Maristuen v. National States Ins. Co., 94-1825

• Decision Date: 16 June 1995
• Docket Number: No. 94-1825,94-1825
• Citation: 57 F.3d 673
• Parties: Norma MARISTUEN, as Personal Representative of the Estate of Henrietta Sougstad, deceased, Appellee, v. NATIONAL STATES INSURANCE COMPANY, a Missouri Corporation, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 673

57 F.3d 673

32 Fed.R.Serv.3d 917

Norma MARISTUEN, as Personal Representative of the Estate of Henrietta Sougstad, deceased, Appellee, v. NATIONAL STATES INSURANCE COMPANY, a Missouri Corporation, Appellant.

No. 94-1825.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 15, 1995.

Decided June 16, 1995.

Michael John Morley, Grand Forks, ND, for appellant.

Jay Hamilton Fiedler, Grand Forks, ND, for appellee.

Before BOWMAN, BEAM, and HANSEN, Circuit Judges.

BOWMAN, Circuit Judge.

Henrietta Sougstad, who died during the pendency of this lawsuit, brought this action against National States Insurance Company after National denied her request for nursing home benefits under an extended care confinement insurance policy. A jury awarded Norma Maristuen, as the representative of Sougstad's estate, contract damages plus prejudgment interest, bad faith damages in the form of litigation expenses, bad faith damages in the form of attorney fees in an amount to be determined by the court, and punitive damages. The District Court ¹ entered judgment on the jury's verdict. The court later calculated the attorney fees award and amended the judgment accordingly. National moved to vacate the bad faith and punitive damages awards or, alternatively, to reduce the amount of those damages. The District Court denied the motion, and National appeals. Maristuen moved to dismiss the appeal as untimely and also moved for damages and double costs on the ground that National's appeal is frivolous. We deny the motion to dismiss the appeal as untimely, but we affirm the District Court and grant Maristuen's motion for damages and double costs.

I.

Sougstad purchased a limited benefit extended care confinement insurance policy from National in 1986. At the time of the purchase, Sougstad was eighty-four years old. Under the terms of the policy, if Sougstad had to be confined in an extended care facility following a hospitalization, National agreed to pay $61.50 per day starting on the twenty-first day of confinement and ending on the 100th day of confinement. The maximum policy benefits were $4920. The policy excluded custodial care but did not define that term. North Dakota law, however, defines custodial care as "care which is primarily for the purpose of meeting personal needs without supervision by a registered nurse or licensed practical nurse." N.D.Cent.Code Sec. 26.1-04-03(9)(1) (Michie Supp.1993).

Following a hospitalization for surgery in March 1988, Sougstad was confined to the Northwood Deaconess Hospital Swing Bed Unit where she received skilled nursing care for more than 100 days. Sougstad claimed the full benefits under the policy. After lengthy delays, National took the position that Sougstad received only twelve days of skilled care during the period of coverage. National issued a check for $792 and denied the balance of Sougstad's claim, contending that days thirteen through eighty were merely custodial care and thus not covered under the insurance policy.

Sougstad filed a complaint with the North Dakota Commissioner of Insurance, whose office advised National that the commissioner disagreed with its denial of benefits. After National took no action in response to the commissioner's advice, Sougstad sought legal counsel. She thereafter filed a complaint against National in North Dakota state court alleging that National breached its contract of insurance and breached the covenants of good faith and fair dealing implied in every insurance contract under North Dakota law. In addition to contract and bad faith damages, Sougstad sought punitive damages, exemplary damages, and damages under federal and state RICO statutes. National then tendered the balance of the policy benefits plus interest, a total of $4893.37, in exchange for a release from further liability. Sougstad declined to release her claims and the litigation proceeded. ²

National removed the case to federal court and filed an answer denying liability under the insurance policy. Sougstad died on September 12, 1992, and the District Court substituted Maristuen as plaintiff. The case eventually went to trial in two stages. ³ At the conclusion of the first stage on August 31, 1993, the jury awarded Maristuen contract damages of $4128 plus prejudgment interest. The jury also found that National had breached its duty of good faith and awarded bad faith damages in the form of litigation expenses and attorney fees. The jury set the amount of litigation expenses at $31,200 but did not quantify the attorney fees because the parties had agreed prior to the start of the trial that the amount of any attorney fees award would be set by the court. At the conclusion of the second stage, the jury awarded Maristuen punitive damages of $50,000. The court entered judgment on these verdicts on September 7, 1993.

Following the entry of judgment, counsel for both parties submitted evidence, briefs, and arguments to assist the court in quantifying the attorney fees the jury had awarded as part of Maristuen's damages. Maristuen requested fees in an amount exceeding $100,000. On January 13, 1994, the District Court set the amount of attorney fees at $33,344.42 and amended the September 7, 1993 judgment accordingly.

National made a post-judgment motion that the District Court denied on February 15, 1994. On March 11, 1994, National filed its notice of appeal from the amended judgment of the District Court, arguing that the District Court erred when it (1) awarded excessive attorney fees, (2) refused to reduce the jury's award of bad faith damages in the form of litigation expenses, and (3) refused to vacate or reduce the jury's award of punitive damages.

II.

We must first address Maristuen's motion to dismiss the appeal as untimely filed. Maristuen argues that the appeal is untimely because it was not filed within thirty days "after the date of entry of the judgment or order appealed from." See Fed.R.App.P. 4(a)(1). Maristuen contends that the September 7, 1993 judgment was a final decision within the meaning of 28 U.S.C. Sec. 1291 (1988). National contends that it was not, and that the judgment was not final and appealable until it was amended on January 13, 1994, to include the fully quantified amount of bad faith damages.

Section 1291 gives this Court jurisdiction over appeals from "all final decisions of the district courts of the United States ... except where a direct review may be had in the Supreme Court." Id. Generally, a final decision within the meaning of Sec. 1291 is one that " 'ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.' " Union Pacific R.R. Co. v. United Transp. Union, 3 F.3d 255, 258 (8th Cir.1993) (quoting Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633-34, 89 L.Ed. 911 (1945)), cert. denied, --- U.S. ----, 114 S.Ct. 881, 127 L.Ed.2d 76 (1994). In the instant case, National contends that the September 7, 1993 judgment of the District Court was not a final decision because, while providing for bad faith damages in the form of litigation expenses and attorney fees, it did not set the total amount of those damages, the quantum of attorney fees still being an open item. Maristuen argues that the determination of the attorney fees portion of the bad faith damages is a collateral matter that does not affect the finality of the underlying judgment.

Substantial effort has been expended over the years on answering the question of whether a post-judgment motion for attorney fees precludes a judgment on the merits from becoming final and appealable. When a fee question is pending the district court must do more than simply "execute the judgment," and many litigants reasonably assumed, based on the language in Catlin, that a judgment was not final if it did not dispose of a timely demand for attorney fees. This assumption turned out to be erroneous. See Budinich v. Becton Dickinson & Co., 486 U.S. 196, 201, 108 S.Ct. 1717, 1721, 100 L.Ed.2d 178 (1988); Obin v. District No. 9 of the Int'l Ass'n of Machinists & Aerospace Workers, 651 F.2d 574, 584 (8th Cir.1981) (holding that post-judgment motion for attorney fees "raises a collateral and independent claim" that does not affect the finality of an otherwise final decision on the merits). Although the Supreme Court strongly had hinted that "[t]he collateral character of the fee issue establishes that an outstanding fee question does not bar recognition of a merits judgment as 'final' and 'appealable,' " White v. New Hampshire, 455 U.S. 445, 452-53 n. 14, 102 S.Ct. 1162, 1167 n. 14, 71 L.Ed.2d 325 (1982), some courts of appeals concluded prior to Budinich that a judgment may not be final and appealable if the attorney fees sought were part of the damages claimed by the plaintiff (e.g., the attorney fees paid by an insured to force an insurance company to pay benefits owed to the insured). See Budinich, 486 U.S. at 201, 108 S.Ct. at 1721 (citing relevant courts of appeals decisions). After Budinich, however, the distinction between attorney fees that form part of the plaintiff's claim for damages and attorney fees that are awarded as costs is largely irrelevant. The Court stated that "the Sec. 1291 effect of an unresolved issue of attorney's fees for the litigation at hand should not turn upon the characterization of those fees by the statute or decisional law that authorizes them." Id. at 201, 108 S.Ct. at 1721. But see Justine Realty Co. v. American Nat'l Can Co., 945 F.2d 1044, 1048 (8th Cir.1991) (distinguishing Budinich and holding that attorney fees other than "fees for the litigation at hand" can still form part of merits judgment and thus, if undecided, prevent judgment from becoming final and appealable).

Both Maristuen and National have structured their arguments as if this case were controlled by cases like Budinich and Justine Realty, but they disagree as to whether the fees awarded by the jury are a part of the judgment on...