Western National Insurance Group v. Hanlon et al

Filing 15

ORDER. IT IS ORDERED that 9 Defendants' motion to stay is DENIED. Signed by Magistrate Judge Carl W. Hoffman on 5/30/17. (Copies have been distributed pursuant to the NEF - MR)

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1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 4 5 6 7 8 9 WESTERN NATIONAL INSURANCE GROUP, et al, ) ) ) Plaintiffs, ) ) v. ) ) CARRIE M. HANLON, ESQ., et al, ) ) Defendants. ) _______________________________________ ) Case No. 2:17-cv-0825-JCM-CWH ORDER 10 Presently before the Court is Defendant Carrie M. Hanlon’s motion to stay (ECF No. 9), filed 11 on April 14, 2017. Plaintiff Western National Insurance Group (WNI) filed a response (ECF No. 12) 12 on April 28, 2017, and Hanlon filed a reply (ECF No. 14) on May 5, 2017. 13 WNI brings this suit against Hanlon and the law firm of Morris, Sullivan, Lemkul and 14 Pitegoff, who are WNI’s former counsel, for malpractice stemming from a case in Nevada state 15 court. In that case, Hanlon allegedly failed to timely respond to a request for admissions. Mot. at 3 16 (ECF No. 9). The Nevada Court deemed the requested information admitted, and subsequently 17 granted a motion for partial summary judgment against WNI. Id. WNI subsequently acquired new 18 counsel and settled the case for $1.5 million. Id. Hanlon filed an appeal, as an intervening party, of 19 the Nevada Court’s decision. Id at 3-4. WNI then brought the instant case in federal court, alleging, 20 inter allia, that Hanlon’s malpractice led WNI to settle the case for $1.5 million. Resp. at 6 (ECF 21 No. 12). 22 Hanlon now requests a stay of all proceedings pending the outcome of her appeal to the 23 Nevada Supreme Court, arguing that WNI’s malpractice claims should not go forward until the 24 appeal in the underlying case has become final. WNI opposes the stay, arguing that its cause of 25 action is ripe, and that the appeal has no bearing on its damages. 26 27 As Hanlon notes, it is within a Court’s discretion to enter a stay “pending resolution of independent proceedings which bear upon the case.” Yong v. I.N.S., 208 F.3d 1116, 1120 (9th Cir. 28 1 1 2000) (internal quotation marks and citations omitted). When determining whether to grant a stay, 2 courts should seek to “balance the length of the stay against the strength of the justification for it.” 3 Id. at 1119. 4 Here, in support of the motion to stay, Hanlon argues that, under Nevada state law, a claim 5 for malpractice cannot be brought until the underlying case that gave rise to the malpractice claim 6 has been resolved in its entirety. In support of this standard, Defendants rely on Nevada Supreme 7 Court’s decision in Semenza v. Nevada Med. Liab. Ins. Co., 104 Nev. 666 (1988), which holds that 8 “it is only after the underlying case has been affirmed on appeal that it is appropriate to assert injury 9 and maintain a legal malpractice cause of action for damages. . . . where damage has not been 10 sustained or where it is too early to know whether damage has been sustained, a legal malpractice 11 action is premature and should be dismissed.” Id. at 668. 12 However, based on the explicit rationale for this holding, a malpractice claim would not be 13 premature in all cases in which an appeal is pending. The Semenza Court’s decision was predicated 14 on the principle that a malpractice claim “does not accrue until the plaintiff knows, or should know, 15 all facts relevant to the foregoing elements and damage has been sustained. More specifically, where 16 damage has not been sustained or where it is too early to know whether damage has been sustained, a 17 legal malpractice action is premature and should be dismissed.” Id. The situation contemplated by 18 the Semenza Court involved damages which were awarded subsequent to a judgment of liability, and 19 so would have been erased if the plaintiff alleging malpractice had won on appeal. In contrast, when 20 damages are result of a voluntary dismissal and settlement, any damages from malpractice are 21 already fixed and cannot be mitigated by appeal. Therefore, under the rationale articulated by the 22 Semenza court, such a malpractice action would not be premature because of a pending appeal. 23 Here, unlike in Semenza, WNI’s alleged damages had already accrued when the malpractice 24 claim was brought. WNI alleges Hanlon caused the $1.5 million dollar settlement, which is not 25 subject to the pending appeal, and has already been paid to the plaintiff of underlying case. Even if 26 Hanlon’s appeal as an intervening party is successful, there is no indication that the settlement will 27 be unwound, as neither party to the settlement has raised any objection. Thus, regardless of the 28 2 1 outcome of the pending appeal, WNI’s alleged damages are fixed at the amount of the settlement. 2 Their malpractice claim is therefore ripe for adjudication. 3 Defendants will certainly question what extent, if any, they are responsible for the alleged 4 damages. While the Nevada Supreme Court’s decision may provide assistance in answering those 5 questions, Hanlon’s appeal has been pending for only two months, and there is no suggestion that a 6 decision is imminent. The Court therefore finds that the potential length of Hanlon’s proposed stay 7 is significant, and the benefits to the parties uncertain. In contrast, moving forward allows the parties 8 and the Court to begin determination of the merits of this case immediately. The Court does not find 9 good cause for a stay of the case at this point. 10 IT IS THEREFORE ORDERED that Defendants’ motion to stay (ECF No. 9) is DENIED. 11 DATED: May 30, 2017. 12 13 _________________________________ C.W. Hoffman, Jr. United States Magistrate Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3

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