885 F.2d 826 (11th Cir. 1989), 88-8755, American Family Life Assur. Co. of Columbus, Ga. v. United States Fire Co.

Docket Nº:88-8755.
Citation:885 F.2d 826
Party Name:AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, GEORGIA, a Georgia Corp., Plaintiff-Appellee, v. UNITED STATES FIRE COMPANY, and Boston Old Colony Insurance Company, Defendants-Appellants.
Case Date:October 10, 1989
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 826

885 F.2d 826 (11th Cir. 1989)

AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, GEORGIA,

a Georgia Corp., Plaintiff-Appellee,

v.

UNITED STATES FIRE COMPANY, and Boston Old Colony Insurance

Company, Defendants-Appellants.

No. 88-8755.

United States Court of Appeals, Eleventh Circuit

October 10, 1989

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[Copyrighted Material Omitted]

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        Michael Hufft, Kansas City, Mo., H. Baxter Harcourt, Columbus, Ga., for Boston Old Colony Ins. Co.

        John W. Denney, Bradford C. Dodds, Kelly, Denney, Pease & Allison, Columbus, Ga., for U.S. Fire Co.

        Forrest L. Champion, Jr., Champion & Champion, Albert W. Stubbs, Hatcher, Stubbs, Land, Hollis & Rothschild, Columbus, Ga., for plaintiff-appellee.

        Appeal from the United States District Court for the Middle District of Georgia.

        Before KRAVITCH, JOHNSON and ANDERSON, Circuit Judges.

        JOHNSON, Circuit Judge:

        This case arises on appeal from the entry of judgment after a jury trial in favor of the plaintiff, American Family Life Assurance Company of Columbus, Georgia ("American Family"), against two insurance companies, on claims brought under Georgia law for attorney's fees incurred by American Family in defense of a Missouri suit alleging American Family had engaged in malicious prosecution, for attorney's fees incurred in suits to recover these attorney's fees, and for prejudgment interest. We affirm in part, reverse in part, and remand.

       I. FACTS

        This case has a complicated history. The first relevant event occurred when American Family brought suit against the former Governor of Missouri, Joseph P. Teasdale, alleging tortious interference with contract rights and utterance of injurious falsehoods stemming from Teasdale's actions, taken while governor, banning the sale of cancer insurance ("case 1"). The trial court entered judgment in favor of defendant and granted defendant's post-judgment motion for attorney's fees because the court found the suit vindictive and frivolous. American Family Life Assurance Co. v. Teasdale, 564 F.Supp. 1571 (W.D.Mo.1983), aff'd, 733 F.2d 559 (8th Cir.1984).

        On July 29, 1983, Governor Teasdale filed suit against American Family in the Western District of Missouri alleging malicious prosecution and abuse of process ("case 2"). At this time, American Family

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had a $500,000 liability insurance policy with Boston Old Colony Insurance Company ("Boston Old Colony"), and a $9 million excess insurance policy with United States Fire Insurance Company ("U.S. Fire"). Both policies had clauses providing that the insurance carriers would defend suits filed against American Family. On August 10, 1983, twelve days after Teasdale filed suit, American Family notified Boston Old Colony and U.S. Fire of the suit and requested each to provide a defense. On August 19, 1983, Boston Old Colony denied coverage of liability in the insurance policy but agreed to defend American Family in Teasdale's suit. On August 29, 1983, U.S. Fire denied both coverage and its obligation to defend.

        On May 29, 1984, American Family notified Boston Old Colony and U.S. Fire that their denial of coverage had created a conflict of interest in response to which American Family had obtained its own legal representation. On June 20, 1984, U.S. Fire filed a declaratory judgment action in federal district court in the Western District of Missouri seeking a declaration that it was not liable either to American Family or to Teasdale ("case 3"). Boston Old Colony intervened in this suit. On December 13, 1984, the Missouri district judge stayed the proceedings in the declaratory judgment action pending resolution of Teasdale's suit against American Family.

        On May 15, 1985, American Family filed suit against Boston Old Colony and U.S. Fire in federal district court in the Middle District of Georgia ("case 4"). In Count I, American Family sought to recover attorney's fees it had incurred in defense of Teasdale's suit. In Count II, American Family sought a declaratory judgment interpreting its rights and obligations under the insurance contracts with Boston Old Colony and U.S. Fire. American Family also sought to recover attorney's fees and expenses incurred in cases 3 and 4 on the basis of bad faith by Boston Old Colony and U.S. Fire in denying coverage in those two actions.

        On June 26, 1985, the Georgia district court granted partial summary judgment in favor of American Family in case 4. The court first applied Georgia choice-of-law rules and determined that Georgia law governed the construction, validity, and interpretation of the insurance contracts. The court then held that under these contracts both Boston Old Colony and U.S. Fire had the duty to defend American Family in Teasdale's suit. The district court further found that, because Boston Old Colony and U.S. Fire had denied coverage, a conflict of interest existed between the insurers, Boston Old Colony and U.S. Fire, and the insured, American Family, such that American Family was justified in obtaining independent counsel. Finally, the district court held that American Family could negotiate settlement with Teasdale and that Boston Old Colony and U.S. Fire would be bound by any reasonable settlement.

        The district court certified final judgment on October 25, 1985, and defendants appealed. During the pendency of this appeal, the district court in the Western District of Missouri transferred U.S. Fire's declaratory judgment action against American Family to the Middle District of Georgia under 28 U.S.C.A. Sec. 1404(a). Upon transfer, the district judge in the Middle District of Georgia consolidated the cases, and shortly thereafter the parties settled Teasdale's suit. This Court dismissed defendants' appeal from the grant of summary judgment for lack of subject matter jurisdiction based on mootness, because the claims for coverage had been settled, and based on a lack of finality, because the amount of attorney's fees claimed had not yet been determined. American Family Life Assurance Co. v. United States Fire Insurance Co., 794 F.2d 629 (11th Cir.1986). This Court remanded the case to the district court for further proceedings on the attorney's fees issue. On July 31, 1987, Boston Old Colony filed a cross-claim against U.S. Fire for contribution and indemnification, and U.S. Fire counterclaimed.

        The Georgia district court held a jury trial between June 20, 1988, and June 27, 1988, on the issue of defendants' liability for American Family's attorney's fees. The jury returned a verdict in favor of

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American Family against both defendants in the amount of $753,416.08. The jury awarded $294,930.80 in attorney's fees and expenses incurred in defending Teasdale's suit (case 2). The jury found that both defendants had denied coverage in bad faith; the jury awarded $39,303.21 for attorney's fees and expenses incurred in connection with the declaratory judgment action originally brought in Missouri (case 3), and $419,182.07 in fees and expenses incurred in the action brought in the Middle District of Georgia (case 4). The jury granted an award of prejudgment interest on all claims. On August 2, 1988, after calculating the interest to total $111,502.69, the district court entered final judgment in favor of American Family in the amount of $864,919.07. The district court also denied Boston Old Colony's cross-claim against U.S. Fire and U.S. Fire's counterclaim. Subsequent to entering judgment, the district court denied defendants' motions for judgment notwithstanding the verdict and for a new trial. Boston Old Colony and U.S. Fire appeal.

       II. DISCUSSION

        Boston Old Colony and U.S. Fire moved for judgment notwithstanding the verdict on all claims brought by American Family on which the jury rendered a verdict in favor of American Family. The review of a jury verdict on a motion for judgment notwithstanding the verdict is provided in Boeing Company v. Shipman, 411 F.2d 365, 374 (5th Cir.1969) (en banc):

        On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence--not just that evidence which supports the non-mover's case--but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury. A mere scintilla of evidence is insufficient to present a question for the jury.

        See generally Watts v. Great Atlantic and Pacific Tea Co., 842 F.2d 307, 309-10 (11th Cir.1988) (applying Boeing Co.). On appeal from the jury verdict, this Court applies the same standard. This Court will accept the jury verdict if there exist probative facts in the record to support it. See Fitzgerald v. McDaniel, 833 F.2d 1516, 1519 (11th Cir.1987).

  1. Attorney's Fees in Teasdale's Suit

            1. Choice of Law

            The question of which state's substantive law applies in a case is a question of law entitled to independent review on appeal. Sigalas v. Lido Maritime, Inc., 776 F.2d 1512, 1516 (11th Cir.1985). In diversity cases, the choice-of-law rules of the forum state determine which state's substantive law applies. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Federal jurisdiction in this case is based on diversity,...

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