Ironshore Europe Dac v. Schiff Hardin, LLP

284 F. Supp. 3d 845
CourtDistrict Court, E.D. Texas
DecidedJanuary 9, 2018
DocketCIVIL ACTION NO. 2:17–CV–00431–JRG
StatusPublished

This text of 284 F. Supp. 3d 845 (Ironshore Europe Dac v. Schiff Hardin, LLP) is published on Counsel Stack Legal Research, covering District Court, E.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ironshore Europe Dac v. Schiff Hardin, LLP, 284 F. Supp. 3d 845 (E.D. Tex. 2018).

Opinion

RODNEY GILSTRAP, UNITED STATES DISTRICT JUDGE

Before the Court is Defendant Schiff Hardin, LLP's ("Schiff") Motion to Dismiss Plaintiff Ironshore Europe DAC's ("Ironshore") First Amended Complaint (Dkt. No. 17) ("the Motion"). Having considered the same, and for the reasons set forth herein, the Motion is GRANTED-IN-PART and DENIED-IN-PART .

*848I. Background

In November 2014, Ironshore issued an insurance policy to Dorel Juvenile Group, Inc. ("Dorel"). (Dkt. No. 10 ¶ 2.) On May 13, 2015, Dorel was sued by Nicole and Cameron Hinson on behalf of their minor child who was injured in a car accident involving a product manufactured by Dorel. See Hinson v. Dorel Juvenile Group, Inc. , No. 2:15-cv-713-JRG-RSP, Dkt. No. 1, 2015 WL 2374191 (E.D. Tex. May 13, 2015). In this underlying case, Dorel was represented by Schiff, the defendant in the instant case. (Dkt. No. 10 ¶ 2.)

While representing Dorel, Schiff regularly communicated with Ironshore. Id. at ¶ 3. Specifically, Ironshore was concerned that if the Hinson case resulted in an award or settlement in excess of $6 million, then Ironshore might have to pay out on its insurance policy with Dorel. Id. at ¶ 19. Against this backdrop, Ironshore alleges that on several occasions Schiff misled Ironshore into believing it was unlikely the Hinson case would result in any exposure for Ironshore. See , e.g., id. at ¶ 20 ("At various times during the Lawsuit, Schiff misrepresented to Ironshore that a settlement within Ironshore's policy limits was 'unwarranted.' "). Ironshore also alleges that Schiff withheld other critical information about developments in the lawsuit. For example, Ironshore alleges that "Schiff falsely represented that the last offer of settlement received from Plaintiffs was $6.5 million" when in reality the Hinson Plaintiffs had expressed a willingness to settle for as little as $3.25 million. Id. at ¶ 48. Ironshore further alleges that "Schiff's various misrepresentations led Ironshore to believe that the Ironshore Policy was not at risk. Thus, Ironshore did not associate in the defense of the lawsuit." Id. at ¶ 20. Had Ironshore been given an accurate picture of the Hinson case, Ironshore alleges it "would have exercised its right to settle the case...[or] paid the Plaintiffs to release all claims." Id. at ¶ 49. Instead, the case went to trial and the jury awarded the Hinson Plaintiffs $34 million. Id. at ¶ 46. This verdict, being in excess of $6 million, would have required Ironshore to pay out on its policy with Dorel. Id. at ¶¶ 46-47. After eventually settling with the Hinson Plaintiffs after trial, Ironshore filed this case against Schiff. Id. Defendant has now moved to dismiss Ironshore's negligent misrepresentation claim, which is the only claim in this case.

II. Legal Standard

A. Applicable Law

When a federal court hears state law claims based on diversity jurisdiction, it generally applies the substantive law of the state in which it sits. See, e.g., Gilbane Bldg. Co. v. Admiral Ins. Co. , 664 F.3d 589, 593-94 (5th Cir. 2011) ; Erie R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). For example, if there is precedent from that state's highest court, or other binding authority interpreting such precedent, that authority controls with respect to questions of state law. Gilbane , 664 F.3d at 593-594 ; Motiva Enterprises, LLC v. St. Paul Fire & Marine Ins. Co. , 445 F.3d 381, 385 (5th Cir. 2006) ("Under Erie , we are, of course, obliged to decide questions of state law as we believe the state supreme court would decide the issue."). To the extent there is uncertainty about a question of state law, federal courts must make an " Erie guess" as to how the state's highest court would decide the question. Gilbane , 664 F.3d at 593-594. Generally, this " Erie guess" is based on "cases that, while not deciding the issue, provide guidance as to how the [state high court] would decide the question." Id. (internal quotations omitted). These cases can include decisions from lower state courts or others who have ventured a similar Erie guess. Id.

*849In spite of these general choice-of-law rules, Parties to a contract may also specify that a particular state's laws should govern the interpretation of their agreement through what is often called a forum-selection clause. In these circumstances, interpretation of the agreement is guided by the substantive law of the chosen forum state. See, e.g., Barnett v. DynCorp Int'l, L.L.C. , 831 F.3d 296, 301-302 (5th Cir. 2016) (explaining that federal law controls question of the enforceability of forum-selection clauses, while interpretation of such clauses is governed by the law of the chosen forum).

Finally, regardless of whether state law controls questions of substantive law or contract interpretation, "federal courts sitting in diversity apply...federal procedural law." Gasperini v. Ctr. for Humanities, Inc. , 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996) ; Taylor v. Bailey Tool Mfg. Co. , 744 F.3d 944, 947 (5th Cir. 2014) (federal procedural rules apply once a case has been removed).

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284 F. Supp. 3d 845, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ironshore-europe-dac-v-schiff-hardin-llp-txed-2018.