Gibbons v. Mony Life Insurance Company et al
Filing
148
MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 8/9/2017: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court denies in part Gibbons's motion for relief from judgment [dkt. no. 128] to the extent he challenges the summary judgment ruling. The Court also denies Gibbons's motion for relief from the order enforcing settlement to the extent that it is based on fraud or misconduct by an opposing party under Rule 60(b)(3). The Cou rt orders an evidentiary hearing on the remaining issue in the motion, as described in the body of this decision. The evidentiary hearing is set for September 8, 2017 at 1:30 p.m., though the Court reserves the right to move the hearing up to that morning. A status hearing to discuss the evidentiary hearing and the witnesses who will need to appear (likely Gibbons, Terri Gibbons, and Pellis) is set for August 14, 2017 at 9:30 a.m. (mk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CLIFFORD SAM GIBBONS,
Plaintiff,
vs.
MONY LIFE INSURANCE COMPANY and
DISABILITY MANAGEMENT SERVICES,
INC.,
Defendants.
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Case No. 15 C 5352
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Clifford Gibbons sued MONY Life Insurance Company and Disability
Management Services, Inc. (DMS), for claims arising out of defendants' refusal to pay
benefits under Gibbons's disability insurance policy and eventual termination of the
policy. Gibbons brought claims of negligence, breach of contract, and intentional
infliction of emotional distress, and he requested reformation of the contract and
declaratory relief. By October 2016, the Court had either dismissed or awarded
summary judgment in favor of defendants on all but one claim. In March 2017, the
Court granted defendants' motion to enforce settlement on the final claim. Gibbons has
moved for relief from judgment pursuant to Federal Rule of Civil Procedure 60(b)(1), (3),
(4), and (6). For the reasons stated below, the Court denies Gibbons's motion in part
and orders an evidentiary hearing to resolve the remaining issue.
Background
The Court assumes familiarity with the facts of this case and will summarize them
only briefly here. The Court also reviews the relevant procedural history.
In October 1990, Gibbons, who is an attorney, purchased a disability insurance
policy from MONY. The policy provides benefits through age 65, but an accompanying
"rider" authorizes benefits beyond age 65 when certain conditions are met. The rider
authorizes coverage for an incapacity due to injury that commences prior to age 65 or
an incapacity due to sickness that commences prior to age 60. The term "injury" is
defined as "accidental bodily injury sustained while this Policy is in force." Compl., Ex.
A at 5. The term "sickness" is defined as "sickness or disease which first manifests
itself while this Policy is in force." Id.
In April 2013, at the age of 62, Gibbons suffered two heart attacks which left him
disabled and unable to work. Later that year, he informed MONY that he would seek
coverage under his policy. DMS, the policy's administrator, issued payments until
August 2014, when it terminated the policy due to Gibbons's alleged failure to cooperate
in the claims investigation. In April 2015, DMS sent a letter to Gibbons indicating that
his heart attack constituted a "sickness" and not an "injury" and therefore that he was
not entitled to any benefits under the policy.
Gibbons hired attorney Joseph Pellis to represent him in this suit against
defendants. Gibbons alleged that MONY was liable for negligence for its failure to
exercise ordinary skill and care in procuring lifetime coverage for him (count 1); Gibbons
was entitled to reformation of the contract to reflect the parties' intent for lifetime
disability coverage (count 2); Gibbons was entitled to a declaratory judgment that his
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stress-induced heart attacks were the result of injury and that MONY was required to
provide lifetime benefits (count 3); defendants were liable for breach of contract (count
4); and DMS was liable for intentional infliction of emotional distress (count 5).
In December 2015, the Court dismissed as time-barred Gibbons's claims for
negligence and reformation. In June 2016, Gibbons filed a motion for partial summary
judgment, in which he asked the Court to address whether his "unforeseen and
unexpected stress-induced heart attack" qualified as an "injury" under the terms of the
policy. Dkt. no. 63 at 1. In his motion, he stated, "It is undisputed that Gibbons had a
stress-induced heart attack on April 6, 2013." Id. at 2. He acknowledged that, if the
Court were to determine that his heart attack qualifies as a "sickness," he would not be
entitled to benefits under the rider to his insurance policy because his heart attack did
not occur before he reached the age of 60. Id. at 3. The "sole remaining issue" would
then be the claim for intentional infliction of emotional distress. Id. at 6.
In September 2016, the Court denied Gibbons's motion. See dkt. no. 84. Both
the Court and the parties "assume[d] for the purposes of argument that Gibbons was
correct on the causation issue"—that is, that work-related stress and not coronary artery
disease caused the heart attack. Id. at 3. The Court therefore assumed as true
Gibbons's assertions regarding the work-related stressors that supposedly induced his
heart attack. The Court determined, however, that under Illinois law, the ordinary
meaning of the term "injury" in the context of insurance policies requires a discrete,
external, triggering event. Because Gibbons did not point to any such event, the Court
concluded that his disability was due to sickness rather than injury. Id. at 11. Following
this ruling, defendants moved for entry of summary judgment in their favor on counts 3
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and 4. The Court granted this motion in October 2016.
In December 2016 and January 2017, the parties engaged in discussions
regarding settlement. On January 17, 2017, defense counsel Steven Hartmann emailed Pellis to reiterate a settlement offer of $40,000 in exchange for dismissal of all
claims with prejudice as well as a general release and cancellation of the insurance
policy. Two days later, Pellis e-mailed Hartmann stating that his client would accept the
offer and requesting a draft settlement agreement. Gibbons maintains that he never
authorized Pellis to accept the settlement offer. Pellis has turned over to the Court a
copy of his e-mails with Gibbons during this time period regarding settlement for in
camera review. These e-mails will be discussed in greater detail later in the opinion.
On February 6, 2017, Pellis informed Hartmann that Gibbons had changed his
mind and no longer wished to settle the case. Defendants thereafter filed a motion to
enforce what they contended was a binding oral settlement agreement. See dkt. no. 97.
At a hearing on the motion in March 2017, Gibbons appeared personally and stated that
he had never agreed to settle the case. See dkt. no. 106. The Court found, however,
that Pellis's e-mail, written as Gibbons's agent, constituted a meeting of the minds that
created an enforceable agreement. The Court granted the motion to enforce the
settlement and ordered dismissal with prejudice of the remaining claim of intentional
infliction of emotional dismiss upon defendants' tender of $40,000 to Gibbons. The
Court dismissed the case with prejudice on March 24, 2017.
In April 2017, Gibbons filed an appeal from the dismissal order. While that
appeal was still pending, Gibbons filed the current motion for relief from judgment under
Rule 60(b) in May 2017. After reviewing the parties' briefs, the Court determined that
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the motion raised a substantial issue but, due to the pending appeal, the Court lacked
jurisdiction to issue a ruling on the motion. The Court therefore asked the court of
appeals to remand the case. Dkt. no. 142. The Seventh Circuit granted the Court's
request for a remand in accordance with Federal Rule of Appellate Procedure 12.1 and
Circuit Rule 57. Dkt. no. 146. The appellate court retained jurisdiction of this case and
authorized a limited remand for the sole purpose of issuing an order regarding
Gibbons's motion under Rule 60(b).
Discussion
Gibbons has filed this motion for relief from judgment pursuant to Federal Rule of
Civil Procedure 60(b)(1), (3), (4), and (6). Gibbons requests relief from the Court's
partial grant of summary judgment in favor of defendants on counts 3 and 4 and the
order enforcing settlement. He argues primarily that the Court's summary judgment
ruling constituted an advisory opinion in violation of Article III of the Constitution and that
he never authorized Pellis to settle the case.
Rule 60(b) provides six grounds upon which a court may relieve a party from a
final judgment, order, or proceeding, four of which are relevant to this case: "(1)
mistake, inadvertence, surprise, or excusable neglect; . . . (3) fraud (whether previously
called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; (4)
the judgment is void; . . . or (6) any other reason that justifies relief." Fed. R. Civ. P.
60(b). Relief under this rule is an extraordinary remedy that is granted only in
exceptional circumstances. Eskridge v. Cook Cty., 577 F.3d 806, 809 (7th Cir. 2009).
District courts are given broad discretion to deny a motion for relief from judgment.
Mendez v. Republic Bank, 725 F.3d 651, 657 (7th Cir. 2013).
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A.
Summary judgment ruling
Gibbons first asks for relief from the Court's summary judgment ruling on the
ground that it is void. Pl.'s Mot. for Relief from a J. Pursuant to Rule 60(b)(1), (3), (4),
(6) (Pl.'s Mot. for Relief from J.) at 5. He argues that the ruling is an impermissible
advisory opinion because the Court lacked subject-matter jurisdiction. Id. at 2. The
Seventh Circuit has held, however, that "lack of subject-matter jurisdiction is not by itself
a basis for deeming a judgment void, that is, open to collateral attack" under Rule 60(b).
Bell v. Eastman Kodak Co., 214 F.3d 798, 801 (7th Cir. 2000). Therefore Gibbons has
no basis for requesting relief from the Court's summary judgment ruling.
Even were the Court to entertain this challenge, Gibbons's argument that the
opinion was advisory is incorrect. Article III limits the jurisdiction of federal courts to
"cases and controversies" and does not permit courts to issue advisory opinions.
Wisconsin's Envtl. Decade, Inc. v. State Bar of Wis., 747 F.2d 407, 410 (7th Cir. 1984).
"The difference between an abstract question calling for an advisory opinion and a ripe
'case or controversy' is one of degree, not discernible by any precise test." Id. The
essential question is whether there is a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and reality to warrant judicial action.
See id. at 411. The parties cannot agree to submit to an advisory opinion and thereby
evade this requirement. Barr v. Mateo, 355 U.S. 171, 172 (1957).
The Court's ruling on Gibbons's summary judgment motion addressed a specific
question of law that was actually in dispute by the two parties. Gibbons argued in his
motion that his heart attack was caused by work-related stress and that this clearly
qualified as "injury" under the insurance policy. Pl.'s Mot. for Partial Summ. J. and
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Supporting Mem. of Law at 2. In response, defendants argued that even if work-related
stress was the sole cause of the heart attack, this qualified as "sickness" and therefore
did not entitle Gibbons to benefits. Defs.' Opp'n to Pl.'s Mot. for Partial Summ. J. at 2.
The parties thus disagreed regarding the proper interpretation of the terms of the policy.
And if defendants were correct, Gibbons's claims under the policy were barred.
Because resolution of this issue would determine whether Gibbons was entitled to
coverage—and therefore whether defendants were liable for their failure to pay—the
parties had concretely adverse legal interests that warranted judicial action.
Gibbons argues that the ruling was advisory because Pellis did not submit, and
the Court did not consider, evidence regarding his medical history and the opinion of
medical experts, which, Gibbons contends, demonstrates that his heart attacks were not
caused by "sickness." Pl.'s Mot. for Relief from J. at 27–28. But this evidence was not
relevant to the issue the Court had under consideration. The issue argued by the
parties and determined by the Court was "th[e] threshold legal question" of whether,
under the terms of the insurance policy, "an insured who is disabled by a heart attack
that is indisputably induced by stress is . . . disabled due to injury or due to sickness."
See dkt. no. 84 at 2, 3. Thus Gibbons, by his own motion, asked the Court only to
interpret the terms of the insurance contract and reserved the question of whether he
had adequately proved that stress did in fact cause his heart attacks. Courts have
repeatedly held that, where terms of a contract are not ambiguous, interpretation of
these terms is purely a question of law appropriate for resolution by the court without
looking to extrinsic evidence. Platt v. Gateway Int'l Motorsports Corp., 351 Ill. App. 3d
326, 330, 813 N.E.2d 279, 283 (2004); Omnitrus Merging Corp. v. Ill. Tool Works, Inc.,
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256 Ill. App. 3d 31, 34, 628 N.E.2d 1165, 1168 (1993). Evidence of what actually
caused Gibbons's heart attack—and opinion testimony on whether stress-induced
events qualify as "injury"—would have been irrelevant to a legal determination regarding
whether, if the facts were viewed in the light most favorable to Gibbons, he was entitled
to be paid under the contract. And the fact that the Court in its summary judgment
ruling resolved a question of law that did not require extrinsic evidence does not per se
render the ruling advisory. The issue was actually in dispute between the parties, and
the Court's ruling was necessary for resolution of Gibbons's claims.
For these reasons, the Court denies Gibbons's motion for relief from the
summary judgment ruling.
B.
Order enforcing settlement
Gibbons next requests relief from the Court's order enforcing the settlement
agreement. He argues that he never consented to any settlement, despite Pellis's
statements to the contrary. Gibbons contends that he is entitled to relief due to Pellis's
mistake, inadvertence, or excusable neglect; or fraud, misrepresentation, or misconduct
by opposing counsel. See Fed. R. Civ. P. 60(b)(1) & (3).
1.
Mistake or excusable neglect
Gibbons argues that his attorney's acceptance of defendants' settlement offer
constitutes mistake or excusable neglect entitling him to relief from judgment. In
considering whether an error by an attorney justifies relief under Rule 60(b)(1), the
Seventh Circuit has drawn a distinction between inexcusable and excusable neglect.
See Helm v. Resolution Trust Corp., 84 F.3d 847, 878 (7th Cir. 1996). Excusable
neglect may, in some circumstances, warrant relief from a judgment; inexcusable
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neglect does not. Id. The burden to prove that the attorney's neglect was excusable
falls on the party seeking relief from judgment. Id. Although the Seventh Circuit has not
clearly defined excusable neglect, it has emphasized that the determination is "at
bottom an equitable one, taking account of all the relevant circumstances surrounding
the party's" error. Robb v. Norfolk & W. Ry. Co., 122 F.3d 354, 359 (7th Cir. 1997)
(citing Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 395
(1993)).
Gibbons has not yet demonstrated that his attorney erred or acted with
excusable neglect. He states in his affidavit that he never told Pellis he would settle his
claims "for a nuisance sum of $40,000." Pl.'s Mot. for Relief from J., Ex. 2 (Gibbons
Affid.) ¶ 10. Pellis told the Court at the hearing on the motion to enforce that Gibbons
had consented, and he has reaffirmed this in connection with the present motion. In
support of this position, Pellis has provided the Court with copies of the e-mails he
exchanged with Gibbons and his wife, Terri, regarding settlement of the case. Pellis
submitted the e-mails for in camera review, and thus they have not yet been made
available to defendants.
The first question is whether it is appropriate for the Court to consider the emails, which involve communications between Gibbons and his wife on the one hand
and Pellis on the other. On their face, the communications appear to be privileged. The
Court therefore starts with a review of the questions of privilege and waiver.
Federal Rule of Evidence 501 provides that "in a civil case, state law governs
privilege regarding a claim or defense for which state law supplies the rule of decision."
Fed. R. E. 501; Doe v. Archdiocese of Milwaukee, 772 F.3d 437, 440 (7th Cir. 2014).
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Gibbons asserted only claims under Illinois law. Therefore Illinois law regarding
privilege applies to the e-mails. "Where legal advice of any kind is sought from a lawyer
in his or her capacity as a lawyer, the communications relating to that purpose, made in
confidence by the client, are protected from disclosure by the client or lawyer, unless
the protection is waived." Center Partners, Ltd. v. Growth Head GP, LLC, 2012 IL
113107, ¶ 30, 981 N.E.2d 345, 355. An implied waiver of privilege occurs, however,
"where a party voluntarily injects either a factual or legal issue into the case, the truthful
resolution of which requires an examination of the confidential communications." Lama
v. Preskill, 353 Ill. App. 3d 300, 305, 818 N.E.2d 443, 448 (2004).
In his Rule 60(b) motion, Gibbons directly attacks Pellis's statement to the Court
that he (Gibbons) had accepted defendants' offer of settlement. By doing so, Gibbons
has injected a factual issue into resolution of the motion that requires the Court and the
parties to evaluate his otherwise confidential communications regarding settlement.
Gibbons has therefore waived his attorney-client privilege with regard to the relevant
communications. This waiver extends only to communications between Gibbons, Terri,
and Pellis regarding the same subject-matter—i.e., whether to engage in settlement
discussions and, later, accept defendants' settlement offer. See Center Partners, 2012
IL 113107 at ¶¶ 38–39, 981 N.E.2d 345, 357.
The Court therefore proceeds to summarize certain of the relevant e-mails. On
January 15, 2017, Pellis wrote to Gibbons to tell him that defendants had offered to
settle the case for $40,000 in exchange for dismissal of the claims with prejudice and
termination of the insurance policy. Gibbons responded the same day to say he was
not happy with the offer. He stated that he needed 24 hours to consider it and asked
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whether he and Pellis could arrange a conference call for the next day that would
include his wife, Terri. Pellis responded with a phone number. Terri e-mailed Pellis four
hours later to say there was no need "to waste [his] time with another conference call."
Needing an answer regarding the settlement offer, Pellis asked Terri to confirm whether
she and Cliff were willing to accept the settlement offer. On January 19 around 1:00
PM, Terri responded, "It appears we have no other choice" and told Pellis to "[s]end us
the necessary paperwork to sign and enable both parties to move on and officially end
the relationship." At 6:09 PM, Pellis e-mailed Hartmann and indicated that Gibbons
would accept the offer. At 11:49 PM that same evening, Gibbons e-mailed Pellis
regarding the settlement offer. He stated that the "settlement offer is all in your court at
this stage"; "[y]our settlement negotiations skills [sic] is all your money"; "I would
suggest you give it all you can with this ----- representing MONY/DMS"; "[w]hatever you
can best negotiate is it"; and "give it your best show for your best interest." (It appears
that the proposed $40,000 payment was expected to go to Pellis for legal fees.)
Gibbons went on to express anger regarding both the defendants and Pellis's efforts on
the case.
An attorney's acceptance of a settlement offer based upon an erroneous belief
that he had the authority to do so conceivably might qualify as excusable neglect. It is
not entirely clear to the Court from these e-mails whether Pellis had authority from
Gibbons himself to accept the proposed settlement before he communicated
acceptance to defense counsel; whether Terri Gibbons's statements gave Pellis the
authority to accept the proposed settlement; or, perhaps, whether Gibbons ratified the
acceptance. An evidentiary hearing, including testimony, will be required to resolve
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these issues. Prior to the hearing, defendants must be permitted to review the e-mails
that give rise to the dispute regarding acceptance. The Court directs Pellis to produce
to defense counsel the following e-mails that were provided to the Court:
•
the e-mail from Pellis to Terri dated December 1, 2016 at 4:10 PM, with the
subject "RE: Gibbons v. MONY/DMS Litigation – 'Injury' vs. 'Sickness'
Nonsense," and the response from Terri to Pellis dated December 5, 2016 at
1:36 PM;
•
the e-mail from Pellis to Gibbons and Terri dated January 15, 2017 at 6:35 PM,
with the subject "RE: Status Hearing Today (Privileged and Confidential Attorney
Client Communications)";
•
the e-mail from Gibbons to Pellis and Terri dated January 15, 2017 at 6:29 PM,
with the same subject;
•
the e-mail from Pellis to Gibbons dated January 16, 2017 at 10:43 AM;
•
the e-mail from Terri to Gibbons dated January 19, 2017 at 3:00 PM, in which
she forwarded the following communications between her and Pellis:
o the e-mail from Terri to Pellis dated January 16, 2017 at 2:09 PM, with the
subject "RE: Status Hearing Today (Privileged and Confidential Attorney
Client Communications)";
o the e-mail from Pellis to Terri dated January 18, 2017 at 3:27 AM;
o the e-mail from Terri to Pellis dated January 19, 2017 at 12:59 PM, with
the subject "RE: Status Hearing Today (Privileged and Confidential
Attorney Client Communications)";
•
the e-mail from Gibbons to Pellis dated January 19, 2017 at 11:49 PM, with the
same subject.
Pellis is not required to turn over any e-mails that were made available to the Court that
are in the same string as the listed e-mails or that were sent prior to or following these
specific communications regarding settlement.
2.
Fraud or misrepresentation
Gibbons also argues that he is entitled to relief from the order enforcing
settlement due to fraud, misrepresentation, or misconduct by an opposing party. His
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argument focuses on the briefs the parties submitted regarding the motion to enforce.
Defendants alleged in their motion that Pellis first indicated that Gibbons accepted the
settlement and, a few weeks later, said that Gibbons had changed his mind.
Defendants also provided the Court with a copy of the e-mail from Pellis to Hartmann in
which Pellis stated that Gibbons would accept the offer. In Gibbons's response motion,
Pellis affirmed that "he does not contest the facts as presented in" defendants' motion.
Gibbons argues that this affirmation "constitutes an illegal disclosure of protected
attorney / client communications" and that Hartmann's use of this information
constitutes fraud or misconduct. Pl.'s Mot. for Relief from J. at 21–22.
Pellis's statements do not constitute an illegal disclosure of privileged
communications. The attorney-client privilege does not extend to communications that
were intended to be disclosed to third parties or that the client could not reasonably
have believed would be understood by the attorney as confidential. In re Marriage of
Johnson, 237 Ill. App. 3d 381, 392–93, 604 N.E.2d 387, 386–87 (1992). Gibbons could
not reasonably have believed that either his acceptance or rejection of a settlement
offer made by defendants was confidential information that Pellis would not relay to
defendants' counsel. Therefore Pellis did not disclose privileged communications, and
Hartmann's reference to these communications is not fraud or misconduct. The Court
denies Gibbons's motion for relief from the order enforcing settlement to the extent it
relies on Rule 60(b)(3).
Conclusion
For the foregoing reasons, the Court denies in part Gibbons's motion for relief
from judgment [dkt. no. 128] to the extent he challenges the summary judgment ruling.
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The Court also denies Gibbons's motion for relief from the order enforcing settlement to
the extent that it is based on fraud or misconduct by an opposing party under Rule
60(b)(3). The Court orders an evidentiary hearing on the remaining issue in the motion,
as described in the body of this decision. The evidentiary hearing is set for September
8, 2017 at 1:30 p.m., though the Court reserves the right to move the hearing up to that
morning. A status hearing to discuss the evidentiary hearing and the witnesses who will
need to appear (likely Gibbons, Terri Gibbons, and Pellis) is set for August 14, 2017 at
9:30 a.m.
________________________________
MATTHEW F. KENNELLY
United States District Judge
Date: August 9, 2017
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