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February 26, 1998

ARENA FOOTBALL LEAGUE, Inc., as licensee of Gridiron Enterprises, Inc., an Illinois Corporation, Plaintiff,

The opinion of the court was delivered by: PALLMEYER


 Plaintiff, Arena Football League, Inc. ("AFLI"), filed this two-count action against Defendants, E. Guy Roemer ("Roemer") and Roemer & Featherstonhaugh, P.C., for legal malpractice and breach of fiduciary duty. In its first count, AFLI alleges that Roemer was negligent in advising AFLI employees that the AFLI's member teams could seek coverage under a single workers' compensation account through the State of Delaware and that he concealed material information regarding this application from the AFLI's Board of Directors. In its second count, the AFLI alleges that Defendants are liable for breach of fiduciary duty, both by providing negligent advice and by mishandling litigation that resulted from the negligent advice. Defendant has moved for summary judgment on both counts of the Amended Complaint. For the reasons set forth below, summary judgment is denied.


 The following facts are drawn from the parties' Local Rule 12(M) and 12(N) statements, and pertinent submissions attached thereto.

 The Parties

 Plaintiff Arena Football League, Inc. ("AFLI"), a Delaware corporation, is a nonprofit membership organization and the successor to an Illinois corporation of the same name, which for the purposes of differentiation will hereinafter be referred to as "the League." The League was formed in 1987 for the purpose of holding indoor football games in various cities across the United States. (Defendants E. Guy Roemer and Roemer & Featherstonhaugh, P.C.'s Statement of Material Facts as to Which No Genuine Issue Exists ("Defs.' 12(M) Stmt.") P 1; Plaintiff's Response to Defendant's Local Rule 12(M) Statement ("Pl.'s 12(N) Stmt.") P 1.) This case arises in part out of state laws that required the various league teams ("member teams") to maintain worker's compensation insurance for their employees and personnel. (Defs.' 12(M) Stmt. P 6.)

 Defendant E. Guy Roemer ("Roemer") is an attorney licensed to practice law in the states of New York and Florida and is a senior partner at the law firm of Roemer & Featherstonhaugh, P.C., also a Defendant in this case. (Defs.' 12(M) Stmt. P 2; Pl.'s 12(N) Stmt. P 3.) In 1991, the AFLI Board of Directors hired Roemer as general counsel to represent AFLI in all areas regarding its legal needs. (Additional Facts Warranting Denial of Summary Judgment ("Pl.'s 12(N)(3)(b) Stmt.") P 1; Deposition of Guy Roemer ("Roemer Dep."), Vol. 1, at 60-62.) Roemer & Featherstonhaugh, P.C. is and was at all relevant times a law firm organized as a professional corporation under the laws of the State of New York with its principal office located in Albany, New York. (Defs.' 12(M) Stmt. P 3.)

 The Events

 The parties agree that between 1987 and 1993--the relevant time period in this lawsuit--one of any team's largest operating expenses were its workers' compensation insurance premiums. (Defs.' 12(M) Stmt. P 6; Pl.'s 12(N) Stmt. P 6.) Between 1987-1990, each member team paid the same premium by virtue of the League's holding itself out as a "single-entity employer" located in Illinois. (Pl.'s 12(N) Stmt. P 7.) By holding itself out as a single-entity employer, the League "was able to retain a single carrier to provide workers' compensation and pay premiums which were lower than those charged in [the] home states of some of its members." (Id.)

 In 1990, however, the National Council of Compensation Insurance ("NCCI") directed that the League's member teams cease this practice. The NCCI is the plan administrator for the assigned risk market *fn1" in 23 states, including Illinois and the League's state of incorporation, Delaware. (Id.) In a written decision, the NCCI ruled that the League was not a single-entity employer and therefore not entitled to coverage by a single carrier. (Id.) Instead, Plaintiff alleges, the NCCI concluded that the individual member teams, and not the League, employed the players (Plaintiff's Amended Complaint, Ex. A to Def.'s 12(M) Stmt., P 10); Defendants concede that this was the NCCI's ruling, but neither party has furnished a copy of the decision itself, nor has either side identified the date the decision was entered. The ruling effectively required each member team thereafter to apply for its own workers' compensation insurance coverage in the state of its home office. (Id. P 11.)

 In response to the NCCI ruling, the AFLI *fn2" hastily formed what it called the Ad Hoc Committee on Workers' Compensation and, assisted by Roemer (who had since been hired as the AFLI's general counsel) and Jardin Insurance Agency-Michigan, its insurance broker, attempted to devise a strategy to standardize premium costs for its member teams. (Id. P 13.) Roemer apparently believed that the most effective strategy would be simply to get the NCCI to reconsider its ruling; he wrote that agency at least two letters (one dated October 22, 1992 and the other dated December 14, 1992) asking them to do just that after the ruling was handed down. *fn3" (Pl.'s 12(N)(3)(b) Stmt. PP 15-18; Letters From Roemer to NCCI Representative Pamela Tackett, Exs. 3, 6 to Pl.'s 12(N)(3)(b) Stmt.) That strategy ultimately proved ineffective, however; on February 3, 1993, the NCCI sent Roemer a letter affirming its prior ruling that the AFLI would not be considered a single-entity employer. (Pl.'s 12(N)(3)(b) Stmt. P 19; 2/3/93 Letter From NCCI Representative Pamela Tackett to Roemer, Ex. 7 to Pl.'s 12(N)(3)(b) Stmt.)

 In early April 1993, the workers' compensation insurance carrier for two member teams, the Tampa Bay Storm and the Albany Firebirds, notified the respective owners of those two teams, Robert Gries and Glenn Mazula, that the teams' insurance premiums were being raised. (Defs.' 12(M) Stmt. PP 10, 12.) Tampa Bay's annual insurance premium was slated to be increased by at least $ 340,000--from $ 60,000 to between $ 400,000 and $ 500,000--and Albany's by almost $ 350,000--from $ 90,000 to $ 428,000. (Id.) Both owners promptly called then-AFLI Commissioner Joseph O'Hara and told him their respective teams would sit out the 1993 season if they could not obtain lower annual premiums. (Pl.'s 12(N)(3)(b) Stmt. P 23.)

 There appears to be no dispute that the AFLI determined to attempt to obtain lower premiums for the Tampa Bay and Albany franchises. Neither does there appear to be any dispute that applying for insurance coverage in Delaware as a single-entity employer--this despite the fact that Delaware was a state "covered" by the NCCI's 1990 ruling--is the course of action the AFLI ultimately took in this regard. What the parties do dispute, and what ultimately is the subject of this litigation, is the extent to which Roemer participated in the decision to apply for coverage in Delaware. Defendants' version first: Defendants assert that Mark Higley, the AFLI's director of business and financial affairs, came up with the idea of obtaining insurance coverage through the State of Delaware without any input from Roemer. *fn4" (Def.'s 12(M) Stmt. PP 8, 16, 17; Deposition of Mark Higley ("Higley Dep.") at 7, 16, 33.) After learning of this proposal from Higley, the story goes, Roemer advised the AFLI that to make the plan work it would have to establish a "presence" in Delaware as fully and as completely as possible. (Def.'s 12(M) Stmt. P 17; Roemer Dep. at 211.) Defendants further assert that it was Higley's responsibility, not Roemer's, "to make certain that Arena's presence in Delaware was established," (Def.'s 12(M) Stmt. P 18), relying for this assertion on Tampa Bay Storm owner Robert Gries's testimony that he (Gries) believed that to be the case. (Deposition of Robert Gries ("Gries Dep.") at 18.) Higley testified, moreover, that he did not view Roemer as an expert on workers' compensation insurance issues. (Def.'s 12(M) Stmt. P 18; Higley Dep. at 18.)

 Defendants assert that the Board of Directors did in fact authorize the establishment of an AFLI office in Delaware. (Def.'s 12(M) Stmt. P 20; O'Hara Dep. at 80.) Pursuant to the Board's grant of authority, Higley prepared and signed an application for workers' compensation insurance through the State of Delaware on behalf of the AFLI--an application that Roemer testified he had no input on or even saw until after it was submitted. *fn5" (Def.'s 12(M) Stmt. PP 21, 28; Roemer Dep. at 192, 201; Delaware Insurance Application, Ex. 30 to Pl.'s 12(N)(3)(b) Stmt.) To corroborate Roemer's testimony, Defendants offer Higley's testimony to the effect that he did not believe the application was provided to Roemer for review prior to its submission. (Def.'s 12(M) Stmt. P 25; Higley Dep. at 23.) They also rely on the following colloquy between Higley and AFLI's counsel at Higley's deposition to bolster their position that Roemer did not advise Higley as to the contents of the application:

Question: And at any time before, during, or after the completion of those applications, did Mr. Roemer encourage you to make misrepresentations or state inaccuracies to either [the Delaware insurance carrier later assigned to AFLI,] Travelers, NCCI, or anyone else on the subject of worker's compensation issues?
Answer: No.

 (Higley Dep. at 44.) Finally, Defendants, paraphrasing Commissioner O'Hara's deposition testimony, assert that "no member of Arena's Board of Directors ever told O'Hara that they relied on Roemer in making the decisions to procure workers compensation insurance in Delaware." (Def.'s 12(M) Stmt. P 35; O'Hara Dep. at 78.)

 The AFLI, predictably, has a much different view of Roemer's involvement in the Delaware scheme--it asserts that Roemer played an active role in the decision to pursue the Delaware option. (Pl.'s 12(N)(3)(b) Stmt. PP 26, 27.) There is ample support for this assertion in the record. Donald Balmes, a Jardin employee who took part in Ad Hoc Committee negotiations, testified that he participated in several conference calls with Roemer in which the two discussed the possibility of obtaining coverage for the AFLI through Delaware. *fn6" (Deposition of Donald Balmes ("Balmes Dep.") at 41.) He further testified that Roemer told him the AFLI "[was] a Delaware corporation, that all of the employees of at least these two teams were, in his mind, employees of the league, and if the application was filed under the name of Arena Football and they had established a business presence [in Delaware], that it should fly." (Id. at 46.)

 Members of AFLI's Board of Directors also recounted that Roemer participated in the decision to obtain coverage through Delaware. Board member Jerry Kurz, asked whether he knew who had been charged with filling out the Delaware insurance application, responded that "anything that was supposed to be done with insurance, the person in the league office was Mark Higley, and he was to work in conjunction and under the guidance of Guy Roemer being counsel for the league." (Deposition of Jerry Kurz ("Kurz Dep.") at 26.) ...

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