Hortica-Florists' Mut. Ins. Co. v. Pittman Nursery Corp.

• Decision Date: 09 September 2013
• Docket Number: 12–1434.,Nos. 12–1352,s. 12–1352
• Citation: 729 F.3d 846
• Parties: HORTICA–FLORISTS' MUTUAL INSURANCE COMPANY, Plaintiff–Appellee v. PITTMAN NURSERY CORPORATION; Donna Sue Pittman King, Defendants–Appellants Hortica–Florists' Mutual Insurance Company, Plaintiff–Appellant v. Pittman Nursery Corporation; Donna Sue Pittman King, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

729 F.3d 846

HORTICA–FLORISTS' MUTUAL INSURANCE COMPANY, Plaintiff–Appellee

v.PITTMAN NURSERY CORPORATION; Donna Sue Pittman King, Defendants–Appellants

Hortica–Florists' Mutual Insurance Company, Plaintiff–Appellant

v.Pittman Nursery Corporation; Donna Sue Pittman King, Defendants–Appellees.

Nos. 12–1352, 12–1434.

United States Court of Appeals, Eighth Circuit.

Submitted: April 9, 2013.

Filed: Sept. 6, 2013.

Corrected: Sept. 9, 2013.

Thomas F. Loose, argued, Dallas, TX (Stephen D. Wilson, Kirsten M. Castaneda, Seth M. Roberts, on the brief), for appellants/cross-appellees.

Steven W. Quattlebaum, argued, Little Rock, AR (E.B. Chiles IV, Bradley G. Dowler, on the brief), for appellee/cross-appellant.

Before RILEY, Chief Judge, BYE and BENTON, Circuit Judges.

BYE, Circuit Judge.

“All happy families are alike; each unhappy family is unhappy in its own way.” ¹ This case presents to us the affairs of the uniquely unhappy Pittman family of Magnolia, Arkansas. A struggle for control of the family business spawned five lawsuits. Hortica–Florists' Mutual Insurance Company(Hortica), insurer for Pittman Nursery Corporation (PNC), filed a declaratory judgment action to clarify its obligation to provide a defense. PNC filed five counter-claims. The district court ruled Hortica had a duty to defend three of the five lawsuits. The court dismissed two of PNC's five counter-claims via pre-verdict judgment as a matter of law (JAML). The remaining claims, for breach of contract, negligence, and bad faith, were tried to a jury. The jury returned a verdict in favor of PNC on the bad faith and negligence claims, but the district court granted Hortica's post-verdict JAML motion.

PNC appeals. It argues the district court erred by (1) denying PNC a mandatory award of attorneys fees; (2) granting Hortica's post-verdict JAML motion; (3) granting pre-verdict JAML on PNC's breach of fiduciary duty and punitive damages claims; and (4) excluding relevant evidence. We have carefully examined the rather mountainous factual record, and when all is said and done, we reverse the district court's denial of PNC's motion for attorneys' fees and affirm on all remaining issues.

I. Background

Hortica is an insurance company located in Edwardsville, Illinois. PNC, located in Magnolia, Arkansas, sells trees, shrubs, and plants to large and small retailers nationwide. PNC is part of a larger horticultural business owned by Mickey H. Pittman and her three adult children: Donna Pittman King, who is president of PNC, David Pittman, and Dixie Pittman. Beginning in 2007, a family feud pitted Donna against her own mother and siblings, as well as Mr. Dawood Aydani, the former president of PNC. The parties filed five lawsuits, which we summarize:

1. Muniz, et al. v. Pittman Properties, et al.²: in this suit, the most complex of the five, members of PNC's Mexican migrant workforce accused Aydani of abusing, threatening, and extorting money from them. Aydani allegedly required each migrant worker to pay him $1,000 before he agreed to sign the paperwork which allowed the employees to renew their work visas and return to PNC the following year. The plaintiffs claimed because they had to pay this money, their wages did not meet the minimum wage standards required by the Fair Labor Standards Act (FLSA). 29 U.S.C. § 206. They also contended Aydani's repeated extortion amounted to racketeering actionable under the Racketeer Influenced and Corrupt Organizations Act (RICO). 18 U.S.C. §§ 1961– 1968. Most of the Pittman family supported Aydani. Pittman King took the side of the migrant workers. She fired Aydani, but the other family members promptly re-hired him to work in other branches of the family business.

2. Aydani v. Pittman Nursery Corp.: Aydani sued PNC, alleging wrongful termination, unpaid commissions, tortious interference with his 18% interest in Pittman Properties Limited Partnership # 1, and violation of the Arkansas Deceptive Trade Practices Act. SeeArk.Code Ann. §§ 4–88–107.

3. Hunter v. Pittman Nursery Corp.: John–Michael Hunter, Aydani's step-son, was also fired. He, too, filed a suit for wrongful termination.

4. Pittman Properties Limited Partnership # 1 v. Pittman Nursery Corp., et al.: an entity controlled by the Pittman family members aligned with Aydani sought to remove PNC from its land.

5. Feazell v. Pittman Properties Limited Partnership, et al.: brought by a trustee of PNC against Pittman King, David Pittman, and Mickey Pittman, the suit sought to evict Pittman King and PNC for non-payment of rent.

PNC began purchasing insurance from Hortica in 2002. PNC purchased the “Hortica Greenhouse Grower Business Package,” which included the following relevant policies:

1. Commercial General Liability Policy (CGL): provided primary, occurrence-based ³ coverage with a policy limit of $2 million.

2. Business Excess Policy (Excess): provided occurrence-based, $5 million-per-year coverage. PNC had this policy from 2002 through 2005.

3. Employment Practices Liability Endorsement (EPL): a secondary, claims-made policy covering wrongful employment practices. It had an aggregate limit of $100,000. The EPL coverage was “eroding,” meaning attorneys' fees and defense costs are deducted from the amount of available coverage as those fees and costs are incurred. (The CGL and Excess policies are non-eroding.)

4. Employee Dishonesty Endorsement (ED): covered $5,000 per occurrence for losses resulting from employee dishonesty.

PNC asked Hortica to provide a defense in all five lawsuits. Hortica hired the law firm of Cross, Gunter, Witherspoon, & Galchus, P.C. (Cross Gunter) to defend PNC,⁴ but still questioned its obligation to provide a defense. The parties continued to litigate the underlying lawsuits on the merits. On December 26, 2007, Hortica filed a motion for a declaratory judgment to clarify its coverage obligations. PNC responded by filing counter-claims for negligence, bad faith, breach of fiduciary duty, and breach of contract. PNC also claimed it was entitled to punitive damages for Hortica's conduct. PNC's counter-claims rested on a theory that Hortica knew it was obligated to defend PNC in Muniz, Aydani, and Hunter, but refused to do so.

On March 2, 2010, the district court ruled Hortica had a duty to defend and indemnify PNC under the CGL policy in Muniz and under the EPL policy in Hunter. On August 30, 2010, the court ruled Hortica had a duty to defend and indemnify PNC under the EPL policy in Aydani.⁵ Only PNC's counter-claims remained. The district court granted JAML on the breach of fiduciary duty and punitive damages claims. SeeFed.R.Civ.P. 50(a)(1). The remaining claims—bad faith, negligence, and breach of contract—were tried to a jury.

The jury found Hortica was negligent in its handling of PNC's insurance claims and awarded PNC $50,000 in damages. It also concluded Hortica acted in bad faith and awarded PNC $1.3 million in damages. The jury did not find for PNC on its breach of contract claim. Hortica moved for JAML on PNC's negligence and bad faith claims. On January 10, 2012, the district court granted Hortica's JAML motion, concluding the jury's verdict with respect to PNC's negligence and bad faith claims was not supported by substantial evidence.⁶ PNC appealed and now urges the district court erred by (1) denying PNC's claim for attorneys' fees in defending Hortica's declaratory judgment action; (2) granting post-verdict JAML on PNC's negligence and bad faith claims; (3) granting pre-verdict JAML on PNC's breach of fiduciary duty and punitive damages claims; (4) excluding relevant evidence in support of its counter-claims.

II. Attorneys' Fees

The district court ordered Hortica to pay PNC's attorneys additional fees for their defense in Muniz, but denied PNC's other claims for reimbursement, including, as relevant here, its claim for payment for defending the declaratory judgment action. PNC claims Arkansas law mandates the payment of fees in this instance.

In a diversity case such as this one, see28 U.S.C. § 1332, we employ state substantive law. See HOK Sport, Inc. v. FC Des Moines, L.C., 495 F.3d 927, 934 (8th Cir.2007). State law governing attorneys' fees is generally “substantive.” See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 259 n. 31, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975); Ferrell v. West Bend Mut. Ins. Co., 393 F.3d 786, 796 (8th Cir.2005). Accordingly, Arkansas law determines whether PNC is entitled to additional attorneys' fees. We review the district court's interpretation of Arkansas law de novo.⁷Salve Regina Coll. v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991).

We follow Arkansas's rules of statutory construction when interpreting its law. Gershman v. Am. Cas. Co. of Reading, Pa., 251 F.3d 1159, 1162 (8th Cir.2001). When Arkansas courts consider the meaning of a statute, they begin by observing its plain language, giving the words their ordinary meaning. Mamo Transp., Inc. v. Williams, 375 Ark. 97, 289 S.W.3d 79, 83 (2008) (citation omitted). They construe the statute so no word is left void, superfluous, or insignificant. Id. If the language of the statute is clear, there is no need to turn to the rules of statutory construction. Id.

The Arkansas statute we are called upon to consider provides,

[i]n all suits in which the judgment or decree of a court is against a life, property, accident and health, or liability insurance company, either in a suit by it [to cancel, lapse, or change the conditions of the policy] ... or in a suit for a declaratory judgment under the policy ... the company shall also be liable to pay the holder of the policy all reasonable attorney's fees for the defense or prosecution of the suit, as the case may be.Ark.Code Ann. § 23–79–209(a) (emphasis added). The district court concluded, and Hortica now argues, PNC may not recover attorneys' fees for Hortica's declaratory judgment action because “PNC did not prevail on any of its claims in the case at...