United States District Court, W.D. Kentucky, Louisville Division
EVEREST STABLES, INC. PLAINTIFF
WILLIAM C. RAMBICURE, JR., et al. DEFENDANTS
MEMORANDUM OPINION AND ORDER
N. Stivers, Judge
matter is before the Court on Defendants Rambicure and
Rambicure Law Group's Motion for Summary Judgment (DN
33), Defendant Miller & Wells, PLLC's Motion for
Judgment on the Pleadings (DN 34), Defendant Zurich American
Insurance Company's Motion to Dismiss (DN 98),
Plaintiff's Objection to Magistrate Judge's Ruling
(DN 60), Plaintiff's Renewed Motion to Compel (DN 61),
Plaintiff's Motion for Summary Judgment (DN 77),
Defendant Rambicure and Rambicure Law Group's Motions for
Leave (DN 82, 84), and Plaintiff's Motion in Limine (DN
116). For the following reasons, Defendants Rambicure and
Rambicure Law Group's Motion for Summary Judgment is
GRANTED, Defendant Miller & Wells, PLLC's Motion for
Judgment on the Pleadings is GRANTED, Defendant Zurich
Insurance Company's Motion to Dismiss is GRANTED,
Plaintiff's Objection is OVERRULED AS MOOT,
Plaintiff's Renewed Motion to Compel is DENIED AS MOOT,
Plaintiff's Motion for Summary Judgment is DENIED,
Defendants' Motion for Leave to Amend is DENIED AS MOOT,
Defendants' Motion for Leave to Seal is GRANTED, and
Plaintiff's Motion in Limine is DENIED AS MOOT.
action follows a dispute between Plaintiff Everest Stables,
Inc. (“Everest” or “Plaintiff”) and
Crestwood Farm Bloodstock, LLC (“Crestwood”)
resulting in litigation (“Crestwood litigation”)
which both the Eastern District of Kentucky and Sixth Circuit
resolved in Crestwood's favor. See Crestwood Farm
Bloodstock, LLC v. Everest Stables, Inc., 864 F.Supp.2d
629 (E.D. Ky. 2012) (Crestwood I); Crestwood Farm
Bloodstock, LLC v. Everest Stables, Inc., 751 F.3d 434
(6th Cir. 2014) (Crestwood II). The Crestwood litigation
centered upon a Purchase and Sale Agreement
(“Agreement”) executed on November 4, 2008, to
govern Crestwood's management of a series of sales in
Kentucky of thoroughbred horses owned by Everest. (Second Am.
Compl. ¶¶ 12-15, DN 87). The contested thoroughbred
sales began in January 2009 and continued through September
2009, including the sale of one horse over Everest's
objection and another sale that was blocked by a separate
Everest agent. (Second Am. Compl. ¶¶ 27-34).
Everest sought legal advice during this period from its
Kentucky attorney, Defendant William Rambicure
(“Rambicure”), who participated in drafting the
Agreement. (Second Am. Compl. ¶ 30). Everest and its
owner, Jeffrey Nielsen (“Nielsen”), allegedly
believed at the time that the Agreement created a fiduciary
and/or agency relationship between Crestwood and Everest.
(Second Am. Compl. ¶¶ 15-16).
Crestwood litigation, the U.S. District Court for the Eastern
District of Kentucky held that the Agreement failed to create
a fiduciary relationship, dismissed Everest's various
tort law claims against Crestwood, and ruled in
Crestwood's favor on the breach of contract claims.
See Crestwood I, 864 F.Supp.2d at 634, 639-42;
see also Crestwood II, 751 F.3d at 439-44 (affirming
the decision in Crestwood I). Following Judge Caldwell's
decision in Crestwood I, and before Everest's appeal to
the Sixth Circuit, Everest fired Rambicure in April 2012.
(Second Am. Compl. ¶ 35). Shortly after the Sixth
Circuit affirmed Crestwood I, Everest and Rambicure signed a
tolling agreement on September 11, 2014. (Defs.' Mem.
Supp. Mot. Summ. J. 23, DN 33-1 [hereinafter Defs.' Mot.
Summ. J.]). Everest filed this suit against Rambicure,
Rambicure Law Group (jointly, “Rambicure
Defendants”), and Miller & Wells, PLLC
(“Miller Wells”) on July 1, 2015.
present action, Everest asserts against Rambicure Defendants
claims of legal malpractice, negligent representation, breach
of fiduciary duty, and breach of contract. (Second Am. Compl.
¶¶ 63-88). Everest claims that Rambicure advised
that Everest could set a minimum bid for a filly named Chase the
Storm,  which Crestwood presented for auction on
behalf of Everest at Keeneland's September 2009 Yearling
Sales. Rambicure admits that he told Everest that it had the
legal right to RNA Chase the Storm, which it did by setting a
minimum price of $1.5 million. When auction bidding topped
out at $875, 000, Everest cancelled the sale and retained the
horse. Crestwood, however, maintained that it was entitled to
a commission of $219, 000 based on the highest auction bid and
prevailed on this claim in the Crestwood litigation. See
Crestwood I, 864 F.Supp.2d at 636, 642. Everest now asserts
that it should recover the commission amount from Rambicure
due to his professional negligence, in addition to the net
sales price Everest would have received from the cancelled
sale, and $272, 000 for attorneys' fees Everest was
required to pay to Crestwood in the prior action. Everest
further maintains that Rambicure negligently drafted the
Agreement so that it failed to impose fiduciary duties on
Crestwood in the marketing of Everest's horses. (Second
Am. Compl. ¶¶ 69, 72).
has also asserted a claim for breach of contract against
Miller Wells under the theory that the law firm agreed to
provide Rambicure insurance coverage for Everest's
malpractice claim when Rambicure associated with the firm and
that Everest was a third-party beneficiary of that agreement,
in addition to claims for fraud and negligent
misrepresentation. (Second Am. Compl. ¶¶ 89-109,
117-21). Further, Everest asserts claims against
Zurich for breach of its insurance contract with Miller
Wells, bad faith, fraud, conspiracy to commit fraud, and
negligent misrepresentation. (Second Am. Compl. ¶¶
present motions, Rambicure Defendants move for summary
judgment on Plaintiff's claims, Miller Wells moves for
judgment on the pleadings, Zurich has moved to dismiss for
failure to state a claim, and Plaintiff moves for summary
judgment on its claims against Rambicure Defendants.
(Defs.' Mot. Summ. J., DN 33; Def.'s Mot. J.
Pleadings, DN 34; DN 98; Pl.'s Mot. Summ. J., DN 77). In
addition, Everest objects to the Magistrate Judge's
ruling regarding documents which Zurich has claimed as
privileged and moves to compel discovery. (Pl.'s Obj., DN
60; Pl.'s Mot. Compel Disc., DN 61). All matters are ripe
Court has subject matter jurisdiction over this action under
28 U.S.C. § 1332 as there is complete diversity between
the parties and the amount in controversy exceeds the sum of
Rambicure Defendants' Motion for Summary Judgment (DN 33)
Defendants seek summary judgment on Plaintiff's claims
against them on various bases including, inter alia, that the
claims are barred by the applicable statute of limitations.
(Defs.' Mot. Summ. J. 19-25). Of course, in ruling on a
motion for summary judgment the Court must determine whether
there is any genuine issue of material fact that would
preclude entry of judgment for the moving party as a matter
of law. See Fed.R.Civ.P. 56(a). The moving party bears the
initial burden of stating the basis for the motion and
identifying evidence in the record that demonstrates an
absence of any material factual dispute. See Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the
moving party satisfies its burden, the non-moving party must
then produce specific evidence establishing the existence of
a genuine issue of fact for trial. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).
the Court must view the evidence in light most favorable to
the non-moving party, the non-moving party must do more than
merely show the existence of some “metaphysical doubt
as to the material facts.” Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)
(citation omitted). Rather, the non-moving party must present
specific facts proving that a genuine factual issue exists by
“citing to particular parts of the materials in the
record” or by “showing that the materials cited
do not establish the absence . . . of a genuine
dispute.” Fed.R.Civ.P. 56(c)(1). “The mere
existence of a scintilla of evidence in support of the
[non-moving party's] position will be insufficient; there
must be evidence on which the jury could reasonably find for
the [non-moving party].” Anderson, 477 U.S. at
Statute of Limitations
Rambicure Defendants assert that the Court should dismiss
Everest's legal malpractice claim based on the applicable
statute of limitations, KRS 413.245. (Defs.' Mot. Summ. J.
19). Everest maintains that its malpractice claim did not
accrue until the Sixth Circuit's ruling in Crestwood II
became final and was tolled by the subsequent tolling
agreement. (Pl.'s Resp. Defs.' Mot. Summ. J. 26-32,
DN 55 [hereinafter Pl.'s Resp.]).
determine when or if a cause of action for legal malpractice
accrued, ” courts “look to the relevant statute
of limitations, KRS 413.245.” Doe v. Golden &
Walters, PLLC, 173 S.W.3d 260, 270 (Ky. App. 2005). KRS
413.245 provides that an action for professional services
negligence “shall be brought within one (1) year from
the date of the occurrence or from the date when the cause of
action was, or reasonably should have been, discovered by the
party injured.” In a recent decision, the Kentucky
Court of Appeals explained:
“Occurrence, ” as used in KRS 413.245, is
synonymous with “cause of action[.]” “[T]he
use of the word ‘occurrence' in KRS 413.245
indicates a legislative policy that there should be some
definable, readily ascertainable event which triggers the
statute.” The so-called “triggering event”
is “the date of ‘irrevocable non-speculative
injury.'” An “occurrence” legal
malpractice claim is ripe, and a cause of action has accrued,
when both negligence and “reasonably
ascertainable” damages have occurred.
Saalwaechter v. Carroll, No. 2015-CA-001799-MR, 2017
WL 1290620, at *4 (Ky. App. Apr. 7, 2017) (alteration in
original) (internal citations omitted) (citation omitted).
regard to the “occurrence” statute of
limitations, Rambicure Defendants note that the allegedly
negligent drafting of the Agreement occurred in 2008. (See
Defs.' Mot. Summ. J. 2-3; Defs.' Reply Supp. Mot.
Summ. J. 8, DN 59). Rambicure Defendants further posit that
Everest's claimed damages from the handling of the horse
sales by Crestwood in 2009. (Defs.' Mot. Summ. J. 6-7).
At that point, they argue, Rambicure's supposed
malpractice had occurred and the damages were fixed and
non-speculative. See Michels v. Sklavos, 869 S.W.2d
728, 730 (Ky. 1994) (stating that a cause of action for legal
malpractice accrues “where negligence and damages have
both occurred . . . .” (internal quotation marks
omitted) (quoting Nw. Nat'l Ins. Co. v. Osborne,
610 F.Supp. 126, 128 (E.D. Ky. 1985))); Queensway Fin.
Holdings Ltd. v. Cotton & Allen, P.S.C., 237 S.W.3d
141, 147 (Ky. 2007) (holding that the occurrence limitations
period is triggered by an “irrevocable non-speculative
injury . . . .” (internal quotation marks omitted)
(citing Michels, 869 S.W.2d at 730)). Thus,
according to Rambicure Defendants, the statute of limitations
began to run upon completion of the horse sales in 2009, but
in any case no later than the Crestwood I decision in March
2012, and would have expired long before the present action
was filed in 2015. (Defs.' Mot. Summ. J. 6-8).
Defendants' argument ignores the triggering event which
fixed the damages arising from the drafting of the Agreement
and the horse sales. In this regard, there is a crucial
distinction between Everest's claims against Crestwood
and its claims against Rambicure Defendants. Everest's
losses attributed to Crestwood were triggered by the horse
sales in 2009-at that time any damages from improperly
marketing the horses could have been calculated. By contrast,
Everest's claims against Rambicure are that his poor
drafting of the Agreement prevented Everest from recovering
from Crestwood-an outcome that was not evident until the
finality of the Crestwood litigation. At that point, Everest
was foreclosed from recouping its claimed losses from
Crestwood, which established for the first time the damage
suffered by Everest from the failure of the Agreement to
impose fiduciary duties upon Crestwood. These are the losses
Everest now blames on Rambicure, losses which became
irrevocable and non-speculative only at the close of the
prior litigation. See Queensway Fin. Holdings Ltd.,
237 S.W.3d at 147 (citation omitted). As a result, the
statute of limitations did not begin running on the
malpractice claim until the Crestwood litigation became
final. See Michels, 869 S.W.2d at 728
(legal malpractice claim arising from the attorney's
representation in a wrongful discharge lawsuit did not accrue
until the termination of the underlying suit);
Alagia, 882 S.W.2d at 125-26 (legal malpractice
claim did not accrue until the amount owed to the IRS was
determined through negotiations, which fixed the damages);
Meade Cty. Bank v. Wheatley, 910 S.W.2d 233, 235
(Ky. 1995) (attorney's failure to disclose an outstanding
mortgage in a title opinion constituted malpractice which
loss “was not realized as damages until the sale of the
property . . . .”).
Court is mindful of the Kentucky Supreme Court's closing
remarks in Pedigo v. Breen, 169 S.W.3d 831 (Ky.
2004), where it stated:
This case well illustrates the desirability of strictly
construing the occurrence rule and requiring that all tort
elements be fully developed. As in Alagia, Trautwein
& Smith v. Broadbent, Hibbard v. Taylor, and Michels v.
Sklavos, sound public policy is best served by allowing
parties an opportunity to seek mitigation of damages by
pursuit of the underlying claim, and by leaving the
professional negligence claim open until the underlying claim
Id. at 834; see also Taracido v. Perez-Abreu,
Zamora & De La Fe, P.A., 705 So.2d 41, 43 (Fla.
Dist. Ct. App. 1997) (“The existence of legal
malpractice is often difficult to ascertain. A client should
not be placed in the position of having to file a potentially
baseless claim prematurely fearing that otherwise an action
will be precluded by the statute of limitations. Thus we hold
that a cause of action for legal malpractice based upon a
prior transaction accrues at the conclusion of subsequent
litigation between the client and a third party.”
(citations omitted)). Consistent with the Kentucky Supreme
Court's directive, the statute of limitations on
Everest's legal malpractice claim did not begin to run
until the Sixth Circuit's decision in Crestwood II became
final-i.e., when the mandate issued on June 5, 2014. Everest
and Rambicure entered into a tolling agreement on September
11, 2014, which was within the one-year statute of limitation
and stayed further passage of the limitations period.
Accordingly, Everest's assertion of its legal malpractice
claim was timely when filed on July 1, 2015. The motion for
summary judgment based on the statute of limitations will
therefore be denied.
Defendants also assert that they are entitled to summary
judgment based on collateral estoppel. (Defs.' Mot.
Summ. J. 10-19). Ordinarily, federal law governs the
preclusive effect of a prior federal-court judgment.
Taylor v. Sturgell, 553 U.S. 880, 891 (2008)
(citation omitted); J.Z.G. Res., Inc. v. Shelby Ins.
Co., 84 F.3d 211, 213-14 (6th Cir. 1996). But where, as
here, the prior case comes to federal court under diversity
jurisdiction “federal law incorporates the rules of
preclusion applied by the State in which the rendering court
sits.” Taylor, 553 U.S. at 891 n.4 (citing Semtek
Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497,
508 (2001)). Accordingly, Kentucky's collateral estoppel
law is incorporated with federal common law.
collateral estoppel, once an issue is actually and
necessarily determined by a court of competent jurisdiction,
that determination is conclusive in subsequent suits based on
a different cause of action involving a party to the prior
litigation.” Montana v. United States, 440
U.S. 147, 153 (1979) (citations omitted). For collateral
estoppel to operate as a bar, the movant must show that: (1)
the issue in the second case is the same as the issue in the
first case; (2) the issue was actually litigated; (3) the
issue was actually decided in the prior action; and (4) the
decision on the issue in the prior action was necessary to
the court's judgment. Yeoman v. Commonwealth Health
Policy Bd., 983 S.W.2d 459, 465 (Ky. 1998) (citing
Restatement (Second) of Judgments § 27 (1982)); see
also Ga.-Pac. Consumer Prods. LP v. Four-U-Packaging,
Inc., 701 F.3d 1093, 1098 (6th Cir. 2012) (citations
omitted). Further, Kentucky law holds that collateral
estoppel “applies only if the party against whom it is
sought to be applied had a realistically full and fair
opportunity to litigate the issue . . . and if principles of
justice and fairness would be served by its
application.” Berrier v. Bizer, 57 S.W.3d 271,
281 (Ky. 2001) (citations omitted).
Defendants argue that Everest cannot prove the causation
element of its malpractice claim because the Crestwood
litigation effectively resolved the matter of damages and
liability. (Defs.' Mot. Summ. J. 10, 12-19). They assert
that collateral estoppel prevents Everest from re-litigating
previously adjudicated claims of third-party liability under
Kentucky's “suit within a suit” approach to
legal malpractice cases. (Defs.' Mot. Summ. J. 10-19).
Everest contends in opposition that collateral estoppel does
not apply because this case differs from Crestwood I, as the
case at bar focuses on Rambicure's negligent legal work,
and does not require a showing of “third-party
liability, ” nor does it require overruling the
Crestwood litigation decisions. (Pl.'s Resp. 20-23).
Everest explains that a “suit within a suit” is
unnecessary because the claimed ...