636 F.3d 1273 (10th Cir. 2011), 09-5150, Scottsdale Ins. Co. v. Tolliver
|Citation:||636 F.3d 1273|
|Opinion Judge:||MELGREN, District Judge.|
|Party Name:||SCOTTSDALE INSURANCE COMPANY, Respondent-Appellee, v. Michael S. TOLLIVER and Sandra L. Tolliver, Petitioners-Appellants.|
|Attorney:||Brian E. Dittrich, Dittrich Law Firm, Tulsa, OK, for Petitioners-Appellants. James E. Weger (C. Michael Copeland, Tadd J.P. Bogan, Adam J. Strange, with him on the briefs), Jones, Gotcher & Bogan, Tulsa, OK, for Respondent-Appellee.|
|Judge Panel:||Before KELLY and GORSUCH, Circuit Judges, and MELGREN, District Judge.[*]|
|Case Date:||February 24, 2011|
|Court:||United States Courts of Appeals, Court of Appeals for the Tenth Circuit|
[Copyrighted Material Omitted]
In this diversity case, Defendants Sandra and Michael Tolliver appeal from the district court's order granting Plaintiff Scottsdale Insurance Company's Motion for Attorneys' Fees. The Tollivers contend that because the Oklahoma statute allowing such fees, Okla. Stat. tit. 12, § 1101.1, is procedural and because that statute is in conflict with the procedure of Rule 68 of the Federal Rules of Civil Procedure, the attorneys' fees awarded by the district court violated the principles of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Scottsdale denies any collision between the Oklahoma statute and Rule 68, and argues that because § 1101.1(B)(3) of the Oklahoma statute is substantive, the district court properly awarded attorneys' fees under state law. Exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM, but for reasons other than those relied upon by the district court.
The Tollivers purchased a dwelling insurance policy from Scottsdale Insurance Company to insure a residential property they owned in Tulsa, Oklahoma. After the house was destroyed by fire, the Tollivers submitted a claim to Scottsdale pursuant to that policy. In the process of investigating the claim, Scottsdale discovered that the Tollivers had failed to disclose on their application for insurance their complete loss history, which included two total-loss fire claims within the prior three years. Based on this omission, Scottsdale filed a declaratory judgment action seeking to avoid payment of the Tollivers' claim and rescission of the policy due to misrepresentation.
The Tollivers asserted counterclaims against Scottsdale for bad faith and breach of contract. Scottsdale moved for summary judgment on all of the Tollivers' counterclaims and prevailed only with respect to the bad faith claim. Thereafter, Scottsdale made an offer of judgment to the Tollivers pursuant to both Rule 68 and § 1101.1 regarding the Tollivers' counterclaims.1 In this offer, Scottsdale agreed to
have judgment taken against it in the amount of $25,000, inclusive of costs and attorneys' fees. The Tollivers rejected Scottsdale's offer of judgment.
The action proceeded to trial where the jury returned a verdict in favor of Scottsdale. After trial, the Tollivers appealed. We affirmed the district court's grant of summary judgment on the Tollivers' bad faith claim, but reversed and remanded based on the district court's erroneous instruction on the burden on proof with respect to the element of intent to deceive under Okla. Stat. tit. 36, § 3609, a statute concerning representations made in applications for insurance coverage. See Scottsdale Ins. Co. v. Tolliver, 261 Fed.Appx. 153, 162 (10th Cir.2008). After remand, a second trial returned a verdict in Scottsdale's favor, and the Tollivers again appealed the jury's verdict. We affirmed. Scottsdale Ins. Co. v. Tolliver, 343 Fed.Appx. 347 (2009).
After we affirmed the jury's verdict from the second trial, Scottsdale moved the district court for attorneys' fees pursuant to § 1101.1. While the Tollivers opposed Scottsdale's right to attorneys' fees, the parties stipulated that the proper amount of attorneys' fees, should the district court determine that Scottsdale was entitled to recover, was $140,000. The district court referred Scottsdale's motion to a magistrate judge for a report and recommendation, who recommended that Scottsdale be awarded attorneys' fees pursuant to § 1101.1. The Tollivers objected to the magistrate judge's report and recommendation. The district court reviewed the matter de novo, accepted the magistrate judge's report, and granted Scottsdale's attorneys' fee request.
" We review a district court's decision on whether to award attorney fees for abuse of discretion, but we review de novo the district court's application of the legal principles underlying that decision." Pound v. Airosol Co., Inc., 498 F.3d 1089, 1100-01 (10th Cir.2007).
The Tollivers challenge the district court's award of attorneys' fees by first arguing that the procedural requirements for both Rule 68 and the Oklahoma statute, which Scottsdale contends provides the basis for the award, are in direct conflict, and as a result, the Oklahoma statute is inapplicable in federal court pursuant to the Erie doctrine, precluding Scottsdale's claim for attorneys' fees. The Tollivers argue that § 1101.1 requires that an offer of judgment be filed with the court regardless of whether it is accepted, while Rule 68 provides the opposite by prohibiting the filing of an unaccepted offer. Applying Erie and its progeny, the district court determined that because Rule 68 and § 1101.1 collided with respect to the procedural mechanism for making an offer of judgment, a federal court must apply the procedure of Rule 68. The district court further stated that because Scottsdale clearly intended to make its offer of judgment under both Rule 68 and § 1101.1, and because Scottsdale followed the correct procedure for making an offer of judgment in federal court under Rule 68, its offer did not become invalid due to its failure to follow § 1101.1's requirement that the offer be filed with the court.2
We have held that the " first analytical step" in an Erie case " is to determine whether [a state] statute collides with any federal procedural rule."
Trierweiler v. Croxton & Trench Holding Corp., 90 F.3d 1523, 1539 (10th Cir.1996) (quoting Hanna v. Plumer, 380 U.S. 460, 470, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965)). In other words, we must determine " ‘ whether, when fairly construed, the scope of [the Federal Rule] is " sufficiently broad" to cause a " direct collision" with the state law or, implicitly, to " control the issue" before the court.’ " Id. at 1539-40 (quoting Burlington N. RR. Co. v. Woods, 480 U.S. 1, 4-5, 107 S.Ct. 967, 94 L.Ed.2d 1 (1987) (quoting Walker v. Armco Steel Corp., 446 U.S. 740, 749-50, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980))) (alteration in original). In such a case, there " leav[es] no room for the operation of [the state] law," and we must apply the Federal Rule unless the Rule violates the Rules Enabling Act or is unconstitutional. Id. ; see Walker v. Armco Steel Corp., 446 U.S. 740, 749-50, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980); Hanna, 380 U.S. at 471, 85 S.Ct. 1136. Put another way, a " clear case" under Erie occurs when:
[T]he state rule is in actual conflict with one of the Federal Rules of Civil Procedure, so that enforcing the state rule would knock out the federal rule. If the federal rule is within the scope of the Rules Enabling Act, 28 U.S.C. § 2071(a), under which the Federal Rules were promulgated, then it is valid (barring some constitutional objection ...) and...
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