Ben Li v. Ironshore Indemnity, Inc.

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 4, 2019
• Docket: 17-55972
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 4 2019 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

BEN LI; et al., No. 17-55972

Plaintiffs-Appellants, D.C. No. 8:17-cv-00323-DOC-SK v.

IRONSHORE INDEMNITY, INC., MEMORANDUM*

Defendant-Appellee.

Appeal from the United States District Court for the Central District of California David O. Carter, District Judge, Presiding

Submitted December 6, 2018** Pasadena, California

Before: RAWLINSON and BEA, Circuit Judges, and RICE,*** Chief District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Thomas O. Rice, Chief United States District Judge for the Eastern District of Washington, sitting by designation. This case arises from a malpractice dispute between an attorney, Ernesto

Martinez, Jr., and a number of his clients. When Martinez and the clients settled

the malpractice claim after arbitration, Martinez assigned to the clients all rights to

any claims against his insurance company, Ironshore Indemnity, Inc.

Under a “Lawyers Professional Liability Policy,” Ironshore promised to

indemnify Martinez for damages “arising out of the rendering of or failure to

render Professional Legal Services” and to defend Martinez against any claim

seeking damages for such, “even if any of the allegations are groundless, false, or

fraudulent.” Under Exclusion M of the Policy, however, coverage does not

extend to payments in connection with any claim “alleging, arising out of, based

upon or attributable to the conversion, misappropriation, improper commingling

of client funds, the return of or restitution, or disgorgement of fees, costs and

expenses, or other amounts . . . .”

Ironshore refused to defend or indemnify Martinez for the resulting award.

Martinez and the clients (as assignees of the rights to the Policy) then brought this

suit (1) seeking a determination that Ironshore had a duty to defend and indemnify

Martinez and (2) asserting four claims based on the alleged failure to do so. The

district court granted Ironshore’s motion to dismiss the complaint. The plaintiffs

timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we

affirm.

2 17-55972 Ironshore did not have a duty to defend or indemnify Martinez in the

underlying arbitration actions. As the district court correctly observed, the request

for the return of “overcharge[d]” fees was “self-evidently a demand for the ‘return

of . . . fees . . . or other amounts’ under the Policy[,]” which is excluded from

coverage under Exclusion M. The award for fees and costs from Martinez’s

defamation suit against one of his former clients is similarly “attributable to the

conversion [and] misappropriation . . . of client funds”—and thus excluded—

because Martinez brought the suit based on statements concerning his

misappropriation of client funds. Finally, even if the policy exclusion does not

apply, Martinez’s claim—seeking restitution for the overbilling of his clients—is

uninsurable as a matter of Texas law. See In re TransTexas Gas Corp., 597 F.3d

298, 309-10 (5th Cir. 2010) (holding that a judgment restoring ill-gotten gains is

uninsurable under Texas law). Because Ironshore did not owe a duty to defend or

indemnify Martinez, the remaining causes of action based on the same also fail.

AFFIRMED.

3 17-55972