Moses Enters. v. Lexington Ins. Co.
| Docket Number | Civil Action 3:19-cv-0477 |
| Decision Date | 01 November 2023 |
| Parties | MOSES ENTERPRISES, LLC, Plaintiff, v. LEXINGTON INSURANCE COMPANY and AIG CLAIMS, INC., aka AIG COMMERCIAL PROPERTY CLAIMS, Defendants. |
| Court | U.S. District Court — Southern District of West Virginia |
Before the Court is Plaintiff's Supplemental Memorandum in Support of Attorneys' Fees & Costs ( ). ECF No. 248. For the following reasons the Court GRANTS IN PART the motion. The Court ORDERS and ADJUDGES Defendants liable to Plaintiff for $343,871.06 in attorneys' fees.[1]
Moses Enterprises, LLC sells cars. See Moses Enter., LLC v Lexington Ins. Co., 66 F.4th 523, 525 (4th Cir. 2023). To protect its business, Moses maintained an insurance policy with Lexington Insurance Company. See id. AIG Claims, Inc. served as claim administrator. See id.
While the insurance policy was in place, Moses sold a car to someone using a stolen identity. See id. The fraudster never paid. See id. When Moses discovered the sham, it filed a claim with AIG. See id. AIG denied coverage because Moses did not provide notice of the claim within the policy's required period. See id. Moses sued. See id. Relevant here, Moses asserted Defendants breached the parties' insurance contract and violated the West Virginia Unfair Trade Practices Act (“UTPA”). See id. Moses sought “[d]amages for attorney fees.” Id. (quotation omitted).
After discovery, the Court granted partial summary judgment for Moses on its breach of contract claim. See id. at 526. The Court did not resolve damages. See id. Nearly a year later, the Court denied Defendants' Motion for Summary Judgment. See id.
On the eve of trial, the parties settled their underlying dispute. See id. They did not settle attorneys' fees. See id. Litigation continued. In March 2022, the Court awarded $293,135.45 in attorneys' fees and costs to Plaintiff's counsel. See id. Defendants appealed. See id. The Fourth Circuit vacated this Court's decision and remanded for further proceedings. See id. at 530.
Parties to a civil controversy pay their own attorneys' fees unless a statute or contract “provid[es] for recovery” or case law “carves out an exception.” Am. Reliable Ins. Co. v Stillwell, 336 F.3d 311, 320 (4th Cir. 2003) (quotation omitted). In Hayseeds, Inc. v. State Farm Fire & Cas., the West Virginia Supreme Court of Appeals carved out an exception for “prevailing claimants in property damage insurance cases.” 352 S.E.2d 73, 79 (W.Va. 1986). “[W]henever a policyholder must sue [their] own insurance company over any property damage claim, and the policyholder substantially prevails in the action,” the insurance company becomes “liable for the payment of the policyholder's reasonable attorneys' fees.” Id. at 80. To determine the reasonableness of requested fees, the Court considers the factors outlined in Aetna Cas. & Sur. v. Pitrolo, 342 S.E.2d 156, 161-62 (W.Va. 1986).
Plaintiff may recover attorneys' fees. See Moses, 66 F.4th at 527. The Court's analysis proceeds in three parts. First, the Court determines what type of work is compensable. Second, the Court considers Defendants arguments seeking to preclude Plaintiff from receiving fees after May 26, 2020. Finally, the Court calculates Plaintiff's fee award.
The Fourth Circuit provided simple instructions on remand. The Court must “determine which portions of the requested fees were ‘necessary to obtain payment of the insurance proceeds' and then award fees based on that work only.” Moses, 66 F.4th at 529 (quotation omitted). In other words, the Court must separate work done for the breach of contract claim from work done for the UTPA claim. See id. at 528. Only work for the former is compensable. See id.
The parties disagree which work is compensable. Plaintiff argues work for the breach of contract claim “cannot possibly be disentangled” from work under the UTPA because “no separate work was required to establish violations of the UTPA.” Pl.'s Suppl. Mem. at 5. In other words, Moses' breach of contract claim “subsumed” its UTPA claim. Pl.'s Reply at 2.[2] Defendant argues the work for both claims work can-and should-be disentangled. See Defs.' Resp. at 12-13.
The Court agrees much of the work Plaintiff counsel performed for the UTPA claim is “so intertwined” with their work for the breach of contract claim that time spent on each claim “cannot be disentangled.” Moses 66 F.4th at 529. Yet the Fourth Circuit stressed a breach of contract claim and a UTPA claim are “not” the same. Moses, 66 F.4th at 528. They are “wholly distinct.” McCormick v. Allstate Ins. Co., 475 S.E.2d 507, 514-15 (W.Va. 1996).
A breach of contract claim accuses the defendant of “breaching a first-party insurance contract.” Moses, 66 F.4th at 528. It seeks to hold the insurer to its promises to the insured. A UTPA claim accuses the defendant of violating the West Virginia UTPA when handling a policyholder's insurance claim. It ensures uniformity within the insurance industry by encouraging insurers to follow the same procedures when administering claims. See McCormick, 475 S.E.2d at 514-15 (). An award of attorneys' fees for all work performed for the two claims erases this distinction. Accordingly, the Court rejects Plaintiff's argument its work for the two claims cannot be disentangled.
Undeterred, Plaintiff presses another theory. Because a plaintiff can seek punitive damages for breach of contract and a UTPA claim, Plaintiff argues awarding fees for work proving damages under the former should yield attorneys' fees for the latter. See Pl.'s Suppl. Mem. at 5 ( all issues in this case were “related”-including “proof of malice” required for punitive damages).
The Court is not persuaded. A plaintiff can seek punitive damages for a breach of contract claim and a UTPA claim. See Hayseeds, 352 S.E.2d at 80; McCormick, 505 S.E.2d at 459. See also Raines v. Westfield Ins. Co., 2023 WL 5490161, at *9 (S.D. W.Va. Aug. 24, 2023) ( the “actual malice” standard for punitive damages applies to both breach of contract and UTPA claims); Skiles v. Mercado, 2016 WL 183921, at *10 (S.D. W.Va. Jan. 14, 2016) (similar).
Yet doing work towards proving punitive damages is not enough to secure attorneys' fees for UTPA work. While there are “similarities” between the criteria for punitive damages and the criteria for attorneys' fees, the West Virginia Supreme Court of Appeals has held the issues are “separate and distinct” and “must be addressed separately.” Midkiff v. Huntington Nat. Bank W.Va., 511 S.E.2d 129, 131 (W.Va. 1998) (citing cases). In Muzelak v. King Chevrolet, Inc., the Supreme Court of Appeals refused to award attorneys' fees “for work done to support theories justifying punitive damages.” 368 S.E.2d 710, 717 (W.Va. 1988). Similarly, in Lemasters v. Nationwide Mut. Ins. Co., the Supreme Court of Appeals rejected a “bright-line rule” that “a litigant against whom a finding of actual malice is made and against whom punitive damages are assessed should be required to pay the prevailing parties' attorneys' fees.” 751 S.E.2d at 744. Such an “automatic award” of attorneys' fees would “eras[e]” the “distinction” between attorneys' fees and punitive damages. Midkiff, 511 S.E.2d at 131 n.5. Cf. Int'l Union of Operating Eng., Local 150 v. Lowe Excavating Co., 870 N.E.2d 303, 324 (Ill. 2006) ().
In short, if a prevailing party cannot secure attorneys' fees every time a jury awards punitive damages, a prevailing party cannot secure attorneys' fees every time counsel prepares to prove punitive damages to a jury. See Lemasters, 751 S.E.2d at 744. Accordingly, the Court rejects Plaintiff's attempt to create a backdoor to attorneys' fees through punitive damages.
* * *
Based on the above, the Court concludes it must separate Plaintiff counsel's breach of contract work from his UTPA work. Only the former is compensable. See Moses, 66 F.4th at 529.
The parties also dispute the timeframe in which Plaintiff can seek attorneys' fees. Plaintiff argues it can seek fees for work throughout this litigation-including work on the fee litigation. See Pl.'s Suppl. Mem. at 9-10. Defendants argue Plaintiff cannot recover fees after this Court issued its Memorandum Opinion & Order granting Plaintiff's Motion for Partial Summary Judgment on May 26, 2020. See Defs.' Resp. at 10-12. The Court agrees with Plaintiff.
A party, not the party's attorney, is entitled to attorney fees. See Astrue v. Ratliff, 560 U.S. 586, 598 (2010); State ex rel. Owners Ins. Co. v. McGraw, 760 S.E.2d 590, 597 (W.Va. 2014) (Davis, C.J.) () (quotation omitted). Indeed, a fee award “controls what the losing defendant” must pay to the plaintiff-“not what the prevailing plaintiff must pay [its] lawyer.” Venegas v. Mitchell, 495 U.S. 82, 86 (1990). Of course, once awarded, the attorney may collect the fees. See Astrue, 560 U.S. at 597-98 (recognizing the “practical reality” that “attorneys are the beneficiaries and, almost always the ultimate recipient” of attorneys' fees).
When seeking attorneys' fees, the attorney must prove the reasonableness of its fees-a task that requires “time and effort.” Hollen v. Hathaway Elec., Inc. 584 S.E.2d 523, 528 (W.Va. 2003). If the attorney cannot receive compensation for those efforts, the “net effect would be to reduce the attorney's hourly rate for all the hours worked on the case.” Id. As a result, courts routinely award...
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