Foremost Signature Insurance Company, MI v. Sojo Design, LLC

• Court: Court of Appeals for the Eleventh Circuit
• Decided: December 4, 2019
• Docket: 18-14599
• Status: Unpublished

Opinion

Case: 18-14599 Date Filed: 12/04/2019 Page: 1 of 11

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 18-14599 Non-Argument Calendar ________________________

D.C. Docket No. 1:17-cv-20581-DPG

FOREMOST SIGNATURE INSURANCE, MI,

Plaintiff-Appellee,

versus

Silverboys, LLC, et al.,

Defendants,

SOJO DESIGN, LLC, SOFIA JOELSSON, XAVIER COE, a.k.a. Chayanne Coe,

Defendants-Appellants.

________________________

Appeal from the United States District Court for the Southern District of Florida ________________________ (December 4, 2019) Case: 18-14599 Date Filed: 12/04/2019 Page: 2 of 11

Before MARCUS, JILL PRYOR, and ANDERSON, Circuit Judges.

PER CURIAM:

Sojo Design, LLC (“Sojo”), an architectural design firm, appeals from the

district court’s order of summary judgment in a declaratory action brought by

Foremost Signature Insurance, which sought to establish that it owed Sojo no duty

to defend it in a state court case. The district court granted summary judgment to

Foremost, concluding that Foremost owed no duty to defend Sojo from the claims

made in the state court complaint because they fell outside Foremost’s policy

coverage. Sojo timely appealed to us. In the interim period, however, the

underlying state court complaint was voluntarily dismissed by the parties.

Accordingly, we conclude that this case is moot, vacate the district judge’s order,

and order the case dismissed.

Sojo, an architectural design firm based in Miami, Florida, rendered design

services to Silverboys, LLC, relating to a vacation home owned by the company in

the Bahamas. The project did not go well. Silverboys subsequently brought suit

against Sojo in the Eleventh Judicial Circuit of Florida, which encompasses

Miami-Dade County, on July 26, 2016, alleging a number of claims sounding in

tort. In response, Sojo tendered the complaint to Foremost, its insurer, which

defended Sojo under a reservation of rights. Sojo does not appear to have incurred

any litigation costs during the state court proceeding.

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However, Foremost believed that the claims made by Silverboys against

Sojo fell outside the scope of the insurance policy it issued Sojo. Accordingly, it

filed a declaratory judgment in the Southern District of Florida on February 15,

2017, seeking to establish that it owed Sojo no duty to defend them in the state-

court case. The district court agreed and granted Foremost summary judgment on

September 11, 2018. Sojo timely appealed to us.

Before the parties filed briefs, however, Sojo moved on February 27, 2019,

to remand the appeal to the district court on a limited basis and to stay the briefing

schedule. Apparently, the plaintiffs in the state court litigation sought to amend

their complaint, which Sojo argued could render the appeal moot. Before we

reached a decision on Sojo’s motion, the situation became murkier. On April 15,

2019, the parties in the state court case agreed to a voluntary dismissal, which was

accepted by the judge. In response, we issued the parties an order to show cause,

specifically asking them to address what impact the voluntary dismissal had on

Sojo’s motion and on the appeal generally.

Foremost argued that the dismissal had no effect on the case and that the

district court’s ruling “remains viable and important” and the appeal “continues to

present an actual and live controversy.” Sojo, on the other hand, contended that

“[t]here is no reasonable doubt that the Underlying Plaintiff plans to file its

proposed amended complaint as a new action under a new case number,” and that

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under Florida law, Foremost’s duty to defend Sojo needed to be re-evaluated on

the basis of that complaint. Accordingly, Sojo requested that we abate this appeal

until the new complaint was filed; if Foremost continued to deny coverage at that

point, Sojo indicated that it would request that we remand the case back to the

district court. Ultimately, we denied Sojo’s motion without prejudice and allowed

the appeal to continue.

After the briefs were filed, however, we asked the parties to address a set of

discrete questions surrounding the potential mootness of the instant case.

Specifically, we asked the parties whether Foremost defended Sojo under a

reservation of rights; whether Sojo incurred any litigation costs during the defense;

and the impact of the aforementioned on mootness. The parties timely filed

supplemental letter briefs to that effect. Sojo informed us that Foremost had

defended it under a reservation of rights and that it had incurred no “substantial”

costs in defending itself, but that in so doing, Sojo exhausted a separate insurance

policy issued by Underwriters at Lloyd’s London by Hiscox, Inc. It informed us

that another complaint had been filed against them in the Southern District of

Florida by the same plaintiffs, and that Foremost’s duty to defend it in that case

was a separate legal question. It argued that the case was moot, but made no effort

to withdraw its appeal.

In response, Foremost argued that the case was not moot. We read

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Foremost’s letter brief as suggesting that Sojo’s exhaustion of its Hiscox policy in

connection with Foremost’s defense of the state court case saves the case from

mootness because, if we reversed the district court’s order, Sojo would have a legal

claim against Foremost. Secondarily, and more clearly, Foremost argued that

because a new complaint had been filed in federal court, this case still presented a

live controversy because it practically determined Foremost’s duty to defend Sojo

in the present litigation.

After both considering the parties’ arguments and reviewing the record, we

determine that the voluntary dismissal of the original state court complaint renders

this case moot for three reasons: (1) Sojo does not appear to have paid any out-of-

pocket costs in defending the state court complaint; (2) the exhaustion of Sojo’s

insurance policy provided by Hiscox is outside the record and cannot be

considered by us; and (3) our resolution of this case would not determine

Foremost’s duty to defend Sojo in the still-pending federal case because the duty to

defend under Florida law is governed by the specific allegations in each complaint.

Each is addressed in turn.

First, based on the undisputed factual assertions in both letter briefs, the

parties appear to concede that Sojo did not expend any out-of-pocket expenses in

defending the dismissed state court action because Foremost defended the action,

even after the district court’s order, under a reservation of rights. Had this not been

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the case—that is, had Sojo paid any costs out of pocket—it would have been

“entitled to a full reimbursement” of its litigation costs under Florida law.

BellSouth Telecomms., Inc. v. Church & Tower of Fla., Inc., 930 So.2d 668, 670–

71 (Fla. 3d DCA 2006). But this is not the case. Accordingly, even if we reversed

the district court’s order, it would not provide Sojo with a legal right—e.g., a right

to reimbursement—to which it would otherwise be entitled.

Second, the exhaustion of the Hiscox insurance policy is outside the record

and we cannot consider it. There is no mention in any of the original filings—or,

indeed, anywhere else in the record—of the Hiscox policy. It may be possible that

the wrongful exhaustion of an insurance policy, especially if done while in breach

of a duty to defend, might grant a party in Sojo’s position a claim against a

wrongful party in Foremost’s position. But we need not decide whether Sojo has

such a claim under either Florida or federal law because the existence of the

Hiscox policy, much less its exhaustion, is wholly outside the record. The

Supreme Court is clear that “[w]here it appears on the face of the record that the

only concrete interest in the controversy has terminated, reasonable caution is

needed to be sure that mooted litigation is not pressed forward.” Lewis v.

Continental Bank Corp., 494 U.S. 472, 480 (1990) (emphasis added). In the usual

case, “reasonable caution” includes limiting review of a case to the material

contained in the record. See id.

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Accordingly, the Court’s “ordinary practice in disposing of a case that has

become moot on appeal is to vacate the judgment with directions to dismiss.” Id.

at 482 (citations omitted). “However, in instances where the mootness is

attributable to a change in the legal framework governing the case, and where the

plaintiff may have some residual claim under the new framework that was

understandably not asserted previously, our practice is to vacate the judgment and

remand for further proceedings in which the parties may, if necessary, amend their

pleadings or develop the record more fully.” Id.

We conclude that dismissal, rather than remanding to the district court to

fully determine the effect of the Hiscox policy’s exhaustion on mootness, is the

appropriate course of action for two reasons. First, neither party is presently

seeking a remand to the district court on this ground. Second, and more relevantly,

we conclude that the exception to the “ordinary practice” detailed by the Supreme

Court in Lewis is inapplicable here. Unlike in Lewis, the parties here—more

specifically, Sojo—certainly would have known prior to the pendency of this

appeal that the Hiscox policy was exhausted. Indeed, it appears from the letter

briefs that the Hiscox policy was exhausted relatively early in the state court

litigation and did so at least several years ago. The parties have had ample

opportunity before the district court to fully develop the record in this regard.

Their failure to do so cannot now be used as a defense against mootness.

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Accordingly, the concerns raised by the Court in Lewis do not counsel a remand

here.

Third, nothing we do in this appeal will have any effect on Foremost’s duty

to defend Sojo against the still-pending litigation. To the extent that Foremost

argues otherwise, it is incorrect. Florida courts have uniformly that “[t]he duty to

defend must be determined from the allegations in the complaint.” Jones v. Fla.

Ins. Guar. Ass’n, 908 So.2d 435, 443 (Fla. 2005). These are not hollow words.

Florida courts have logically extrapolated from this holding that the determination

of an insurer’s duty to defend one complaint has no impact on their duty to defend

another, different complaint. Where more than one complaint has been filed, “the

original complaint can no longer furnish a basis for determining the insurer’s duty

to defend.” Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So.2d 810, 815

(Fla. 1st DCA 1985). Accordingly, Florida law provides that courts look to the

current underlying complaint. Id.

This is because “[t]he duty to defend depends solely on the facts and legal

theories alleged in the pleadings and claims against the insured.” James River Ins.

Co. v. Ground Down Eng’g, Inc., 540 F.3d 1270, 1275 (11th Cir. 2008) (quoting

Nova Casualty Co. v. Waserstein, 424 F. Supp. 2d 1325, 1332 (S.D. Fla. 2006)).

The actual facts of the underlying conduct “are not pertinent,” Baron Oil, 470

So.2d at 814, because the relevant question is whether the relevant complaint

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“alleges facts which fairly and potentially bring the suit within policy coverage,”

Lime Tree Village Community Club Ass’n v. State Farm Gen. Ins. Co., 980 F.2d

1402, 1405 (11th Cir. 1993), “even if the later true facts show there is no

coverage.” Trizec Properties, Inc. v. Biltmore Const. Co., 767 F.2d 810, 811 (11th

Cir. 1985) (citation omitted) (emphasis added).

Accordingly, what matters is not, as Foremost incorrectly argues, the actual

underlying conduct, but the underlying conduct as alleged by the pending

complaint. That the voluntarily dismissed state court case and the presently filed

federal case roughly revolve around the same chain of events is irrelevant to

determining Foremost’s duty to defend Sojo.

Therefore, the relevant question is whether the federal complaint alleges the

same conduct and raises the same claims as the state court complaint. If it does,

we might reasonably determine, based on res judicata and Florida law, that our

determination of Foremost’s duty to defend against the state court complaint also

determines its duty to defend against the federal complaint. An even cursory

evaluation of the federal complaint shows that it alleges different facts and legal

claims than the state court complaint. Though the federal complaint has not been

made part of the record before us, we can reasonably take judicial notice of it as a

public record under Federal Rule of Evidence 201(b)(2). See Rothman v. Gregor,

220 F.3d 81, 92 (2d Cir. 2000) (taking judicial notice of complaint as public

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record).

The state court complaint factually alleged that Sojo failed to supervise its

contractors and fraudulently charged Silverboys for its design of Silverboys’

beachside home. It alleged claims of breach of contract, professional negligence,

conversion, negligence, fraud in the inducement, fraudulent misrepresentation, and

negligent misrepresentation. But the federal complaint alleges something quite

different, though nonetheless derived from the same chain of events. The federal

complaint alleges a wide-ranging criminal conspiracy predicated on money

laundering and a de facto cabal of renegade design companies conspiring to inflate

prices, and includes fourteen additional defendants not named in the state court

complaint. It alleges as substantive counts a violation of the Racketeer Influenced

and Corrupt Organizations Act (RICO), conspiracy to violate RICO, fraud, aiding

and abetting fraud, breach of fiduciary duty, aiding and abetting breach of

fiduciary duty, civil conspiracy, breach of contract, conversion, and violation of the

Florida Deceptive and Unfair Practices Act; seeks to invoke successor liability; and

requests an accounting.

In other words, the state and federal court complaints are extremely

different. This isn’t a matter of the plaintiffs copying and pasting their state court

complaint into a federal complaint and filing it with no changes; this is an entirely

different complaint based on entirely different facts and alleging entirely different

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claims. Though technically based on the same linear chain of events, it appears

that Silverboys’ understanding of the events has significantly broadened since

filing the state court complaint. It would be manifestly unfair to conclude,

therefore, that the two complaints involve the same predicate facts.

For these reasons, this case is MOOT. The appeal is DISMISSED. The

judgment of the district court is VACATED and the case is REMANDED with

instructions to dismiss the case.