First American Title Insurance Co. v. Bowles Rice, L.L.P.

Filing 241

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES MOTIONS FOR SUMMARY JUDGMENT (DKT. NOS. 168 ; 170 ): For the reasons discussed, neither party is entitled to judgment as a matter of law regarding First Americans breach ofcontract claims. Therefore, the Court DENIES the parties motions for summary judgment (Dkt. Nos. 168 ; 170 ). Signed by Senior Judge Irene M. Keeley on 8/8/18. (jss)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

FIRST AMERICAN TITLE INSURANCE CO.,
Plaintiff,
v.

CIVIL ACTION NO. 1:16cv219
(Judge Keeley)

BOWLES RICE, LLP,
Defendant.
MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
Pending before the Court are the parties’ competing motions
for summary judgment (Dkt. Nos. 168; 170). For the following
reasons, the Court DENIES the motions.
I. INTRODUCTION
For

a

detailed

summary

of

the

factual

and

procedural

background in this case, the Court incorporates its statement of
the facts in the related case of ALPS Property & Casualty Company
v. Bowles Rice, LLP, Civil Action No. 1:18CV29, Dkt. No. 48 at 213. The plaintiff, First American Title Insurance Company (“First
American”),

is

a

title

insurance

company

with

an

office

in

Barboursville, West Virginia. The defendant, Bowles Rice, LLP
(“Bowles Rice”), is a law firm with offices in, among others,
Charleston and Morgantown, West Virginia.
The parties’ relationship is contractual. In 1994, First
American and Bowles Rice entered into a Limited Agency Agreement in
which First American appointed the Bowles Rice office in Charleston

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
to act as its agent throughout West Virginia (“the 1994 Agency
Agreement”). Carl Andrews, a partner at the office in Charleston,
executed the agreement on Bowles Rice’s behalf. When the parties
amended the agreement in 2003, Charles Dollison (“Dollison”),
another partner in the Charleston office, executed the addendum for
Bowles Rice. In 2006, First American and Bowles Rice entered into
a separate Agency Agreement in which First American appointed the
Bowles Rice office in Morgantown, West Virginia, to act as its
agent throughout the state (“the 2006 Agency Agreement”). Charles
Wilson (“Wilson”), a partner in the firm’s Morgantown office,
executed that agreement for Bowles Rice.
The pending case is one of many flowing from the ill-fated
construction of a $2 billion coal-fired power plant by Longview
Power,

LLC

(“Longview”),

straddling

the

border

of

Monongalia

County, West Virginia, and Greene County, Pennsylvania. Financing
for the Longview project was secured by a deed of trust in favor of
Union Bank of California, N.A. (“Union Bank”). When Union Bank’s
financing closed on February 28, 2007, First American issued an
owner’s and lender’s policy for the West Virginia properties and an
owner’s and lender’s policy for the Pennsylvania properties.
At issue in this case is Union Bank’s $775 million lender’s
policy for the West Virginia properties that Dollison signed on
2

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
behalf of First American (“Lender’s Title Policy”).1 At Union
Bank’s request, the Lender’s Title Policy included an endorsement
that covered risks related to mechanic’s liens.
The Longview project took a turn for the worse in 2012 when
Longview’s contractors filed mechanic’s liens totaling in excess of
$335 million. Because the contractors might claim that their liens
held priority over its deed of trust, Union Bank filed a claim on
First American under the Lender’s Title Policy in April 2013.
Longview

subsequently

filed

for

bankruptcy

protection

in

the

District of Delaware in August 2013. After extensive litigation, in
December 2014, First American agreed to pay $41 million to settle
Union Bank’s claim as part of Longview’s bankruptcy proceeding.
In November 2016, First American filed this case against
Bowles Rice, claiming that Bowles Rice caused its losses under the
Lender’s Title Policy by breaching its duties under the parties’
agency agreements. More particularly, First American claims that
Bowles

Rice

knew

construction

had

commenced

on

the

Longview

project, thereby presenting a risk of mechanic’s liens senior in
1

Dollison also signed the owner’s policy for West Virginia,
but because neither Dollison nor Wilson were licensed title agents
in Pennsylvania, First American itself issued the policies for
Pennsylvania. Nonetheless, the Bowles Rice office in Morgantown
conducted title examinations related to the Longview project in
Pennsylvania (Dkt. No. 172-1 at 6).
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
priority to Union Bank’s deed of trust, but failed to advise First
American of this risk pursuant to its obligations under the 1994
and 2006 Agency Agreements.
II. STANDARD OF REVIEW
Summary
documents,

judgment

is

electronically

appropriate
stored

where

the

information,

“depositions,
affidavits

or

declarations, stipulations (including those made for purposes of
the motion only), admissions, interrogatory answers, or other
materials” establish 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), (c)(1)(A). “When cross-motions for
summary judgment are submitted to a district court, . . . the facts
relevant to each must be viewed in the light most favorable to the
non-movant.” Mellen v. Bunting, 327 F.3d 355, 363 (4th Cir. 2003);
see also Providence Square Assocs., L.L.C. v. G.D.F., Inc., 211
F.3d 846, 850 (4th Cir. 2000). The Court must avoid weighing the
evidence or determining its truth and limit its inquiry solely to
a determination of whether genuine issues of triable fact exist.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
The moving party bears the initial burden of informing the
Court

of

the

basis

for

the

motion

4

and

of

establishing

the

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
nonexistence of genuine issues of fact. Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Once the moving party has made the
necessary showing, the non-moving party “must set forth specific
facts showing that there is a genuine issue for trial.” Anderson,
477 U.S. at 256 (internal quotation marks and citation omitted).
The “mere existence of a scintilla of evidence” favoring the nonmoving party will not prevent the entry of summary judgment; the
evidence must be such that a rational trier of fact could find for
the nonmoving party. Id. at 248–52. Nor can the non-movant “create
a genuine issue of material fact through mere speculation or the
building of one inference upon another.” Runnebaum v. NationsBank
of Md., N.A., 123 F.3d 156, 164 (4th Cir. 1997).
III. APPLICABLE LAW
This case involves the interpretation of agency agreements,
lien

waivers,

exercising

and

various

diversity

other

jurisdiction

contracts.
is

“A

obliged

federal
to

apply

court
the

substantive law of the state in which it sits.” Volvo Constr.
Equip. N. Am. v. CLM Equip. Co., Inc., 386 F.3d 581, 599-600 (4th
Cir. 2004) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79
(1938)). In West Virginia, “[a] claim for breach of contract
requires proof of the formation of a contract, a breach of the

5

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
terms of that contract, and resulting damages.” Sneberger v.
Morrison, 776 S.E.2d 156, 171 (W. Va. 2015) (citing Syl. Pt. 1,
State ex rel. Thornhill Group, Inc. v. King, 759 S.E.2d 795 (W. Va.
2014)). In addition, the plaintiff must “show that he has complied
with the contract himself, . . . and, if the evidence shows that he
has not complied with the terms of the contract, and has not been
prevented or relieved therefrom as aforesaid, he will be denied a
recovery from the breach of same.” Charleston Nat’l Bank v. Sims,
70 S.E.2d 809, 813 (W. Va. 1952) (quoting Jones v. Kessler, 126
S.E. 344 (W. Va. 1925)); see also Exec. Risk Indem., Inc. v.
Charleston

Area

Med.

Ctr.,

Inc.,

681

F.

Supp.

2d

694,

714

(S.D.W.Va. 2009) (citing 23 Williston on Contracts § 63:1 (Richard
A. Lord, ed., 4th ed. West 2009)).
When the existence of a written contract is not in dispute,
“[i]t is the province of the Court, and not of the jury, to
interpret” the contract. Syl. Pt. 1, Toppings v. Rainbow Homes,
Inc., 490 S.E.2d 817 (W. Va. 1997). “A valid written instrument
which expresses the intent of the parties in plain and unambiguous
language is not subject to judicial construction or interpretation
but will be applied and enforced according to such intent.” Syl.
Pt. 4, Zimmerer v. Romano, 679 S.E.2d 601 (W. Va. 2009) (quoting
Syl. Pt. 1, Sally-Mike Props. v. Yokum, 332 S.E.2d 597 (W. Va.
6

FIRST AMERICAN V. BOWLES RICE

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
1985)). “[I]t is the duty of the court to construe [a written
instrument] as a whole, taking and considering all the parts
together, and giving effect to the intention of the parties
wherever that is reasonably clear and free from doubt.” Zimmerer,
679 S.E.2d 601, Syl. Pt. 5 (quoting Syl. Pt. 5, Hall v. Hartley,
119 S.E.2d 759 (W. Va. 1961)).
“A contract is ambiguous when it is reasonably susceptible to
more than one meaning in light of the surrounding circumstances and
after applying the established rules of construction.” Williams v.
Precision Coil, Inc., 459 S.E.2d 329, 342 n.23 (W. Va. 1995). Only
if a contract is ambiguous may the Court resort to “the situation
of

the

contract

parties,
was

the

entered

circumstances
into[,]

and

surrounding
their

them

subsequent

when

the

conduct.”

Zimmerer, 679 S.E.2d 601, Syl. Pt. 7 (quoting Syl. Pt. 2, Snider v.
Robinett, 88 S.E. 599 (W. Va. 1916)).
IV. DISCUSSION2
A.

The 2006 Agency Agreement may apply to this case.
As an initial matter, Bowles Rice contends that the 1994

Agency Agreement is the only contract applicable to this case.

2

As appropriate, the facts relevant to each cross-motion for
summary judgment are viewed in the light most favorable to the nonmoving party. Mellen, 327 F.3d at 363.
7

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
According to Bowles Rice, because Dollison’s duties as an agent
were governed by the 1994 Agency Agreement, and he signed the
Lender’s

Title

Policy

upon

which

First

American

bases

its

allegations, the 2006 Agency Agreement is inapplicable (Dkt. Nos.
171 at 7; 179 at 10).
Whether Bowles Rice breached the 2006 Agency Agreement is much
more fact-bound than Bowles Rice’s simple observation that Dollison
signed the Lender’s Title Policy. Neither party’s motion adequately
addresses whether the alleged title work performed by Wilson and
the Morgantown office falls under the 2006 Agency Agreement.
Indeed, both parties recognize that deciding whether the 2006
Agency Agreement applies in this case involves questions of fact
that are not necessary to resolve in order to decide the pending
motions (Dkt. Nos. 171 at 7; 172 at 15 n.4). Therefore, the Court
will

focus

its

analysis

on

application

of

the

1994

Agency

Agreement, and reserve for trial whether Bowles Rice breached the
2006 Agency Agreement.
B.

First American is not entitled to summary judgment on the
question whether Bowles Rice breached the 1994 Agency
Agreement.
First American contends that Bowles Rice breached the 1994

Agency Agreement when it failed to inform First American that

8

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
construction had commenced on the Longview property (Dkt. No. 172
at 14-17). A mechanic’s lien attaches “as of the date such labor,
material, machinery or other necessary equipment shall have begun
to be furnished, and shall have priority over any other lien
secured by a deed of trust or otherwise which is created subsequent
to such date.” W. Va. Code § 38-2-17. Under the 1994 Agency
Agreement, Bowles Rice was required to determine insurability
based, in part, on “[t]he absence of knowledge by Agent or approved
attorney of any fact, doubt, or rumor which may adversely affect
the interest of the proposed insured or the real property to be
described in the policy” (Dkt. No. 170-18 at 3). It follows that,
when Bowles Rice asked First American to authorize issuance of the
Lender’s Title Policy, Bowles Rice was required to advise if it had
knowledge of such a “fact, doubt, or rumor.” See id. at 2-3.
As Longview’s efforts to finance the project drew to a close,
on February 13, 2007, several parties opposed to the project filed
suit

against

Longview

and

its

contractors,

alleging

that

a

necessary Prevention of Significant Deterioration (“PSD”) permit
under

the

Clean

Air

Act

(“CAA”)

had

expired

(“the

Jamison

litigation”) (N.D.W.Va., Civil No. 1:07cv20, Dkt. No. 1). Bowles
Rice

partner

Leonard

Knee

(“Knee”)

responded

to

the

Jamison

litigation on behalf of Longview. He argued, in part, that West
9

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
Virginia regulations approved by the Environmental Protection
Agency required a PSD permit to be revoked after 18 months only if
Longview could not provide “written proof of a good faith effort
that . . . construction . . . has commenced” (N.D.W.Va., Civil No.
1:07cv20, Dkt. No. 10-1 at 14-16). He also unequivocally advised
the Court that construction activities had commenced, including
“preliminary site establishment activities such as clearing and
grubbing of vegetation, grading for placement of construction
offices and an access road, [and] placement of stone base material
on

the

access

road

and

parking

area”

(N.D.W.Va.,

Civil

No.

1:07cv20, Dkt. No. 12-2 at 9).
Around the same time, Dollison and Knee were involved in the
preparation of a permitting opinion letter for Union Bank, which at
the lender’s request, included an express opinion that construction
had commenced for purposes of the CAA permit (Dkt. No. 174-2 at
370). When Dollison became aware of this request on February 21,
2007, he asked Union Bank’s counsel to “give [him] a call about the
. . . requested express opinion on commence construction” because
Bowles Rice could not “give that without a lengthy discussion of
the pending case.” Id. at 376. In his deposition, however, Dollison
testified that he had only a general knowledge of the Jamison

10

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
litigation, and that he could not remember whether he knew in
February 2007 that work had commenced. Id. at 27, 33-35.
Viewed in the light most favorable to Bowles Rice, questions
of fact exist regarding whether Dollison’s knowledge of the Jamison
litigation and permitting issues was detailed enough to constitute
a “fact, doubt, or rumor” that construction actually had commenced
on the Longview property sufficient for a mechanic’s lien to
attach. In light of these questions, First American is not entitled
to summary judgment on the issue whether Bowles Rice breached the
1994 Agency Agreement because of Dollison’s knowledge that work had
commenced on the site of Longview’s project.3
C.

The 1994 Agency Agreement includes an express indemnification
provision that may apply to this case.
The

parties

dispute

whether

the

1994

Agency

Agreement

expressly requires Bowles Rice to indemnify First American for the
$41 million settlement in bankruptcy court (Dkt. Nos. 179 at 10-12;
192-2 at 8-9).
West Virginia recognizes both express and implied duties of
indemnification. Express indemnity is based on a written agreement
and "can provide the person having the benefit of the agreement,
3

Notably, neither party addresses whether Knee’s undisputed
knowledge of work done on the Longview property is imputable to
Dollison under the principles of partnership law.
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
the indemnitee, indemnification even though the indemnitee is at
fault." Syl. Pt. 1, Valloric v. Dravo Corp., 357 S.E.2d 207 (W. Va.
1987). Implied indemnity, on the other hand, arises out of a
relationship between the parties. Id. To receive the benefit of
implied indemnification, the indemnitee’s “independent actions”
must

not

have

“contribute[d]

to

the

injury.”

Syl.

Pt.

6,

Ruckdeschel v. Falcon Drilling Co., LLC, 693 S.E.2d 815 (W. Va.
2010) (quoting Syl. Pt. 2, Harvest Capital v. W. Va. Dep’t of
Energy, 560 S.E.2d 509 (W. Va. 2002)).4
The

1994

Agency

Agreement

provides

that

Bowles

Rice

is

responsible for indemnification in the following circumstances:
Agent shall be liable for the first one Thousand Dollars
($1,000.00) of each and every loss or expense arising
from a policy issued by Agent and any loss, cost or
expense occassioned [sic] by assumption of a risk not
authorized by the Company.
(Dkt. No. 170-18 at 5). Bowles Rice contends that its liability, if
any, is limited to $1,000 because First American authorized it to
issue the Lender’s Title Policy (Dkt. No. 179 at 11-12). Indeed,
First

American

employees

have

confirmed

that

First

American

authorized Bowles Rice to issue the Lender’s Title Policy, knowing
4

The 2006 Agency Agreement undoubtedly includes an express
indemnification provision (Dkt. No. 170-10 at 8-9). But, as
discussed earlier, whether the agreement applies under the
circumstances is disputed by the parties. See supra Part IV.A.
12

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
that it included a mechanic’s lien endorsement (Dkt. Nos. 172-23 at
8; 183-5 at 2-3; 183-6 at 2).
First American, on the other hand, contends that Bowles Rice
is liable for its entire loss because First American authorized a
mechanic’s lien endorsement without being fully advised by its
agent of the risk entailed (Dkt. No. 172 at 18). Resolution of this
dispute requires analysis of the phrase “assumption of a risk not
authorized by the Company” (Dkt. No. 170-18 at 5).
The 1994 Agency Agreement does not define “assumption” or
“risk,” but the Court is aided by dictionary definitions. See Nat’l
Union Fire Ins. Co. v. Miller, 724 S.E.2d 343, 352 (W. Va. 2012).
“Assume” means “to take to or upon oneself.” Assume, MerriamWebster, https://www.merriam-webster.com/dictionary/assume. In the
context of insurance, “risk” is “[t]he chance or degree of loss to
the subject matter of an insurance policy” or “the amount that an
insurer stands to lose.” Risk, Black’s Law Dictionary (10th ed.
2014). Under these definitions, the 1994 Agency Agreement would
require Bowles Rice to fully indemnify First American even in some
circumstances, such as the instant case, where First American
authorizes a policy or endorsement. In other words, if Bowles Rice
requested and received authorization to issue a mechanic’s lien
endorsement, but did not disclose “the chance or degree of loss”
13

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
that such an endorsement would entail, it could be said that Bowles
Rice assumed a risk not authorized by First American.
But “Risk” may also mean “[t]he type of loss covered by a
policy; a hazard from a specified source.” Id. In fact, looking at
the context of the entire instrument, Zimmerer, 679 S.E.2d 601,
Syl. Pt. 5, the 1994 Agency Agreement appears to utilize this form
of the definition. Bowles Rice is not authorized to act for First
American with regard to “[a]ny proposal or agreement to accept or
insure over any special or extraordinary risks not contemplated in
the Company’s forms including, but not limited to, mechanic lien
risk, without prior approval by the Company” (Dkt. No. 170-18 at
3). Under this reading, Bowles Rice would only be required to
indemnify First American when it insured over an extraordinary
risk, such as issuing a mechanic’s lien endorsement, without
receiving authorization from First American. First American would
otherwise be limited to holding Bowles Rice liable for the first
$1,000 of loss, even where Bowles Rice omitted critical details
when requesting the endorsement from First American. Id.5
5

Although this result seems absurd when the agent is issuing
$775 million in title insurance, one must recall that the 1994
Agency Agreement capped Bowles Rice’s authority at $500,000 (Dkt.
No. 170-18 at 2). Moreover, the parties are free to contract for
the express indemnification provision of their choosing, as
illustrated by the much more comprehensive indemnity provision in
14

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
Consequently, even after application of the established rules
of

construction,

authorized

by

what

the

constitutes

Company”

is

“assumption

reasonably

of

a

risk

susceptible

to

not
two

different meanings. Williams, 459 S.E.2d at 342 n.23. Neither
party, therefore, is entitled to summary judgment regarding whether
the 1994 Agency Agreement requires express indemnification in this
case.
D.

Factual disputes preclude a ruling regarding whether Bowles
Rice had a duty to indemnify First American.
Even if the 1994 Agency Agreement expressly imposes a duty to

indemnify, there are material facts in dispute regarding whether
First American is entitled to be indemnified in the amount of $41
million. When an indemnitee settles its liability to a third party,
there are two possible burdens of proof; the indemnitee must either
establish that it was potentially or actually liable to recover
from the indemnitor. Valloric, 357 S.E.2d at 211.
1.

There are material facts in dispute regarding whether
First American provided adequate notice.

“[W]hether actual or potential liability must be shown depends
on whether the indemnitor . . . had actual notice of the underlying
claim, an opportunity to defend it, and the right to participate in

the 2006 Agency Agreement (Dkt. No. 170-10 at 8-9).
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
any settlement negotiations.” Id. These factors are commensurate
with an indemnitee’s duty to provide “reasonable notice . . . of a
claim that is covered by [an] indemnity agreement.” VanKirk v.
Green Const. Co., 466 S.E.2d 782, 789 (W. Va. 1995). Disputed
questions regarding notice, including its reasonableness under the
circumstances, are reserved for the trier of fact under West
Virginia law. See, e.g., Syl. Pt. 1, Dairyland Ins. Co. v. Voshel,
428 S.E.2d 542 (W. Va. 1993) (holding that the reasonableness of
notice provided to an insurer “ordinarily becomes a question of
fact”); Johnson v. Inter-Ocean Cas. Co., 164 S.E. 411, 412 (W. Va.
1932) (referring to “proper notice” as a question of fact).
Here,
potential

First

American

liability

because

contends
two

that

letters

it
it

must
sent

only

prove

Bowles

Rice

constitute adequate notice under the circumstances (Dkt. No. 172 at
12-13). On May 6, 2014, First American’s Senior Claims Counsel,
Brian Barlow (“Barlow”), sent a letter to Dollison summarizing the
nature of the “title issue” in Longview’s bankruptcy proceeding,
including that the mechanic’s liens claimed priority over the deed
of trust because “construction work began on the project prior to

16

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
the recording of the Deed of Trust” (Dkt. No. 172-18 at 74).6
Barlow further advised Dollison that
[t]he lien priority issues have proceeded to mediation in
the Bankruptcy Court. Based on the information available
to date, your firm should put its liability insurance
carrier on notice of this claim if it has not already
done so. Please confirm in writing that you have put your
liability insurance carrier on notice of this claim.
Id. On “May 19, 2014, Bowles Rice notified ALPS of a potential
claim arising out of” its services on the Longview project (Dkt.
No. 172-24 at 32). On May 21, 2014, Dollison sent an email to
Barlow confirming that Bowles Rice had placed its carrier on notice
of the claim (Dkt. No. 172-18 at 75).
In the second letter from Barlow to Dollison, dated July 14,
2014, Barlow noted that “[t]o date, I have not been contacted by
any

representative

of

the

insurance

carrier

regarding

the

investigation of [the] claim. Nor, despite knowledge of the ongoing
litigation, has the insurance carrier involved itself in this

6

Although First American focuses on the letters it sent to
Bowles Rice in 2014, Dollison actually was aware of the lien
priority issues well in advance of that. On May 1, 2013, shortly
after Union Bank lodged its claim, Dollison emailed Laura Wareheim
(“Wareheim”), the First American employee who authorized issuance
of the Lender’s Title Policy (Dkt. No. 172-23 at 8), advising that,
even if $300 million of mechanic’s liens held priority over the
deed of trust, he was confident they would be covered by Longview’s
significant equity and would never involve the Lender’s Title
Policy (Dkt. No. 174-2 at 418).
17

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
matter.” Id. at 76. The letter also stated that First American was
proceeding with settlement negotiations, and possibly might settle
the case in the absence of “communication or objections” from
either Bowles Rice or its carrier. Id. Around this same time,
Bowles Rice also received a subpoena duces tecum and a notice of
deposition related to the ongoing litigation, and even retained
counsel.

It

did

not,

however,

involve

itself

in

Longview’s

bankruptcy proceeding (Dkt. No. 172-24 at 7-8).
The content of First American’s letters is straightforward,
and

their

effects

are

undisputed.

But

neither

party

has

sufficiently developed a record of the surrounding circumstances,
which also will inform the adequacy of notice. For instance,
although Union Bank lodged its claim with First American in April
2013 (Dkt. No. 174 at 2), and Dollison had knowledge of the
mechanic’s lien issues at that time, First American has not offered
evidence regarding why it waited until May 2014 to advise Bowles
Rice to put its carrier on notice of the claim (Dkt. No. 172-18 at
74).7 First American’s activities during this period bear directly

7

First American’s “status history” regarding the claim
reflects only that it thought the mechanic’s liens did not assert
priority over Union Bank’s deed of trust (Dkt. No. 174 at 5).
18

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
on whether Bowles Rice actually had a reasonable opportunity to
defend the claim.
Moreover, as First American readily admits, it did not place
Bowles Rice on notice of the claim until after the first mediation
had taken place in Longview’s bankruptcy, and only one week before
First American filed suit against Union Bank in California state
court

(Dkt.

Nos.

170-2;

172

at

21).

Whether

First

American

participated in the first mediation session is unclear (Dkt. No.
170-2); if it did so without informing Bowles Rice, however, such
an

action

would

be

relevant

to

whether

Bowles

Rice

had

an

opportunity to participate in any settlement negotiations. See
Valloric, 357 S.E.2d at 211. Thus, there are material facts in
dispute regarding the adequacy of First American’s notice.
2.

There are material facts in dispute regarding whether
First American reasonably settled the claim in light of
its potential liability.

“Where an indemnitor has not been notified . . . and given an
opportunity to participate in the settlement negotiations, then an
indemnitee

must

prove

that

he

was

actually

liable

to

the

plaintiff.” Id., 357 S.E.2d 207, Syl. Pt. 3. On the other hand,
“[w]here a party having a duty to indemnify has been notified or
been made a party to the underlying proceedings and given an

19

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
opportunity to participate in its settlement negotiations . . . the
defendant-indemnitee should not be required to prove” that it was
actually liable “to recover the amount paid in the settlement.”
Id., 357 S.E.2d 207, Syl. Pt. 2. Rather, “[u]nder a potential
liability standard, the indemnitee must in his indemnity suit show
that the original claim is covered by the indemnity agreement. Then
he must demonstrate that he was exposed to liability which could
reasonably be expected to lead to an adverse judgment. Finally, he
must prove that the amount of the settlement was reasonable.” Id.,
357 S.E.2d 207, Syl. Pt. 4. “The focus must remain on what was a
reasonable judgment in light of the circumstances at the time the
settlement was made.” Id. at 213.
Valloric cited with approval Trim v. Clark Equipment Co., 274
N.W.2d 33, 36-37 (Mich. App. 1979) (internal quotation and citation
omitted), where the court observed:
Potential liability actually means nothing more than that
the indemnitee acted reasonably in settling the
underlying suit. The reasonableness of the settlement
consists of two components which are interrelated. The
fact finder must look at the amount paid in settlement of
the claim in light of the risk of exposure. The risk of
exposure is the probable amount of a judgment if the
original plaintiff were to prevail at trial, balanced
against the possibility that the original defendant would
have prevailed. If the amount of the settlement is
reasonable in light of the fact finder’s analysis of
these factors, the indemnitee will have cleared this
hurdle. The fact that the claim may have been
20

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
successfully defended by a showing of contributory
negligence, lack of negligence or otherwise, is but a
part of the reasonableness analysis and, therefore,
subject to proof.
Valloric, 357 S.E.2d at 214.
Assuming that it provided adequate notice to Bowles Rice,
First American contends it is entitled to judgment as a matter of
law that it reasonably settled a claim for which it was potentially
liable (Dkt. No. 172 at 23-24). Bowles Rice, on the other hand,
contends

that

the

settlement

was

unreasonable

because

First

American had strong defenses to the mechanic’s lien claims (Dkt.
No. 171 at 13-23). Based on these arguments, further factual
development is needed, and neither party is entitled to summary
judgment regarding First American’s potential liability.
a.

First American is not entitled to summary judgment
on potential liability.

First American argues that, because construction commenced
before it issued the Lender’s Title Policy, the mechanic’s liens
had priority over Union Bank’s deed of trust (Dkt. No. 172 at 24).
It further contends that it made a “reasonable decision to settle”
the $335 million claim for a “steep discount” of $41 million after
“having its defenses rejected by the bankruptcy court at every
turn.” Id.

21

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
Under the test in Valloric, First American must show that its
settlement was reasonable “in light of the risk of exposure,” which
“is the probable amount of a judgment if the original plaintiff
were to prevail at trial, balanced against the possibility that the
original defendant would have prevailed.” Valloric, 357 S.E.2d at
214 (quoting Trim, 274 N.W.2d at 36-37). This includes an analysis
of whether the claim may have been successfully defended in whole
or in part. Id.
First American has not addressed many aspects of this burden.
For instance, was $335 million the true “risk of exposure,” or did
the

mechanic’s

liens

include

amounts

that

were

disputed

by

Longview? Another important question not taken up fully in First
American’s motion is whether construction actually had commenced
for purposes of mechanic’s lien attachment.8
8

Although discussed in Bowles Rice’s response brief (Dkt. No.
179 at 2-5, 21-23), neither party specifically moved for summary
judgment on the fact-bound question regarding whether construction
had commenced for purposes of mechanic’s lien attachment or whether
Union Bank’s knowledge of site work brings its claim under section
3(a) of the Lender’s Title Policy exclusions.
The site preparation sufficient to attach mechanic’s liens
under West Virginia law is not entirely clear. Compare Syl. Pt. 3,
Carolina Lumber Co. v. Cunningham, 192 S.E.2d 722 (W. Va. 1972)
(“[A]ll perfected mechanics’ liens attach at the time the initial
mechanic’s lien comes into existence after the construction of the
building or structure begins . . . .”), with Augusta Apartments,
LLC v. Landau Bldg. Co., No. 11-0438, 2011 WL 8197526 (W. Va. Oct.
21, 2011) (memorandum decision) (finding that preparatory work such
22

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
Without addressing these key issues, First American simply
notes the existence of Union Bank’s claim and points to the
settlement for less than the amounts asserted in the mechanic’s
liens. Such arguments, however, are insufficient to meet First
American’s burden to prove that it was potentially liable for Union
Bank’s claim. See id. Therefore, First American is not entitled to
summary judgment regarding the reasonableness of its settlement.
b.

Bowles Rice is not entitled to summary judgment on
potential liability.

Turning to Bowles Rice’s motion, it contends that First
American’s settlement was unreasonable because “[t]he evidence in
the record demonstrates that the likelihood Plaintiff would have
prevailed at trial is overwhelmingly high” (Dkt. No. 171 at 15). It
argues that 1) First American’s own actions demonstrate that the
settlement was unreasonable; 2) First American cannot establish
that the mechanic’s liens were valid; and 3) the mechanic’s liens
were fully released and could not relate back. Id. at 16.9
as “leveling, clearing trees and brush, and hauling out mud and
rocks” was sufficient for mechanic’s liens to attach). The
mechanic’s lien statutes, however, are liberally construed due to
their remedial nature. Carolina Lumber, 192 S.E.2d at 726.
9

Bowles Rice also contends that it is entitled to summary
judgment because First American has not disclosed an expert witness
regarding “the validity of the mechanic’s liens and the strength of
the contractors’ claims” (Dkt. No. 171 at 13). Although expert
23

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
With regard to its first argument, Bowles Rice contends that
the settlement was unreasonable because First American initially
set its reserve at $0 and, “[f]or nearly all of 2014, . . .
maintained the position that settlement . . . would be unreasonable
because the mechanic’s liens were not valid and/or did not have
priority.”

Id.

The

Court

has

already

ruled

that

subjective

evaluations such as reserves are irrelevant to the objective
inquiry set forth in Valloric (Dkt. No. 128 at 12-14). Moreover,
that First American settled the claim without “litigat[ing] its
defenses”

has

nothing

to

do

with

the

reasonableness

of

its

settlement. Tellingly, had First American litigated its defenses,
a settlement would have been unnecessary.
For its second argument, Bowles Rice contends that First
American “cannot demonstrate that the mechanic’s liens were valid”
because the proper parties were not named in the contractors’ lien
notices and lawsuits (Dkt. No. 171 at 17). Pursuant to W. Va. Code

testimony on “the reasonableness of the claim’s settlement and the
underlying motivation for that settlement” certainly may be
appropriate in a bench trial, Chicago Title Ins. Co. v. IMG Exeter
Associates Ltd. P’ship, 985 F.2d 553, 1993 WL 273921, at *4 n.6
(4th Cir. 1993) (unpublished decision), it is within the Court’s
discretion whether to admit, consider, or accept expert testimony
regarding the mechanic’s liens or the strength of the contractors’
claims. See id. Therefore, expert testimony on such legal issues is
not necessary to First American’s claim.
24

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
§§ 38-2-7 and 38-2-8, a mechanic’s lien is discharged unless
perfected and preserved by the filing of a notice of mechanic’s
lien within 100 days after project completion. Bowles Rice thus
contends that the contractors’ notices were insufficient because
they failed to name the Monongalia County Development Authority
(“MCDA”), which owned the property at issue (Dkt. No. 171 at 18).
Review of the only notice of mechanic’s lien filed by Bowles Rice,
however, belies this argument and confirms that the MCDA is clearly
named (Dkt. No. 170-14 at 2).
In addition, pursuant to W. Va. Code § 38-2-34, a lien holder
must bring suit to enforce the lien within six months of filing a
notice of mechanic’s lien. The Supreme Court of Appeals of West
Virginia has indicated that the lender and the trustee of the deed
of trust are necessary parties to such a lien enforcement action.
Syl. Pt. 4, Lunsford v. Wren, 64 S.E. 308 (W. Va. 1908).
Bowles

Rice

contends

that

the

mechanic’s

liens

were

unenforceable because the enforcement actions did not name Union
Bank or the trustee (Dkt No. 171 at 18-19). That Union Bank was not
initially named in the contractors’ enforcement actions is not a
foolproof defense (Dkt. No. 170-15), however, as the state court
may have allowed the contractors to amend their pleadings as
necessary. See, e.g., O.G. Augir & Co. v. Warder, 81 S.E. 708, 708
25

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
(W.

Va.

1914);

Lunsford,

64

S.E.

at

315;

see

also

Earp

v.

Vanderpool, 232 S.E.2d 513, 516 (W. Va. 1976) (describing when
mechanic’s lien statutes are subject to either a strict or liberal
construction).
Third and finally, Bowles Rice contends that the contractors
were fully paid and released their right to assert mechanic’s liens
for work done prior to Union Bank’s closing (Dkt. No. 171 at 19-2).
This argument is unpersuasive; the very language of the partial
lien

waivers

executed

by

the

contractors

establishes

that

mechanic’s liens for subsequent work could relate back to when
construction first commenced on the Longview project.
Undoubtedly, a contractor may waive his right to file a
mechanic’s lien. See Bauer Enters., Inc. v. Frye, 382 S.E.2d 71, 74
(W. Va. 1989).10 But in West Virginia, “[a] valid written instrument
which expresses the intent of the party in plain and unambiguous
10

Bowles Rice cites to cases that generally address the fact
that one may waive mechanic’s liens, but not whether one’s priority
has been waived upon the execution of a partial lien waiver. Such
cases are of little assistance to the Court’s analysis. See, e.g.,
First Union Nat’l Bank v. RPB 2, LLC, 674 N.W.2d 1 (N.D. 2004);
Durant Const., Inc. v. Gourley, 336 N.W.2d 856, 658 (Mich. App.
1983) (finding that record supported conclusion that contractor
intended to waive future liens). Moreover, Bowles Rice cites a case
that actually contradicts its position. See Lyda Swinerton
Builders, Inc. v. Cathay Bank, 409 S.W.3d 221, 230 (Tex. Ct. App.
2013) (noting that liens arising subsequent to a lien waiver relate
back to the time when construction commenced).
26

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
language is not subject to judicial construction or interpretation
but will be applied and enforced according to such intent.” Kopf v.
Lacey, 540 S.E.2d 170, 175 (W. Va. 2000) (quoting Syl. Pt. 1,
Cotiga Dev. Co. v. United Fuel Gas Co., 128 S.E.2d 626 (1962)).
Here, the lien waivers resulted from the Construction Services
Agreement between Longview and its contractors, which required the
contractors, as a condition precedent to payment, to supply “a
waiver and release of liens . . . in order to assure an effective
release of mechanics’ or materialmen’s liens in accordance with the
Applicable Laws of the State of West Virginia.” The waiver form was
to comply with what was “reasonably required by a title insurer
providing title insurance to Owner or any Lender.” The waiver forms
utilized and executed by contractors during the project waived “all
right that the undersigned may have to a lien upon the land and
improvements

.

.

.

to

the

extent

payment

has

been

made

to

Contractor” (Dkt. No. 174-4 at 181).11
The language of the form lien waiver is plain and unambiguous.
Although releasing the contractor’s lien to the extent that payment

11

From the record provided, it appears that Bowles Rice
initially provided a draft lien waiver form to Longview that did
not qualify the waiver “to the extent payment [had] been made”
(Dkt. No. 174-2 at 484). The contractors, however, were not willing
to utilize such a waiver. Id. at 478.
27

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
had been made, it says nothing about when future liens will attach.
Therefore, future liens may still relate back for attachment
purposes to the date that construction commenced. W. Va. Code § 382-17.
As First American aptly contends, this case is like Wachovia
Bank N.A. v. Superior Construction Corp., 718 S.E.2d 160 (N.C. App.
2011). There, the partial lien waiver stated that the contractor
“[did] hereby waive, relinquish, surrender and release any and all
lien, claim, or right to lien on the above said described project
and premises, arising under and by virtue of the mechanic’s lien
laws of the State of North Carolina on account of any labor
performed or the furnishing of any material to the above described
project and premises up to and including the” date specified. Id.
at 249-50.
The limited language in the partial lien waiver did not affect
when future liens attached:
[T]he plain meaning of a waiver of lien rights arising
“on account of” labor performed before 31 May 2005 is
that the only lien rights being waived are those arising
“because of,” “as a result of,” or “on the basis of” work
done prior to the relevant date. The language utilized in
the partial lien waivers does not in any way refer to a
waiver of Defendant Superior’s “place in line;” instead,
it simply refers to a waiver of “any and all” lien rights
applicable to specific payments. In essence, the partial
lien waivers at issue in this case function as an
acknowledgment that a payment for labor and materials
28

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
expended through a certain date has been made and that
Defendant Superior has no further lien rights in the
furnishing of labor and materials reimbursed by those
payments. Thus, we conclude that the partial lien waivers
executed by Defendant Superior merely operated as a
waiver of its right to claim a lien on amounts for which
it had been paid . . . .
Id. at 166. This holding is consistent with similar cases in other
states. See id. (citing Metropolitan Fed. Bank v. A.J. Allen, 477
N.W.2d 668, 673-75 (Iowa 1991); Duckett v. Olsen, 699 P.2d 734,
736-37 (Utah 1985)).
Because Bowles Rice has failed to conclusively establish that
First American was not potentially liable under the Lender’s Title
Policy for at least a portion of the $335 million in mechanic’s
liens filed and prosecuted by the contractors, it is not entitled
to summary judgment regarding its obligation to indemnify First
American for the losses sustained under the Lender’s Title Policy.
E.

This action is not barred by judicial estoppel.
Finally, Bowles Rice contends that judicial estoppel bars

First American from “contending that the mechanic’s liens filed by
the contractors on the Power Plant were valid and took priority
over the Credit Line Deed of Trust” because it took the opposite
position in prior litigation (Dkt. No. 171 at 23). After careful
review of the issue, the Court concludes that applying the doctrine

29

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
of judicial estoppel would be an inappropriate exercise of its
discretion. See King v. Herbert J. Thomas Mem’l Hosp., 159 F.3d
192, 196 (4th Cir. 1998) (noting that the application of judicial
estoppel is at the discretion of the district court).
“Judicial estoppel precludes a party from adopting a position
that is inconsistent with a stance taken in prior litigation.”
Minnieland Private Day Sch., Inc. v. Applied Underwriters Captive
Risk Assurance Co., Inc., 867 F.3d 449, 457 (4th Cir. 2017)
(quoting John S. Clark Co. v. Faggert & Frieden, P.C., 65 F.3d 26,
28 (4th Cir. 1995)). “The purpose of the doctrine is to prevent a
party from playing fast and loose with the courts, and to protect
the essential integrity of the judicial process.” Id. (quoting John
S. Clark Co., 65 F.3d at 29).
In order to apply the doctrine, a court must find that the
following four circumstances exist:
(1) the party sought to be estopped must be seeking to
adopt a position that is inconsistent with a stance taken
in prior litigation; (2) the position sought to be
estopped must be one of fact rather than law or legal
theory; (3) the prior inconsistent position must have
been accepted by the court; and (4) the party sought to
be estopped must have intentionally misled the court to
gain unfair advantage.

30

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
Id. at 458 (internal quotation omitted) (quoting Lowery v. Stovall,
92 F.3d 219, 223-24 (4th Cir. 1996)). Notably, in the Fourth
Circuit, the final element is determinative. Id.
Regarding the first element, as Bowles Rice contends, First
American has adopted a somewhat different position in this case
than it did in the earlier litigation related to the Lender’s Title
Policy. In the California litigation and its adversary proceeding
in

the

Bankruptcy

Court,

First

American

argued

that

the

contractors’ mechanic’s liens were both invalid and not entitled to
priority over Union Bank’s deed of trust. Here, First American
contends that a settlement of $41 million was warranted based on
the risks of an adverse judgment and the magnitude of the exposure
it faced.
None of the other elements, however, are met under the facts
of this case. As to the second element, the about-face of which
Bowles Rice complains plainly involves legal contentions, not
factual

issues.

Lowry,

92

F.3d

at

225.

Whether

sufficient

construction has commenced for a lien to attach or whether a
mechanic’s lien is valid and entitled to priority are, in the final
instance, questions of law. Any perceived variation in First
American’s position on these legal theories is permissible. King v.
Cardinal Health 411, Inc., 5:10CV112, 2011 WL 59672256, at *3
31

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
(N.D.W.Va. Nov. 29, 2011) (Stamp, J.) (noting that “it is rare for
judicial estoppel to be applied to prevent a party from changing
legal theories” or “contradicting itself”).
Under the third element, moreover, “judicial estoppel does not
apply to the settlement of an ordinary civil suit because there is
no judicial acceptance of anyone’s position.” Lowery, 92 F.3d at
225 (internal quotation omitted) (quoting Reynolds v. Commissioner,
861 F.2d 469, 473 (6th Cir. 1988)). Bowles Rice, however, contends
that First American did not settle an “ordinary civil suit.”
“[W]hen a bankruptcy court - which must protect the interests of
all creditors - approves a payment from the bankruptcy estate on
the basis of a party’s assertion of a given position,” the party
may

be

judicially

estopped

from

later

asserting

a

contrary

position. Reynolds, 861 F.2d at 473. This principle, however, is
grounded in the bankruptcy court’s “obligation to apprise itself of
the underlying facts and to make an independent judgment as to
whether the compromise is fair and equitable.” Id.
Here, the bankruptcy court was not called upon to make such
independent judgments regarding the bankruptcy estate:
First American and the Settling Contractors no doubt
believe that they would prevail in their respective
litigations with the Debtors. It cannot be disputed,
though, that such litigations would be enormously complex
and expose all sides to material risks of adverse
32

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
judgments, measured not only by relation to the complex
issues involved but also the magnitude of any potential
adverse judgments.
(Dkt. No. 194-1 at 22). In essence, First American advised the
Bankruptcy Court that, while it stood behind its legal positions,
it had decided to mitigate the risk that it was wrong by settling
its liability for a sum certain. Clearly, this is not the type of
“judicial acceptance” contemplated for the purposes of estoppel,
even in the bankruptcy context. Cf. Reynolds, 861 F.2d at 473.
Finally, with regard to the fourth factor, Bowles Rice has not
established that First American “misled the court to gain unfair
advantage.” Lowery, 92 F.3d at 223. Rather, First American defended
itself against liability on multiple fronts, but, ultimately,
conceded the potential of an “adverse judgment” when it decided to
settle in the Bankruptcy Court (Dkt. No. 194-1 at 22).
In sum, Bowles Rice has established only one of the four
factors

necessary

for

application

of

judicial

estoppel.

And,

although not necessary to the analysis, the Court notes that a
contrary conclusion would defy logic and prevailing practice. Under
Bowles Rice’s interpretation of judicial estoppel, a party could
not assert good faith defenses in an underlying action without
losing its right to seek indemnification if it then, pursuant to a
court-approved agreement, settles the case based on its potential
33

FIRST AMERICAN V. BOWLES RICE

1:16CV219

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 168; 170]
liability. This result would be wholly inconsistent with the legal
policy of encouraging settlements. Cf. United States v. North
Carolina, 180 F.3d 574, 581 (4th Cir. 1999); Valloric, 357 S.E.2d
at 212 & n.6. For all these reasons, the Court concludes that the
doctrine of judicial estoppel does not apply to this case.
V. CONCLUSION
For the reasons discussed, neither party is entitled to
judgment as a matter of law regarding First American’s breach of
contract claims. Therefore, the Court DENIES the parties’ motions
for summary judgment (Dkt. Nos. 168; 170).
It is so ORDERED.
The Court directs the Clerk to transmit copies of this Order
to counsel of record.
DATED: August 8, 2018.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE

34