Harvey v. Allstate Ins. Co.
| Decision Date | 29 November 1993 |
| Citation | 13 F.3d 405 |
| Parties | NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of |
| Court | U.S. Court of Appeals — Tenth Circuit |
Before TACHA, GOODWIN 2 and BRORBY, Circuit Judges.
Dannie L. Harvey appeals a district court order reducing her jury award on one breach of insurance contract claim and awarding Allstate Insurance ("Allstate") a judgment notwithstanding the verdict on a second claim. She also contends that the court erred in calculating her attorney fee award. Allstate cross-appeals the district court's decision to impose rule 11 sanctions in favor of O.R. Whitaker. We reverse, reinstate the jury verdict and award Harvey attorney's fees. In addition, we affirm the district court order imposing Rule 11 sanctions.
In 1984, Harvey sued her employer, the Citizen's State Bank of Liberal Kansas ("Citizen's"), and its president, O.R. Whitaker, for sexual harassment, discrimination, and defamation. Whitaker counterclaimed for libel and slander, requesting a million dollars in punitive damages. Both Whitaker and Harvey were insured by Allstate, under identical homeowner's personal umbrella policies. This policy explicitly promised to defend Harvey against the exact claim Whitaker had filed.
Harvey first sought Allstate's help in July, 1984, contacting her insurance agent, Terry Riney, by telephone. 3 Riney incorrectly informed her that she was not covered. Because Riney kept all copies of the Harveys' insurance policies in his office, Harvey and her husband took him at his word. Therefor, from July 1984 until April, 1985, Harvey defended against Whitaker's counterclaim without Allstate's help. During this period, Whitaker pursued a scorched earth counterclaim and defense, taking eighty depositions. Because of limited funds, Harvey attended some of these depositions herself. Finally, in April, 1985, she again contacted Riney, who sent a letter to Allstate requesting a defense.
Riney suggested that Allstate simply retain Harvey's current counsel, Dennis E. Egan, who had been working on the case for the past year, to defend the counterclaim. However, Allstate instead hired Lee McMaster, a Witcheta attorney who had a long relationship with Allstate, as well as a close friendship with Whitaker 's attorney, but no particular expertise in defamation or slander cases and negative attitudes about sexual harassment cases. 4 McMaster admitted that he kept Allstate's interests in mind while "defending" Harvey and that he advised Allstate on the policy coverage issue even after he had agreed to represent Harvey.
Although Allstate retained McMaster on April 30, 1985, he did not enter his appearance until June 28, almost two months later. McMaster never met his client and did not attend a single one of the twenty-seven depositions taken between April, 1985 and September, 1985, even though Harvey's lawyer requested his help. Harvey continued to attend some depositions alone. Although Egan's office researched defenses to the counterclaim and forwarded McMaster a draft motion to dismiss, he took no action to file this motion. Allstate representatives testified that they did not tell McMaster not to attend depositions, but admitted that they were responsible for supervising his defense.
Meanwhile, although Allstate agents testified at trial that "coverage had been verified" by May 3, 1985 and Allstate's internal memoranda confirmed this testimony, Allstate continued to contest coverage. On July 15, 1985, Allstate filed a declaratory judgment action against Harvey, Whitaker, and Citizen's, seeking to eliminate liability altogether. Evidence presented at trial suggests that both McMaster and the Allstate agent responsible for supervising Harvey's defense were extensively involved in this declaratory judgement action, and that McMaster was in contact with Allstate's coverage attorney. 5
Harvey and Whitaker settled the underlying sexual harassment and defamation cases in September, 1985. Pursuant to the settlement, Harvey received $360,000 for her claims against Whitaker and Whitaker received $10,000 on his counterclaim. At this point, Whitaker and Citizen's had spent over $1 million dollars to prosecute and defend the litigation; Egan had billed Harvey for $169,000 and Allstate had spent only $2,513.
Allstate then filed a motion to dismiss its declaratory judgment action, arguing that the coverage issue was moot. Harvey opposed this dismissal, counterclaiming for (1) reimbursement for legal expenses incurred between July, 1984, when she first asked her agent for coverage, and April, 1985, when Allstate hired McMaster; (2) reimbursement for expenses incurred after April, 1985 because Allstate provided a sham defense; and (3) attorney's fees for defending against Allstate's declaratory judgment action.
Whitaker also filed a cross-complaint seeking attorney's fees. However, after Allstate moved to dismiss its complaint, Whitaker moved to dismiss his counterclaim and withdraw from the litigation. Allstate refused to agree to his withdrawal, despite Whitaker's counsel's repeated requests. The district court later found these refusals were unreasonable and awarded Whitaker sanctions under Fed. R. Civ. Proc. 11.
Harvey's breach of contract counterclaims went to a jury trial, and the jury awarded her $60,000 in damages for Allstate's failure to defend her from July, 1984 until April, 1985 and $34,000 for providing a sham defense thereafter. The district court then reduced the damages on the former claim to $25,921.43 and granted Allstate's motion for Judgment Notwithstanding the Verdict on the latter claim. The court also awarded Harvey attorney's fees for defending against Allstate's declaratory judgment action; however the court found that Harvey was entitled to recover fees only for defending against the declaratory judgment action and not for pursuing her counterclaims after Allstate moved to dismiss its complaint. Thus, the court awarded her only $3,340 of the $47,000 fees she requested. This appeal followed.
Allstate's brief continues to dispute liability for the period between July, 1984 and April, 1985, arguing that the Harveys' notice to Riney did not exist or was insufficient. Allstate contends that there was "no evidence" Riney was notified of Whitaker's counterclaim in July 1984 and that Riney was an independent agent such that oral notice to him was not sufficient.
These contentions are wholly without merit. Both Harvey and her husband testified that they notified Riney by phone in July 1984 and both the Harveys and Riney testified that he was an Allstate agent. 6 The jury obviously found this testimony credible and resolved this factual dispute in favor of the Harveys. The district court correctly found that it had no reason to disturb this factual finding, and Allstate has not shown that the court manifestly abused its discretion in denying Allstate's motion for a judgment notwithstanding the verdict on this ground. Royal College Shop v. North Ins. Co., 895 F.2d 670, 677 (10th Cir.1990).
The remaining question is whether the district court correctly reduced Harvey's damages. We review the grant of a judgment notwithstanding the verdict de novo, and apply the same standard as the trial court. Meyers v. Ideal Basic Industries, 940 F.2d 1379, 1383 (10th Cir.), cert denied, 112 S.Ct. 935 (1991). A trial court may not disturb a jury verdict awarding damages unless the award is so excessive or so inadequate as to shock the conscience and raise an irresistible inference that some improper cause influenced the jury. Moore v. Subaru of America, 891 F.2d 1445, 1451 (10th Cir.1989); Acree v. Minolta Corp., 748 F.2d 1382, 1388 (10th Cir.1984).
Here, the jury awarded Harvey a total of $94,000: $60,000 for the period between July 1984 and April, 1985 and $34,000 for the period after McMaster took over the case. This figure is considerably less than the Egan's total fee of $169,000 7 and considerably less than the amount Whitaker's insurance paid. Thus, we cannot find it was "clearly excessive." Rather, the jury appears to have employed a reasonable, although not necessarily technically correct, method of estimating the costs of defending the counterclaim. 8 See Thompson v. Kerr-McGee Refining Corp., 660 F.2d 1380, 1388 (10th Cir.), cert. denied, 455 U.S. 1019 (1981) ().
The district court reduced Harvey's recovery because it found she could not recover more than the difference between the amount she owed Egan under the continent fee agreement ($144,000) and Egan's hourly fees ($169,921.43). The court reasoned that Harvey would have had to pay Egan $144,000 under the contingent fee agreement regardless of the counterclaim, and thus could not fairly recover more for the counterclaim than the difference between the contingent fee and Egan's hourly fee. Although this may be a plausible method of estimating the costs attributable to defending the counterclaim, it not necessarily more accurate than the jury's method. Uncontradicted evidence showed that Harvey reduced Egan's total hourly fee by attending depositions herself. Moreover, Harvey is not necessarily barred from recovering costs which would have been incurred...
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