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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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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WESTERN NATIONAL INSURANCE
GROUP, et al,

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Plaintiffs,
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v.
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CARRIE M. HANLON, ESQ., et al,
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Defendants.
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_______________________________________ )

Case No. 2:17-cv-0825-JCM-CWH

ORDER

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Presently before the Court is Defendant Carrie M. Hanlon’s motion to stay (ECF No. 9), filed

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on April 14, 2017. Plaintiff Western National Insurance Group (WNI) filed a response (ECF No. 12)

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on April 28, 2017, and Hanlon filed a reply (ECF No. 14) on May 5, 2017.

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WNI brings this suit against Hanlon and the law firm of Morris, Sullivan, Lemkul and

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Pitegoff, who are WNI’s former counsel, for malpractice stemming from a case in Nevada state

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court. In that case, Hanlon allegedly failed to timely respond to a request for admissions. Mot. at 3

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(ECF No. 9). The Nevada Court deemed the requested information admitted, and subsequently

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granted a motion for partial summary judgment against WNI. Id. WNI subsequently acquired new

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counsel and settled the case for $1.5 million. Id. Hanlon filed an appeal, as an intervening party, of

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the Nevada Court’s decision. Id at 3-4. WNI then brought the instant case in federal court, alleging,

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inter allia, that Hanlon’s malpractice led WNI to settle the case for $1.5 million. Resp. at 6 (ECF

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No. 12).

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Hanlon now requests a stay of all proceedings pending the outcome of her appeal to the

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Nevada Supreme Court, arguing that WNI’s malpractice claims should not go forward until the

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appeal in the underlying case has become final. WNI opposes the stay, arguing that its cause of

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action is ripe, and that the appeal has no bearing on its damages.

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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.

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2000) (internal quotation marks and citations omitted). When determining whether to grant a stay,

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courts should seek to “balance the length of the stay against the strength of the justification for it.”

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Id. at 1119.

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Here, in support of the motion to stay, Hanlon argues that, under Nevada state law, a claim

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for malpractice cannot be brought until the underlying case that gave rise to the malpractice claim

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has been resolved in its entirety. In support of this standard, Defendants rely on Nevada Supreme

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Court’s decision in Semenza v. Nevada Med. Liab. Ins. Co., 104 Nev. 666 (1988), which holds that

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“it is only after the underlying case has been affirmed on appeal that it is appropriate to assert injury

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and maintain a legal malpractice cause of action for damages. . . . where damage has not been

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sustained or where it is too early to know whether damage has been sustained, a legal malpractice

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action is premature and should be dismissed.” Id. at 668.

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However, based on the explicit rationale for this holding, a malpractice claim would not be

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premature in all cases in which an appeal is pending. The Semenza Court’s decision was predicated

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on the principle that a malpractice claim “does not accrue until the plaintiff knows, or should know,

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all facts relevant to the foregoing elements and damage has been sustained. More specifically, where

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damage has not been sustained or where it is too early to know whether damage has been sustained, a

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legal malpractice action is premature and should be dismissed.” Id. The situation contemplated by

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the Semenza Court involved damages which were awarded subsequent to a judgment of liability, and

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so would have been erased if the plaintiff alleging malpractice had won on appeal. In contrast, when

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damages are result of a voluntary dismissal and settlement, any damages from malpractice are

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already fixed and cannot be mitigated by appeal. Therefore, under the rationale articulated by the

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Semenza court, such a malpractice action would not be premature because of a pending appeal.

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Here, unlike in Semenza, WNI’s alleged damages had already accrued when the malpractice

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claim was brought. WNI alleges Hanlon caused the $1.5 million dollar settlement, which is not

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subject to the pending appeal, and has already been paid to the plaintiff of underlying case. Even if

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Hanlon’s appeal as an intervening party is successful, there is no indication that the settlement will

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be unwound, as neither party to the settlement has raised any objection. Thus, regardless of the

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outcome of the pending appeal, WNI’s alleged damages are fixed at the amount of the settlement.

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Their malpractice claim is therefore ripe for adjudication.

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Defendants will certainly question what extent, if any, they are responsible for the alleged

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damages. While the Nevada Supreme Court’s decision may provide assistance in answering those

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questions, Hanlon’s appeal has been pending for only two months, and there is no suggestion that a

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decision is imminent. The Court therefore finds that the potential length of Hanlon’s proposed stay

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is significant, and the benefits to the parties uncertain. In contrast, moving forward allows the parties

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and the Court to begin determination of the merits of this case immediately. The Court does not find

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good cause for a stay of the case at this point.

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IT IS THEREFORE ORDERED that Defendants’ motion to stay (ECF No. 9) is DENIED.

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DATED: May 30, 2017.

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_________________________________
C.W. Hoffman, Jr.
United States Magistrate Judge

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