CX Reinsurance Co. v. Johnson

• Decision Date: 14 October 2020
• Docket Number: No. 19-1516,19-1516
• Citation: 977 F.3d 306
• Parties: CX REINSURANCE COMPANY LIMITED, f/k/a CNA Reinsurance Company Limited, Plaintiff - Appellee, v. Devon S. JOHNSON, Defendant - Appellant, and Benjamin L. Kirson, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

977 F.3d 306

CX REINSURANCE COMPANY LIMITED, f/k/a CNA Reinsurance Company Limited, Plaintiff - Appellee,

v.Devon S. JOHNSON, Defendant - Appellant,andBenjamin L. Kirson, Defendant.

No. 19-1516

United States Court of Appeals, Fourth Circuit.

Argued: September 8, 2020

Decided: October 14, 2020

ARGUED: Samuel D. Cowin, GALLAGHER EVELIUS & JONES LLP, Baltimore, Maryland, for Appellant. Ellen Duffy Jenkins, RUBERRY STALMACK & GARVEY, LLC, Chicago, Illinois, for Appellee. ON BRIEF: David G. Sommer, Paul S. Caiola, GALLAGHER EVELIUS & JONES LLP, Baltimore, Maryland, for Appellant. Stuart M.G. Seraina, KRAMON & GRAHAM, P.A., Baltimore, Maryland; Edward F. Ruberry, RUBERRY, STALMACK & GARVEY, LLC, Chicago, Illinois, for Appellee.

Before NIEMEYER, AGEE, and THACKER, Circuit Judges.

Vacated and remanded by published opinion. Judge Niemeyer wrote the opinion, in which Judge Agee and Judge Thacker joined.

NIEMEYER, Circuit Judge:

Local Rule 109 of the District of Maryland requires generally that "any motion requesting the award of attorneys’ fees must be filed within fourteen (14) days of the entry of judgment ," and noncompliance constitutes a "waiver of any claim for attorneys’ fees." D. Md. R. 109.2.a (emphasis added). This language parrots Federal Rule of Civil Procedure 54, which requires generally that "[a] claim for attorney's fees ... must be made by motion ... filed no later than 14 days after the entry of judgment ." Fed. R. Civ. P. 54(d)(2) (emphasis added). The issue in this case is whether the defendant's motion for attorneys fees was timely (1) when filed 18 days after an order granting voluntary dismissal was entered but not set out in a separate document, as required by Rule 58 and (2) when filed 13 days after an order was entered disposing of the defendant's timely filed "post-judgment" motion under Rule 59(e).

In this case, the district court, in a six-page "Memorandum Opinion and Order," granted the plaintiff's contested motion for voluntary dismissal of its complaint under Rule 41(a)(2) and entered an order of dismissal, which included the direction to the Clerk of Court "to close this case." No "separate document," however, set out the order as a "judgment," as required by Rule 58(a). After the defendant filed a Rule 59(e) post-judgment motion three days later to modify the order of dismissal and after the court denied that motion, the defendant filed a motion for attorneys fees. That motion was filed 18 days after the district court entered its order of dismissal in the case but 13 days after the district court disposed of the defendant's Rule 59(e) motion. The court held that its Local Rule required that the defendant's motion be filed within 14 days of the entry of judgment and that because the defendant filed his motion 18 days after it entered the order of dismissal with prejudice, the motion was untimely. The court rejected the defendant's argument that his Rule 59(e) motion extended the judgment date until the court disposed of that motion. It also rejected the defendant's argument that in disregarding the extension resulting from his Rule 59(e) motion, the district court rendered its Local Rule in conflict with Rule 54. The district court explained that because its "[l]ocal rules are construed as standing orders of the district court" (emphasis added), they are exempted from any requirement to be consistent with Rule 54.

We vacate and remand the district court's order denying as untimely the defendant's motion for attorneys fees. Rule 58(a)’s separate-document requirement was not satisfied, and therefore the "entry of judgment" did not occur on the date that the district court entered its dismissal order. The dismissal order thus did not trigger the time for filing motions for attorneys fees under either Local Rule 109 or Federal Rule 54. Moreover, the district court's interpretation of its Local Rule with respect to a Rule 59(e) motion's effect on the date of judgment was inconsistent with Rule 54, in violation of Rule 83 (requiring local rules to be "consistent with ... federal statutes and rules").

I

CX Reinsurance Company Limited ("CX Re") commenced this action against Benjamin L. Kirson, a policyholder, in October 2015, seeking the rescission of commercial general liability insurance policies issued to Kirson with respect to residential buildings that Kirson owned in Baltimore, Maryland. CX Re alleged that, in applying for the policies, Kirson had falsely represented that there had never been any lead-paint violations in the buildings.

Shortly after CX Re commenced its action, Devon S. Johnson obtained a state-court judgment against Kirson for personal injuries caused by lead-paint exposure at one of Kirson's residential properties. Contending that his judgment against Kirson fell within the coverage of the CX Re policies, Johnson was permitted to intervene as a defendant in CX Re's rescission action in order to protect his interest in the proceeds of the policies.

After CX Re and Kirson reached a settlement agreement and Kirson was dismissed from the action, CX Re nonetheless continued to seek rescission of its policies with Johnson as the defendant. But on June 4, 2018, CX Re filed a motion for voluntary dismissal of its action with prejudice under Federal Rule of Civil Procedure 41(a)(2). Johnson opposed this motion, arguing that CX Re was only attempting to avoid a ruling that might adversely affect other related actions.

In a six-page "Memorandum Opinion and Order" dated June 15, 2018, the district court granted CX Re's motion for a voluntary dismissal and dismissed CX Re's complaint with prejudice. After addressing the payment of costs in the action and the return of materials obtained by discovery, the opinion and order directed the Clerk of Court "to close this case." The dismissal order was then entered in the docket. No separate document set out a "judgment," and the civil docket does not indicate the entry of any "judgment."

Three days after the district court entered its order of dismissal, Johnson filed a motion to modify the dismissal order, thereafter treating his motion as a Rule 59(e) motion. The district court denied that motion on June 20, 2018.

Thirteen days after the court denied Johnson's Rule 59(e) motion — on July 3, 2018 — Johnson filed a motion for attorneys fees. He maintained that while CX Re had "vigorously assert[ed] that it did not know of the basis for its rescission claim until 2015," it had actually "known about and possessed the lead violation notice on which the claim was based since 2008." Johnson thus argued that under the "bad faith" exception to the American rule for attorneys fees, Federal Rule of Civil Procedure 11, and 28 U.S.C. § 1927, he was entitled to recover attorneys fees. He also claimed fees incurred in obtaining certain documents in discovery that CX Re withheld until compelled to produce them.

CX Re responded to Johnson's motion, arguing primarily that it was untimely. It noted that the court had entered its order of dismissal on June 15, 2018, and that Johnson's motion was not filed until 18 days after that order. It argued that under Local Rule 109.2.a (requiring that such motions be filed within 14 days of "the entry of judgment"), Johnson's motion was untimely. Alternatively, CX Re argued that if the court were to consider Johnson's motion on the merits, the court should also consider its own cross motion for attorneys fees. The district court referred the parties’ cross motions to a magistrate judge for a report and recommendation.

In her report and recommendation dated November 5, 2018, the magistrate judge recommended that Johnson's motion for attorneys fees be denied as untimely. The magistrate judge reasoned that because Local Rule 109.1 set the deadline for the filing of a bill of costs to be "within 14 days of the entry of judgment, or the entry of an order denying a motion filed under Fed. R. Civ. P. 50(b), 52(b), or 59," the lack of "a similar reference to post-judgment motions" in Local Rule 109.2.a governing the deadline for filing an attorneys fees motion was telling. The judge also observed that "courts in this jurisdiction have held that the period for filing a motion for attorneys’ fees under the Local Rule runs ‘from the date of entry of the primary judgment ... [rather than] post-verdict motions,’ " citing Jackson v. Beard , 828 F.2d 1077, 1078 (4th Cir. 1987). Finally, the magistrate judge rejected Johnson's argument that this interpretation of "entry of judgment" in Local Rule 109.2.a would place the Local Rule's deadline for attorneys fees motions in conflict with the deadline in Federal Rule of Civil Procedure 54. She reasoned that no conflict existed because " Rule 54 allows courts to modify the deadline for motions for attorneys’ fees" by a court order and "[l]ocal rules are construed as standing orders of the district court."

The district court adopted in full the magistrate judge's report and recommendation by order dated March 26, 2019. The court agreed that "the plain language of Local Rule 109 suggests that the fourteen days is measured from the entry of the primary judgment as opposed to the resolution of post-judgment motions," and it rejected Johnson's argument that "Local Rule 109.2.a should be read consistently with the cases interpreting similar language in Federal Rule of Civil Procedure 54." Accordingly, the court denied Johnson's motion for attorneys fees as untimely and also denied CX Re's conditional cross motion for attorneys fees.

From the district court's order dated March 26, 2019, denying his motion for attorneys fees, Johnson filed this appeal.

II

The district court denied Johnson's motion for attorneys fees as untimely because it was filed 18 days after the court filed its order of dismissal under Rule 41. In so ruling, the court applied Local Rule 109, which requires that "any motion requesting the award of attorneys’ fees must be filed within fourteen (14) days of the entry of judgment ." D. Md....