that attempted
to shift all liability to one party’s insurance providers. At issue in this action is whether
those insurance providers, Travelers and RSUI, are liable for the full, or a partial, amount
of that settlement. Travelers and RSUI insist that they are not, and they each seek, inter
alia, a declaratory judgment from the Court specifying as much.
Undisputed Facts
The Florida state court litigation underlying this action began when ATIF sued the
other Defendants to this action (“Section 10”), seeking to recover $3 million it had to pay
as title insurer for a fraudulently sold property. (Doc. #37-19 at 3). The basis for that
action was a belief that the sellers who orchestrated the fraudulent sale reinvested their
proceeds in a property owned by Section 10 (“the Property”), leading ATIF to assert three
claims: equitable lien/constructive trust, injunctive relief, and unjust enrichment (“ATIF

2

Lawsuit”). (Doc. #37-19 at 3). To ensure potential buyers of the Property were aware of
the ongoing litigation, ATIF also recorded a lis pendens. (Doc. #37-19 at 3). Section 10
responded by filing Counterclaims for slander of title, wrongful lis pendens, declaratory
judgment, tortious interference, and wrongful injunction. (Doc. #37-19 at 5). In doing so,
Section 10 averred that no fraud proceeds were invested in the Property and that ATIF
had one “true intention” in instituting the litigation – to render the Property unmarketable
in order to “shake some money out of them. . . .” (Doc. #50-1 at 10).
In addition to filing the Counterclaims, Section 10 also petitioned the state court for
an order requiring ATIF to post a bond if it wished to maintain the lis pendens. (Doc. #3719 at 3). ATIF never responded to the court order, but the court never dissolved the lis
pendens either. (Doc. #37-19 at 3). Sometime later, the state court again ordered ATIF
to post a bond, but this time the court set the bond amount at $10 million and gave ATIF
a 45-day deadline to do so. (Doc. #37-19 at 3). Yet, ATIF once again failed to post the
bond or respond to the court’s order. (Doc. #37-19 at 3). The court then renewed its
order for a third time, eventually dissolving the lis pendens once ATIF failed to respond
yet again. (Doc. #37-19 at 3).
A few years later, Section 10 retained new counsel and filed several amendments
to its Answer and Counterclaims. (Doc. #37-19 at 5). ATIF tendered these new Amended
Counterclaims to its insurance providers, Travelers and RSUI, shortly thereafter. (Doc.
#69-8). From 2011 until 2013, RSUI issued ATIF a director and officer’s liability insurance
policy annually, providing $5 million in coverage. (Docs. ##69-1, 69-2). Moreover, from
2007 until 2012, Travelers issued ATIF commercial general liability and commercial
umbrella liability insurance policies annually, providing $1 million and $10 million in

3

coverage, respectively. (Doc. #37-19 at 5). Both Travelers and RSUI denied coverage
for the respective claims. (Doc. #37-21 at 42-43; Doc. #69-9).
Subsequently, Section 10 filed a Second Amended Counterclaim, asserting a
single count against ATIF for slander of title. (Doc. #146-7). But Section 10 also defaulted
on a loan secured by the Property, leading to a foreclosure judgment against it during this
same time period. (Doc. #37-19 at 4). Due to the foreclosure judgment, ATIF voluntarily
dismissed the first two counts of its action – equitable lien/constructive trust and injunctive
relief – on the basis that those counts were now moot. (Doc. #37-19 at 4). ATIF continued
to pursue its unjust enrichment count against Section 10, notwithstanding the foreclosure.
(Doc. #37-19 at 4). Eventually, the court dismissed Section 10’s Second Amended
Counterclaim. (Doc. #37-19 at 5).
With only ATIF’s unjust enrichment claim left standing, Section 10 filed a new
action against ATIF for malicious prosecution related to the ATIF lawsuit (“Section 10
lawsuit”). (Doc. #50-1). Section 10 averred that it incurred substantial damages as a
result of the “unjustified” and “wrongful” lis pendens, including significant loss of value to
the Property. (Doc. #50-1 at 11). ATIF forwarded a copy of the complaint for the Section
10 lawsuit to both Travelers and RSUI.

(Doc. #37-19 at 5). The state court then

consolidated the ATIF lawsuit and the Section 10 lawsuit, finding that they shared the
same underlying basis. (Doc. #37-19 at 1).
Travelers responded to ATIF’s demand by agreeing to defend ATIF in the newlyconsolidated action, but also reserving its rights to initiate a declaratory judgment action
to determine the scope of its obligations and, if appropriate, to withdraw from the defense
and/or seek recoupment of attorneys’ fees and other litigation expenses paid during the

4

defense. (Doc. #37-19 at 25). Meanwhile, RSUI once again denied coverage and
reserved its rights. (Doc. #69-13). Three days later, ATIF rejected Travelers’ offer of a
conditional defense. (Doc. #37-22 at 32). That same day, the parties to the Consolidated
Action executed a Coblentz settlement agreement without notice to Travelers or RSUI,
and without their consent. (Docs. ##208-1, 208-2, 208-3). The Coblentz agreement
provided that the parties consented to judgment in favor of Section 10 on both ATIF’s
unjust enrichment claim and Section 10’s malicious prosecution claim, resulting in a $40
million judgment against ATIF. (Docs. ##50-3, 50-4). Notably, because of the nature of
the Coblentz agreement, Section 10 agreed to enforce the judgment against only
Travelers and RSUI, not ATIF, and received a purported assignment of rights from ATIF
to do so. (Doc. #50-3).
Legal Standard
An award of summary judgment is proper “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a). To that end, “[o]nly disputes over facts that might affect
the outcome of the suit under the governing law will properly preclude the entry of
summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Such a
dispute is genuine only “if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Id.
In determining whether summary judgment is appropriate, the Court evaluates the
evidence in the record, “including depositions, documents, electronically stored
information, affidavits or declarations, stipulations . . . , admissions, interrogatory
answers, or other materials . . . .” Fed. R. Civ. P. 56(c)(1)(A). All evidence, and factual

5

inferences reasonable drawn from that evidence, must be viewed in the light most
favorable to the nonmoving party. Rioux v. City of Atlanta, 520 F.3d 1269, 1274 (11th
Cir. 2008) (citations omitted). And all reasonable doubts about the facts must be resolved
in favor of the non-movant too. Id. For it is not the Court’s task to “weigh the evidence
and determine the truth of the matter,” but rather to “determine whether there is a genuine
issue for trial.” Anderson, 477 U.S. at 249.
Discussion
ATIF seeks summary judgment in its favor on the basis that it has assigned all
rights it has related to this action and the underlying claims to Section 10. In support,
ATIF relies on the fact that Travelers and RSUI “admitted, regardless of the outcome of
the litigation over the validity of the settlement, assignment, and consent judgment, they
will have no obligation to ATIF.” (Doc. #198 at 7). Travelers and RSUI, however,
adamantly disagree that this issue is that simple.
Both Travelers and RSUI believe that the instant Motion is nothing more than an
attempt by ATIF to reargue its misjoinder motion, which the Court denied after finding that
the settlement agreement and related assignment of rights that ATIF entered into was at
the crux of this litigation. (Doc. #207 at 10-13; Doc. #208 at 10-13). As Travelers and
RSUI explain, the Court has not yet ruled on the validity of the settlement agreement at
issue. (Doc. #207 at 10-13; Doc. #208 at 10-13). Therefore, a genuine issue remains
with regard to ATIF’s compliance with their respective policies’ conditions, which could
affect the validity of the settlement agreement. (Doc. #207 at 10-13; Doc. #208 at 10-13).
And should the Court find that the settlement agreement is invalid, Travelers believes
there is a possibility that ATIF could be responsible for the costs that Travelers and RSUI

6

incurred in defending against the invalid settlement agreement, raising yet another
genuine issue of material fact. (Doc. #208 at 13-14). The Court finds Travelers’ and
RSUI’s respective positions persuasive.
Travelers and RSUI are correct – the Court addressed a nearly identical argument
in its Order on ATIF’s Motion to Dismiss for Misjoinder. (Doc. #49). In doing so, the Court
noted, “it is unclear from the record thus far whether the settlement agreement and
assignment therein is valid.” (Doc. #49 at 3). Nothing appears to have changed. ATIF
fails to direct the Court’s attention to evidence in the record that illustrates the settlement
or assignment at issue are valid. Instead, ATIF focuses on the fact that Travelers and
RSUI have now admitted2 that regardless of the outcome of this litigation, they have no
further obligation to ATIF. But this fact is not enough to alter the Court’s previous analysis.
There are still material issues present that involve ATIF. Primarily, whether ATIF’s and
the other state court litigants’ actions resulted in a valid assignment, entitling Section 10
to pursue its $40 million judgment against Travelers and RSUI.
ATIF attempts to support its argument by relying on two cases that both analyzed
whether the insured should be included in an action that already included the assignee
and the insurer. In Panopoulos v. Lexington Ins. Co., No. 8:13-CV-700-T-33TGW, 2013
WL 2708688 (M.D. Fla. June 12, 2013), the defendant insurer argued that the action must
be dismissed because the plaintiff assignee failed to join the insured, a necessary party.
The court rejected this argument, finding that because the assignment was valid, it was
unnecessary to join the insured. Id. at *3-6. Likewise, in Citizens Prop. Ins. Corp. v.
Ifergane, 114 So.3d 190 (Fla. 3d DCA 2012), the court dismissed the defendant insured

2

Travelers and RSUI both expressly objected to the respective requests for admission on several grounds.
(Doc. #198-2).

7

from the action after finding that the assignment was valid and that the assignee was the
only party in interest. At first blush, these cases might appear to support ATIF’s argument.
But there is a critical distinguishing factor that both of these cases share – a valid postloss assignment.
Here, there remain general issues of material fact related to the assignment. For
example, Travelers and RSUI still dispute whether the assignment at issue arose after a
loss, as defined under their respective policies. Central to that issue are ATIF’s actions
prior to the assignment.

Again, the only evidence that ATIF presents to the Court in

support of its Motion are two admissions from Travelers and RSUI that admit, regardless
of the outcome of this action, they have no further monetary obligation to ATIF. These
admissions by no means concede that the assignment at issue was valid. Without such,
there remains a genuine issue of material fact, precluding summary judgment in ATIF’s
favor on the basis that it has assigned any interest it has in this litigation.
ATIF also avers that summary judgment in its favor is appropriate because a
declaratory action can proceed solely between an assignee and an insurer. To support
this argument, ATIF provides the Court with numerous citations, including Pozzi Window
Co. v. Auto-Owners Ins. Co., 429 F.Supp.2d 1311 (S.D. Fla. 2004). The interesting
aspect of Pozzi Window Co. is not that it illustrates it is possible for an assignee and an
insurer to litigate issues without the insured’s presence; it is the timing of when the insured
was dismissed from that action.
There, the plaintiff assignee sued the defendant insurer, seeking to recover on the
insurance rights assigned to it by the insured as part of a settlement reached in separate
litigation. Pozzi Window Co., 429 F.Supp.2d at 1314. The defendant insurer then filed a

8

third-party complaint against the insured, seeking, inter alia, a declaratory judgment that
it had no duty to pay any judgment entered against the insured in the separate litigation.
Pozzi Window Co. v. Auto-Owners Ins. Co., No. 1:02-cv-23093-EGT, FLSD Docket #23
(S.D. Fla. Apr. 29, 2003). In response, the insured filed a motion for judgment on the
pleadings, presenting the same argument that ATIF presents here – i.e., because it had
assigned its rights, it has no interest in the action. Pozzi Window Co., No. 1:02-cv-23093EGT, FLSD Docket #67 (S.D. Fla. Dec. 30, 2003). Significantly, the court waited until
after it determined that the defendant insurer breached its duty to defend – because the
complained-about damages were covered under the applicable insurance policy – to
grant the insured’s motion. Pozzi Window Co., No. 1:02-cv-239093-EGT, FLSD Docket
#91 (S.D. Fla. Feb. 20, 2004). At best, Pozzi Window Co. illustrates that dismissing ATIF
at this stage in the litigation would be premature. There has been no determination that
there is coverage under either of the policies at issue or even that the assignment was
valid.
The other citations provided by ATIF for this same proposition fair no better. In
each of the cases, the insured was not involved in the litigation, or if it was at some point,
the claim against it was withdrawn. See Sinni v. Scottsdale Ins. Co., 676 F.Supp.2d 1319
(M.D. Fla. 2009) (while the insured was originally included in the action, subsequent
amended complaint removed any claims against insured); Bradfield v. Mid-Continent Cas.
Co., 15 F.Supp.3d 1253 (M.D. Fla. 2014) (assignee brought claim against insurer, never
involved the insured); Ahern v. Odyssey Re (London) Ltd., 788 So.2d 369 (Fla. 4th DCA
2001) (assignee brought claim against insurer, never involved the insured). None of
these cases involved the insurer seeking a declaratory judgment against both the insured

9

and the assignee, where the court dismissed the insured because it no longer had any
interest in the action.
Without presenting more than admissions illustrating neither Travelers nor RSUI
believe they are obligated for payment of indemnity (or anything else) to ATIF regardless
of who succeeds in the instant action, ATIF has failed to meets its burden of illustrating
that no genuine issue of material fact exists. Consequently, the Motion must be denied.
Accordingly, it is now
ORDERED:
Defendants, Attorneys' Title Insurance Fund, Inc. and Florida Title Company's
Motion for Summary Judgment (Doc. #198) is DENIED.
DONE and ORDERED in Fort Myers, Florida, this 15th day of July, 2015.

Copies: All Parties of Record

10