Clark v. Milam

• Decision Date: 07 July 1995
• Docket Number: Civ. A. No. 2:92-0935.
• Parties: Hanley C. CLARK, Commissioner of Insurance for the State of West Virginia, as Receiver of George Washington Life Insurance Co., Plaintiff, v. Arthur W. MILAM [term. 2/13/95], John W. Wilbur, Dudley D. Allen and Frank E. Clark, Jr., Defendants.
• Court: U.S. District Court — Southern District of West Virginia

891 F. Supp. 268

Hanley C. CLARK, Commissioner of Insurance for the State of West Virginia, as Receiver of George Washington Life Insurance Co., Plaintiff, v. Arthur W. MILAM term. 2/13/95, John W. Wilbur, Dudley D. Allen and Frank E. Clark, Jr., Defendants.

Civ. A. No. 2:92-0935.

United States District Court, S.D. West Virginia, Charleston Division.

July 7, 1995.

Rudolph L. DiTrapano and Debra L. Hamilton, DiTrapano & Jackson, Charleston, WV, Ellen G. Robinson, C. Philip Curley, Mary Cannon Veed, Cynthia H. Hyndman & Judi A. Lamble Robinson, Curley & Clayton, P.C., Chicago, IL, for plaintiff.

John H. Wilbur, Jacksonville, FL, Dudley D. Allen, Jacksonville, FL, Frank E. Clark, Jr., Jacksonville, FL, for defendants.

MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

On April 10, 1995, the jury reached its verdict and found the Defendants liable on two of the four counts alleged by the Receiver. On April 12, 1995, the Court entered its Partial Final Judgment on the Jury Verdict. Since then the parties filed several post-trial motions, which now are fully briefed and ripe for adjudication.

Pending are the following motions: (1) the Receiver's Rule 59(e) motion to alter partial final judgment on the jury verdict and for costs; (2) the motion of Defendants Allen and Wilbur for stay of enforcement of judgment; (3) Defendants Allen and Wilbur's motion for new trial; (4) Defendants Allen and Wilbur's motion to modify or alter the partial final judgment on the jury verdict and to grant Defendants credit for settlements made prior to trial; and (5) Defendant Clark's motion to grant Defendant credit for settlements made prior to trial. The Court will treat the Defendants' two motions seeking credit for settlements prior to trial as one motion.

The Court now proceeds to the substance of the parties' motions rather than attempting to restate the complicated factual under-pinnings of this action. If reacquaintance with the facts is desired, the Court directs the reader to the numerous published opinions generated in this action.¹

I Defendants' Motion for New Trial

Defendants Allen and Wilbur moved for a new trial pursuant to Rule 59(a), Federal Rules of Civil Procedure. They seek to set aside the jury's verdict, vacate the Partial Final Judgment, and grant the Defendants a new trial as to Count III (breach of fiduciary duty) and Count IV (professional malpractice). The Defendants assert twenty-four grounds in support of their motion.

Rule 59(a), Federal Rules of Civil Procedure, provides, in pertinent part:

A new trial may be granted to all or any of the parties and on all or part of the issues (1) in any action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States.

Id. Having thoroughly considered the Defendants' grounds for new trial under the rule, the Court finds each to be wholly without merit. Accordingly, the Defendants' motion for a new trial is DENIED.

II Receiver's Motion to Alter Partial Final Judgment and for Costs

The Receiver moved to alter partial final judgment on the jury verdict pursuant to Rule 59(e), Federal Rules of Civil Procedure. The Receiver asks the Court to restore the amounts offset from the judgment for the jury's apportionment of fault to the Receiver in his capacity as Insurance Commissioner and regulator. The Receiver argues any negligence attributed to him in his capacity as Insurance Commissioner and regulator cannot be applied to reduce the verdict he obtained in his capacity as Receiver.

The Receiver also moves the Court to award him costs as the prevailing party pursuant to Rule 54(d)(1), Federal Rules of Civil Procedure. The Defendants' brief opposition contends only the motion is premature.

As an affirmative defense, the Defendants asserted the Insurance Commissioner had been negligent in his duties toward them. The jury found the Insurance Commissioner, as regulator, contributorily negligent on both counts. In the partial judgment the Court applied the negligence of the Insurance Commissioner to reduce the jury award by one-third (33%) on Count III and by forty percent (40%) on Count IV.

The Receiver's argument not to reduce the judgment by the Insurance Commissioner's negligence is compelling. It comports with the Court's earlier ruling that the Defendants could not assert counterclaims against the Insurance Commissioner. The Court held and ordered as follows:

Generally, however, in an action brought by a plaintiff in a representative capacity, a defendant cannot assert a counterclaim against plaintiff in his individual capacity because such a claim in not asserted against an "opposing party." State of N.C. v. Alexander & Alexander Serv. Inc., 711 F.Supp. 257, 263 (E.D.N.C.1989); Banco Nacional de Cuba v. Chase Manhattan Bank, 658 F.2d 875, 885 (2nd Cir.1981); In re Sunrise Securities Litigation, 818 F.Supp. 830, 835 (E.D.Pa.1993). Assertion of a counterclaim "requires that the counterdefendant and the plaintiff be the same entity, and, as a result, if a party sues in one capacity the defendant may not counterclaim against plaintiff in another capacity." Sunrise Securities, 818 F.Supp. at 835.

Plaintiff brings this action solely in his capacity as receiver of GW LIFE. He acquired that capacity by virtue of W.Va. Code § 33-10-14 (1992) which mandates whenever "a receiver is to be appointed in delinquency proceedings for a domestic or alien insurer, the court shall appoint the insurance commissioner as such receiver." As receiver, Plaintiff is vested by operation of law with all rights of action held by GW LIFE. W.Va.Code § 33-10-14(b) (1992). He asserts those rights of action on GW LIFE's behalf, having "stepped into the shoes" of the company upon his appointment as receiver. Cf. Cook v. Eastern Gas & Fuel Assoc., 129 W.Va. 146, 39 S.E.2d 321, 326 (1946) (assignee of right of action steps into shoes of assignor).

Defendant Wilbur's counterclaim asserts claims against Plaintiff not in his capacity as receiver of GW LIFE, but rather in his individual and regulatory capacities. His claims relate primarily to actions he attributes to Plaintiff prior to GW LIFE's liquidation. None of the counterclaim's allegations describe conduct for which GW LIFE, or Plaintiff as its receiver could stand liable. Consequently, the counterclaim is improper under Rule 13, and Plaintiff's motion to dismiss the counterclaim is GRANTED. The Court ORDERS the counterclaim be dismissed.

Memorandum Opinion and Order of August 20, 1993, pages 7-8 (emphasis in original).²

Although the Supreme Court of Appeals of West Virginia has not passed on this issue, this Court believes the West Virginia Court would follow other courts and hold any negligence of the Insurance Commissioner as regulator could not be attributed to his representational capacity as Receiver. See Foster v. Rockwood Holding Co., 158 Pa.Cmwlth. 258, 264, 632 A.2d 335, 338 (1993) (defendants cannot assert regulatory negligence to offset their alleged culpability to receiver); State of N.C. ex rel. Long v. Alexander & Alexander, 711 F.Supp. 257, 264 (E.D.N.C.1989) (any award cannot be set off by counterclaims against the Commissioner, since the Commissioner is only a party as insurance company's representative); Corcoran v. National Union Fire Ins. Co., 143 A.D.2d 309, 311, 532 N.Y.S.2d 376, 378 (N.Y.App.Div.1988) (Superintendent as Liquidator subject only to defenses that could be raised against insurance company); In the Matter of the Liquidation of Ideal Mutual Ins. Co., 140 A.D.2d 62, 66-67, 532 N.Y.S.2d 371, 374 (N.Y.App.Div.1988) (negligent conduct of Superintendent as regulator is not conduct of the Superintendent as Liquidator).

Accordingly, the Court is now of the opinion that the jury's finding of negligence by the Insurance Commissioner cannot be used to reduce its award to the Commissioner in his capacity as the Receiver for George Washington Life. Negligence attributable to the Commissioner as regulator is not attributable to George Washington Life nor to the Receiver as GW LIFE's representative. The Court GRANTS the Receiver's motion to alter partial final judgment on the jury verdict and VACATES its Partial Final Judgment on the Jury Verdict insofar as the Court reduced the jury award to the Receiver by the percentage negligence of the Insurance Commissioner.³

The Defendants are not prejudiced by this ruling. If the Court has erred, such error is preserved and our Court of Appeals may modify the judgment on appeal without remanding this matter for further proceedings.

Turning now to the motion for award of costs, Rule 54(d)(1) provides, in pertinent part:

Except when express provision therefor is made either in a statute of the United States or in these rules, costs other than attorneys' fees shall be allowed as of course to the prevailing party unless the court otherwise directs.

Id. "The rule makes clear that, in the ordinary course, a prevailing party is entitled to an award of costs.... Indeed, the rule gives rise to a presumption in favor of an award of costs to the prevailing party." Teague v. Bakker, 35 F.3d 978, 996 (4th Cir.1994) (citations omitted), cert. denied, ___ U.S. ___, 115 S.Ct. 1107, 130 L.Ed.2d 1073 (1995).

The Court finds and concludes the Receiver was the prevailing party. As discussed above, the jury returned a verdict in favor of the Receiver on two of the four counts and awarded damages in excess of thirteen million dollars. Accordingly, the Court holds the Receiver is entitled to reasonable costs and GRANTS the Receiver's motion for costs, subject to compliance with the rules of Court.

The Receiver has not complied yet with Rule 7.01 of the Local Rules of Civil Procedure of this judicial district. Rule 7.01 provides:

The prevailing party shall prepare a bill of costs as soon as possible after entry of the final judgment on the form supplied by the clerk. The bill of costs

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