Brooks, Tarlton, Gilbert, Douglas & Kressler v. U.S. Fire Ins. Co., No. 86-1768

CourtU.S. Court of Appeals — Fifth Circuit
Writing for the CourtBefore RANDALL, WILLIAMS and GARWOOD; RANDALL
Citation832 F.2d 1358
PartiesBROOKS, TARLTON, GILBERT, DOUGLAS & KRESSLER, Etc., Plaintiffs-Appellees, Cross-Appellants, v. UNITED STATES FIRE INSURANCE COMPANY, Defendant-Appellant, Cross-Appellee.
Docket NumberNo. 86-1768
Decision Date05 November 1987

Page 1358

832 F.2d 1358
56 USLW 2321
BROOKS, TARLTON, GILBERT, DOUGLAS & KRESSLER, Etc.,
Plaintiffs-Appellees, Cross-Appellants,
v.
UNITED STATES FIRE INSURANCE COMPANY, Defendant-Appellant,
Cross-Appellee.
No. 86-1768.
United States Court of Appeals,
Fifth Circuit.
Nov. 5, 1987.
Rehearing Denied Dec. 9, 1987.

William M. Murphy, Murphy, Shrull, Moore & Bell, Fort Worth, Tex., for defendant-appellant, cross-appellee.

James B. Barlow and Cora S. Werley, Barlow, Garsek & Bowers, Fort Worth, Tex., for plaintiffs-appellees, cross-appellants.

Page 1359

Appeals from the United States District Court for the Northern District of Texas.

Before RANDALL, WILLIAMS and GARWOOD, Circuit Judges.

RANDALL, Circuit Judge:

Defendant, an insurance company, appeals the district court's decision--based on competing cross-motions--to grant summary judgment in favor of plaintiff, the insured, on a breach of contract claim. In a related argument, defendant also challenges the district court's award of damages on the contract claim. Next, defendant appeals the district court's determination that defendant's conduct toward its insured violated the Texas Deceptive Trade Practices Act. Plaintiff cross-appeals the Deceptive Trade Practices Act claim, arguing that the district court incorrectly applied the Act's 1979 amendments to plaintiff's claim and, as a result, awarded plaintiff only a fraction of the punitive damages which it should have received. Plaintiff also asks this court to correct a mathematical mistake in the judgment entered below. We agree with the district court that defendant breached the terms of the insurance policy between plaintiff and defendant. However, we reject the court's conclusion that this breach of contract was also a breach of an express warranty and, therefore, a Deceptive Trade Practices Act violation. Moreover, the unorthodox nature of the proceedings below prohibits us from deciding whether either the alternative ground asserted by the district court in support of its judgment or the additional arguments pled by plaintiff demonstrate a violation of the Act. Consequently, we affirm the district court's entry of summary judgment against defendant, and its subsequent order on damages, as they relate to the breach of contract claim. We reverse, however, the district court's decision on the Deceptive Trade Practices Act claim and return the claim to that court for further proceedings.

I.

FACTS AND PROCEDURE

In April, 1975, the law partnership of Brooks, Tarlton, Gilbert, Douglas & Kressler and its individual members ("the Lawyers") entered into a contract for insurance with United States Fire Insurance Company ("USFIC"). The insurance policy ("the policy") purchased by the Lawyers was a professional liability policy--it recited that USFIC would pay, on the Lawyers' behalf, all sums which the Lawyers became legally obligated to pay as damages arising out of the Lawyers' performance of professional services for others. In addition, the policy contained a "Defense, Settlement, Supplementary Payments" provision by which USFIC agreed that, with respect to the insurance afforded by the terms of the policy, it would defend the Lawyers in any suit brought against them, regardless of whether the suit was "groundless, false or fraudulent." The policy also, however, contained an exclusionary clause ("exclusion provision") which recited that the policy did not apply "to any dishonest, fraudulent, criminal or malicious act or omission of the insured." The policy coverage was for one year, but the Lawyers and USFIC renewed it in 1976, 1977, 1978, and 1979 on essentially the same terms. Consequently, the Lawyers were continuously covered by the policy from April, 1975 to April, 1980.

In April, 1975, Eva D. Clifton ("Clifton") hired the Lawyers to represent her in a divorce action filed against her by her husband. In early 1976, Clifton retained Belvin R. Harris ("Harris") of the firm of Sullivant, Meurer, Harris & Sullivant to assist the Lawyers in the divorce proceeding. Although initially Clifton agreed to pay the Lawyers on an hourly basis, sometime early in 1976, Clifton, the Lawyers, and Harris entered into a contingent fee contract which obligated Clifton to pay for her representation based on the amount of property that she was awarded in the divorce action. In June, 1976, Clifton and her husband were granted a divorce according to the terms of a negotiated settlement agreement. Immediately prior to the filing of the decree, and in fulfillment of the contingent fee agreement, Clifton signed a deed conveying to the Lawyers and Harris 10% of one-half of all of her undivided

Page 1360

interest in the properties she retained under the settlement agreement. Clifton, however, subsequently became dissatisfied with the terms of the contingent fee arrangement. Consequently, in April, 1979, Clifton brought suit against the Lawyers and Harris to have the deed conveying the 10% interest set aside. 1

As her basis for setting aside the deed, Clifton argued in her petition that the deed involved a "breach of confidential relationship between the attorneys and their client, and therefore involved a breach of trust and [was] illegal, void and unenforceable." Moreover, Clifton alleged that the deed was procured "under fraud, duress, undue influence, and involved the breach of an attorney-client privilege, which was a fiduciary relationship." Finally, Clifton alleged that the contingent fee agreement was "unconscionable and therefore in violation of the Deceptive Trade Practice Act of The State of Texas" because it took advantage of her lack of knowledge and resulted in a "gross disparity between the services received and the consideration paid therefor." After being served with Clifton's petition, the Lawyers informed USFIC of the suit and demanded that USFIC provide them with a defense, as required by the terms of the policy. USFIC, however, evaluated Clifton's allegations in the petition and concluded that the petition alleged only "dishonest, fraudulent, criminal or malicious" acts; therefore, on April 10, 1979, USFIC informed the Lawyers by letter that the exclusion provision removed its obligation to provide the Lawyers with a defense. Subsequently, Clifton amended her petition five times. As the amended petitions were served on the Lawyers, the Lawyers made demand on USFIC for a defense under the policy. USFIC, however, adhered to its original position and continued to refuse the Lawyers' demand. 2 Because of USFIC's position, the Lawyers hired their own counsel to defend them against Clifton. Beginning August 22, 1983, Clifton's claims were tried to a jury; on September 6, 1983, the case ended in a mistrial when the jury "hung."

On January 24, 1984, the Lawyers brought this suit against USFIC based on USFIC's refusal to defend the Lawyers in the Clifton suit. In their complaint, the Lawyers asserted two separate causes of action. First, the Lawyers claimed USFIC breached its insurance contract with them by failing to defend. Second, the Lawyers charged that in refusing a defense, USFIC violated several provisions of the Texas Deceptive Trade Practices Act--including sections 17.46(a), 17.46(b)(5), 17.46(b)(12), and 17.50(a)(1), (2), (3), and (4). Under the first cause of action, the Lawyers sought actual and punitive damages and attorneys' fees; under the second, they sought their attorneys' fees and three times their actual damages. After USFIC answered, both

Page 1361

parties filed motions for summary judgment with the court on the breach of contract claim. 3 Each party argued, in its motion, that the unambiguous terms of the insurance contract required the court to support its position as a matter of law. On November 9, 1984, the district court denied USFIC's motion, granted the Lawyers', and entered summary judgment for the Lawyers on the issue of liability under the contract. However, contrary to the position taken by both parties in their competing motions, the court reached its conclusion by determining that the terms of the insurance policy were ambiguous as a matter of law. Consequently, the court construed the policy in favor of the insured and, therefore, in favor of USFIC's liability. In its order memorializing its decision, the court directed that "[a] hearing on the issue of damages will be set as soon as practicable."

For more than a year, no action was taken. Finally, on January 14, 1986, the district court entered an order setting the case for "a hearing on damages." After reluctantly granting USFIC a one-month continuance, the district court convened the parties on February 20, 1986. At that time, the court announced that, because of the partial summary judgment which it previously granted the Lawyers, it was ready to take evidence on the issue of damages. The Lawyers, therefore, called several witnesses to testify to the attorneys' fees the Lawyers incurred in defending the action brought by Clifton--the action for which the court found USFIC owed the Lawyers a defense--and the fees incurred in bringing suit against USFIC for its failure to defend. Along the way, the Lawyers also placed into evidence copies of the insurance policy between USFIC and the Lawyers, and correspondence between the two concerning USFIC's duty to defend the suit brought by Clifton. Although USFIC cross-examined the Lawyers' witnesses, it did not present any evidence or witnesses of its own. At the conclusion of the hearing, both parties presented "summation" arguments to the court. Neither argument, however, focused on the evidence which had been presented during the hearing; instead, both parties directed their attention to the Deceptive Trade Practices Act claim which the Lawyers alleged in their complaint.

In their summation, the Lawyers focused on the version of the Act under which the court should award damages. They explained that before 1979, the Act required an automatic trebling of all actual...

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94 practice notes
  • Berge Helene Ltd. v. GE Oil & Gas, Inc., Civil Action No. 4:08–02931.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • September 30, 2012
    ...a breach of warranty claim and a breach of contract claim. See Brooks, Tarlton, Gilbert, Douglas & Kressler v. U.S. Fire Ins. Co., 832 F.2d 1358, 1374–75 (5th Cir.1987); Beauty Mfg. Solutions Corp. v. Ashland, Inc., 848 F.Supp.2d 663, 671–72 (N.D.Tex.2012); Contractor's Source Inc. v. H......
  • Dennis v. General Imaging, Inc., No. 90-3052
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 3, 1990
    ...is 'entitled to a judgment as a matter of law.' " Brooks, Tarlton, Gilbert, Douglas & Kressler v. United States Fire Ins. Co., 832 F.2d 1358, 1364 (5th Cir.) (quoting Fed.R.Civ.P. 56(c)), clarified on rehearing, 832 F.2d 1378 (5th Cir.1987). After a careful review of the entire rec......
  • Top Rank, Inc. v. Gutierrez, No. SA-99-CA-880-FB.
    • United States
    • United States District Courts. 5th Circuit. Western District of Texas
    • June 4, 2001
    ...by a companion order, also issued on this date. 173. Brooks, Tarlton, Gilbert, Douglas & Kressler v. United States Fire Ins. Co., 832 F.2d 1358, 1373 (5th Cir.1987); La Sara Grain Co. v. First Nat'l Bank of Mercedes, 673 S.W.2d 558, 565 174. Rocky Mountain Helicopters, Inc. v. Lubbock C......
  • State of La., ex rel. Guste v. Verity, No. 88-3185
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • August 15, 1988
    ...v. S/S BERMUDA STAR, 848 F.2d 1364, 1368 (5th Cir.1988); Brooks, Tarlton, Gilbert, Douglas & Kressler v. United States Fire Ins. Co., 832 F.2d 1358, 1364 (5th Cir.1987). Review in the first instance of a challenge made to regulations promulgated under the Endangered Species Act, 16 U.S.......
  • Request a trial to view additional results
94 cases
  • Berge Helene Ltd. v. GE Oil & Gas, Inc., Civil Action No. 4:08–02931.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • September 30, 2012
    ...a breach of warranty claim and a breach of contract claim. See Brooks, Tarlton, Gilbert, Douglas & Kressler v. U.S. Fire Ins. Co., 832 F.2d 1358, 1374–75 (5th Cir.1987); Beauty Mfg. Solutions Corp. v. Ashland, Inc., 848 F.Supp.2d 663, 671–72 (N.D.Tex.2012); Contractor's Source Inc. v. H......
  • Dennis v. General Imaging, Inc., No. 90-3052
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 3, 1990
    ...is 'entitled to a judgment as a matter of law.' " Brooks, Tarlton, Gilbert, Douglas & Kressler v. United States Fire Ins. Co., 832 F.2d 1358, 1364 (5th Cir.) (quoting Fed.R.Civ.P. 56(c)), clarified on rehearing, 832 F.2d 1378 (5th Cir.1987). After a careful review of the entire rec......
  • Top Rank, Inc. v. Gutierrez, No. SA-99-CA-880-FB.
    • United States
    • United States District Courts. 5th Circuit. Western District of Texas
    • June 4, 2001
    ...by a companion order, also issued on this date. 173. Brooks, Tarlton, Gilbert, Douglas & Kressler v. United States Fire Ins. Co., 832 F.2d 1358, 1373 (5th Cir.1987); La Sara Grain Co. v. First Nat'l Bank of Mercedes, 673 S.W.2d 558, 565 174. Rocky Mountain Helicopters, Inc. v. Lubbock C......
  • State of La., ex rel. Guste v. Verity, No. 88-3185
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • August 15, 1988
    ...v. S/S BERMUDA STAR, 848 F.2d 1364, 1368 (5th Cir.1988); Brooks, Tarlton, Gilbert, Douglas & Kressler v. United States Fire Ins. Co., 832 F.2d 1358, 1364 (5th Cir.1987). Review in the first instance of a challenge made to regulations promulgated under the Endangered Species Act, 16 U.S.......
  • Request a trial to view additional results

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