It is a sanction – and therefore excluded under a lawyer’s professional liability protection – if a court forces a plaintiff’s lawyer to pay a defendant’s legal fees to file a frivolous complaint, a federal appellate court said on Friday, confirming a lower court decision in favor of an AmTrust Financial Services Inc. unit.
In the AmTrust case, attorneys Jason Wallace, Daniel Bache and Kristopher Immel filed claims under the Individuals with Disabilities Education Act against four school districts in northern Ohio – Akron, Solon, Nordonia Hills and Cleveland Heights – under the 6th US Circuit ruling. Cincinnati Court of Appeals Wesco Insurance Co. v. Roderick Linton Belfance, LLP et al.
After “significant administrative litigation”;, an interrogation representative for the school district found in each proceeding. A district court also ruled for Akron, which the 6th Circuit confirmed, the verdict said.
“Frustrated at having to defend themselves against what they considered to be frivolous litigation,” the school districts sued the three lawyers and their companies.
Their lawsuit alleges that they presented “sloppy submissions, actually made false or legally irrelevant allegations and unnecessary to extend the proceedings,” the verdict said.
Wesco Insurance, a unit of New York-based AmTrust, had issued a professional liability policy to the lawyers and their former law firm, the ruling said.
The firm and lawyers asked Wesco to defend and indemnify them in the litigation, but Wesco refused, based on a policy exclusion for sanctions. Wesco then filed a motion of censure in the U.S. District Court in Cleveland, requesting a declaratory judgment that did not apply to its policy.
The district court ruled in favor of the insurer. Two of the lawyers, Mr. Wallace and Mr. Bache, appealed against the decision, which was confirmed by a panel of three judges.
“This case raises the” interpretive question “as to whether a court compels a lawyer to pay a defendant’s attorney’s fee because the lawyer filed a frivolous complaint” or brought a case for such an inappropriate purpose, “the verdict said.
“And we have a large number of legal sources to help answer that: The thousands of legal decisions available about Westlaw or Lexis,” it said, referring to two legal research services.
“They reveal that the legal community routinely describes a lawyer’s fee as a ‘sanction’ when a court grants it because of abusive litigation,” it said.
“This fact condemns the request for insurance coverage from the two lawyers who filed this appeal,” the panel said when confirming the lower court.
Lawyers in the case did not respond to a request for comment.