American Home Assur. Co. v. Pope, 02-4057-CV-C-SOW.
| Decision Date | 23 January 2006 |
| Docket Number | No. 02-4057-CV-C-SOW.,02-4057-CV-C-SOW. |
| Citation | 410 F.Supp.2d 849 |
| Parties | AMERICAN HOME ASSURANCE COMPANY, Plaintiff, v. Kelly POPE, et al., Defendants. |
| Court | U.S. District Court — Western District of Missouri |
Gerald L. Angst, Sidley & Austin, Chicago, IL, Joy M. Leong, Robert D. Keeling, Stephen B. Kinnaird, Sidley Austin Brown & Wood LLP, Washington, DC, Douglas J. Schmidt, Michael E. Callahan, Blackwell, Sanders, Peper, Martin, LLP, Kansas City, MO, for Plaintiff.
Danieal H. Miller, Danieal H. Miller, P.C., Columbia, MO, Roger G. Brown, Roger G. Brown & Associates, Jefferson City, MO, for Defendants.
Before the Court are Defendant Kelly Pope's Motion for Award of Attorney Fees With Suggestions (Doc. # 169), Defendant ad litem Buckley's Motion for Award of Attorneys' Fees (Doc. # 171), Defendant Kelly Pope's Supplemental Motion for Award of Attorney Fees (Doc. # 172), Amended Application for Attorneys' Fees by Counsel for Defendant ad litem (Doc. # 177), Defendant Kelly Pope's Motion for Imposition of Appeal Bond (Doc. # 184), Plaintiff American Home Assurance Company's Consolidated Suggestions in Opposition, and both defendants' replies. The motions are fully briefed and ready for ruling.
For the reasons stated herein, Defendant Kelly Pope and defendant ad litem Buckley's motions for attorney's fees are granted. Defendant Kelly Pope's supplemental motion for attorney's fees, which asks for attorney's fees and costs to cover the appeal of this case to the Eighth Circuit is denied. Defendant Kelly Pope's motion for imposition of appeal bond is denied.
The litigation involving this case has been ongoing since 1991. The case came before this Court in April 2002 when plaintiff American Home Assurance Company ("American Home") brought this diversity suit under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201 ("FDJA"), against Kelly Pope and defendant ad litem C. Robert Buckley ("ad litem Buckley"). American Home sought a declaration that it had no obligation to defend or indemnify Dr. Bruce N. Strnad1 in the underlying Missouri state court litigation. This Court found in 2003 that American Home's criminal act exclusion in the policy at issue precluded coverage for Dr. Strnad. This finding was appealed to the United States Court of Appeals for the Eighth Circuit. In May 2004, the Eighth Circuit issued an Opinion finding that American Home's criminal act exclusion does not preclude coverage for Dr. Strnad and remanded the case back to this Court for further proceedings consistent with its opinion.2 Subsequently, this Court allowed American Home to amend its Complaint. The parties then moved for summary judgment. On October 13, 2005, this Court, in compliance with the Eighth Circuit's mandate, entered summary judgment in favor of defendants Pope and ad litem Buckley and found that American Home has a duty to provide coverage for Kelly Pope's claims against Dr. Strnad.3 American Home is currently appealing this Court's finding to the Eighth Circuit.
Following this Court's Order, defendant Pope and defendant ad litem Buckley sought attorney's fees. Defendant Pope sought attorney's fees that will be incurred on appeal, and also sought an imposition of appeal bond. Plaintiff American Home moved, pursuant to Fed.R.Civ.P. 54(d)(2)(C) to bifurcate the pending motions for attorney's fees so that the Court could determine issues of liability for fees before receiving submissions bearing on issues of evaluation of services for which liability is imposed by the Court. Specifically, American Home brought to the Court's attention that discovery on issues pertaining to reasonableness of attorney's fees may not be necessary if American Home is without liability for fees. The Court granted American Home's motion to bifurcate. Accordingly, this Order will only address the issue of liability. Since this Court finds that American Home is liable for attorney fees, the parties are directed to brief the issue of the reasonableness of the fees sought by defendant Pope and defendant ad litem Buckley.
The question of whether an insurer may be held liable for attorney's fees incurred in a declaratory judgment action brought to establish the existence of coverage is one that has led to contradictory answers by Missouri state courts and federal courts. It is defendant Kelly Pope's position that under Missouri law, in declaratory judgment actions, costs are to be awarded in a manner that is equitable and just, pursuant to Missouri statute § 526.100 and Missouri Rule of Civil Procedure 87.09, and furthermore, that "costs" include attorney's fees.
The Eighth Circuit has recognized that the Federal Declaratory Judgment Act, 28 U.S.C. § 2201, "makes no express provision for an award of attorney's fees." American Family Insurance Co. v. Dewald, 597 F.2d 1148, 1151 (8th Cir.1979). Yet, defendants Pope and ad litem Buckley urge the Court to consider 28 U.S.C. § 2202 as a basis for an award of attorney's fees in a declaratory judgment action. Specifically, section 2202 states that "[f]urther necessary or proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment." In the Dewald opinion, the Eighth Circuit followed two district court cases which "held that attorney's fees may be awarded under 28 U.S.C. § 2202 where such an award is authorized by applicable state law for comparable actions." Dewald, 597 F.2d at 1151 (). The Dewald court recognized that this analysis only applies to cases where an insurance company has been found to have wrongfully refused to defend the insured. Ultimately, the court turned to North Dakota state law to determine whether attorney's fees may be awarded in declaratory judgment actions. This step was almost moot though because the court below had found that the insurance policy did not cover the circumstances involved and therefore the court denied an award of attorney's fees. Dewald, 597 F.2d at 1152.
The Eighth Circuit again revisited the issue of the award of attorney's fees following a declaratory judgment action in National Union Fire Ins. v. Structural Systems Technology, Inc., 964 F.2d 759, 763 (8th Cir.1992). The court affirmed the district court's denial of an award of attorney's fees under the FDJA, 28 U.S.C. §§ 2201-2202. Id. A review of the district court's order reveals that it did not mention the analysis set forth in Dewald. National Union Fire Ins. v. Structural Systems Technology, Inc., 764 F.Supp. 145, 147 (E.D.Mo.1991). Rather, the court cited the well-known "American Rule" of attorney's fees, which states that each litigant is responsible for bearing the expense of its own attorney's fees absent statutory authority for such an award or contractual agreement of the parties. Id. (citing Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975)). Ultimately, the district court denied the award of attorney's fees under section 2202 and held that the "further necessary and proper relief" phrase in section 2202 of the FDJA does not constitute statutory authority for attorney's fees as an exception to the American Rule. Again, the Eighth Circuit stated that "we cannot conclude that the district court erred or abused its discretion in refusing to award attorneys' fees." National Union, 964 F.2d at 763.
By the Court's reading, it is difficult to square these two holdings by the Eighth Circuit. Dewald seemed to hold in 1979 that section 2202 of the FDJA may be a basis for an award of attorney's fees (if permitted by applicable state law), and National Union in 1992 seemed to essentially hold, albeit by implication, that section 2202 is not statutory authority for an award of attorney's fees (once it stated that the district court did not err in its analysis and refusal to award attorney's fees). Yet, this Court has found that in diversity declaratory judgment actions such as the case at hand, the U.S. district courts have followed the analysis as set forth in Broyles, Harper, and Dewald and looked to Missouri law to determine whether attorney's fees may be awarded. See, e.g., Wiles v. Capitol Indemnity Corp., 204 F.Supp.2d 1207 (E.D.Mo.2002). Accordingly, the Court finds that section 2202 of the FDJA grants this Court authority to award attorney's fees. This Court is directed to analyze this case according to the analysis laid out in Dewald. The next step is to turn to Missouri law to determine whether attorney's fees should be allowed in this case.
As a starting point, it is well recognized that Missouri follows the American Rule regarding attorney's fees. The Missouri Supreme Court has stated the American Rule as: "absent statutory authorization or contractual agreement, with few exceptions, each litigant must bear his own attorney's fees." Ranken v. Boykins, 816 S.W.2d 189, 193 (1991) (citing Mayor, Councilmen, & Citizens v. Beard, 636 S.W.2d 330, 331 (Mo.1982)). The "exceptions" usually involve "`very unusual circumstances' or where the natural and proximate result of a breach of duty is to involve the wronged party in collateral litigation." Ranken, 816 S.W.2d at 193.
In Missouri, the declaratory judgment statutes fall under chapter 527. Defendants Pope and Buckley argue that the "statutory authority" for attorney's fees in a declaratory judgment action in Missouri comes from MO.REV.STAT. § 527.100. Under section 527.100, attorney's fees are not explicitly mentioned, rather "costs" are discussed. "In any proceeding under sections 527.011 to 527.130 the court may make such award of costs as may seem equitable and just." MO.REV. STAT. § 527.100 (2006). It has been recognized that the word "costs" here "does not...
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